UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Information to be Included in Statements Filed Pursuant to Rule 13d-1(a) and
Amendments Thereto Filed Pursuant to Rule 13d-2(a)
Under the Securities Exchange Act of 1934
(Amendment No. 4)*
THE HOUSTON EXPLORATION COMPANY
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(Name of Issuer)
Common Stock, par value $ .01 per share
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(Title of Class of Securities)
44212010
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(CUSIP Number)
John J. Bishar, Jr.
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Senior Vice President & General Counsel
KeySpan Corporation
One MetroTech Center
Brooklyn, New York 11201
(718) 403-1000
With a copy to:
William R. Dougherty
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
June 2, 2004
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. |_|
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See ss.240.13d-7
for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 2 of 8
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON KeySpan Corporation
I.R.S. Identification No. 11-3431358
--------- ----------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4. SOURCES OF FUNDS*
Not Applicable
--------- ----------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
--------- ----------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
--------- ----------------------------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON 6,580,392 (indirectly through KeySpan Energy
Corporation and THEC Holdings Corp.)
WITH
-------- --------------------------------------------------
8. SHARED VOTING POWER
-------- --------------------------------------------------
9. SOLE DISPOSITIVE POWER
6,580,392 (indirectly through KeySpan Energy
Corporation and THEC Holdings Corp.)
-------- --------------------------------------------------
10. SHARED DISPOSITIVE POWER
-------------------- -------- --------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,580,392 (indirectly through KeySpan Energy Corporation
and THEC Holdings Corp.)
--------- ----------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
--------- ----------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24%
--------- ----------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
HC
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Page 3 of 8
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
KeySpan Energy Corporation
I.R.S. Identification No. 11-3344628
--------- ----------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4. SOURCES OF FUNDS*
Not Applicable
--------- ----------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
--------- ----------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
-------------------- -------- --------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON 6,580,392 (indirectly through THEC Holdings Corp.)
WITH
-------- --------------------------------------------------
8. SHARED VOTING POWER
-------- --------------------------------------------------
9. SOLE DISPOSITIVE POWER
6,580,392 (indirectly through THEC Holdings Corp.)
-------- --------------------------------------------------
10. SHARED DISPOSITIVE POWER
--------- ----------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,580,392 (indirectly through THEC Holdings Corp.)
--------- ----------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
--------- ----------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24%
--------- ----------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
--------- ----------------------------------------------------------------------
Page 4 of 8
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THEC Holdings Corp.
I.R.S. Identification No. 76-0489610
--------- ----------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)
(b)
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4. SOURCES OF FUNDS*
Not Applicable
--------- ----------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
--------- ----------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
--------- ----------------------------------------------------------------------
NUMBER OF SHARES 7. SOLE VOTING POWER
BENEFICIALLY OWNED
BY EACH REPORTING
PERSON 6,580,392
WITH
-------- --------------------------------------------------
8. SHARED VOTING POWER
-------- --------------------------------------------------
9. SOLE DISPOSITIVE POWER
6,580,392
-------- --------------------------------------------------
10. SHARED DISPOSITIVE POWER
--------- ----------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,580,392
--------- ----------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
--------- ----------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24%
--------- ----------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
--------- ----------------------------------------------------------------------
Page 5 of 8
Item 1. Security and Issuer
Item 1 is hereby amended and restated as follows:
This Amendment No. 4 (the "Amendment") to Schedule 13D relating to the
Common Stock, par value $0.01 per share (the "Common Stock"), of The Houston
Exploration Company, a Delaware corporation (the "Issuer") is filed by KeySpan
Corporation (f/k/a BL Holding Corp.), a New York corporation ("KeySpan"),
KeySpan Energy Corporation, a New York corporation ("KEC"), and THEC Holdings
Corp., a Delaware corporation ("THEC" and, together with KeySpan and KEC,
"Reporting Persons"), to further amend the Schedule 13D that was previously
filed on October 8, 1997 and amended by Amendment No. 1 thereto, filed on April
7, 2000, Amendment No. 2 thereto, filed on March 3, 2003 and Amendment No. 3
thereto, filed on May 24, 2004. Unless otherwise indicated, all capitalized
terms used but not defined in this Amendment have the same meaning as set forth
in the Schedule 13D as previously amended. The principal executive offices of
the Issuer are located at 1100 Louisiana, Suite 2000, Houston, Texas 77002-5219.
Item 4. Purpose of Transaction
Item 4 is hereby amended and restated as follows:
On June 2, 2004, KeySpan successfully completed an exchange transaction
with the Issuer valued at $449 million, which reduced THEC's ownership interest
in the Issuer from approximately 55% to 24%.
Under the terms of the transaction, THEC exchanged 10,800,000 shares of
Common Stock for all of the stock of Seneca-Upshur Petroleum, Inc ("Seneca"), a
wholly owned subsidiary of the Issuer. In connection with the transaction, the
Issuer retired 4.6 million shares and issued 6.2 million shares in a public
offering.
Based on the Issuer's announced offering price of $48.00 per share, the
shares of Common Stock exchanged in the transaction were valued at $41.57 per
share. Seneca's assets consist of Appalachian Basin producing properties valued
at $60.0 million and $389.0 million in cash. At December 31, 2003, the producing
properties had proved reserves of 50.5 billion cubic feet of natural gas
equivalent (Bcfe), or approximately 7% of Issuer's total proved reserves.
KeySpan now owns 6,580,392 shares, or approximately 24%, of Issuer's
outstanding Common Stock. In addition, KeySpan reduced its representation on
Issuer's Board of Directors to two directors from five and the Chief Executive
Officer of KeySpan no longer serves as Chairman of the Board of Directors of the
Issuer.
In addition, KeySpan entered into an underwriting agreement pursuant to
which it agreed, among other things, not to transfer, without the prior written
consent of the underwriters and subject to certain exceptions, any shares of
Common Stock during the period ending 90 days after May 26, 2004, the date of
the prospectus supplement relating to the offering of shares of Common Stock.
Under the terms of the Distribution Agreement (as defined below), THEC also
agreed that, for a period of three years, it would not increase its ownership
interest in the Issuer above 24% of the Issuer's issued and outstanding Common
Stock.
The preceding summary of the transactions is not intended to be complete
and is qualified in its entirety by reference to the full text of the
Distribution Agreement, by and among the Issuer, Seneca, THEC and KeySpan, dated
as of June 2, 2004, a copy of which is filed as Exhibit 10 hereto, and which is
incorporated herein by reference.
KeySpan, KEC and THEC intend to review the performance of their investment
in the Issuer from time to time. Depending on various factors, including the
business, prospects and financial position of the Issuer, the current and
Page 6 of 8
anticipated future price levels of the Common Stock, the conditions in the
securities markets and general economic and industry conditions, as well as the
benefits of diversification and the other investment opportunities available to
them, KeySpan, KEC and THEC will take such actions with respect to their
investment in the Issuer as they deem appropriate in light of the circumstances
existing from time to time. Subject to the terms of the agreements entered into
in connection with the transactions as described above, KeySpan, KEC and THEC
may purchase additional equity in the Issuer or may dispose of some or all of
their holdings in the open market, in public offerings, in private negotiated
transactions or in other transactions, including derivative transactions.
Other than as described above, none of KeySpan, KEC and THEC has any plans
or proposals that relate to or would result in any of the actions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D (although KeySpan, KEC
and THEC reserve the right to develop such plans).
Item 5. Interest in Securities of the Issuer
Item 5 is hereby amended and restated as follows:
(a) As of the date hereof, THEC beneficially owns, and KeySpan and KEC
beneficially own indirectly through THEC, 6,580,392 shares of Common Stock,
representing approximately 24% of the total outstanding shares of Common Stock
(based on 31,854,155 shares of Common Stock outstanding as reported in the
Issuer's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on May 7, 2004).
(b) THEC has, and KeySpan and KEC each have indirectly through THEC, sole
power to vote or direct the vote and to dispose or direct the disposition of
shares of Common Stock owned by it.
(c) See response to Item 4 above.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
Item 6 is hereby amended and restated as follows:
As of June 2, 2004, Robert B. Catell, the Chief Executive Officer of
KeySpan and KEC, who also serves as director to KeySpan and KEC, and Stephen W.
McKessey, who also serves as a director of KeySpan, will continue to serve as
directors of the Issuer. For as long as THEC has the right to appoint members to
the board of the Issuer, the Issuer has agreed to cause the board to consist at
all times of not more than nine directors. At any time THEC and its affiliates
hold at least 10% of the issued and outstanding Common Stock, THEC shall have
the right to designate two members of the slate of directors being proposed by
the Issuer to be elected to the board. At any time THEC and its affiliates hold
Common Stock constituting less than 10% but greater than 5% of the issued and
outstanding Common Stock, THEC shall have the right to appoint one member of the
slate of directors being proposed by the Issuer to be elected to the board. Once
THEC and its affiliates hold Common Stock constituting 5% or less of the issued
and outstanding Common Stock, THEC will not have the right to appoint members to
any slate of directors being proposed by the Issuer to be elected to the board.
In addition, KeySpan entered into an underwriting agreement pursuant to
which it agreed, among other things, not to transfer, without the prior written
consent of the underwriters and subject to certain exceptions, any shares of
Common Stock during the period ending 90 days after the date of the prospectus
supplement relating to the offering of shares of Common Stock. Pursuant to the
Distribution Agreement, THEC also agreed that, for a period of three years, it
would not increase its ownership interest in the Issuer above 24% of the
Issuer's issued and outstanding Common Stock.
Page 7 of 8
Pursuant to the Distribution Agreement, the Issuer has agreed that for the
period from June 2, 2004 and ending on August 15, 2004, the Issuer will not,
directly or indirectly, offer for sale, sell, or issue any shares of Common
Stock (other than Common Stock issued pursuant to employee arrangements or stock
options existing on June 2, 2004).
THEC and the Issuer entered into an Amended and Restated Registration
Rights Agreement, dated as of June 2, 2004, (the "Registration Rights
Agreement") amending and restating the existing registration agreement, dated as
of July 2, 1996. The Registration Rights Agreement provides that (i) the Issuer
will use commercially reasonable efforts to keep its shelf registration
statement on Form S-3, effective March 31, 2004 (No. 333-113659) continuously
effective until the earlier of (x) the date which is eighteen months from June
2, 2004 and (y) such date as all shares of Common Stock held by THEC may be
immediately sold under Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act") during any 90 day period and (ii) THEC will have the
right to make two demands ("Demands") to the Issuer to register Common Stock
held by it in a public offering pursuant to the Securities Act, so long as the
shares being registered represent no less than 10% of the then issued and
outstanding Common Stock. Demand registrations are subject to the right of the
Issuer to delay the exercise by THEC of the right for a period of up to 180 days
if, in the Issuer's good faith judgment, that it is in the best interest of the
Issuer to defer the filing. Pursuant to the Registration Rights Agreement, THEC
also has the right to "piggyback" or include its Common Stock in any
registration of Common Stock made by the Issuer.
Expenses incurred in connection with a Demand registration are to be paid
by THEC. The Issuer agreed to indemnify THEC, its officers, directors, agents,
any underwriter, and each person controlling any of the foregoing, against
certain liabilities under the Securities Act or the securities laws of any state
or country in which securities of the Issuer are sold pursuant to the
Registration Rights Agreement.
The Distribution Agreement and the Registration Rights Agreement are filed
as exhibits hereto and are hereby incorporated by reference into this Item 6.
Except as described in this Schedule 13D, or in the exhibits hereto, none
of KeySpan, KEC or THEC, nor, to the best knowledge and belief of KeySpan, KEC
and THEC, any of their respective directors or executive officers, is a party to
any other contract, arrangement, understanding or relationship with respect to
any securities of the Issuer, except that Mr. Cattel and Mr. McKessey have
interests in stock options granted by the Issuer for compensation related to
their service as directors of the Issuer. Mr. McKessey also receives an annual
retainer and meeting fees associated with his services as a director of the
Issuer.
Item 7. Material to Be Filed as Exhibits
Item 7 is hereby amended by adding the following text:
9. Joint Filing Agreement, dated June 3, 2004 among the Reporting
Persons relating to the filing of a joint statement on Schedule
13D.
10. Distribution Agreement, dated as of June 2, 2004, by and among
The Houston Exploration Company, Seneca-Upshur Petroleum, Inc.,
THEC Holding Corp, and KeySpan Corporation
11. Amended and Restated Registration Rights Agreement, dated as of
June 2, 2004 by and among The Houston Exploration Company and
THEC Holdings Corp.
Page 8 of 8
Signature
After reasonable inquiry and to the best of our knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: June 4, 2004
KEYSPAN CORPORATION
By: /s/Michael J. Taunton
Name: Michael J. Taunton
Title: Senior Vice President and Treasurer
KEYSPAN ENERGY CORPORATION
By: /s/Michael J. Taunton
Name: Michael J. Taunton
Title: Senior Vice President and Treasurer
THEC HOLDINGS CORP.
By: /s/Saiyed Zain Mirza
Name: Saiyed Zain Mirza
Title: Senior Vice President and Chief Financial Officer
INDEX OF EXHIBITS
Number Description
9 Joint Filing Agreement, dated June 3, 2004, among the Reporting
Persons relating to the filing of a joint statement on Schedule 13D.
10 Distribution Agreement, dated as of June 2, 2004, by and among The
Houston Exploration Company, Seneca-Upshur Petroleum, Inc., THEC
Holding Corp, and KeySpan Corporation.
11 Amended and Restated Registration Rights Agreement, dated as of June
2, 2004 by and among The Houston Exploration Company and THEC Holdings
Corp.
Exhibit 9
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) promulgated under the Securities Exchange
Act of 1934, as amended, the undersigned hereby agree to the joint filing with
all other Reporting Persons (as such term is defined in the Schedule 13D
referred to below) on behalf of each of them of a Statement on Schedule 13D
(including amendments thereto) with respect to the Common Stock, par value $0.01
per share, of The Houston Exploration Company, a Delaware corporation, and that
this Agreement may be included as an Exhibit to such joint filing. This
Agreement may be executed in any number of counterparts, all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the
4th day of June 2004.
KEYSPAN CORPORATION
By: /s/Michael J. Taunton
Name: Michael J. Taunton
Title: Senior Vice President and Treasurer
KEYSPAN ENERGY CORPORATION
By: /s/Michael J. Taunton
Name: Michael J. Taunton
Title: Senior Vice President and Treasurer
THEC HOLDINGS CORP.
By: /s/Saiyed Zain Mirza
Name: Saiyed Zain Mirza
Title: Senior Vice President and Chief Financial Officer
Exhibit 10
DISTRIBUTION AGREEMENT
by and among
THE HOUSTON EXPLORATION COMPANY
(a Delaware corporation),
SENECA-UPSHUR PETROLEUM, INC.
(a West Virginia corporation),
THEC HOLDINGS CORP.
(a Delaware corporation)
and
KEYSPAN CORPORATION
(a New York corporation)
Effective as of June 2, 2004
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TABLE OF CONTENTS
Page
Article I. CERTAIN DEFINITIONS AND OTHER MATTERS...................1
Section 1.1 Certain Definitions.....................................1
Section 1.2 Terms Defined in Other Sections........................10
Section 1.3 Interpretation and Rules of Construction...............12
Article II. DISTRIBUTION OF STOCK; CLOSING.........................12
Section 2.1 Distribution of Stock..................................12
Section 2.2 Closing................................................12
Section 2.3 THX's Deliveries at the Closing........................12
Section 2.4 THEC's Deliveries at the Closing.......................13
Article III. REORGANIZATION.........................................13
Section 3.1 Contribution...........................................13
Section 3.2 Assets and Liabilities.................................13
Section 3.3 Assignment of Contracts and Rights.....................15
Article IV. REPRESENTATIONS AND WARRANTIES OF THX..................16
Section 4.1 Organization and Qualification.........................16
Section 4.2 Capitalization.........................................16
Section 4.3 Authorization..........................................17
Section 4.4 Consents and Approvals; No Violation...................17
Section 4.5 Lease Operating Statements.............................17
Section 4.6 Financial Information; No Undisclosed Liabilities......17
Section 4.7 Bank Account Information...............................18
Section 4.8 Litigation.............................................18
Section 4.9 Licenses; Approvals....................................18
Section 4.10 Labor Matters..........................................18
Section 4.11 Compliance with Laws...................................19
Section 4.12 Insurance..............................................19
Section 4.13 Contracts..............................................19
Section 4.14 Environmental Matters..................................19
Section 4.15 Real Property..........................................20
Section 4.16 Employee Benefit Plans.................................20
Section 4.17 Non-Foreign Representation.............................22
Section 4.18 Reserve Report.........................................22
Section 4.19 Title..................................................23
Section 4.20 Sufficiency of Assets..................................23
Section 4.21 No Sale of EnerVest Assets.............................23
Section 4.22 Financing..............................................23
Section 4.23 Condition of Personal Property.........................23
Section 4.24 Brokerage Fees and Commissions.........................23
Section 4.25 No Hedges..............................................23
Section 4.26 Disclaimers............................................23
-i-
Page
Article V. REPRESENTATIONS AND WARRANTIES OF THEC AND KEYSPAN.....24
Section 5.1 Organization...........................................24
Section 5.2 Authorization..........................................25
Section 5.3 Consents and Approvals; No Violation...................25
Section 5.4 THEC THX Shares........................................25
Section 5.5 Litigation.............................................25
Section 5.6 Acquisition of Seneca-Upshur Shares for Investment.....26
Section 5.7 Acknowledgements.......................................26
Article VI. COVENANTS AND AGREEMENTS...............................26
Section 6.1 Employee Matters.......................................26
Section 6.2 Further Assurances.....................................28
Section 6.4 Confidentiality; Access to Records.....................29
Section 6.5 THX Shares Retained by THEC............................30
Section 6.6 Intercompany Accounts and Bank Debt....................30
Section 6.7 THX Compliance with Underwriting Agreement.............31
Section 6.8 Governance.............................................31
Section 6.9 Issuances of THX Common Stock..........................31
Section 6.10 Insurance..............................................32
Article VII. TAX MATTERS............................................32
Article VIII. CONDITIONS TO CLOSING..................................32
Section 8.1 Mutual Conditions......................................32
Section 8.2 Conditions to THEC's and KeySpan's Obligations.........32
Section 8.3 Conditions to THX's and Seneca-Upshur's Obligations....33
Article IX. TERMINATION............................................34
Section 9.1 Termination............................................34
Section 9.2 Effect of Termination..................................35
Article X. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION......................................35
Section 10.1 Survival of Representations and Warranties.............35
Section 10.2 Indemnification by THX.................................35
Section 10.3 Indemnification by THEC and KeySpan....................36
Section 10.4 Definition of Damage; Determination of
Indemnification......................................37
Section 10.5 Notice.................................................37
Section 10.6 Third Party Claim......................................38
Section 10.7 Exclusivity............................................40
Article XI. MISCELLANEOUS..........................................40
Section 11.1 Notices................................................40
Section 11.2 Governing Law; Consent to Jurisdiction.................41
Section 11.3 Waiver of Jury Trial...................................42
-ii-
Page
Section 11.4 Assignment; Successors and Assigns;
No Third Party Rights................................42
Section 11.5 Counterparts...........................................42
Section 11.6 Titles and Headings....................................42
Section 11.7 Entire Agreement.......................................42
Section 11.8 Amendment and Modification.............................42
Section 11.9 Publicity; Public Announcements........................43
Section 11.10 Waiver.................................................43
Section 11.11 Severability...........................................43
Section 11.12 No Strict Construction.................................43
Section 11.13 Knowledge..............................................43
Section 11.14 Affiliate Status.......................................43
Section 11.15 No Third Party Beneficiaries...........................43
Section 11.16 Specific Performance...................................43
Section 11.17 Expenses...............................................44
EXHIBITS
Exhibit A Asset Contribution Agreement
Exhibit B Amended and Restated Registration Rights Agreement
Exhibit C Tax Matters Agreement
Exhibit D Transition Services Agreement
Exhibit E Business Employees
Exhibit F THX Change-of-Control Plan
-iii-
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of June 2, 2004 (this "Agreement"),
is entered into by and among THE HOUSTON EXPLORATION COMPANY ("THX"), a Delaware
corporation having its principal place of business at 1100 Louisiana, Suite
2000, Houston, Texas, 77002, SENECA-UPSHUR PETROLEUM, INC. ("Seneca-Upshur"), a
West Virginia corporation and a wholly owned subsidiary of THX, having its
principal place of business at 1100 Louisiana, Suite 2000, Houston, Texas,
77002, THEC HOLDINGS CORP. ("THEC"), a Delaware corporation having its principal
place of business at One Metrotech Center, Brooklyn, New York 11201-3850, and
KEYSPAN CORPORATION ("KeySpan"), a New York corporation and the parent company
of THEC, having its principal place of business at One Metrotech Center,
Brooklyn, New York 11201-3850.
W I T N E S S E T H:
WHEREAS, THX operates (directly and indirectly through Seneca-Upshur) a
business consisting of the exploration for, and development and production of,
natural gas in the states of West Virginia, Pennsylvania and New York (the
"Business");
WHEREAS, KeySpan, through THEC, owns 17,380,392 of THX's 31,888,945
outstanding shares of common stock;
WHEREAS, THX, THEC and KeySpan intend that (a) the Contribution and
Distribution qualify under Sections 355 and 368 of the Code and (b) this
Agreement constitutes a plan of reorganization as the term is defined in Section
368 of the Code; and
WHEREAS, the boards of directors of THX, THEC and KeySpan have, in each
case, determined that it is in the best interests of their respective
corporations to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and intending to be legally bound, the parties hereto agree as
follows:
Article I.
CERTAIN DEFINITIONS AND OTHER MATTERS
Section 1.1 Certain Definitions.
As used in this Agreement and the schedules hereto, the following terms
have the respective meanings set forth below.
"Action" means any administrative, regulatory, judicial or other formal
proceeding or investigation by or before any Governmental Authority or
arbitrator.
"Affiliate" means, with respect to any Person, any other Person that, at
the relevant time, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or general partnership or
managing member interests, by contract or otherwise, including the ability to
elect the members of the board of directors or other governing body of a Person,
and the terms "controlled" and "controlling" have correlative meanings. For
purposes of this Agreement, THEC and KeySpan shall be deemed not to be
"Affiliates" of THX or any of its subsidiaries and THX or any of its
subsidiaries shall be deemed not to be an "Affiliate" of THEC or KeySpan;
provided, however, that following the Closing, Seneca-Upshur shall be an
"Affiliate" of THEC and KeySpan and shall not be an "Affiliate" of THX.
"Ancillary Agreements" means the agreements to be entered into by and among
THX and/or its Affiliates (other than Seneca-Upshur), on the one hand, and
Seneca-Upshur, THEC and/or KeySpan, on the other hand, concurrently with this
Agreement, including, but not limited to the Tax Matters Agreement, the Asset
Contribution Agreement, the Transition Services Agreement and the Registration
Rights Agreement.
"Asset Contribution Agreement" means the Asset Contribution Agreement dated
as of June 2, 2004 by and between THX and Seneca-Upshur with respect to the
contribution to Seneca-Upshur of the Contributed Business Assets and the
assumption by Seneca-Upshur of the Contributed Business Liabilities, in the form
attached hereto as Exhibit A.
"Business Contracts" means all Contracts, as defined in and contributed to
Seneca-Upshur pursuant to the Asset Contribution Agreement, and all
Seneca-Upshur Contracts.
"Business Day" means a day other than Saturday or Sunday on which banks are
open for business in New York, New York.
"Business Employees" means individuals who provide employment or
employment-type services primarily to the Business as of the date hereof, each
of whom is listed in Section 1.1 of THX's Disclosure Schedule.
"Business Fee Mineral Interests" means the Fee Mineral Interests, as
defined in and contributed to Seneca-Upshur pursuant to the Asset Contribution
Agreement, and the Seneca-Upshur Fee Mineral Interests.
"Business Leases" means all Leases, as defined in and contributed to
Seneca-Upshur pursuant to the Asset Contribution Agreement, and all
Seneca-Upshur Leases.
"Business Surface Agreements" means all Surface Agreements, as defined in
and contributed to Seneca-Upshur pursuant to the Asset Contribution Agreement,
and all Seneca-Upshur Surface Agreements.
"Cash Amount" means an amount in cash equal to $388,979,250.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act, as amended.
"Claims" means any and all (a) claims, (b) demands, (c) suits, or (d)
causes of action (in the case of clause (d), relating to or resulting from an
Action).
2
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Business Information" shall mean financial information,
customer lists, supplier lists, pricing and cost information, operating data,
reserve reports, projections, business and marketing plans and proposals and
other proprietary business information of or relating to the Business.
"Contract" means any contract, agreement, lease, license, sales order,
purchase order, indenture, note, bond, loan, instrument, lease, commitment or
other arrangement or agreement that is binding on any Person or any part of its
assets or properties under applicable Law.
"Contributed Business Assets" means all of the Interests, as defined in the
Asset Contribution Agreement.
"Contributed Business Contracts" means collectively all of the Contributed
Contracts and Surface Agreements (each as defined in the Asset Contribution
Agreement) contributed to Seneca-Upshur pursuant to the Asset Contribution
Agreement.
"Contributed Business Equipment" means all of the Equipment, as defined in
and contributed to Seneca-Upshur pursuant to the Asset Contribution Agreement.
"Contributed Business Liabilities" means the obligations, liabilities,
debts and commitments assumed by Seneca-Upshur pursuant to Section 6.2 of the
Asset Contribution Agreement.
"Defensible Title" means such record and beneficial right, title and
interest in and to such property that:
1.1.1 entitles Seneca-Upshur to a net revenue interest in such
property not less than the net revenue interest set forth in the
Reserve Report for such property, without reduction, suspension, or
diminution throughout the intended duration of the estate constituting
such property, except as shown in the Reserve Report or in Section
4.18.1 of THX's Disclosure Schedule. Changes or adjustments that
result solely from the establishment of units or changes in existing
units (or the participating areas therein) shall not constitute a
change in the net revenue interest;
1.1.2 subjects Seneca-Upshur to a working interest in such
property that is no greater than the record title or operating rights
interest set forth in the Reserve Report for such property, without
increase throughout the intended duration of the estate constituting
such property, except as shown in the Reserve Report or in Section
4.18.1 of THX's Disclosure Schedule. Changes or adjustments that
result solely from the establishment of units or changes in existing
units (or the participating areas therein) shall not constitute a
change in the working interest; and
1.1.3 has no Encumbrances other than Permitted Encumbrances.
"Effective Time" means 12:01 am Eastern Daylight Time on June 1, 2004.
3
"Encumbrances" means security interests, liens, Claims, charges, title
defects, deficiencies or exceptions (including, with respect to Real Property,
defects, deficiencies or exceptions in, or relating to, marketability of title,
or leases, subleases or the like affecting title), mortgages, deeds of trust,
pledges, easements, encroachments, restrictions on use, rights-of-way, rights of
first refusal, conditional sales or other title retention agreements, covenants,
conditions or other similar restrictions (including restrictions on transfer).
"EnerVest Agreement" means the Purchase and Sale Agreement dated December
1, 2003 by and between EnerVest East Limited Partnership and THX.
"Environmental Laws" means any Law governing or relating to (a) the
environment, (b) Releases or threatened Releases of Regulated Substances,
including investigations, monitoring and abatement of such Releases, (c) the
manufacture, handling, transport, use, treatment, storage or disposal of
Regulated Substances or materials containing Regulated Substances or (d)
protection of human health or safety (to the extent related to exposure to
Regulated Substances), including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss. 9601 et
seq.); the Hazardous Material Transportation Act, as amended (42 U.S.C. ss. 1801
et seq.); the Resource Conservation and Recovery Act, as amended (42 U.S.C. ss.
6901 et seq.); the Toxic Substances Control Act, as amended (15 U.S.C. ss.
2601); the Clean Air Act, as amended (42 U.S.C. ss. 7401 et seq.); the Emergency
Planning and Community Right-to-Know Act, as amended (42 U.S.C. ss. 11001 et
seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. ss. 651 et
seq.); the Safe Drinking Water Act, as amended (42 U.S.C. ss. 300f et seq.); the
Federal Water Pollution Control Act, as amended (33 U.S.C. ss. 1251 et seq.);
and state equivalents of these Environmental Laws or regulations promulgated
pursuant to any of said Environmental Laws.
"Environmental Permit" means any registration, approval, identification
number, License, notice, permit, exemption, or other authorization or filing
required under or issued pursuant to any applicable Environmental Law.
"Equity Offering" means the offering and sale by THX of shares of THX
Common Stock pursuant to the Underwriting Agreement, the net proceeds of which
offering shall comprise a portion of the Cash Amount.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles in
effect from time to time applied consistently throughout the relevant periods.
"Governmental Authority" means any national, supranational, federal, state,
municipal or local government, foreign or domestic, or the government of any
political subdivision of any of the foregoing, or any entity, authority, agency,
ministry or other similar body exercising executive, legislative, judicial,
regulatory or administrative authority or functions of or pertaining to
government, including any authority or other quasi-governmental entity
established by a Governmental Authority to perform any of such functions.
4
"Hydrocarbons" means all merchantable oil, gas, liquid hydrocarbons,
liquefiables, condensate and distillate that have been produced from any assets
of Seneca-Upshur.
"Indebtedness" means (a) indebtedness for borrowed money or for the
deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), including indebtedness evidenced by a
note, bond, debenture or similar instrument; (b) guarantees or other contingent
obligations in respect of items in clause (a); (c) obligations required to be
classified and accounted for as capital leases on a balance sheet under GAAP;
(d) obligations in respect of outstanding letters of credit, acceptances and
similar obligations created for the account of such Person; (e) liabilities
under interest rate cap Contracts, interest rate swap Contracts, gas or other
commodity hedges and similar Contracts; and (f) to the extent not otherwise
included in the foregoing, any financing of accounts receivable or inventory.
"Independent Engineers" means Netherland, Sewell & Associates, Inc. and
Miller and Lents, Ltd., independent petroleum engineering consultants.
"Insurance Policies" means each insurance policy (other than relating to
employee benefit plans) which, as of the date hereof, is maintained by or on
behalf of or provides coverage primarily to (a) Seneca-Upshur with respect to
the Business Assets or (b) the Business.
"IRS" means the Internal Revenue Service of the United States of
America.
"Laws" means all United States federal, state or local or foreign laws
(including common law), constitutions, statutes, codes, rules, regulations,
ordinances, executive orders, decrees, edicts, guidelines, governmental
restrictions or other legally enforceable requirements of a Governmental
Authority.
"Liabilities" means any and all debts, liabilities, commitments and
obligations, whether or not fixed, contingent or absolute, matured or unmatured,
direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or
unknown, whether or not required by GAAP to be reflected in financial statements
or disclosed in the notes thereto.
"Material Adverse Effect" means any change, effect, circumstance,
condition, event, occurrence or state of facts which would reasonably be
expected to be materially adverse to the business, operations or condition
(financial or otherwise) of Seneca-Upshur or the Business, taken as a whole, or
that would prevent or delay, in any material respect, the consummation by THX or
its Affiliates of the transactions contemplated by this Agreement, the Tax
Matters Agreement and the other Ancillary Agreements, other than any change,
effect, event, occurrence or state of facts (a) that is generally applicable in
the economy of the United States, (b) generally affecting the industry in which
THX and Seneca-Upshur operate, so long as THX and Seneca-Upshur are not
disproportionately affected thereby, or (c) relating to the announcement or
disclosure of this Agreement or of the transactions contemplated hereby. For the
avoidance of doubt, in the definition of Material Adverse Effect, references to
Seneca-Upshur will be deemed to be references to Seneca-Upshur Petroleum, Inc.
after giving effect to the Business Contribution (but for the avoidance of doubt
before giving effect to the contribution of the Cash Amount) and references to
5
the Business will be deemed to be references to the business operated by THX
consisting of the exploration for, and development and production of, natural
gas in the states of West Virginia, Pennsylvania and New York, without taking
into account the contribution of the Cash Amount into the Business.
"Permitted Encumbrances" means:
1.1.4 royalties, overriding royalties and division orders and
sales contracts containing terms and provisions covering gas, oil or
associated liquid or gaseous hydrocarbons, reversionary interests and
similar burdens if the net cumulative effect of such burdens does not
operate to reduce the net revenue interest of any property to an
amount less than the net revenue interest for such property as set
forth in the Reserve Report;
1.1.5 (a) calls on production which entitle Seneca-Upshur to
receive a current market price for such substance or (b) (i)
preferential rights to purchase the property, (ii) required third
party consents to assignments and (iii) similar agreements, in each of
clause (i), (ii) or (iii) prior to Closing (1) waivers or consents
have been obtained from the appropriate parties, (2) the appropriate
time period for asserting such rights has expired without an exercise
of such rights, or (3) with respect to consents referred in clause
(ii), such consent need not be obtained prior to an assignment, or
failure to obtain such consent would not reasonably be expected to
have a material adverse impact on the relevant property;
1.1.6 Encumbrances for Taxes or other assessments or changes by
Governmental Authorities that arise by operation of Law and are not
yet due and payable, or that are being contested in good faith;
provided that all monies that are required to be paid under applicable
Law during the pendency of any contest have been paid;
1.1.7 mechanics', carriers', workers', materialmen's,
warehousemen's and similar liens arising or incurred in the ordinary
course of business for (a) sums not due and payable, or (b) payments
that are being contested in good faith by appropriate proceedings,
which proceedings are disclosed in Section 1.1.7 of THX's Disclosure
Schedule;
1.1.8 all rights to consent by, required notices to, filings
with, or other actions by third parties or Governmental Authorities in
connection with the sale or conveyance of oil and gas leases or
interests therein if the same are customarily obtained subsequent to
such sale or conveyance;
1.1.9 easements, rights-of-way, servitudes, surface leases and
other rights in respect of surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like and conditions,
covenants or other restrictions relating thereto, duly recorded or
visible on the ground; permits disclosed in Schedule 1.1.9; and
easements of streets, alleys, highways, pipelines, telephone lines,
power lines, railways and other easements and rights-of-way on, over
or in respect of any Real Property which do not and would not
reasonably be expected to impair the continued use or operation of
such assets substantially as such assets are currently used or
operated;
6
1.1.10 rights reserved to or vested in any Governmental Authority
to control or regulate any property used in the Business, and all
applicable Laws which, in either case, will not materially interfere
with the operation of the Business;
1.1.11 any matter that a reasonable and prudent operator
knowledgeable in the gas and oil business would not consider a
material impairment of Seneca Upshur's title; and
1.1.12 any Encumbrances and similar matters set forth in Section
1.1.12 of THX's Disclosure Schedule.
"Person" means an individual, partnership, corporation, limited liability
company, joint stock company, unincorporated organization or association, trust
or joint venture, or a Governmental Authority.
"RCRA" means the Resource Conservation and Recovery Act, as amended.
"Real Property" means any real property owned by Seneca-Upshur as of the
Closing Date.
"Registration Rights Agreement" means the Amended and Restated Registration
Rights Agreement to be entered into by and among THX, THEC and KeySpan as of the
Closing, in the form attached hereto as Exhibit B.
"Regulated Substances" means any pollutant, contaminant, hazardous,
dangerous or toxic substance, material or waste defined as such in, regulated
pursuant to, or that could give rise to liability under, any Environmental Law
including any explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum (including
crude oil and any fraction thereof) and petroleum products (including waste
petroleum and petroleum products).
"Release" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, dispersal, leaching or migration into the indoor
or outdoor environment (including ambient air, surface water, groundwater and
surface or subsurface strata) or into or out of any property, including the
movement of Regulated Substances through or in the air, soil, surface water,
groundwater or property.
"Retained Business" means the business currently conducted by THX and its
subsidiaries other than the Business.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Seneca-Upshur Assets" means all of the assets of Seneca-Upshur immediately
prior to giving effect to the Contribution (which assets have been valued at
$60,000,000 by the parties), including all of Seneca Upshur's right, title and
interest in and to the following:
1.1.13 the oil and gas leases and oil, gas and mineral leases set
forth in Section 1.1.13 of THX's Disclosure Schedule, together with
7
all of Seneca-Upshur's other right, title and interest in and to the
land covered by such leases, including all mineral, royalty and
overriding royalty interests, and all rights, privileges and
obligations appurtenant to those interests (the "Seneca-Upshur
Leases");
1.1.14 all rights and interests in any unit or pooled area in
which the Seneca-Upshur Leases are included, to the extent that these
rights and interests arise from and are associated with the
Seneca-Upshur Leases or the Seneca-Upshur Fee Mineral Interests (as
hereinafter defined), including all rights derived from any
unitization, pooling, operating, communitization or other agreement or
from any declaration or order of any governmental authority;
1.1.15 all oil, gas and condensate wells (whether producing, not
producing or abandoned), water source, water injection and other
injection or disposal wells and systems located on the Seneca-Upshur
Leases, the Seneca-Upshur Fee Mineral Interests or lands unitized or
pooled with the Seneca-Upshur Leases or the Seneca-Upshur Fee Mineral
Interests (the "Seneca-Upshur Wells");
1.1.16 all equipment, facilities, pipelines, pipeline laterals,
gathering systems, platforms, well pads, tank batteries, compressors,
meters, improvements, fixtures, inventory, spare parts, tools,
materials and other personal property on the Seneca-Upshur Leases or
used in developing or operating the Seneca-Upshur Leases or producing,
treating, storing, compressing, processing or transporting
hydrocarbons on or from the Seneca-Upshur Leases or the Seneca-Upshur
Fee Mineral Interests (the "Seneca-Upshur Equipment");
1.1.17 all easements, rights-of-way, licenses, permits,
servitudes, surface leases and similar interests applicable to or used
in operating the Seneca-Upshur Leases or the Seneca-Upshur Fee Mineral
Interests or the Seneca-Upshur Equipment (the "Seneca-Upshur Surface
Agreements");
1.1.18 all contracts and contractual rights, obligations and
interests relating to the Seneca-Upshur Leases or the Seneca-Upshur
Fee Mineral Interests or the lands unitized or pooled with the
Seneca-Upshur Leases or the Seneca-Upshur Fee Mineral Interests, or
the Seneca-Upshur Equipment, including unit agreements, farmout
agreements, farm-in agreements, operating agreements, and hydrocarbon
sales, purchase, gathering, transportation, treating, marketing,
exchange, processing and fractionating agreements, whether of record
or not (the "Seneca-Upshur Contracts");
1.1.19 all fee mineral interests described in Section 1.1.19 of
THX's Disclosure Schedule (the "Seneca-Upshur Fee Mineral Interests"),
including all rights and obligations pertaining to the Seneca-Upshur
Fee Mineral Interests under any of the Seneca-Upshur Contracts;
1.1.20 all other tangibles, miscellaneous interests or other
assets on or used in connection with the Seneca-Upshur Leases,
Seneca-Upshur Wells, Seneca-Upshur Fee Mineral Interests,
Seneca-Upshur Equipment and/or Seneca-Upshur Contracts, including all
lease files, land files, well files, production records, division
8
order files, abstracts, title opinions, and contract files, insofar as
they are directly related to the items described in Sections 1.1.13
through 1.1.20 hereof; and
1.1.21 Hydrocarbons that have been produced from the assets
described in Sections 1.1.13 through 1.1.20 above prior to the
Effective Time and that are stored, at the Effective Time, in the
Seneca-Upshur Leases or unit stock tanks or in the Seneca-Upshur
Leases or unit gathering lines or production facilities upstream of
the sale or custody transfer meters of the purchaser or processor of
such Hydrocarbon production from the Seneca-Upshur Assets, the
quantities of which have been determined at the Effective Time
pursuant to the Seneca-Upshur Leases or unit operator's tank gauge
readings, meter tickets or other inventory records; provided that for
natural gas wells that do not have electronic measurement and where
charts are changed on other than a daily basis, the production from
such wells shall be pro-rated as of the Effective Time based upon the
number of days between chart changes during the period between chart
changes that includes the Closing Time, the number of days the well
was actually produced during the period between chart changes that
includes the Closing Time, and the assumption that the well produced
equal quantities during each day of actual production ("Hydrocarbon
Inventory").
"subsidiaries" of any entity means, at any date, any Person (a) the
accounts of which would be consolidated with those of the applicable entity in
such entity's consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, or (b) of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests or more than 50% of the
profits or losses of which are, as of such date, owned, controlled or held by
the applicable entity or one or more subsidiaries of such entity.
"Tax" means any United States federal, state, local or foreign taxes,
including but not limited to any income, gross receipts, payroll, employment,
excise, severance, stamp, business, premium, windfall profits, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added tax, or similar tax, any alternative or add-on minimum
tax, and any estimated tax, in each case, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Matters Agreement" means the Tax Matters Agreement to be entered into
by and among THX, THEC, KeySpan and Seneca-Upshur as of the Closing, in the form
attached hereto as Exhibit C.
"THEC THX Shares" means 10,800,000 shares of THX Common Stock owned by
THEC.
"THEC's Disclosure Schedule" means the disclosure schedule that THEC has
delivered to THX on the date of this Agreement prior to the execution hereof.
"THX's Disclosure Schedule" means the disclosure schedule that THX has
delivered to THEC on the date of this Agreement prior to the execution hereof.
9
"Transition Services Agreement" means the Transition Services Agreement
pursuant to which THX agrees to provide certain transitional operational and
accounting services with respect to the Business, to be entered into by and
between THX and Seneca-Upshur as of the Closing in the form attached hereto as
Exhibit D and executed concurrently herewith.
"Underwriting Agreement" means the Underwriting Agreement entered into by
and among THX and KeySpan and Lehman Brothers Inc. and Goldman, Sachs & Co.
dated May 26, 2004 in connection with the issuance and sale of shares of THX
Common Stock.
Section 1.2 Terms Defined in Other Sections. The following terms are
defined elsewhere in this Agreement in the following Sections:
Agreement........................................... Preamble
Benefit Plans....................................... Section 4.16.1
Benefits Package.................................... Section 6.1.2
Board............................................... Section 6.8
Business............................................ Recitals
Business Assets..................................... Section 3.2.1
Business Contribution............................... Section 3.1
Business Employees.................................. Section 6.1.1
Business Liabilities................................ Section 3.2.3
Business Records.................................... Section 6.4.2
Claim Dispute Notice................................ Section 10.5.4
Closing............................................. Section 2.2
Closing Date........................................ Section 2.2
Commitment.......................................... Section 4.21
Confidential Information............................ Section 6.4.1
Contributed Business Assets......................... Section 3.2.1
Contributed Business Liabilities.................... Section 3.2.3
Contribution........................................ Section 3.1
Damages............................................. Section 10.4
Distribution........................................ Section 2.1
Employees........................................... Section 6.1
Excluded Assets..................................... Section 3.2.2
10
Indemnity Claim..................................... Section 10.5.1
KeySpan............................................. Preamble
KeySpan Basket...................................... Section 10.3.2
KeySpan Cap......................................... Section 10.3.2
KeySpan De Minimis.................................. Section 10.3.2
KeySpan's knowledge................................. Section 11.13
Licenses............................................ Section 4.9
MMMF................................................ Section 4.26.1
NORM................................................ Section 4.26.1
Notice of Claim..................................... Section 10.5.1
PBGC................................................ Section 4.16.3
Purchaser's Title Representations and Warranties.... Section 10.1
Records............................................. Section 6.4.2
Representatives..................................... Section 10.2.1
Reserve Report...................................... Section 4.18.1
Retained Liabilities................................ Section 3.2.4
Seller's Title Representations and Warranties....... Section 10.1
Seneca-Upshur....................................... Preamble
Seneca-Upshur Common Stock......................... Section 4.2.1
Seneca-Upshur Contracts............................ Section 1.1.18
Seneca-Upshur Employees............................ Section 4.16.1
Seneca-Upshur Equipment............................ Section 1.1.16
Seneca-Upshur Fee Mineral Interests Section 1.1.19
Seneca-Upshur Leases............................... Section 1.1.13
Seneca-Upshur Shares............................... Section 4.2.1
Seneca-Upshur Surface Agreements................... Section 1.1.17
Seneca-Upshur Wells................................ Section 1.1.15
THEC............................................... Preamble
THEC's knowledge................................... Section 11.13
Third Party Claim.................................. Section 10.6.1
THX................................................ Preamble
THX Basket......................................... Section 10.2.2
11
THX Cap............................................ Section 10.2.2
THX Common Stock................................... Section 4.2.1
THX De Minimis..................................... Section 4.2.1
THX Shares......................................... Section 4.2.1
THX's knowledge.................................... Section 11.13
Transferred Employees.............................. Section 6.1.2
Section 1.3 Interpretation and Rules of Construction. Unless otherwise
indicated to the contrary in this Agreement by the context or use thereof: (a)
the words, "herein," "hereto," "hereof," "hereunder" and words of similar import
refer to this Agreement as a whole and not to any particular Section or
paragraph of this Agreement; (b) words importing the masculine gender shall also
include the feminine and neutral genders, and vice versa; (c) words importing
the singular shall also include the plural, and vice versa; and (d) the words
"include," "includes," or "including" are deemed to be followed by the words
"without limitation." All terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein.
Article II.
DISTRIBUTION OF STOCK; CLOSING
Section 2.1 Distribution of Stock. Upon the terms and subject to the
conditions of this Agreement, at the Closing, (a) THX shall assign, transfer,
convey and deliver to THEC, and THEC shall accept and acquire from THX, all of
the Seneca-Upshur Shares (free and clear of all Encumbrances) in exchange for
the THEC THX Shares, and (b) THEC shall assign, transfer, convey and deliver to
THX, and THX shall accept and acquire from THEC, the THEC THX Shares (free and
clear of all Encumbrances) in exchange for the Seneca-Upshur Shares
(collectively, the "Distribution").
Section 2.2 Closing. The closing of the Distribution and the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of King & Spalding LLP, Suite 4000, 1100 Louisiana Street, Houston, Texas 77002
at 10:00 a.m. on June 2, 2004, or on such other date or at such other time as
the parties hereto may agree. The date of the Closing is referred to herein as
the "Closing Date."
Section 2.3 THX's Deliveries at the Closing. At the Closing, THX shall
deliver or cause to be delivered to THEC the following:
2.3.1 one or more stock certificates, together with stock powers
executed in blank, representing all of the issued and outstanding
capital stock of Seneca-Upshur;
2.3.2 the stock books, stock ledgers and minute books of
Seneca-Upshur;
2.3.3 each of the Ancillary Agreements to which THX or
Seneca-Upshur is a party, executed by THX or Seneca-Upshur, as the
case may be;
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2.3.4 letters of resignation, dated as of the Closing Date,
from each director and officer of Seneca-Upshur that is not a
Business Employee; and
2.3.5 such other documents as are reasonably required by
THEC to be delivered to effectuate the transactions contemplated
hereby.
Section 2.4 THEC's Deliveries at the Closing. At the Closing, THEC shall
deliver or cause to be delivered to THX the following:
2.4.1 one or more stock certificates, together with stock
powers executed in blank, representing the THEC THX Shares;
2.4.2 each of the Ancillary Agreements to which THEC or
KeySpan is a party, executed by THEC or KeySpan, as the case may
be;
2.4.3 letters of resignation, dated as of the Closing Date,
from each of Messrs. Fani, Luterman and Nichols as a member of
the THX Board of Directors; and
2.4.4 such other documents as are reasonably required by THX
to be delivered to effectuate the transactions contemplated
hereby.
Each document of transfer or assumption referred to in this Article II (or in
any related definition set forth in Article I) that is not attached as an
Exhibit to this Agreement or is not otherwise an Ancillary Agreement shall be in
customary form and shall be reasonably satisfactory in form and substance to the
parties thereto.
Article III.
REORGANIZATION
Section 3.1 Contribution. On or prior to the date hereof, THX has, or has
caused its respective subsidiaries to, contribute to Seneca-Upshur the Cash
Amount and to assign, transfer, convey and deliver to Seneca-Upshur, the
Contributed Business Assets and the Contributed Business Liabilities, and in
exchange therefore, Seneca-Upshur has accepted, assumed and agreed to pay,
perform or otherwise discharge, in accordance with the respective terms and
subject to the respective conditions thereof, the Contributed Business
Liabilities in accordance with the Asset Contribution Agreement (such
contributions and assumptions are referred to herein collectively as the
"Contribution" and such contributions (excluding the contribution of the Cash
Amount) and assumptions are referred to herein collectively as the "Business
Contribution"). Each of the representations, warranties, covenants, agreements
and undertakings of THX contained herein is given or made as if, and on the
basis that, the Business Contribution had occurred prior to all dates relevant
to such representations, warranties, covenants and undertakings. Subject to the
foregoing, any references to "Seneca-Upshur" in any such representations,
warranties, covenants, agreements and undertakings will be deemed to be a
reference to Seneca-Upshur Petroleum, Inc. after giving effect to the Business
Contribution, but for the avoidance of doubt not the contribution of the Cash
Amount, unless the context clearly indicates otherwise.
Section 3.2 Assets and Liabilities.
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3.2.1 Business Assets. For purposes of this Agreement,
"Business Assets" means all of the Contributed Business Assets
and all of the Seneca-Upshur Assets.
3.2.2 Excluded Assets. All assets, rights, properties,
agreements or other interests owned by THX or its subsidiaries
(other than Seneca-Upshur) that are not used solely in connection
with the Business, including the assets, rights and interests set
forth in Section 1.3 of the Asset Contribution Agreement, or that
are described, or referred to in Section 3.2.2 of THX's
Disclosure Schedule (such assets, rights, properties, agreements
and other interests being referred to herein, collectively, as
the "Excluded Assets"), shall be excluded from the transactions
contemplated hereby and shall remain the property of THX and its
subsidiaries.
3.2.3 Business Liabilities. Subject to the terms and
conditions of this Agreement, in partial consideration of the
transfer to Seneca-Upshur of the Contributed Business Assets,
Seneca-Upshur has assumed the Contributed Business Liabilities
and, on the Closing Date will assume the following liabilities
and obligations of the Business (collectively, the "Business
Liabilities"):
3.2.3.1 Liabilities relating to the Transferred
Employees arising following the Closing Date to the extent
expressly allocated to Seneca-Upshur or KeySpan pursuant to
Section 6.1; and
3.2.3.2 all Liabilities related to the ownership or
operation of the Business that are not Retained Liabilities,
whether arising before or after the Effective Time.
3.2.4 Retained Liabilities. THX hereby retains, and is and
will remain liable for the payment, performance and discharge of
the following (collectively, the "Retained Liabilities"):
3.2.4.1 all Liabilities relating to the Excluded Assets
whether arising before or after the Effective Time;
3.2.4.2 any Indebtedness of Seneca-Upshur outstanding
as of the Closing Date;
3.2.4.3 all Liabilities relating to (a) current and
former employees, directors and consultants of THX
(including the Business Employees) and (b) all employee
benefit plans, programs, policies and arrangements (whether
or not Benefit Plans) of THX and its Affiliates (including
Seneca-Upshur), in each case to the extent arising before,
on or after the Closing Date, except to the extent any such
Liabilities are expressly allocated to Seneca-Upshur or
KeySpan pursuant to Section 6.1;
3.2.4.4 all regular lease operating expenses relating
to the Seneca-Upshur Leases outstanding at the Effective
Time or arising after the Effective Time to the extent
accrued prior to the Effective Time.
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3.2.4.5 all accounts payable (including any
intercompany payables) of Seneca-Upshur outstanding at the
Effective Time or arising after the Effective Time in
respect of goods or services provided on or prior to the
Effective Time; and
3.2.4.6 all liabilities or obligations with respect to
any production or pipeline imbalances and penalties assessed
as a result of such imbalances, associated with production
and sales prior to the Effective Time.
3.2.5 Taxes. For purposes of this Agreement, Taxes shall not
be a Business Liability or a Retained Liability, and refunds or
credits from Taxes shall not be a Business Asset or Excluded
Asset. Liabilities, refunds and credits with respect to Taxes
shall be governed by and allocated exclusively in accordance with
the Tax Matters Agreement.
3.2.6 Post-Closing Reimbursements. Following the Closing,
THX will (i) pay to Seneca-Upshur any proceeds received by THX on
account of Hydrocarbon Inventory as of the Effective Time or
Hydrocarbons produced on or after the Effective Time and (ii)
reimburse Seneca-Upshur for any expenses paid by Seneca-Upshur
that represent Retained Liabilities, upon receipt from
Seneca-Upshur of appropriate evidence of such payment. Following
the Closing, Seneca-Upshur will promptly (i) pay to THX any
proceeds received by Seneca-Upshur on account of Hydrocarbons
produced prior to the Effective Time other than Hydrocarbon
Inventory as of the Effective Time and (ii) reimburse THX for any
expenses paid by THX that represent Business Liabilities, upon
receipt from THX of appropriate evidence of such payment. The
parties agree to keep proper accounts of such amounts and agree
to settle such amounts on a date that is to be mutually agreed
within 60 days after Closing and on each following successive 30
day period. Any credit or liability with respect to production or
pipeline imbalances and any associated penalties existing as of
the Effective Time will be settled by the parties after the
Closing.
Section 3.3 Assignment of Contracts and Rights. With respect to any
Contributed Business Contract and any claim, right or benefit arising thereunder
or resulting therefrom to be assumed by Seneca-Upshur hereunder, where written
consent of the other parties to any such Contributed Business Contract is
required from other parties for the assignment thereof to Seneca-Upshur and such
consent is not obtained by THX on or before the Closing Date, THX and THEC shall
cooperate in an arrangement reasonably satisfactory to THX and THEC under which
Seneca-Upshur would obtain, to the extent practicable, the claims, rights and
benefits and assume the corresponding obligations thereunder in accordance with
this Agreement and the Asset Contribution Agreement, including by
subcontracting, sublicensing or subleasing such claims, rights, benefits and
obligations to Seneca-Upshur and/or by entering into an arrangement under which
THX would enforce, for the benefit of THEC and at the expense of THEC, such
claims, rights and benefits, and Seneca-Upshur would assume for the benefit of
THX such obligations, against a third party thereto. From and after the Closing,
THX will promptly pay to THEC when received all monies received by THX in
connection with any Business Asset or any claim, right or benefit arising
thereunder relating to the period on or after the Effective Time and not
15
previously transferred to Seneca-Upshur. As of or from the Closing Date, THX
authorizes Seneca-Upshur, to the extent permitted by applicable Law, to perform
all of the obligations and receive all of the benefits as of the Effective Time
of THX under such Contributed Business Contracts and appoints THEC
attorney-in-fact to act in its name on its behalf with respect thereto.
Article IV.
REPRESENTATIONS AND WARRANTIES OF THX
THX hereby represents and warrants to THEC and KeySpan as follows:
Section 4.1 Organization and Qualification. Each of THX and Seneca-Upshur
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power to
own, lease and operate its properties and to carry on its business as it is now
being conducted. Each of THX and Seneca-Upshur is duly qualified to conduct
business and in good standing as a foreign corporation in every jurisdiction in
which its ownership or lease of property or the conduct of its business and
operations makes such qualification necessary, except for such jurisdictions in
which THX's or Seneca-Upshur's failure to be so qualified would not reasonably
be expected to have a Material Adverse Effect. Neither THX nor Seneca-Upshur is
in violation in any material respect of any provision of its certificate of
incorporation, by-laws or other comparable organizational documents.
Section 4.2 Capitalization.
4.2.1 The authorized capital stock of THX consists of 50,000,000
shares of common stock, par value $.01 per share (the "THX Common
Stock"), of which 31,888,945 shares of Common Stock (the "THX Shares")
are issued and outstanding as of the date hereof. The THX Shares
constitute all of the issued and outstanding shares of capital stock
of THX. Except as disclosed in THX's Prospectus Supplement dated May
26, 2004, there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments (contingent or
otherwise) or other agreements of any character (any of the foregoing
a "Commitment") obligating THX to issue any additional shares of its
capital stock, or any other securities convertible into or evidencing
the right to subscribe for any shares of THX Common Stock.
4.2.2 The authorized capital stock of Seneca-Upshur consists of
100 shares of common stock, par value $50 per share (the
"Seneca-Upshur Common Stock"), of which 100 shares are issued and
outstanding (the "Seneca-Upshur Shares"). The Seneca-Upshur Shares are
owned by THX, free and clear of any Encumbrances, and have been duly
authorized and validly issued and are fully paid and nonassessable and
free of preemptive rights. At the Closing, the Seneca-Upshur Shares
will be transferred to THEC free and clear of any Encumbrances except
as may be set forth in Section 4.2.2 of THX's Disclosure Schedule.
There are not any Commitments obligating Seneca-Upshur to issue any
additional shares of its capital stock, or any other securities
convertible into or evidencing the right to subscribe for any shares
of Seneca-Upshur Common Stock. THX is not a party to any voting trust
or agreement with respect to any Seneca-Upshur Shares or to any
agreement relating to the issuance, sale, redemption, transfer,
acquisition or other disposition of Seneca-Upshur Shares.
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Seneca-Upshur does not own any capital stock, membership interest,
partnership interest, joint venture interest or other equity interest
in any Person.
Section 4.3 Authorization. Each of THX and Seneca-Upshur has the requisite
corporate power and authority to execute and deliver this Agreement, the Tax
Matters Agreement and the other Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby and the execution and delivery by
THX and Seneca-Upshur of this Agreement, the Tax Matters Agreement and the other
Ancillary Agreements and the consummation by THX and Seneca-Upshur of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of each of THX and Seneca-Upshur, and no
other corporate proceedings on the part of THX or Seneca-Upshur are necessary to
authorize this Agreement, the Tax Matters Agreement or the other Ancillary
Agreements or to consummate the transactions contemplated hereby or thereby.
Each of this Agreement, the Tax Matters Agreement and the other Ancillary
Agreements has been duly and validly executed and delivered by each of THX and
Seneca-Upshur, and constitutes the legal, valid and binding obligation of each
of THX and Seneca-Upshur, enforceable against each of THX and Seneca-Upshur in
accordance with its terms, subject to (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws of general application with
respect to creditors, (b) general principles of equity, and (c) the power of a
court to deny enforcement of remedies generally based upon public policy.
Section 4.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement, the Tax Matters Agreement and the other Ancillary
Agreements by THX and Seneca-Upshur, as applicable, nor the consummation by THX
and Seneca-Upshur of the transactions contemplated hereby or thereby, will (a)
violate, conflict with or result in a breach of any provision of the governing
documents of THX or Seneca-Upshur, (b) require any consent, approval, order,
authorization, waiver or License of, or filing with or notification to, any
third party or Governmental Authority, except (i) as set forth in Section 4.4 of
THX's Disclosure Schedule, or (ii) any consents, approvals, authorizations or
waivers normally obtained after the consummation of transactions of the nature
contemplated by this Agreement and the failure to obtain such consent, approval,
authorization or waiver or License would not, individually or in the aggregate,
have a Material Adverse Effect, (c) (with or without notice or lapse of time or
both) conflict with, violate, require consent under, result in a default (or
give rise to any right of termination, cancellation or acceleration) of any
Contract or License other than as to which requisite waivers or consents have
been obtained or which, individually or in the aggregate, are not reasonably
expected to have a Material Adverse Effect, or (d) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to THX or
Seneca-Upshur or any of its assets, except for violations which, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
Section 4.5 Lease Operating Statements. Seneca-Upshur is not party to, nor
are any of its properties or assets bound by, any oil and gas leases or oil, gas
and mineral leases other than the Business Leases. THX previously has delivered
to THEC and KeySpan true and correct copies of lease operating statements and
authorizations for expenditure for all Business Leases.
Section 4.6 Financial Information; No Undisclosed Liabilities.
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4.6.1 The summary of lease operating statements previously
provided to KeySpan was true and correct in all material respects
as of the date of the information set forth therein.
4.6.2 As of the Closing Date, Seneca-Upshur will have no
Indebtedness. Except as set forth in Section 4.6 of THX's
Disclosure Schedule, as of the Closing Date, Seneca-Upshur has no
material liabilities or obligations of any kind, whether accrued,
contingent, absolute, determined, determinable or otherwise, that
would be required to be reflected on a balance sheet or the notes
thereto prepared in accordance with GAAP, other than routine
operating expenses incurred at or after the Effective Time,
liability for Taxes (which are addressed in the Tax Matters
Agreement), royalty and other payment obligations relating to
Hydrocarbons produced at or after the Effective Time and usual
and customary asset retirement and abandonment obligations
relating to any wells on any properties set forth in Section 4.15
of THX's Disclosure Schedule.
Section 4.7 Bank Account Information. Section 4.7 of THX's Disclosure
Schedule contains an accurate list of the names and addresses of every bank and
other financial institution in which Seneca-Upshur maintains an account (whether
checking, savings or otherwise), lock box or safe deposit box, and the account
numbers and persons having signature authority or legal access thereto.
Section 4.8 Litigation. Except as set forth in Section 4.8 of THX's
Disclosure Schedule, there are no Actions pending or, to THX's knowledge,
threatened against Seneca-Upshur or with respect to assets or properties of
Seneca-Upshur. Except as set forth in Section 4.8 of THX's Disclosure Schedule
(a) there are no judgments or outstanding orders, injunctions, decrees,
stipulations, or awards (whether rendered by a court or administrative agency or
by arbitration) against THX that would reasonably be expected to prohibit,
restrict or affect the Business in any material respect and (b) there are no
judgments or outstanding orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration) against
Seneca-Upshur.
Section 4.9 Licenses; Approvals. Except as set forth in Section 4.9 of
THX's Disclosure Schedule, Seneca-Upshur possesses all governmental licenses,
permits, franchises, and other authorizations of any Governmental Authority (the
"Licenses") that are necessary to the ownership or operation of the Business as
currently conducted and all such Licenses are and immediately following the
Closing will remain in full force and effect, except where the failure to
possess any License or the failure to be in full force and effect would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No proceeding is pending or, to THX's knowledge, threatened
seeking the revocation or limitation of any such License.
Section 4.10 Labor Matters. Seneca-Upshur has no agreements or arrangements
with, commitments to or responsibility for any employees or consultants other
than the Business Employees. There are no agreements with any labor unions or
associations representing Business Employees. No material work stoppage is
pending or, to THX's knowledge, threatened. Except as set forth in Section 4.110
of THX's Disclosure Schedule, neither THX nor Seneca-Upshur is involved in or,
to THX's knowledge, is threatened with any labor dispute, arbitration, lawsuit,
18
or administrative proceeding relating to labor matters involving Business
Employees.
Section 4.11 Compliance with Laws. Except as set forth in Section 4.11 of
THX's Disclosure Schedule, THX and Seneca-Upshur have conducted the Business in
compliance with all statutes, laws, regulations, ordinances, rules, judgments,
orders, or decrees applicable thereto (provided that no representation is made
in this Section 4.11 as to compliance with Environmental Laws, representations
as to which are set forth exclusively in Section 4.14), except for violations or
failures so to comply, if any, that would not, individually or in the in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 4.12 Insurance. Section 4.12 of THX's Disclosure Schedule sets
forth a list of all Insurance Policies issued in favor of THX or Seneca-Upshur
that relate to the Business. All such Insurance Policies are in full force and
effect and are valid and enforceable and cover against the risks normally
insured against by entities in the same or similar lines of business in coverage
amounts typically and reasonably carried by such entities. THX has paid all
premiums, deductibles and retro-adjustment billings, if any, with respect
thereto covering all periods and ensuring coverage of the Business up to and
including the date hereof. In the last two years, neither THX nor Seneca-Upshur
has received notice of cancellation or termination of such Insurance Policies
other than in connection with normal renewals of such Insurance Policies.
Section 4.13 Contracts. Except for the Business Contracts and the Business
Surface Agreements, there are no Contracts that are material to the ownership,
operation, value or use of the Business, or to which the Business or
Seneca-Upshur will be subject upon the Closing. THX has made available to
KeySpan true and complete copies of all Business Leases, Business Contracts and
Business Surface Agreements. THX and Seneca-Upshur have complied with all of
their material obligations under all Business Contracts and Business Surface
Agreements to which they are party and no defaults have been asserted against
them and to the knowledge of THX, no other party to any Business Contract or
Business Surface Agreement is in default thereunder in any material respect. All
Business Contracts and Business Surface Agreements are valid, binding and in
full force and effect. The Business Contracts and Business Surface Agreements
contain only terms that (a) are customary in the oil and gas exploration,
development or extraction business in the area in which the Business Assets
affected by such leases or contracts are located, (b) are of the type that a
prudent operator in such area would not find objectionable or imprudent and (c)
individually or in the aggregate do not materially interfere with
Seneca-Upshur's rights to own, operate and maintain the Business Assets in the
manner and for the purposes in and for which they are currently operated.
Section 4.14 Environmental Matters. Except as set forth in Section 4.14 of
THX's Disclosure Schedule, and subject to Section 4.26.2 of this Agreement, (a)
each of THX, Seneca-Upshur and the Business complies in all material respects
with all applicable Environmental Laws and has not violated in any material
respect any such Environmental Laws, (b) without limitation of the foregoing,
there are no existing, pending or, to THX's knowledge, threatened actions,
suits, investigations, inquiries, proceedings (including those involving cleanup
obligations) by any Person relating to any (i) violation or alleged violation of
any Environmental Laws, or (ii) actual or potential Liability as a result of the
presence, Release or threatened Release of any Regulated Substances at any
property (including the Real Properties), in each case that could reasonably be
19
expected to materially and adversely affect THX, Seneca-Upshur or the Business,
(c) there are and have been no Regulated Substances or other conditions at any
property owned, leased, operated, or otherwise used now or in the past by THX,
Seneca-Upshur or the Business, or at any other location, in circumstances that
could reasonably be expected to materially and adversely affect THX,
Seneca-Upshur or the Business under any applicable Environmental Law or result
in material costs to THX, Seneca-Upshur or the Business arising out of any
applicable Environmental Laws, (d) all material Environmental Permits required
to be obtained or filed by THX, Seneca-Upshur or the Business in connection with
the operation of the Business or the assets and properties of Seneca-Upshur
(including such Environmental Permits required for the treatment, storage,
disposal or Release of Regulated Substances) have been duly obtained or filed
and complied with in all material respects, and are valid and in full force and
effect, (e) neither THX or Seneca-Upshur has entered into during the previous 5
years or, to THX's knowledge during any other years any consent decree or other
agreement with any Governmental Authority relating to any Environmental Laws or
Regulated Substances, and neither THX or Seneca-Upshur is subject to any
judgment, decree, order or similar requirement relating to any Environmental
Laws or Regulated Substances, in either case that could reasonably be expected
to materially and adversely affect THX, Seneca-Upshur or the Business, and (f)
neither THX or Seneca-Upshur has assumed or retained, by contract or operation
of law, any Liabilities under any Environmental Laws or concerning any Regulated
Substances, in either case that could reasonably be expected to materially and
adversely affect THX, Seneca-Upshur or the Business, other than Liabilities
assumed in connection with the transactions contemplated by the EnerVest
Agreement and the acquisition of Seneca-Upshur by THX from KeySpan. THX and
Seneca-Upshur have made available to KeySpan a copy of all studies, audits,
assessments or investigations concerning compliance with, or liability or
obligations under, Environmental Laws affecting THX, Seneca-Upshur or the
Business that are in the possession or control of THX or Seneca-Upshur. The term
"disposal" as used in Section 4.14(d) above has the meaning specified in RCRA.
Section 4.15 Real Property. Except as set forth in Section 4.15 of THX's
Disclosure Schedule, Seneca-Upshur does not own, lease, sublease, license or
occupy any real property.
Section 4.16 Employee Benefit Plans.
4.16.1 Section 4.16.1 of THX's Disclosure Schedule sets forth a
list of all "employee pension benefit plans" (as defined in Section
3(2) of ERISA), "employee welfare benefit plans" (as defined in
Section 3(1) of ERISA), stock option, stock purchase, incentive,
deferred compensation, vacation, employment, severance,
change-in-control, stay-on bonus, fringe benefit, collective
bargaining, employee loan and other employee benefit plans, programs,
agreements, policies and arrangements, whether or not subject to ERISA
(including any funding mechanism therefor now in effect), whether
formal or informal, oral or written, legally binding or not, under
which (i) any Business Employee or any current or former employee,
director or consultant of Seneca-Upshur (collectively, the
"Seneca-Upshur Employees") has any present or future right to benefits
and which are sponsored, maintained, or contributed to by THX or
Seneca-Upshur or (ii) Seneca-Upshur has any present or future
liability (relating to events or omissions arising on or before the
Closing Date) (all the foregoing being herein called "Benefit Plans").
With respect to each Benefit Plan, THX has made available to THEC
20
true, complete and correct copies, to the extent applicable or
required, of the most recent summary plan description (with all
summaries of material modifications provided after the most recent
summary plan description was distributed).
4.16.2 (a) All Benefit Plans are and have been established and
administered in material compliance with their terms and all
applicable laws, including without limitation, ERISA and the Code, (b)
each Benefit Plan which is intended to be qualified within the meaning
of Section 401(a) of the Code is so qualified and has received a
favorable determination letter as to its qualification, and nothing
has occurred, whether by action or failure to act, that could
reasonably be expected to cause the loss of such qualification, and
(c) no event has occurred and no condition exists that would
reasonably be expected to subject Seneca-Upshur, either directly or by
reason of the affiliation with any member of its "Controlled Group"
(defined as any organization which is a member of a controlled group
of organizations within the meaning of Sections 414(b), (c), (m) or
(o) of the Code), to any material tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable laws, rules
and regulations.
4.16.3 With respect to any Benefit Plan, (a) no actions, suits or
claims (except claims for benefits payable in the normal operation of
the Benefit Plans) are pending or, to THX's knowledge, threatened, (b)
no facts or circumstances exist that reasonably could be expected to
give rise to any such actions, suits or claims, and (c) no
administrative investigation, audit or other administrative proceeding
by the Department of Labor, the Pension Benefit Guaranty Corporation
(the "PBGC"), the Internal Revenue Service or other governmental
agencies are pending, to THX's knowledge, threatened or in progress
(including, without limitation, any routine requests for information
from the PBGC).
4.16.4 All contributions to, and payments from, the benefits
required to be made in accordance with the Benefit Plans have been
timely made, other than contributions or payments the failure of which
to make would not reasonably be expected to have a Material Adverse
Effect.
4.16.5 No Benefit Plan is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code, and none of THX, Seneca-Upshur, or
any member of their Controlled Group has at any time within the last 5
years sponsored or contributed to any such plan, or could have,
directly or indirectly, any current or future liability (relating to
events or omissions arising on or before the Closing Date) under, or
obligation in respect of, any such plan, including an obligation to
indemnify any Person for liability related to any such plan.
4.16.6 (a) No "reportable event" (as such term is defined in
Section 4043 of the Code) that could reasonably be expected to result
in material liability to THX, Seneca-Upshur, KeySpan or any of their
respective directors, employees or Affiliates, and no "prohibited
transaction" (as such term is defined in Section 4975 of the Code or
Section 406 or ERISA) has occurred with respect to any Benefit Plan
that could reasonably be expected to result in material liability to
Seneca-Upshur, KeySpan or any of their respective directors, employees
or Affiliates and (b) there has been no breach of any fiduciary duty
21
with respect to any Benefit Plan, other than any such breach that,
individually or in the aggregate, could not reasonably be expected to
result in material liability to Seneca-Upshur, KeySpan or any of their
respective directors, employees or Affiliates.
4.16.7 Neither THX nor Seneca-Upshur has incurred any current or
projected liability in respect of post-employment or post-retirement
health, medical or life insurance benefits for Seneca-Upshur
Employees, except as required to avoid an excise tax under Section
4980B of the Code or otherwise except as may be required pursuant to
any other applicable law.
4.16.8 Except as set forth in Section 4.16.8 of THX's Disclosure
Schedule, no Benefit Plan exists that, as a result of the execution of
this Agreement, shareholder approval of this Agreement, or the
transactions contemplated by this Agreement (whether alone or in
connection with any subsequent event(s)), will (a) entitle any
Seneca-Upshur Employee to severance pay or any increase in severance
pay upon any termination of employment after the date of this
Agreement other than severance described in Section 6.1.6, (b)
accelerate the time of payment or vesting or result in any payment or
funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or result in any other
material obligation pursuant to, any of the Benefit Plans other than
the accelerated vesting by THX as described in Section 6.1.3, (c)
limit or restrict the right of Seneca-Upshur to merge, amend or
terminate any of the Benefit Plans sponsored or maintained by
Seneca-Upshur, (d) cause Seneca-Upshur to record additional
compensation expense on its income statement with respect to any
outstanding stock option or other equity-based award, or (e) result in
payments under any of the Benefit Plans which would not be deductible
under Section 280G of the Code.
Section 4.17 Non-Foreign Representation. Neither THX nor
Seneca-Upshur is a foreign corporation, foreign partnership, foreign
trust, foreign person, or foreign estate (as those terms are defined
in the Code).
Section 4.18 Reserve Report.
4.18.1 THX has made available to THEC a copy of that portion
of the oil and gas reserve report with respect to the Business
prepared by the Independent Engineers as of December 31, 2003
(the "Reserve Report"). Except as set forth in Section 4.18.1 of
THX's Disclosure Schedule, to THX's knowledge, there are no facts
that would make the factual information provided by THX to the
Independent Engineers and on which the Reserve Report was based,
inaccurate in any material respect at the time provided.
4.18.2 OTHER THAN AS EXPRESSLY SET FORTH ABOVE IN THIS
SECTION 4.18, THX MAKES NO REPRESENTATION OR WARRANTY, AND HEREBY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, THAT THE RESERVE
ESTIMATES, COST AND CASH FLOW ESTIMATES, PRICE ESTIMATES, OR
PRODUCTION OR FLOW RATE ESTIMATES CONTAINED IN THE RESERVE
REPORT, OR IN ANY SUPPLEMENT THERETO OR UPDATE THEREOF, ARE IN
ANY WAY COMPLETE, ACCURATE OR NOT MISLEADING, THE SAME BEING
22
PREDICTIONS AS TO FUTURE EVENTS WHICH ARE INHERENTLY SUBJECT TO
INCOMPLETENESS AND INACCURACY.
Section 4.19 Title.
4.19.1 As of the Closing Date, Seneca-Upshur will have
Defensible Title, free and clear of all Encumbrances (other than
Permitted Encumbrances), to the Business Leases and the Business
Fee Mineral Interests, except for those matters set forth in
Section 4.19 of THX's Disclosure Schedule.
4.19.2 THX has and will transfer at Closing to THEC good
title to, or valid leasehold interest in, all of the Business
Assets (other than the Business Leases and Business Fee Mineral
Interests, title to which is addressed in Section 4.19.1 above),
free and clear of all Encumbrances, except for Permitted
Encumbrances.
Section 4.20 Sufficiency of Assets. The Business Assets
constitute all of the assets, rights and properties used or held for
use in the conduct of the Business in all material respects as
currently conducted, and there are no assets, rights or properties
(other than the Excluded Assets) which have been used in the conduct
of the Business that THX will retain following the Closing. Since
acquiring Seneca-Upshur from KeySpan in 1996, Seneca-Upshur has not
conducted any activities other than the conduct of the Business.
Section 4.21 No Sale of EnerVest Assets. Neither THX nor
Seneca-Upshur has transferred, sold or otherwise disposed of any
assets it acquired pursuant to the EnerVest Agreement (other than in
connection with the transactions contemplated herein).
Section 4.22 Financing. THX has available capacity under its
Amended and Restated Credit Agreement to borrow that portion of the
Cash Amount that is to be borrowed by THX.
Section 4.23 Condition of Personal Property. Each item of
Contributed Business Equipment has been maintained in accordance with
the Business's customary practices and is in good operating condition
and repair, normal wear and tear excepted.
Section 4.24 Brokerage Fees and Commissions. Except as set forth
in Section 4.24 of THX's Disclosure Schedule, neither THX nor
Seneca-Upshur has incurred any obligation or entered into any
agreement for any investment banking, brokerage or finder's fee or
commission in respect of the transactions contemplated by this
Agreement for which THEC, KeySpan or Seneca-Upshur shall incur any
liability.
Section 4.25 No Hedges. There are no puts, calls, straddles,
options, swaps, collars, caps or other hedging arrangements of any
kind relating to the Business or to which Seneca-Upshur or any of its
assets are subject.
Section 4.26 Disclaimers.
4.26.1 EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV, THX
MAKES NO EXPRESS, STATUTORY OR IMPLIED WARRANTY OR REPRESENTATION
OF ANY KIND, INCLUDING WARRANTIES RELATING TO (a) THE CONDITION
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OR MERCHANTABILITY OF THE BUSINESS ASSETS OR (b) THE FITNESS OF
THE BUSINESS ASSETS FOR A PARTICULAR PURPOSE.
4.26.2 THEC AND KEYSPAN HAVE HAD THE OPPORTUNITY TO INSPECT
THE PROPERTIES INCLUDED IN THE BUSINESS FOR THE PURPOSE OF
DETECTING THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE
MATERIALS ("NORM") AND MAN MADE MATERIAL FIBERS ("MMMF") AND,
EXCEPT TO THE EXTENT ARISING OUT OF ANY BREACH OF 4.14(B) AND
4.14(E) OF THIS AGREEMENT, THEC AND KEYSPAN ARE RELYING SOLELY
UPON THE RESULTS OF SUCH INSPECTION AND SHALL ACCEPT THE
PROPERTIES INCLUDED IN THE BUSINESS IN THEIR "AS IS, WHERE IS"
CONDITION AND "WITH ALL FAULTS' WITH RESPECT TO NORM AND MMMF.
EXCEPT TO THE EXTENT ARISING OUT OF ANY BREACH OF 4.14(B) AND
4.14(E) OF THIS AGREEMENT, THX DISCLAIMS ALL LIABILITY ARISING IN
CONNECTION WITH THE PRESENCE OF NORM OR MMMF ON THE PROPERTIES
INCLUDED IN THE BUSINESS AND IF TESTS HAVE BEEN CONDUCTED BY THEC
OR KEYSPAN FOR THE PRESENCE OF NORM OR MMMF, THX DISCLAIMS ANY
WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR RESULTS. THX
DISCLAIMS ALL LIABILITY ARISING IN CONNECTION WITH THE PRESENCE
OF ABANDONED OR PLUGGED WELLS ON THE PROPERTIES INCLUDED IN THE
BUSINESS AS WELL AS ANY LIABILITY TO PLUG, REPLUG AND/OR ABANDON
ANY AND ALL WELLS LOCATED ON THE LEASES IN ACCORDANCE WITH THE
APPLICABLE RULES, REGULATIONS AND REQUIREMENTS OF GOVERNMENTAL
AUTHORITIES.
4.26.3 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THX
MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY OR
IMPLIED, AS TO (a) THE ACCURACY, COMPLETENESS OR MATERIALITY OF
ANY DATA, INFORMATION, PROJECTIONS, ESTIMATES, BUDGETS OR RECORDS
FURNISHED TO THEC OR KEYSPAN OR THEIR REPRESENTATIVES IN
CONNECTION WITH THE BUSINESS (INCLUDING THE ASSETS AND
LIABILITIES THEREOF), (b) THE CURRENT OR FUTURE BUSINESS OR
OPPORTUNITIES OF SUBSIDIARY OR THE BUSINESS, (c) THE QUALITY AND
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE
PROPERTIES INCLUDED IN THE BUSINESS, (d) THE ABILITY OF THE
PROPERTIES INCLUDED IN THE BUSINESS TO PRODUCE HYDROCARBONS,
INCLUDING PRODUCTION RATES, DECLINE RATES AND RECOMPLETION
OPPORTUNITIES, (e) REGULATORY MATTERS, OR (f) THE PRESENT OR
FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY,
TO BE DERIVED FROM THE PROPERTIES INCLUDED IN THE BUSINESS.
Article V.
REPRESENTATIONS AND WARRANTIES OF THEC AND KEYSPAN
THEC and KeySpan hereby jointly and severally represent and warrant to
THX as follows:
Section 5.1 Organization. Each of THEC and KeySpan is a corporation duly
organized, validly existing and in good standing under the laws of the
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jurisdiction of its incorporation and has the requisite corporate power to carry
on its business as it is now being conducted.
Section 5.2 Authorization. Each of THEC and KeySpan has the requisite
corporate power and authority to execute and deliver this Agreement, the Tax
Matters Agreement and the other Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby and the execution and delivery by
THEC and KeySpan of this Agreement, the Tax Matters Agreement and the other
Ancillary Agreements and the consummation by THEC and KeySpan of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of each of THEC and KeySpan, and no other
corporate proceedings on the part of THEC or KeySpan are necessary to authorize
this Agreement, the Tax Matters Agreement or the other Ancillary Agreements or
to consummate the transactions contemplated hereby or thereby. Each of this
Agreement, the Tax Matters Agreement and the other Ancillary Agreements has been
duly and validly executed and delivered by THEC and KeySpan and constitutes the
legal, valid and binding obligation of each of THEC and KeySpan, enforceable
against THEC and KeySpan in accordance with its terms, subject to (a) applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar laws of
general application with respect to creditors, (b) general principles of equity,
and (c) the power of a court to deny enforcement of remedies generally based
upon public policy.
Section 5.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement, the Tax Matters Agreement and the other Ancillary
Agreements by THEC and KeySpan, as applicable, nor the consummation by THEC and
KeySpan of the transactions contemplated hereby or thereby, will (a) violate,
conflict with or result in a breach of any provision of the governing documents
of THEC or KeySpan, (b) require any consent, approval, order, authorization,
waiver or License of, or filing with or notification to, any third party or
Governmental Authority, except (i) as set forth in Section 5.3 of THEC's
Disclosure Schedule, (ii) any consents, approvals, authorizations or waivers
normally obtained after the consummation of transactions of the nature
contemplated by this Agreement, or (iii) where the failure to obtain such
consent, approval, order, authorization, waiver or License, or the failure to
make such filing or notification, would not, individually or in the aggregate,
materially adversely affect THEC's or KeySpan's ability to consummate the
transactions contemplated by this Agreement, or (c) violate any order, writ,
injunction, decree, statute, rule, or regulation applicable to THEC or KeySpan,
except for violations which would not, individually or in the aggregate,
materially adversely affect THEC's or KeySpan's ability to consummate the
transactions contemplated by this Agreement.
Section 5.4 THEC THX Shares. The THEC THX Shares are owned by THEC, and as
of the Closing Date, the THEC THX Shares will be transferred to THX, free and
clear of any Encumbrances.
Section 5.5 Litigation. Except as set forth in Section 5.5 of THEC's
Disclosure Schedule, there are no Actions pending or, to THEC's or KeySpan's
knowledge, threatened against THEC or KeySpan that would reasonably be expected
to materially adversely affect THEC's or KeySpan's ability to consummate the
transactions contemplated by this Agreement, and there are no judgments or
25
outstanding orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against THEC or
KeySpan that would reasonably be expected to materially adversely affect THEC's
or KeySpan's ability to consummate the transactions contemplated by this
Agreement.
Section 5.6 Acquisition of Seneca-Upshur Shares for Investment. THEC is an
accredited investor under Regulation D of the Securities Act, and THEC has such
knowledge and experience in financial and business matters, including, in
particular, the oil and gas industry, that it is capable of evaluating the
merits and risks of its purchase of the Seneca-Upshur Shares. THEC and KeySpan
confirm that THX has made available to THEC and KeySpan the opportunity to
review THX's and Seneca-Upshur's files, materials, data, and other information
relating to Seneca-Upshur and the Business, to ask questions of the officers and
management employees of THX and Seneca-Upshur, and to acquire additional
information about the business and financial condition of Seneca-Upshur. Prior
to entering into this Agreement, THEC and KeySpan were advised by their counsel
and such other persons they have deemed appropriate concerning this Agreement
and other documents executed or delivered in connection herewith. THEC is
acquiring the Seneca-Upshur Shares for investment and not with a view toward, or
for sale in connection with, any distribution thereof, or with any present
intention of distributing or selling the Seneca-Upshur Shares. THEC understands
that the Seneca-Upshur Shares may not be sold, transferred, offered for sale,
pledged, hypothecated, or otherwise disposed of without registration under the
Securities Act, except pursuant to an exemption from such registration available
thereunder, and without compliance with state or foreign securities laws,
Section 5.7 Acknowledgements. Except with respect to the express
representations, warranties and covenants of THX contained in this Agreement,
THEC and KeySpan have not relied on any statements by THX or any of its
representatives, consultants or advisors in making their respective decisions to
enter into this Agreement. Subject to and without altering or affecting the
representations and warranties in Section 4.14 of this Agreement, THEC and
KeySpan acknowledge and understand that (a) the Business Assets have been used
for exploring, developing, producing, treating and transporting oil and gas, (b)
spills of wastes, crude oil, produced water, hazardous substances and other
materials may have occurred in the past with respect to the Business Assets, (c)
there is a possibility that there are currently unknown, unplugged abandoned
wells, plugged wells, pipelines and other equipment on or underneath the
property included in the Business Assets and (d) the Business Assets may contain
asbestos or NORM, which may affix or attach itself to the inside of wells,
materials and equipment as scale or in other forms or which may be included in
wells, materials and equipment or may have been buried or otherwise disposed of
on the properties included in the Business Assets.
Article VI.
COVENANTS AND AGREEMENTS
Section 6.1 Employee Matters.
6.1.1 As of the close of business on the Closing Date, THX will
terminate each of the employees identified on Exhibit E attached
hereto who are active employees of THX at such time (the "Business
Employees").
6.1.2 The Business Employees who report to work for KeySpan or
Seneca-Upshur on the first business day immediately after the Closing
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are referred to herein as the "Transferred Employees." KeySpan or
Seneca-Upshur shall offer to employ each Transferred Employee for the
period commencing immediately after the close of business on the
Closing Date until the first anniversary of the Closing Date, (a) at a
base salary or base hourly rate that is no less than the base salary
or base hourly rate such Transferred Employee was paid by THX as of
the Closing Date, (b) with a vacation policy that is at least as
favorable as the vacation policy provided to such Transferred Employee
immediately before the Closing, and (c) with such other compensation
and benefits (the "Benefits Package") as are comparable, in the
aggregate, to the other compensation and benefits (excluding any
equity-based compensation and benefits) provided to such Transferred
Employee by THX under the Benefit Plans immediately prior to the
Closing; provided, that the medical, dental and life insurance
benefits provided to Transferred Employees and their eligible
dependents by KeySpan shall be provided at no cost to the Transferred
Employee during such one-year period; provided, further, that nothing
in this Agreement shall prevent KeySpan or Seneca-Upshur from
terminating the employment of any Transferred Employee at any time for
any reason or, on or following the first anniversary of the Closing
Date, from altering the terms or conditions (including compensation
and benefits) of any Transferred Employee. Further, each Transferred
Employee shall receive credit for his or her length of service with
THX for eligibility to participate and vesting purposes under all
KeySpan benefit plans, programs and policies in which such Transferred
Employee participates (excluding any post-retirement welfare plans),
including the KeySpan 401(k) plan, cash balance pension plan and
vacation policy, but only to the same extent such service was
recognized by THX under a comparable Benefit Plan immediately prior to
the Closing Date and excluding where such credit would result in an
unintended duplication of benefits; provided, the THX 401(k) plan
shall be deemed to be comparable to the KeySpan cash balance pension
plan for purposes of such service credit. THX shall provide such
information, as KeySpan shall reasonably require to enable KeySpan to
provide such service credit.
6.1.3 On or prior to the Closing Date, THX shall take whatever
action is necessary to cause each Transferred Employee who is a
participant in the THX 401(k) plan to fully vest in his or her
accounts under such plan as of the Closing Date. THX will timely make
all required matching contributions under the THX 401(k) plan to the
accounts of each Transferred Employee with respect to all compensation
earned by such Transferred Employee on or prior to the Closing Date.
On or prior to the Closing Date, THX shall take whatever action is
necessary to cause each Transferred Employee who holds any unvested
stock option to purchase shares of THX stock to become fully vested in
such stock option as of the Closing Date.
6.1.4 THX shall be responsible for payment of accrued, but unused
vacation for periods on and prior to the Closing Date and for timely
payment as required by law of all wages, salaries, bonuses, if any,
and other compensation and benefits due with respect to service of
Business Employees completed on and prior to the Closing Date
(including without limitation welfare claims incurred but not paid on
or prior to the Closing Date). On or promptly following the Closing
Date, THX shall pay to each Transferred Employee a pro-rated bonus
equal to such Transferred Employee's target bonus for the applicable
year multiplied by a fraction, the numerator of which is the number of
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days during such year through and including the Closing Date and the
denominator of which is 365.
6.1.5 THX shall be responsible for offering and providing any
continuation coverage required under Section 4980B of the Code and
Part 6 of Subtitle B of Title I of ERISA with respect to any Business
Employee.
6.1.6 In the event that a Transferred Employee is terminated or
laid off by KeySpan, other than for cause, within one year following
the Closing Date, KeySpan agrees to pay such terminated or laid off
Transferred Employee severance equal to no less than the severance
such Transferred Employee would have received under the THX Change of
Control Plan which is attached as Exhibit F (the "COC Plan") had he or
she remained an employee of THX and such termination was deemed
(solely for purposes of calculating severance benefits) to be a
termination by THX without Cause within one year following a Change of
Control (as those terms are defined under the COC Plan). For the
avoidance of doubt, the parties agree that the transactions
contemplated under this Agreement do not constitute a Change of
Control under the COC Plan or under any other compensation or benefit
plan, policy, program, agreement or arrangement of THX or its
Affiliates.
6.1.7 For the avoidance of doubt, subject to KeySpan's
obligations in Section 6.1.6 relating to certain terminations
following the Closing Date, THX shall be responsible for, and shall
indemnify Seneca-Upshur, THEC and KeySpan for liability related to,
severance or termination pay or benefits (whether pursuant to a
benefit plan, policy, agreement or other arrangement or pursuant to
applicable Law) arising on or before the Closing Date, including any
and all such Liabilities related to Business Employees who do not
become Transferred Employees.
6.1.8 Until the third anniversary of the Closing Date, none of
THX, any of its Affiliates or any of their respective directors or
employees shall, without the prior written consent of KeySpan in its
sole discretion, induce, solicit or encourage, or attempt to induce,
solicit or encourage, whether directly or indirectly, any Transferred
Employee.
6.1.9 Promptly following the date of this Agreement, THX will
provide KeySpan with respect to each Benefit Plan, full and complete
copies of the most recent plan document and any amendment thereto.
Section 6.2 Further Assurances.
6.2.1 Subject to the terms and conditions hereof, from time to
time, each of THEC and THX shall, and shall cause their respective
Affiliates to use all commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable, including as
required by applicable Laws, to assure fully to Seneca-Upshur and its
successors or permitted assigns, all of the Business Assets and
Business Liabilities intended to be conveyed to, owned by, or assumed
by Seneca-Upshur under this Agreement and the Ancillary Agreements and
to assure fully to THX, and its respective successors and permitted
28
assigns, the maintenance by THX of the Excluded Assets and the
assumption by Seneca-Upshur of the Business Liabilities intended to be
assumed by Seneca-Upshur under this Agreement and the Ancillary
Agreements, and to otherwise make effective the transactions
contemplated hereby and thereby (including (a) transferring back to
THX any Excluded Asset, Retained Liability or item relating to or
included in the Retained Business, respectively, which Excluded Asset,
Retained Liability or item relating to or included in the Retained
Business was transferred to THEC indirectly through the acquisition of
the Seneca-Upshur Shares at the Closing and (b) transferring to
Seneca-Upshur any asset or liability contemplated by this Agreement to
be a Business Asset or a Business Liability, respectively, which asset
or liability was not transferred to Seneca-Upshur at or prior to the
Closing).
6.2.2 In furtherance and without limitation to the foregoing, THX
shall, and shall cause its Affiliates to, use all commercially
reasonable efforts to cause the Licenses to be transferred to
Seneca-Upshur or, if any such Licenses are not transferable, THX, at
the request and expense of THEC, shall reasonably assist Seneca-Upshur
in obtaining new Licenses so that it may operate the Business as of
the Closing Date in compliance with applicable Laws.
Section 6.3 Interim Operating Covenant. Between the date hereof and the
Closing, except with the prior written consent of KeySpan, THX shall and shall
cause Seneca-Upshur to conduct the Business in the ordinary course of business
consistent with past practice. In furtherance and not in limitation of the
foregoing, THX hereby covenants to THEC and KeySpan that it will and will cause
Seneca-Upshur to (a) keep and maintain the assets and properties of the Business
in substantially the same operating condition and repair (normal wear and tear
excepted) as currently maintained, (b) preserve substantially intact the
business organization and generally maintain the goodwill of, and relationships
with, the suppliers, contractors, licensors, licensees, distributors, employees
and customers of the Business, (c) not grant any Encumbrance on any portion of
the Business, the Seneca-Upshur Shares or any Business Assets, (d) create,
incur, assume or guaranty and Indebtedness, in relation to the Business, and (e)
comply with all applicable Laws in all material respects.
Section 6.4 Confidentiality; Access to Records.
6.4.1 From and after the Closing Date, THX shall not use (or take
any action to use) in any manner detrimental to KeySpan, THEC or
Seneca-Upshur, and shall hold, and shall cause its Affiliates and
their respective officers, directors, employees, representatives,
consultants, advisors and agents, to not use (or take any action to
use) in any manner detrimental to KeySpan, THEC or Seneca-Upshur and
to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of Law or regulation
(including the Securities Act and the Exchange Act) in which case THX
will notify KeySpan so that KeySpan may seek an appropriate protective
order or waive compliance with this Section 6.4.1, all Confidential
Business Information, except to the extent that such Confidential
Business Information has been or has become (a) generally available to
the public other than as a result of disclosure by such person or (b)
known to the Person receiving such Confidential Business Information
before the date of disclosure of such Confidential Business
Information to such Person. Nothing herein shall preclude THX, its
29
subsidiaries or any of their respective officers, directors,
employees, representatives, consultants, advisors or agents, receiving
Confidential Business Information from using and/or disclosing
information received from a third party to the extent rightfully
permitted by the third party.
6.4.2 THX recognizes that it may have documents, books, records,
work papers and information, whether in written, magnetic, electronic
or other form (collectively, "Records") which relate to the Business
with respect to the period or matters arising prior to the Closing,
including Records pertaining to the Business Assets, the Business
Liabilities and Seneca-Upshur's employees, assets and liabilities (the
"Business Records") or other Records relating to the Business. THX
will use, and will cause its respective Affiliates to use, reasonable
commercial efforts to refrain from using Business Records and
Confidential Business Information, except as provided for in this
Agreement or the Ancillary Agreements, and will preserve the
confidentiality of any information contained in the Business Records
and Confidential Business Information. THX further recognizes that
KeySpan or its Affiliates may need access to such Business Records and
other Records after the Closing. Upon KeySpan's, THEC's or
Seneca-Upshur's reasonable request, THX shall provide KeySpan, THEC or
Seneca-Upshur and their respective employees, representatives and
agents access to, and the right to photocopy (at KeySpan's, THEC's or
Seneca-Upshur's expense), during normal business hours on reasonable
advance notice, such reasonably requested Records. THX shall use
reasonable best efforts to maintain all such Records for the same
length of time that THX maintains its own Records, or, at THX's
discretion or at KeySpan's, THEC's or Seneca-Upshur's reasonable
request (at KeySpan's, THEC's or Seneca-Upshur's expense), transfer
any such Records to THEC or Seneca-Upshur.
6.4.3 Notwithstanding any provision herein to the contrary, from
and after the Closing, Records pertaining to Taxes shall be governed
solely by the Tax Matters Agreement.
Section 6.5 THX Shares Retained by THEC. From and after the Closing Date
until the third anniversary of the Closing, THEC and KeySpan shall not, and
shall cause their Affiliates not to, directly own or acquire or agree to acquire
any shares of THX Common Stock, which will have the effect of increasing the
number of shares of THX Common Stock that KeySpan and its Affiliates (including
THEC) will own, in the aggregate, following the Closing above that number of
shares owned by KeySpan and its Affiliates (including THEC) on the Closing Date,
appropriately adjusted for any stock dividend, stock split, reverse stock split,
share combination, reclassification, recapitalization or similar transaction
with respect to the THX Common Stock.
Section 6.6 Intercompany Accounts and Bank Debt.
6.6.1 Prior to or at the Closing, THX will cancel and eliminate
without liability to Seneca-Upshur all intercompany accounts and
Liabilities of Seneca-Upshur to THX or any of its subsidiaries or
affiliates as of the Closing Date.
6.6.2 Prior to or at the Closing, THX will cause any and all
Indebtedness of Seneca-Upshur to be paid in full and any and all
30
Encumbrances securing any such Indebtedness to be released in each
case without liability to Seneca-Upshur, and THX will obtain the full
and unconditional release of Seneca-Upshur from the lenders thereunder
as of the Closing Date.
6.6.3 Prior to or at the Closing, THX shall cause all accounts
receivable, accounts payable (including accrued Taxes relating to
periods prior to Closing) and trade payables relating to periods prior
to Effective time of Seneca-Upshur to be transferred to THX. After the
Closing, invoices for goods purchased, or services performed, prior to
the Effective Time will be for the account of THX and invoices for
goods purchased, or services performed, at and after the Effective
Time shall be for the account of Seneca-Upshur. After the Closing,
Seneca-Upshur shall promptly remit to THX any invoices for which THX
is responsible pursuant to this Section 6.6.3, and THX shall promptly
pay them. After the Closing, THX shall promptly remit to Seneca-Upshur
any invoices for which Seneca-Upshur is responsible pursuant to this
Section 6.6.3, and Seneca-Upshur shall promptly pay them.
Section 6.7 THX Compliance with Underwriting Agreement. THX shall comply
with all of its covenants, agreements and obligations pursuant to the
Underwriting Agreement for the benefit of KeySpan and THEC. THX shall not amend
or modify the Underwriting Agreement or grant any waiver with respect to the
Underwriting Agreement.
Section 6.8 Governance. For so long as THEC has the right to appoint
members to the board of directors of THX (the "Board") as more fully described
below, THX hereby agrees to take such action as may be required under applicable
Law to cause the Board to consist at all times of not more than nine directors,
to include in the slate of nominees recommended by the Board the designees of
THEC specified below and to use its best efforts to support the election of each
such nominee of THEC. At any time THEC and its Affiliates hold THX Shares
constituting at least 10% of the issued and outstanding THX Shares, THEC shall
have the right to designate two members of the slate of directors being proposed
by THX to be elected to the Board, and at any time THEC and its Affiliates hold
THX Shares constituting less than 10% but greater than 5% of the issued and
outstanding THX Shares it shall have the right to appoint one member of the
slate of directors being proposed by THX to be elected to the Board. Once THEC
and its Affiliates hold THX Shares constituting 5% or less of the issued and
outstanding THX Shares, it shall not have the right to appoint members to any
slate of directors being proposed by THX to be elected to the Board. In the
event that a vacancy is created at any time by the death, disability,
retirement, resignation or removal (with or without cause) of any such designee
of THEC, THX shall cause the vacancy created thereby to be filled by a new
designee of THEC as soon as possible and THX hereby agrees to take, at any time
and from time to time, all actions necessary to accomplish the same.
Section 6.9 Issuances of THX Common Stock. For a period from the Closing
Date and ending on August 15, 2004, THX shall not, directly or indirectly, offer
for sale, sell, contract to sell, issue or otherwise dispose of any shares of
THX Common Stock or securities convertible into or exchangeable for THX Common
Stock (other than THX Common Stock issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans existing on
the date hereof or pursuant to currently outstanding options, warrants or
rights).
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Section 6.10 Insurance. To the extent that any insurance policies
controlled by THX or any of its Affiliates cover any loss, liability, claim,
damage or expense relating to the Business or any asset, employee or part
thereof which relates to or arises out of occurrences prior to the Closing
("Pre-Closing Business Liabilities"), and such insurance policies continue after
Closing to permit claims to be made thereunder with respect to such Pre-Closing
Business Liabilities, THX shall cooperate and shall cause its relevant
Affiliates to cooperate with KeySpan, THEC and Seneca in submitting claims on
behalf of Keyspan, THEC and Seneca under such insurance policies, and shall
assign its rights to, and promptly pay over, any recoveries thereunder (subject
to deduction for any applicable deductibles paid by THX) to Keyspan, THEC and
Seneca-Upshur.
Article VII.
TAX MATTERS
Notwithstanding anything to the contrary in this Agreement, from and after
the Closing, except as expressly provided in the Tax Matters Agreement, (a) the
parties' sole and exclusive representations, warranties, covenants, agreements
or other obligations (including indemnities or any obligations) arising pursuant
to this Agreement, by Laws or otherwise with respect to tax matters (interpreted
in its broadest sense) including the tax consequences of the transactions
contemplated in this Agreement and any other subject matters referred to in the
Tax Matters Agreement shall be as set forth therein; and (b) no other
representation, warranty, covenant, agreement or obligation (including
indemnities or any obligations) arising pursuant to this Agreement, by Laws or
otherwise shall be deemed to apply to such matters.
Article VIII.
CONDITIONS TO CLOSING
Section 8.1 Mutual Conditions. The respective obligations of each party
hereto to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or, if legally permitted, waiver at or prior to the
Closing of the following conditions:
8.1.1 No Governmental Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order of any
nature that prohibits, enjoins or restrains the consummation of the
transactions contemplated by this Agreement.
8.1.2 THX shall have successfully completed the Equity Offering.
8.1.3 Each of the Ancillary Agreements shall be executed and
entered into by each of the parties thereto.
Section 8.2 Conditions to THEC's and KeySpan's Obligations. The obligations
of THEC and KeySpan to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver by THEC and KeySpan
prior to or at the Closing of each of the following conditions:
8.2.1 The representations and warranties of THX and its
Affiliates set forth in Article IV of this Agreement or in any
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agreement or certificate delivered pursuant to the provisions hereof
or in connection with the transactions contemplated hereby shall be
true and correct as of the date hereof and as of the Closing (except
that representations and warranties made as of a specified date, shall
be true and correct only as of such specified date), and THEC shall
have received a certificate, dated the Closing Date, signed on behalf
of THX by an appropriate officer of THX to such effect; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct unless the failure
or failures of such representations and warranties to be so true and
correct, either individually or in the aggregate, and without giving
effect to any qualification as to materiality or Material Adverse
Effect set forth in such representations or warranties, has had or is
reasonably likely to have a Material Adverse Effect on the Business or
Seneca-Upshur.
8.2.2 THX and Seneca-Upshur shall have performed in all material
respects each obligation and agreement to be performed by it, and
shall have complied in all material respects with each covenant
required by this Agreement to be performed or complied with by it at
or prior to the Closing, and THEC shall have received a certificate,
dated the Closing Date, signed on behalf of THX by an appropriate
officer of THX to such effect.
8.2.3 Since the date hereof, there shall not have been any
Material Adverse Effect with respect to the Business or Seneca-Upshur.
8.2.4 Prior to or at the Closing, THX shall have delivered to
THEC the items to be delivered pursuant to Section 2.3.
8.2.5 Prior to or at the Closing, the Contribution shall have
been completed.
Section 8.3 Conditions to THX's and Seneca-Upshur's Obligations. The
obligations of THX and Seneca-Upshur to consummate the transactions contemplated
by this Agreement shall be subject to the fulfillment or waiver at or prior to
the Closing of each of the following conditions:
8.3.1 The representations and warranties of THEC set forth in
Article V of this Agreement or in any agreement or certificate
delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct as of the
date hereof and as of the Closing (except that representations and
warranties made as of a specified date shall be true and correct only
as of such specified date), and THX shall have received a certificate,
dated the Closing Date, signed on behalf of THEC by an appropriate
officer of THEC to such effect; provided, however, that for purposes
of this paragraph, such representations and warranties shall be deemed
to be true and correct unless the failure or failures of such
representations and warranties to be so true and correct, either
individually or in the aggregate, and without giving effect to any
qualification as to materiality or Material Adverse Effect set forth
in such representations or warranties, has had or is reasonably likely
to have a material adverse effect on the ability of THEC to consummate
the transactions contemplated hereby.
8.3.2 THEC shall have performed in all material respects each
obligation and agreement to be performed by it, and shall have
33
complied in all material respects with each covenant required by this
Agreement to be performed or complied with by it at or prior to the
Closing, and THX shall have received a certificate, dated the Closing
Date, signed on behalf of THEC by an appropriate officer of THEC to
such effect.
8.3.3 Prior to or at the Closing, THEC shall have delivered to
THX the items to be delivered pursuant to Section 2.4.
Section 8.4 None of THX, Seneca-Upshur or THEC may rely on the failure of
any condition set forth in this Article VIII to be satisfied if such failure was
caused by such party's failure to act in good faith or to use its reasonable
commercial efforts to cause the Closing to occur as required by Section 6.2.1.
Article IX.
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the consummation of the Closing under the following circumstances:
9.1.1 by mutual written consent of THX and KeySpan;
9.1.2 by either KeySpan or THX upon written notice to the other
if the Closing shall not have been consummated on or before June 8,
2004; provided that the right to terminate this Agreement under this
Section 9.1.2 shall not be available to a party if such party's or
such party's Affiliate's willful act or willful failure to act has
been the cause of or resulted in the failure of the Closing to be
consummated on or before June 8, 2004;
9.1.3 by KeySpan upon written notice to THX, if any of the
conditions to the Closing set forth in Section 8.2 shall have become
incapable of fulfillment by June 8, 2004 and shall not have been
waived in writing by KeySpan;
9.1.4 by either THX or KeySpan upon written notice to the other
that the conditions to the Closing set forth in Section 8.1 have
become incapable of fulfillment by June 8, 2004 due to changes in the
law, regulations or interpretations of the IRS;
9.1.5 by THX upon written notice to KeySpan, if any of the
conditions to the Closing set forth in Section 8.3 shall have become
incapable of fulfillment by June 8, 2004 and shall not have been
waived in writing by THX; or
9.1.6 by either KeySpan or THX upon written notice to the other,
if there shall be in effect a final, non-appealable order of a court
or government administrative agency of competent jurisdiction
permanently prohibiting the consummation of the transactions
contemplated hereby.
Notwithstanding the foregoing or anything to the contrary in this Agreement or
in any Ancillary Agreement, no party will be entitled to terminate this
Agreement pursuant to this Section 9.1 on the basis of facts which were caused
by such party's own breach of this Agreement and which have prevented the
satisfaction of any condition to the transactions contemplated by this
34
Agreement. Any termination pursuant to this Section 9.1 must be effected by a
written instrument signed by the terminating party or parties, which instrument
will specify the specific section hereof pursuant to which this Agreement is
being terminated.
Section 9.2 Effect of Termination. In the event of the valid termination of
this Agreement pursuant to Section 9.1, this Agreement, except for the
provisions of (a) Section 6.4.1 relating to the obligation of the parties to
keep confidential certain information obtained by it, (b) Article XI, and (c)
this Section 9.2, shall become void and have no effect, without any liability on
the part of any party hereto or its directors, officers or stockholders.
Article X.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties. Except for the
representations and warranties contained in Sections 4.1 ("Due Organization and
Qualification of THX and Seneca-Upshur"), 4.2 ("Capitalization of THX and Title
to Seneca-Upshur Shares"), 4.3 ("Authorization of THX and Seneca-Upshur"), 4.24
("Brokerage Fees and Commissions") (collectively, the "Seller's Title
Representations and Warranties"), and 5.1 ("Due Organization of THEC and
KeySpan"), 5.2 ("Authorization of THEC and KeySpan") and 5.4 ("Title to THEC THX
Shares") (collectively, the "Purchaser's Title Representations and Warranties")
which shall survive indefinitely, all of the representations and warranties
provided for in this Agreement or in any agreement or certificate delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby (including the Ancillary Agreements) shall survive the
Closing until the first anniversary of the Closing; provided that any
representations and warranties shall survive with respect to, and to the extent
of, any claim for indemnification made in accordance with this Article X prior
to such termination date and any representations and warranties in the Tax
Matters Agreement shall be exclusively governed by the survival provision in
Section 5.10 of the Tax Matters Agreement.
Section 10.2 Indemnification by THX.
10.2.1 Subject to the limitations set forth in this Article X,
THX shall indemnify and hold harmless THEC, KeySpan and their
respective subsidiaries (including, following the Closing,
Seneca-Upshur), and Affiliates, and their respective officers,
directors, employees, agents and representatives, and each of their
heirs, executors, successors and assigns (collectively, the
"Representatives"), against and in respect of any and all Damages
arising out of, resulting from or incurred in connection with or
relating to:
10.2.1.1 any breach of a representation or warranty made by
THX or Seneca-Upshur in this Agreement or any Schedule hereto or
other agreement or document delivered in connection herewith,
including in each case the circumstance actually constituting
such breach;
10.2.1.2 any breach, failure or non-fulfillment of any
agreement or covenant of THX or Seneca-Upshur contained in this
Agreement or in any Ancillary Agreement; or
35
10.2.1.3 the Retained Liabilities, the Excluded Assets or
the Retained Business.
10.2.2 Notwithstanding the foregoing and subject to the following
sentence, in the case of Damages incurred as a result of a breach set
forth in Section 10.2.1.1, (a) THX shall not be liable for
indemnification hereunder unless and until the aggregate amount of
such Damages exceeds $1,800,000 (the "THX Basket"), in which event
THEC and KeySpan shall collectively be entitled to indemnification for
all Damages in excess of the THX Basket, (b) no claim for Damages
shall be counted toward the THX Basket unless such claim individually
exceeds $50,000 ("THX De Minimis"), and (c) THX's aggregate liability
shall in no event exceed $30,000,000 (the "THX Cap"); provided,
however that there shall be no THX Basket, THX De Minimis or THX Cap
applicable to Damages arising under the Seller's Title Representations
and Warranties. In addition, for the avoidance of doubt, there shall
be no THX Basket, THX De Minimis or THX Cap applicable to Damages
arising under Sections 10.2.1.2 or 10.2.1.3 above or under the Tax
Matters Agreement.
Section 10.3 Indemnification by THEC and KeySpan.
10.3.1 Subject to the limitations set forth in this Article X,
THEC and KeySpan, jointly and severally, shall indemnify and hold
harmless THX and its Representatives, against and in respect of any
and all Damages arising out of, resulting from or incurred in
connection with or relating to:
10.3.1.1 any breach of a representation or warranty made by
THEC or KeySpan in this Agreement or any Schedule hereto or other
agreement or document delivered in connection herewith, including
in each case the circumstances actually constituting such breach;
10.3.1.2 any breach, failure or non-fulfillment of any
agreement or covenant of THEC or KeySpan contained in this
Agreement or any Ancillary Agreement; or
10.3.1.3 any Business Liability.
10.3.2 Notwithstanding the foregoing and subject to the following
sentence, in the case of Damages incurred as a result of a breach set
forth in Section 10.3.1.1, (a) THEC and KeySpan shall not be liable
for indemnification hereunder unless and until the aggregate amount of
such Damages exceeds $1,800,000 (the "KeySpan Basket"), in which event
THX shall be entitled to indemnification for all Damages in excess of
the KeySpan Basket; (b) no claim for Damages shall be counted toward
the KeySpan Basket unless such claim individually exceeds $50,000
("KeySpan De Minimis"), and (c) THEC's and KeySpan's aggregate
liability hereunder shall in no event exceed $30,000,000 (the "KeySpan
Cap"); provided , however that there shall be no KeySpan Basket,
36
KeySpan De Minimis or KeySpan Cap applicable to Damages arising under
Purchaser's Title Representations and Warranties. In addition, for the
avoidance of doubt, there shall be no KeySpan Basket, KeySpan De
Minimis or KeySpan Cap applicable to Sections 10.3.1.2 or 10.3.1.3
above or under the Tax Matters Agreement.
Section 10.4 Definition of Damage; Determination of Indemnification. For
purposes of this Article X, "Damages" shall mean, collectively, any and all
claims, damages, settlement amounts, penalties, Liabilities or losses,
whatsoever (other than punitive or exemplary damages, unless punitive or
exemplary damages are sought, awarded or otherwise imposed in any Third Party
Claim), together with out-of-pocket costs and expenses, including reasonable
fees and disbursements of counsel, accountants, consultants or experts and
expenses of investigation suffered or incurred by a party entitled to
indemnification hereunder relating to or arising out of a matter giving rise to
a claim for indemnification hereunder, such amounts to be (i) determined net of
(x) the insurance proceeds which the indemnified party actually receives in
respect of such matter and (y) indemnity payments which the indemnified party
actually receives from parties other than the indemnifying party hereunder in
respect of such matter, and (ii) decreased by any Tax Benefit (or decreased by
any reduction in any Tax) actually realized by the indemnified party that would
not have been realized but for such Damages or the payment of any indemnity in
respect thereof. For purposes of this paragraph, the indemnified party will be
deemed to recognize a Tax Benefit with respect to a taxable year if, and to the
extent that, the indemnified party's cumulative liability for Taxes through the
end of such taxable year, calculated by excluding any Tax items attributable to
the Damages and the receipt of indemnity payments therefor from all taxable
years, exceeds the indemnified party's actual cumulative tax liability for Taxes
through the end of such taxable year, calculated by taking into account any Tax
items attributable to the Damages and the receipt of indemnity payments therefor
for all taxable years (to the extent permitted by relevant Tax law and treating
such Tax items as the last items taken into account for any taxable year). When,
as, and if the indemnified party recognizes any Tax Benefit attributable to
Damages after the making of indemnification payments therefor, and to the extent
such Tax Benefit has not reduced the amount of such indemnification payments,
the indemnified party will promptly after recognition thereof pay in cash the
amount of such recognized Tax Benefit to an account specified by the
indemnifying party.
Section 10.5 Notice.
10.5.1 If any matter shall arise which may involve or give rise
to a claim by THEC or KeySpan against THX under the provisions of
Section 10.2 or by THX against THEC or KeySpan under the provisions of
Section 10.3 (an "Indemnity Claim"), THEC (on behalf of itself or
KeySpan or both) or THX, as the case may be, shall give prompt written
notice (a "Notice of Claim") of such Indemnity Claim, a description in
reasonable detail of the factual basis thereof (to the extent such
information is available), and the amount of indemnity sought (if then
known or reasonably determinable) to THX (if a claim by THEC or
KeySpan) or to THEC (if a claim by THX); provided, that the failure to
give timely notice will not relieve THX (if a claim by THEC or
KeySpan) or THEC and KeySpan (if a claim by THX) from the obligation
to indemnify against such claim except to the extent that THX (if a
claim by THEC or KeySpan) or THEC (if a claim by THX) establishes by
competent evidence that it is materially prejudiced thereby.
10.5.2 THX shall have 45 days after receipt of a Notice of Claim
to notify THEC in writing that THX disputes the applicable Indemnity
Claim, in whole or in part. If THX within 45 days after receipt of a
37
Notice of Claim notifies THEC in writing that THX disputes the
applicable Indemnity Claim, in whole or in part, then the provisions
of Section 10.5.4 shall apply. If a Notice of Claim is made by THEC
under Section 10.5.1 hereof and if it is agreed or determined
(pursuant to Section 10.5.4 or by a court of competent jurisdiction)
that THX is obligated to indemnify THEC or KeySpan, or THX fails to
notify THEC and KeySpan within 45 days after receipt of a Notice of
Claim that it disputes the applicable Indemnity Claim, such
indemnification shall be paid promptly by wire transfer of immediately
available funds to an account designated by THEC.
10.5.3 THEC shall have 45 days after receipt of a Notice of Claim
to notify THX in writing that THEC or KeySpan disputes the applicable
Indemnity Claim, in whole or in part. If THEC within 45 days after
receipt of a Notice of Claim notifies THX in writing that THEC or
KeySpan disputes the applicable Indemnity Claim, in whole or in part,
then the provisions of Section 10.5.4 shall apply. If a Notice of
Claim is made by THX under Section 10.5.1 hereof and if it is agreed
or determined (pursuant to Section 10.5.4 or by a court of competent
jurisdiction) that THEC or KeySpan is obligated to indemnify THX or
THEC fails to notify THX within 45 days after receipt of a Notice
Claim that it disputes the applicable Indemnity Claim, such
indemnification shall be paid promptly by wire transfer of immediately
available funds to an account designated by THX.
10.5.4 In the event that the indemnifying party disputes the
existence and/or amount of a claim for indemnification set forth in a
Notice of Claim, it will be entitled to deliver a notice to the
indemnified party disputing its validity or the amount thereof (the
"Claim Dispute Notice"). The Claim Dispute Notice will be given within
45 days of receipt of the Notice of Claim to which the Claim Dispute
Notice relates. Upon receiving such Claim Dispute Notice, the
indemnified party shall provide the indemnifying party with access to
such books and records as may be reasonably requested by the
indemnifying party for purposes of verifying such claim. Senior
management of each of the indemnified party and the indemnifying party
shall in good faith meet promptly after such review so as to come to a
settlement of the matter. In the event a settlement is not achieved
within 30 days after the date of the Claim Dispute Notice, the
indemnified party may pursue whatever legal remedies may be available
under this Agreement.
Section 10.6 Third Party Claim.
10.6.1 If an Indemnity Claim by THEC or KeySpan involves any
Action brought or made by any third party (a "Third Party Claim"),
then if THX acknowledges in writing its obligation to indemnify THEC
or KeySpan in respect of such Third Party Claim, THX may elect (by
written notice to THEC delivered within thirty (30) days of notice by
THEC to THX pursuant to Section 10.5.1) to assume at its expense the
defense of such Third Party Claim using counsel reasonably acceptable
to THEC. If THX does not so elect to assume such defense, then such
Third Party Claim shall be defended by THEC or KeySpan in such manner
as it reasonably deems appropriate (and the costs, fees and expenses
of THEC for such defense shall constitute Damages), including entering
a reasonable settlement thereof in which event the settlement plus
THEC's or KeySpan's (as applicable) costs, fees and expenses with
respect thereto shall be the Damage; provided that THEC shall not
enter into any settlement of such Third Party Claim without the prior
38
written consent of THX, which consent shall not be unreasonably
withheld, unless THX and its Affiliates have no liability therefor,
are not required to admit any liability and will not be bound by any
restrictions or limitations on its or their conduct thereafter, and no
negative precedent for future claims, actions or litigation against
THX and its Affiliates will be established, in which case no consent
shall be required. If the defense of a Third Party Claim has been
assumed by THX, THX shall cooperate with THEC or KeySpan in connection
with such defense and shall permit THEC or KeySpan to participate
therein; provided, that THX shall not be liable to THEC or KeySpan
under the provisions hereof for any legal or other expenses incurred
by THEC or KeySpan (as applicable) in connection with THEC's or
KeySpan's (as applicable) participation in the defense of such Third
Party Claim after THX has elected to assume the defense thereof so
long as THX is diligently contesting such Third Party Claim in good
faith, unless THEC or KeySpan is advised by outside counsel that an
actual or potential conflict of interest exists between THEC or
KeySpan (as applicable) and THX or that there are different or
additional defenses available to THEC or KeySpan, as the case may be,
that are not available to THX, in which case THEC may engage separate
counsel (the fees and costs of which shall be borne by THX). THX may
not enter into any settlement of a Third Party Claim without the prior
written consent of THEC or KeySpan (as applicable), which will not be
unreasonably withheld, unless KeySpan and THEC and their respective
Affiliates have no liability therefor, are not required to admit any
liability and will not be bound by any restrictions or limitations on
its or their conduct thereafter, and no negative precedent for future
claims, actions or litigation against KeySpan and THEC and their
respective Affiliates will be established, in which case no consent
shall be required.
10.6.2 If THX's Indemnity Claim involves a Third Party Claim,
then if THEC or KeySpan acknowledges in writing its obligation to
indemnify THX in respect of such Third Party Claim, THEC or KeySpan
may elect (by written notice to THX delivered within thirty (30) days
of notice by THX to THEC pursuant to Section 10.5.1) to assume at its
expense the defense of such Third Party Claim using counsel reasonably
acceptable to THX. If THEC or KeySpan does not so elect to assume such
defense, then such Third Party Claim shall be defended by THX in such
manner as it reasonably deems appropriate (and the costs, fees and
expenses of THX for such defense shall constitute Damages), including
entering a reasonable settlement thereof in which event the settlement
plus THX's costs, fees and expenses with respect thereto shall be the
Damage; provided that THX shall not enter into any settlement of such
Third Party Claim without the prior written consent of THEC, which
consent shall not be unreasonably withheld, unless THEC, KeySpan and
their respective Affiliates have no liability therefor, are not
required to admit any liability and will not be bound by any
restrictions or limitations on its or their conduct thereafter, and no
negative precedent for future claims, actions or litigation against
THEC, KeySpan and their respective Affiliates will be established, in
which case no consent shall be required. If the Third Party Claim has
been assumed by THEC or KeySpan, THEC or KeySpan (as applicable) shall
cooperate with THX in connection with such defense and shall permit
THX to participate therein; provided, that THEC or KeySpan (as
applicable) shall not be liable to THX under the provisions hereof for
any legal or other expenses incurred by THX in connection with THX's
participation in the defense of such Third Party Claim after THEC or
KeySpan (as applicable) has elected to assume the defense thereof so
long as THEC or KeySpan (as applicable) is diligently contesting such
39
Third Party Claim in good faith, unless THX is advised by outside
counsel that an actual or potential conflict of interest exists
between THX and THEC or KeySpan (as applicable) or that there are
different or additional defenses available to THX that are not
available to THEC or KeySpan (as applicable), in which case THX may
engage separate counsel (the fees and costs of which shall be borne by
THEC or KeySpan). THEC or KeySpan may not enter into any settlement of
a Third Party Claim without the prior written consent of THX, which
will not be unreasonably withheld, unless THX and its Affiliates have
no liability therefor, are not required to admit any liability and
will not be bound by any restrictions or limitations on its or their
conduct thereafter, and no negative precedent for future claims,
actions or litigation against THX and its Affiliates will be
established, in which case no consent shall be required.
Section 10.7 Exclusivity. Following the Closing, except in the case of
common law fraud or with respect to matters for which the remedy of specific
performance, injunctive relief or other non-monetary equitable remedies are
available, the sole and exclusive remedy of the parties with respect to any and
all claims arising from any breach of the representations or warranties herein
or in any certificate or other document delivered hereunder or nonperformance of
any covenants and agreements herein or in any certificate or other document
delivered hereunder shall be pursuant to the indemnification provisions set
forth in this Article X; provided that all matters relating to Taxes shall be
addressed in and governed by the Tax Matters Agreement.
Article XI.
MISCELLANEOUS
Section 11.1 Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile (with confirming copy sent by one of the other delivery methods
specified herein), by overnight courier or sent by certified, registered or
express air mail, postage prepaid, and shall be deemed given when so delivered
personally, or when so received by facsimile or courier, or, if mailed, three
calendar days after the date of mailing, as follows:
If to THX: The Houston Exploration Company
1100 Louisiana, Suite 2000
Houston, Texas 77002
Facsimile: (713) 830-6885
Attention: John H. Karnes
and with a copy to King & Spalding LLP
(which shall not constitute 1100 Louisiana, Suite 4000
notice to): Houston, Texas 77002
Facsimile: (713) 751-3290
Attention: Christine B. LaFollette
40
If to THEC: THEC Holdings Corp.
c/o KeySpan Energy Corporation
One Metrotech Center
Brooklyn, New York 11201-3850
Facsimile: (718) 403-3394
Attention: Saiyed Zain Mirza
and with a copy to Simpson Thacher & Bartlett LLP
(which shall not constitute 425 Lexington Avenue
notice to): New York, New York 10017
Facsimile: (212) 455-2502
Attention: William R. Dougherty
If to KeySpan: KeySpan Corporation
One Metrotech Center
Brooklyn, New York 11201-3850
Facsimile: (718) 403-2161
Attention: Steven L. Zelkowitz
and with a copy to KeySpan Corporation
(which shall not constitute Office of the General Counsel
notice to): One Metrotech Center
Brooklyn, New York 11201-3850
Facsimile: (718) 403-2809
Attention: John J. Bishar, Jr.
and with a copy to Simpson Thacher & Bartlett LLP
(which shall not constitute 425 Lexington Avenue
notice to): New York, New York 10017
Facsimile: (212) 455-2502
Attention: William R. Dougherty
or to such other address and with such other copies as any party hereto shall
notify the other parties hereto (as provided above) from time to time.
Section 11.2 Governing Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal Laws of the State
of Delaware, without reference to the choice of law principles thereof. Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of Delaware and the United States District Court for any
district within such state for the purpose of any Action or judgment relating to
or arising out of this Agreement or any of the transactions contemplated hereby
and to the laying of venue in such court. Service of process in connection with
any such Action may be served on each party hereto by the same methods as are
specified for the giving of notices under this Agreement. Each party hereto
irrevocably and unconditionally waives and agrees not to plead or claim any
objection to the laying of venue of any such Action brought in such courts and
irrevocably and unconditionally waives any claim that any such Action brought in
any such court has been brought in an inconvenient forum.
41
Section 11.3 Waiver of Jury Trial. Each party hereto acknowledges and
agrees that any controversy which may arise under this Agreement, the Tax
Matters Agreement or any other Ancillary Agreement is likely to involve
complicated and difficult issues and, therefore, each such party hereby
irrevocably and unconditionally waives to the fullest extent permitted by
applicable Law, any right such party may have to a trial by jury in respect to
any Action directly or indirectly arising out of, under or in connection with or
relating to this Agreement, the Tax Matters Agreement or any other Ancillary
Agreement or the transactions contemplated by this Agreement, the Tax Matters
Agreement or any other Ancillary Agreement. Each party hereto certifies and
acknowledges that (a) no representative, agent or attorney of any other party
hereto has represented, expressly or otherwise, that such other party would not,
in the event of such Action, seek to enforce the foregoing waiver, (b) each such
party understands and has considered the implications of this waiver, (c) each
such party makes this waiver voluntarily and (d) each such party has been
induced to enter into this Agreement by, among other things, the mutual waivers
and certifications in this Section 11.3.
Section 11.4 Assignment; Successors and Assigns; No Third Party Rights.
This Agreement and the Ancillary Agreements may not be assigned by any party
hereto without the prior written consent of the other parties hereto, and any
attempted assignment shall be null and void. This Agreement and the Ancillary
Agreements shall be binding upon and inure solely to the benefit of the parties
hereto and their respective successors and permitted assigns. Except as provided
in Sections 10.2 or 10.3, this Agreement shall be for the sole benefit of the
parties hereto, and their respective successors and permitted assigns and is not
intended (expressly or otherwise), nor shall be construed, to give any Person,
other than the parties hereto and their respective successors and permitted
assigns any legal or equitable right, benefit, remedy or claim hereunder.
Nothing in this Agreement shall prevent any party and its successors and
permitted assigns from consolidating with or merging with or into, or
transferring, in one transaction or a series of related transactions,
substantially all of its assets to, any Person or Persons; provided, however,
that the purchaser of substantially all of the assets of the party or its
successor or permitted assign shall agree with the other party to be bound by
all of the transferring party's obligations hereunder; provided, further that
THEC may assign its rights under Section 6.9 to any Affiliate of KeySpan who
holds THX Shares at such time.
Section 11.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument. This Agreement may be executed by
facsimile signature.
Section 11.6 Titles and Headings. The headings and table of contents in
this Agreement are for reference purposes only, and shall not in any way affect
the meaning or interpretation of this Agreement.
Section 11.7 Entire Agreement. This Agreement (including the Schedules and
Exhibits attached hereto or delivered in connection herewith) and the Ancillary
Agreements constitute the entire agreement among the parties hereto with respect
to the matters covered hereby and thereby, and supersede all previous written,
oral or implied agreements, representations and understandings among them with
respect to such matters.
Section 11.8 Amendment and Modification. This Agreement may not be amended
42
or modified except by an instrument in writing signed by each of the parties
hereto.
Section 11.9 Publicity; Public Announcements. THX, Subsidiary, THEC and
KeySpan shall consult with each other before issuing, and give each other a
reasonable opportunity to review and comment upon the initial press release with
respect to the transactions contemplated hereby.
Section 11.10 Waiver. Any of the terms or conditions of this Agreement may
be waived at any time by the party or parties hereto entitled to the benefit
thereof, but only by a writing signed by the party or parties waiving such terms
or conditions. No such waiver shall be operative as a waiver of any other
subsequent requirement of this Agreement. The failure of any party to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
Section 11.11 Severability. If any term, provisions, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 11.12 No Strict Construction. THEC, KeySpan, Seneca-Upshur and THX
each acknowledge that this Agreement has been prepared jointly by the parties
hereto and shall not be strictly construed against any party hereto.
Section 11.13 Knowledge. To the extent that any representation is made to
"THX's knowledge" (or similar words), such knowledge shall refer to the actual
knowledge, after due inquiry, of the individuals listed in Section 11.13 of
THX's Disclosure Schedule. To the extent that any representation is made to
"THEC's knowledge" or "KeySpan's knowledge" (or similar words), such knowledge
shall refer to the actual knowledge, after due inquiry, of the individuals
listed in Section 11.13 of THEC's Disclosure Schedule.
Section 11.14 Affiliate Status. To the extent that a party hereto is
required hereunder to take certain action with respect to entities designated
herein as such party's Affiliates, such obligation shall apply to such entities
only during such period of time that such entities are Affiliates of such party.
Section 11.15 No Third Party Beneficiaries This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person any legal or equitable right, benefit or remedy of any
nature whatsoever, including any rights of employment for any specified period,
under or by reason of this Agreement.
Section 11.16 Specific Performance. The parties agree that if any of the
provisions of this Agreement were not performed in accordance with their
43
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof or injunctive relief, in addition to any other remedy at law or equity.
Section 11.17 Expenses. Each party shall be responsible for its own
expenses incurred in connection with this Agreement, the Ancillary Agreements
and the transactions contemplated hereby and thereby.
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE HOUSTON EXPLORATION COMPANY
By: /s/ John H. Karnes
--------------------------------------
Name: John H. Karnes
Title: Senior Vice President and
Chief Financial Officer
SENECA-UPSHUR PETROLEUM, INC.
By: /s/ James F. Westmoreland
--------------------------------------
Name: James F. Westmoreland
Title: Vice President
THEC HOLDINGS CORP.
By: /s/ Michael J. Nilsen
--------------------------------------
Name: Michael J. Nilsen
Title: Vice President, Treasurer
and Comptoller
KEYSPAN CORPORATION
By: /s/ Michael J. Taunton
--------------------------------------
Name: Michael J. Taunton
Title: Senior Vice President
and Treasurer
Exhibit 11
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement, dated as of June
2, 2004 (this "Agreement"), is entered into by and among The Houston Exploration
Company, a Delaware corporation (the "Company"), and THEC Holdings Corp., a
Delaware corporation ("THEC Holdings").
W I T N E S S E T H
WHEREAS, the Company, Seneca-Upshur Petroleum, Inc. ("Seneca"), THEC
Holdings and KeySpan Corporation have entered into a Distribution Agreement
dated as of June 2, 2004 where THEC Holdings will exchange up to 10,800,000
shares of Common Stock for all of the outstanding common stock of Seneca (the
"Distribution");
WHEREAS, the Company and THEC Holdings are parties to the Registration
Rights Agreement, dated as of July 2, 1996 (the "Existing Registration Rights
Agreement"); and
WHEREAS, in connection with the Distribution the parties have agreed to
amend and restate the Existing Registration Rights Agreement in accordance with
the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree that as of the date hereof the
Existing Registration Rights Agreement is hereby amended and restated in its
entirety as follows:
1. Certain Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Commercially Reasonable Efforts", when used with respect to an
obligation to be performed or term or provision to be observed
hereunder, means such efforts as a prudent person seeking the benefits
of such performance or action would make, use, apply or exercise to
preserve, protect or advance its rights or interests, provided that
such efforts do not require such person to incur a material financial
cost or a substantial risk of material liability unless such cost or
liability (i) would customarily be incurred in the course of
performance or observance of the relevant obligation, term, or
provision, (ii) is caused by or results from the wrongful act or
negligence of the person whose performance or observance is required
hereunder or (iii) is not excessive or unreasonable in view of the
rights or interests to be preserved, protected or advanced. Such
efforts may include, without limitation, (A) the expenditure of such
funds and retention by such person of such accountants, attorneys or
other experts or advisors as may be necessary or appropriate to effect
the relevant action, (B) the undertaking of any special audit or
internal investigation that may be necessary or appropriate to effect
the relevant action and (C) the commencement, termination or
settlement of any action, suit or proceeding involving such person to
the extent necessary or appropriate to effect the relevant action.
(b) "Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
(c) "Company" has the meaning set forth in the initial paragraph of this
Agreement
(d) "Common Stock" means the shares of Common Stock, par value $0.01 per
share, of the Company.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(f) "Holder" means THEC Holdings and any holder of Registrable Securities
to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 10 hereof.
(g) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
(h) "Registrable Securities" means (i) any shares of Common Stock held by
THEC Holdings, and (ii) any Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement of
such shares, provided, however, that Registrable Securities shall not
include any shares of Common Stock which have previously been
registered and sold under the Securities Act, which have been sold or
otherwise transferred under Rule 144 or which may be sold without
restriction pursuant to Rule 144(k).
(i) "Registration Expenses" means all expenses incurred in effecting any
registration pursuant to this Agreement (excluding, for the avoidance
of doubt, the Shelf Registration Statement), including, without
limitation, all registration, qualification, and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and expenses of any regular or
special audits incident to or required by any such registration, but
shall not include Selling Expenses (and shall not include the
compensation of regular employees of the Company, which shall be paid
in any event by the Company).
(j) "Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(k) "Rule 145" means Rule 145 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(l) "Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(m) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder.
2. Shelf Registration. The Company hereby acknowledges that the Company's
Registration Statement on Form S-3 (No. 333-113659), filed with the
Commission on March 16, 2004 for an offering to be made on a continuous
basis pursuant to Rule 415 under the Securities Act (including any
amendments and supplements or replacements as provided below, the "Shelf
Registration Statement") covers all of the Registrable Securities. The
Company agrees to use Commercially Reasonable Efforts to keep the Shelf
Registration Statement continuously effective until the earlier of (x) the
date which is 18 months from the date hereof (provided that such 18-month
period shall be extended for the duration of any period during which the
2
Holder's right to sell Registrable Securities thereunder has been
suspended) or (y) such date as all shares of Registrable Securities held or
entitled to be held upon conversion by Holder may be immediately sold under
Rule 144 during any 90-day period (such period, the "Effective Period"). If
the Shelf Registration Statement ceases to be effective for any reason at
any time during the Effective Period (other than because of the sale of all
of the securities registered thereunder), the Company shall use
Commercially Reasonable Efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof or shall file with the
Commission a new registration statement for an offering to be made on a
continuous basis pursuant to Rule 415 under the Securities Act covering all
of the shares of Registrable Securities then outstanding for the remainder
of the Effective Period. Holders may only sell Registrable Securities
pursuant to the Shelf Registration Statement in transactions involving not
less than 500,000 shares of Common Stock (subject to adjustment for stock
dividends, stock splits and the like) per transaction.
3. Demand Registration.
3.1 Request for Registration. (a) At any time and from time to time
one or more Holders will have the right by a written request
delivered to the Company, to require that the Company register
all or part of the Registrable Securities, representing no less
than 10% of the Company's then outstanding shares of Common Stock
(a "Demand Registration"); provided that effective on the date of
this Agreement and subject to the conditions set forth herein
THEC Holdings (and any Holder of Registrable Securities to whom
registration rights conferred by this Agreement have been
transferred in compliance with Section 10 hereof) may not make
more than two Demand Registrations in total. Upon receipt of
notice pursuant to this Section 3.1(a), the Company will:
(i) promptly give written notice of the proposed registration to
all other Holders;
and
(ii) as soon as practicable, use Commercially Reasonable Efforts
to effect such Demand Registration (including, without
limitation, filing a registration statement and any
appropriate pre-effective or post-effective amendments,
appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with
the Securities Act) so as to permit or facilitate the sale
and distribution of all or such portion of the Registrable
Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified
in a written request received by the Company within 20 days
after such written notice from the Company is effective.
Each request for a Demand Registration under this Section 3 shall specify
the amount of Registrable Securities proposed to be registered.
(b) The Company shall not be obligated to effect, or to take any action to
effect, any such Demand Registration pursuant to this Section 3:
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless
the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act;
(ii) prior to the expiration of a period of six months after the
Company has initiated any Demand Registration pursuant to this
Section 3.1, provided that a Demand Registration initiated
3
pursuant to this Section 3.1 and subsequently withdrawn by the
Holders registering shares therein shall not be counted as a
requested Demand Registration pursuant to this clause (ii) if (X)
such withdrawal is based upon material adverse information
relating to the Company that is not known by or available (upon
request from the Company or otherwise) to the Holders initiating
the Demand Registration at the time of their request for
registration pursuant to this Section 3.1 or (Y) the Holders bear
the Registration Expenses for such registration;
(iii)during the period starting with the date 60 days prior to the
Company's good faith estimate of the date of filing of, and
ending on a date 180 days after the effective date of, a
Company-initiated registration, provided that the Company is
actively employing in good faith all Commercially Reasonable
Efforts to cause such registration statement to become effective;
(iv) if the Holders initiating a Demand Registration do not request
that such offering be firmly underwritten by underwriters
selected by a majority in interest of the Holders initiating a
Demand Registration (subject to the consent of the Company, which
consent will not be unreasonably withheld);
(v) if the Company and the initiating Holders are unable to obtain
the commitment of the underwriters described in clause (iv) above
to firmly underwrite the offer; or
(vi) if, within 14 days after its receipt of a written request to
effect such Demand Registration, the Company causes to be
delivered to the Holders initiating the Demand Registration an
opinion of King & Spalding LLP or other counsel reasonably
acceptable to the initiating Holders to the effect that the
proposed disposition of Registrable Securities by the initiating
Holders will not require registration or qualification under the
Securities Act, it being specifically understood and agreed that
the initiating Holders will promptly furnish to the Company and
such counsel all information such counsel may reasonably request
in order to enable such counsel to determine whether it would be
able to render such opinion.
3.2 Right to Defer Registration. Subject to the provisions of Section
3.1(b), the Company shall use Commercially Reasonable Efforts to file
a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the
request or requests of the Holders initiating the Demand Registration;
provided, however, that if (i) in the good faith judgment of the Board
of Directors of the Company, and in view of a material undisclosed
pending transaction or event that the Board of Directors of the
Company determines is reasonably likely to occur in the near term and
the disclosure of which at such time the Board of Directors of Company
determines would not be in the best interests of the Company, and the
Board of Directors of the Company concludes, as a result, that it is
in the best interests of the Company to defer the filing of such
registration statement at such time, and (ii) the Company shall
furnish to such Holders a certificate signed by an executive officer
of the Company stating that in the good faith judgment of the Board of
Directors of the Company, and in view of a material undisclosed
pending transaction or event that the Board of Directors of the
Company determines is reasonably likely to occur in the near term and
the disclosure of which at such time would not be in the best
interests of the Company, it would not be in the best interests of the
Company for such registration statement to be filed at such time and
that it is, therefore, consistent with the best interests of the
Company to defer the filing of such registration statement, then the
Company shall have the right to defer such filing for the period
during which such situation exists and such disclosure would have such
effect, provided that (except as provided in Section 3.1(b)(iii)
above) the Company may not defer the filing for a period of more than
180 days after receipt of the request of the Holders initiating the
Demand Registration, and, provided further, that the Company shall not
defer its obligation in this manner more than once in any twelve-month
period.
4
3.3 Underwriting. (a) The right of any Holder to registration pursuant to
Section 3 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting (together with the Company and other holders of
securities of the Company exercising registration rights with respect
to such registration) shall enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected by a majority in interest of the Holders
initiating the Demand Registration, subject to the consent of the
Company, which consent shall not be unreasonably withheld.
(b) Notwithstanding any other provision of this Section 3, if the
representative of the underwriters advises the Holders initiating
the Demand Registration in writing that marketing factors require
a limitation on the number of shares to be underwritten, the
number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 11
hereof. If a person who has requested inclusion in such
registration as provided above does not agree to the terms of any
such underwriting, such person shall be excluded therefrom by
written notice from the Company, the underwriter or the Holders
initiating the Demand Registration. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting
shall also be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares to be
included in such registration was previously reduced as a result
of marketing factors pursuant to this Section 3.3, then the
Company shall offer to all Holders who have retained rights to
include securities in the registration the right to include
additional securities in the registration in an aggregate amount
equal to the number of shares so withdrawn, with such shares to
be allocated among such Holders requesting additional inclusion
in accordance with Section 11 hereof.
4. Piggyback Registration.
4.1 Notice of Registration. If the Company shall determine to
register any of its securities either for its own account or the
account of a security holder or holders exercising their
respective demand registration rights (other than pursuant to
Section 3 hereof), other than a registration relating solely to
employee benefit plans, a registration relating solely to a Rule
145 transaction, or a registration on any registration form that
does not permit secondary sales, the Company will:
(a) promptly give to each Holder written notice thereof; and
(b) use Commercially Reasonable Efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), except as set forth in Section
4.2 below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or
requests, made by any Holder within 20 days after the
written notice from the Company described in clause (a)
above is given. Such written request may specify all or a
part of a Holder's Registrable Securities.
4.2 Right to Terminate Registration. The Company shall have the right
to terminate or withdraw any registration initiated by it under
this Section 4 prior to the effectiveness of such registration
whether or not any Holder has elected to include Registrable
Securities in such registration.
4.3 Underwriting.
(a) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written
notice given pursuant to Section 4.1 above. In such event,
the right of any Holder to registration pursuant to this
5
Section 4 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute
their securities through such underwriting (together with
the Company and such other holders of securities of the
Company exercising registration rights with respect to such
registration) shall enter into an underwriting agreement in
customary form with the representative of the underwriter or
underwriters selected by the Company or the security holders
initiating such registration, as the case may be.
(b) Notwithstanding any other provision of this Section 4, if
the representative of the underwriters advises the Company
in writing that marketing factors require a limitation on
the number of shares to be underwritten, the representative
may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of
Registrable Securities to be included in, the registration
and underwriting. The Company shall so advise all holders of
securities requesting registration, and the amount of
securities that are entitled to be included in the
registration and underwriting shall be allocated first to
the Company for securities being sold for its own account
and thereafter as set forth in Section 11 hereof. If any
person does not agree to the terms of any such underwriting,
such person shall be excluded therefrom by written notice
from the Company or the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from
such underwriting shall be withdrawn from such registration.
5. Expenses of Registration. All Registration Expenses in any registration,
qualification or compliance pursuant to Section 3 shall be borne by the
holders of the securities so registered pro rata on the basis of the number
of shares of securities so registered on their behalf. All Registration
Expenses in any registration, qualification or compliance pursuant to
Section 4 shall be borne by the Company. All Selling Expenses relating to
securities so registered shall be borne by the holders of such securities
pro rata on the basis of the number of shares of securities so registered
on their behalf.
6. Registration Procedures. In the case of the Shelf Registration and each
registration effected by the Company pursuant to this Agreement, the
Company will keep each Holder advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense (except,
as otherwise provided herein), the Company will use Commercially Reasonable
Efforts to:
(a) except in the case with the Shelf Registration Statement (the duration
of effectiveness of which shall be governed by Section 2), keep such
registration effective for a period of 120 days or until the Holder or
Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs; provided, however,
that such 120-day period shall be extended for a period of time equal
to the period after the effectiveness of such registration that the
Holder refrains from selling any securities included in such
registration at the request of an underwriter of Common Stock (or
other securities) of the Company;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement;
(c) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus,
as a Holder from time to time may reasonably request;
(d) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the happening
of any event as a result of which the prospectus included in such
6
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances then existing, not
misleading, and at the request of any such seller, prepare and furnish
to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading;
(e) cause all such Registrable Securities registered pursuant hereunder to
be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the
effective date of such registration;
(g) comply with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the
first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the Securities Act; and
(h) in connection with any underwritten offering pursuant to the Shelf
Registration Statement or a registration statement filed pursuant to
Section 3 hereof, (i) make available for reasonable inspection during
normal business hours by a representative of the Holders holding
Registrable Securities being sold, any underwriter participating in
any disposition of Registrable Securities, and any attorney or
accountant retained by such selling Holders or underwriter, all
relevant financial information and records and pertinent corporate
documents of the Company in connection with such registration
statement, and cause the officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with
such registration statement and (ii) cause appropriate members of
management, including, without limitation, the Company's Chief
Executive Officer, to cooperate and participate on a reasonable basis
in the underwriters' "road show" conferences related to such offering,
provided that, (x) any records, information or document that are
designated by the Company as confidential shall be kept confidential
by such person unless disclosure of such records, information or
documents is required by court or administrative order, and (y) the
Holders shall reimburse the Company for their proportionate share
(based on the number of shares of Common Stock being sold in such
transaction) of the Company's reasonable out-of-pocket expenses
incurred in connection with the actions referred to in this clause
(h).
In connection with any underwritten offering pursuant to the Shelf Registration
Statement or a registration statement filed pursuant to Section 3 hereof, the
Company will enter into an underwriting agreement reasonably necessary to effect
the offer and sale of Common Stock, provided such underwriting agreement
contains customary underwriting provisions.
7. Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each
person controlling such Holder within the meaning of Section 15
of the Securities Act, if Registrable Securities of such Holder
are included in the securities with respect to which
registration, qualification, or compliance has been effected
7
pursuant to this Agreement or under the Shelf Registration
Statement, and each underwriter, if any, and each person who
controls within the meaning of Section 15 of the Securities Act
any underwriter, against all expenses, claims, losses, damages,
and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
prospectus, offering circular, the Shelf Registration Statement
or other document (including any related registration statement,
notification, or the like) incident to any such registration,
qualification, or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act
or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required by the Company in
connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its
officers, directors, partners, legal counsel, and accountants and
each person controlling such Holder, each such underwriter, and
each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with
investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not
be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter and stated
to be specifically for use therein. It is agreed that the
indemnity agreement contained in this Section 7(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected
without the consent of the Company (which consent has not been
unreasonably withheld).
(b) Each Holder (an "Indemnifying Holder") will, if Registrable
Securities held by the Indemnifying Holder are included in the
securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its
directors, officers, partners, legal counsel, and accountants and
each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of
the Securities Act, each other such Holder (an "Indemnified
Holder"), and each of their officers, directors, and partners,
and each person controlling such Indemnified Holder, against all
claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse the Company and such Indemnified Holders, directors,
officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in
each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus,
offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by
the Indemnifying Holder and stated to be specifically for use
therein; provided, however, that the obligations of the
Indemnifying Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities
(or actions in respect thereof) if such settlement is effected
without the consent of such Holder (which consent shall not be
unreasonably withheld); and provided further that the liability
of an Indemnifying Holder pursuant to this Section 7(b) in
connection with a registration shall be limited to the net
proceeds from the sale of the Registrable Securities of such
Indemnifying Holder pursuant to such registration.
(c) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and, except as provided in the
following sentence, shall permit the Indemnifying Party to assume
8
the defense of such claim or any litigation resulting therefrom;
provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld); provided further
that the Indemnified Party may participate in such defense at its
own expense; and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this
Agreement, to the extent such failure is not materially
prejudicial. After the Indemnifying Party assumes the defense of
such claim or litigation, the Indemnifying Party shall not be
liable to the Indemnified Party under this Section 7 for any
legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof, other than
reasonable costs of investigation, unless the named parties to
any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim
and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7 is held by
a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim,
damage, or expense in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with
the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied
by the Indemnifying Party or by the Indemnified Party and the
parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
8. Information by Holder. Each Holder of Registrable Securities shall furnish
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company
agrees to use its Commercially Reasonable Efforts to:
(a) make and keep public information regarding the Company available
as those terms are understood and defined in Rule 144 under the
Securities Act, at all times from and after 90 days following the
effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the
general public;
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(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such
reporting requirements; and
(c) so long as a Holder owns any restricted Registrable Securities,
furnish to the Holder forthwith upon written request a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after 90 days
following the effective date of the first registration statement
filed by the Company for an offering of its securities to the
general public), and of the Securities Act and the Exchange Act
(at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so
filed as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
10. Transfer or Assignment of Registration Rights. The rights to cause the
Company to register securities granted to THEC Holdings by the Company
under this Agreement may be transferred or assigned by THEC Holdings only
to a transferee or assignee of Registrable Securities representing no less
than 10% of the Company's then outstanding shares of Common Stock. Any
transfer or assignment of the registration rights granted under this
Agreement shall be conditioned upon (i) the Company's being given written
notice at the time of or within a reasonable time after said transfer or
assignment, stating the name and address of the transferee or assignee and
identifying the securities with respect to which such registration rights
are being transferred or assigned and (ii) the assumption in writing by the
transferee or assignee of the obligations of a Holder under this Agreement.
11. Allocation of Registration Opportunities. In any circumstance in which all
of the Registrable Securities requested to be included in a registration on
behalf of the Holders cannot be so included as a result of limitations of
the aggregate number of shares of Registrable Securities that may be so
included, the number of shares of Registrable Securities that may be so
included shall be allocated among the Holders requesting inclusion of
shares pro rata on the basis of the number of shares of Registrable
Securities held by such Holders. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include shares held by stockholders with no
registration rights or, with respect to registrations under Section 3
hereof, in order to include in such registration securities registered for
the Company's own account or securities other than Registrable Securities.
12. Delay of Registration. No Holder shall have any right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
13. Termination of Registration Rights. The right of any Holder to request
registration or inclusion in any registration pursuant to Section 3 or 4
hereof shall terminate on such date as all shares of Registrable Securities
held or entitled to be held upon conversion by such Holder may immediately
be sold under Rule 144(k) without restriction during any 90-day period.
14. Miscellaneous.
14.1 Governing Law. This Agreement shall be governed in all respects
by the internal laws of the State of Delaware, without reference
to the conflicts of law principles thereof.
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14.2 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the
parties hereto.
14.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to
the subjects hereof.
14.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise
delivered by hand or by messenger, including Federal Express or
similar courier services, addressed (a) if to a Holder, to such
Holder c/o THEC Holdings at One Metrotech Center, Brooklyn, New
York 11201-3850, Attn: President, or at such other address as
such Holder shall have furnished to the Company in writing, or
(b) if to the Company, to 1100 Louisiana Street, Suite 2000,
Houston, Texas 77002, Attn: President, or at such other address
as the Company shall have furnished to the Holders. Each such
notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when
delivered if delivered personally, or, if sent by mail or
courier, at the earlier of its receipt or 48 hours after the same
has been deposited in a regularly maintained receptacle for the
deposit of the United States mail, addressed and mailed as
aforesaid.
14.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of
the Holders, each of which shall be enforceable against the
parties actually executing such counterparts, and all of which
together shall constitute one instrument.
14.6 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect such provision in
any other jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained
herein.
14.7 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
14.8 Amendment. Except as expressly provided herein, this Agreement
may be amended only upon the written consent of the Company and
the Holders of at least seventy-five percent (75%) of the
Registrable Securities then subject to this Agreement.
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IN WITNESS WHEREOF, this Agreement has been executed effective as of the
date first set forth above.
Company:
THE HOUSTON EXPLORATION COMPANY
By: /s/ John H. Karnes
-------------------------------------------------
Name: John H. Karnes
Title: Senior Vice President and Chief Financial Officer
THEC Holdings:
THEC HOLDINGS CORP.
By: /s/ Michael J. Nilsen
--------------------------------------------------
Name: Michael J. Nilsen
Title: Vice President, Treasurer and Comptoller
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