CAPITAL STOCK AGREEMENT In Connection With The CAPITAL STOCK OF CITRUS CORP. June 30, 1986 SONAT INC. ENRON CORP. HOUSTON NATURAL GAS CORPORATION CITRUS CORP.
Exhibit
10(p)
In
Connection With The
CAPITAL
STOCK OF CITRUS CORP.
June
30, 1986
SONAT
INC.
ENRON
CORP.
HOUSTON
NATURAL GAS CORPORATION
CITRUS
CORP.
TABLE
OF
CONTENTS
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Page
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SECTION
1 - DEFINITIONS...................................................................................................................................................................................................................................................................................
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2
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SECTION
2 - INVESTMENT
REPRESENTATION..............................................................................................................................................................................................................................................
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8
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SECTION
3 - CAPITAL STOCK OF
CITRUS.......................................................................................................................................................................................................................................................
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8
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(a)
Ownership and Original
Issuance.....................................................................................................................................................................................................................................
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8
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(b) Transfers
of
Shares Between Principals
and Their
Subsidiaries.....................................................................................................................................................................................................................................................
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8
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(c) Disposition
of
Shares.........................................................................................................................................................................................................................................................
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10
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(d)
Sale of
Shares......................................................................................................................................................................................................................................................................
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11
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(e) Pledge
of Shares and
Rights under this
Agreement….................................................................................................................................................................................................
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14
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(f) Opinion
of
Counsel.............................................................................................................................................................................................................................................................
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15
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(g) Legend
on
Certificates.......................................................................................................................................................................................................................................................
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16
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(h) Limitations...........................................................................................................................................................................................................................................................................
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16
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SECTION
4 - BOARD OF
DIRECTORS................................................................................................................................................................................................................................................................
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17
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SECTION
5 - CHAIRMAN OF THE
BOARD......................................................................................................................................................................................................................................................
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18
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SECTION
6 - INFORMAL MEETINGS OF
PRINCIPALS.................................................................................................................................................................................................................................
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19
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SECTION
7 - PERFORMANCE OF
AGREEMENTS..........................................................................................................................................................................................................................................
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19
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SECTION
S - PRINCIPAL
OFFICE
OF
CITRUS.................................................................................................................................................................................................................................................
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19
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SECTION
9 -
AUDITORS.....................................................................................................................................................................................................................................................................................
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19
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SECTION
10
- INSPECTION;
BOOKS AND
RECORDS..................................................................................................................................................................................................................................
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20
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SECTION
1l-OPERATING
AGREEMENT..........................................................................................................................................................................................................................................................
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20
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SECTION
12 - PIPELINE
EXPANSION..............................................................................................................................................................................................................................................................
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20
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SECTION
13 -
FINANCING.................................................................................................................................................................................................................................................................................
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21
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SECTION
14 - VOTING SECURITIES OF THE PRINCIPALS........................................................................................................................................................................................................................
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21
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SECTION
15 - BUY-SELL
RIGHTS.....................................................................................................................................................................................................................................................................
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23
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SECTION
16 - CHANGE OF
CONTROL............................................................................................................................................................................................................................................................
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26
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SECTION
17 - TERM OF
AGREEMENT............................................................................................................................................................................................................................................................
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31
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SECTION
18 -
NOTICE.........................................................................................................................................................................................................................................................................................
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32
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SECTION
19 - GOVERNING
LAW......................................................................................................................................................................................................................................................................
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33
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SECTION
20 -
HEADINGS...................................................................................................................................................................................................................................................................................
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33
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SECTION
21 - SUCCESSORS
BOUND...............................................................................................................................................................................................................................................................
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33
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SECTION
22 - NO
WAIVER................................................................................................................................................................................................................................................................................
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34
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SIGNATURES........................................................................................................................................................................................................................................................................................................
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34
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ii.
THIS
AGREEMENT dated June 30, 1986, among SONAT INC. ("Sonat"),
a Delaware corporation, ENRON CORP. ("Enron"), a Delaware
corporation, formerly named InterNorth, Inc., HOUSTON
NATURAL GAS CORPORATION ("HNG"), a Texas corporation and
wholly owned subsidiary of Enron, and CITRUS CORP. ("Citrus"),
a Delaware corporation.
WITNESSETH:
WHEREAS,
Citrus has, at the date of this Agreement, an authorized capital stock of 1,000
shares of Common Stock, $1 par
value
("Common Stock"), consisting of 500 shares of Class
A
Common Stock ("Class A Common Stock") and 500 shares of
Class
B Common Stock ("Class B Common Stock"); and
WHEREAS,
at the date of this Agreement, the shares of capital
stock of Citrus which are issued and outstanding are 500
shares of Class A Common Stock, which are owned and held by
Sonat,
and 500 shares of Class H Common Stock, which are owned
and
held by HNG; and
WHEREAS,
Citrus has two wholly owned subsidiaries, Florida
Gas Transmission Company ("Florida Gas"), a Delaware corporation,
and Florida Intrastate Pipeline Company ("Florida
Intrastate"), a Florida corporation; and
WHEREAS,
Sonat and HNG wish to make certain representations
in
connection with the shares of Common Stock now owned
by
them; and
WHEREAS,
the parties hereto wish to enter into certain agreements relating to the
ownership and disposition of the capital
stock of Citrus, certain business arrangements regarding
the management of Citrus and related matters;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
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1.
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Definitions.
For
the purposes of this Agreement:
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(a) "Affiliate"
and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of
the
General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
as
in effect on the date of this Agreement.
(b) A
Person
shall be deemed the "Beneficial Owner"
of
and shall be deemed to "beneficially own” any securities:
(i) which
such Person or any of such Person's Affiliates
or Associates beneficially owns, directly
or indirectly;
(ii) which
such Person or any of such Person's
Affiliates or Associates, directly or indirectly,
has (A) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding, or upon the exercise of
2.
conversion
rights, exchange rights, rights, warrants
or options, or otherwise; provided,
however,
that a
Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
securities
tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered
securities are accepted for purchase; or (B)
the
right to vote or dispose of pursuant to any agreement,
arrangement or understanding; provided,
however,
that a
Person shall not be deemed the "Beneficial
Owner" of, or to “beneficially own," any
security under this clause (B) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding
(1) arises solely from a revocable proxy
given to such Person in response to a public proxy
or
consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations
of the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act
(or
any comparable or successor report); or
(iii)
which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such
3.
Person
or
any of
such Person's Affiliates or Associates has
any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except pursuant
to a revocable proxy as described in the proviso to clause (B) of subparagraph
(ii) of this paragraph (b)} or disposing of any securities of a Principal.
(c)"Capital
Stock" means the Common Stock and any class
of
capital stock of Citrus hereafter authorized and
includes any security of Citrus convertible into such
stock and any right to purchase or acquire any such stock
or
any security convertible into such stock.
(d) A
"Change
of Control" of a Principal shall be deemed
to
have occurred if (i) any Person shall become the
Beneficial Owner of securities representing 50%or more
of
the aggregate voting power of such Principal's outstanding Voting Securities
or
(ii) there shall occur a change in the composition of a majority of the Board
of
Directors of such Principal that shall not have received
the prior approval of the Continuing Directors of such Principal; provided,
however, that
neither of the foregoing events shall be deemed to be a Change of Control
if such event has been approved by the Continuing
Directors of the Principal prior to such Person (or any
Affiliate or Associate of such Person) becoming the Beneficial
4.
Owner
of
20% or more of the aggregate voting power
of
such Principal's outstanding Voting Securities.
(e)
A
"Continuing Director" of a Principal means each
member of such Principal's Board of Directors as of March
27,
1986 and any successor of a Continuing Director
who is recommended to succeed a Continuing Director by a majority of the
Continuing Directors then in
office.
(f)
"Expansion" means the construction of necessary
pipeline, compression and appurtenant facilities to increase
Florida Gas's capability to deliver gas along its main pipeline system,
generally from Compressor Station
8
in West Baton Rouge Parish, Louisiana, to Compressor Station 20 in St. Lucie
County, Florida, and all gas purchase, transportation and sale agreements
relating to the increased capacity resulting from the expansion.
Said Expansion, which may be accomplished in phases,
is projected to be an increase in delivery capacity
of Florida Gas's main pipeline system of approximately
200,000 MCFD and is intended to serve existing and
new
customers along Florida Gas's system in peninsular Florida.
(g)
"Formula Price” shall equal the Purchase Price as
determined in and paid pursuant to the Stock Purchase Agreement
minus one-half of the decrease or plus one-half
of
the increase (as the case may be) in the Net Worth of Citrus from
5.
the
end
of the month in which the closing referred to in the Stock Purchase Agreement
occurs until the end of the second month preceding the closing
referred to in Section 16.
(h)
"Net
Worth of Citrus” means the consolidated net
worth
of Citrus and its subsidiaries determined in accordance
with the generally accepted accounting principles
followed by Citrus, applied on a consistent basis.
(i)
"Operating Agreement" means the Operating Agreement
of even date herewith between Citrus and HNG Interstate
Pipeline Company.
(j) "Parent"
means, with respect to a Subsidiary, its
ultimate corporate parent, Sonat or Enron, as the case
may
be.
(k) "Person"
means any individual, corporation, partnership,
joint venture, association, joint stock company,
trust, unincorporated organization or government
or
any agency or political organization thereof and shall
include any successor by merger or otherwise of such
Person.
(1)
"Principals" means Sonat and Enron and their respective
successors and assigns.
6.
(m) "Stock
Purchase Agreement" means the Stock Purchase
Agreement dated March 27, 1985 among Sonat, Enron
and
HNG.
(n) "Subsidiary"
means a corporation all of the voting
shares (that is, shares entitled to vote for the election of directors, but
excluding shares entitled so to
vote
only upon the happening of some contingency unless
such contingency shall have occurred) of which shall be owned by a Principal
or
by one or more Subsidiaries or by a Principal and one or more
Subsidiaries.
(o) "Voting
Securities" of a Principal means all outstanding
securities of such Principal entitled under ordinary circumstances to vote
for
the election of directors.
(p) “Synergy
Agreements" means the following agreements,
all dated of even date herewith:
(i) Gas
Supply Agreement between SW Trading Inc. and Florida Gas;
(ii) Interconnection
Agreement between South Georgia
Natural Gas Company and Florida Gas;
(iii) Agreement
for the Sale and Purchase of Natural
Gas between Southern Natural Gas Company
("Southern Natural") and Florida Gas; and
(iv) Capacity
and Expansion Agreement between
Southern Natural and Florida Gas.
7.
2. Investment
Representation.
Each of
Sonat and HNG hereby
represents that the shares of Common Stock now owned by
it
have been acquired for its own account, for investment and
not
with a view to the distribution thereof.
3. Capital
Stock of Citrus.
(a) Ownership
and Original Issuance.
Unless
otherwise
agreed to by the Principals in writing and except
as
otherwise expressly permitted by the provisions
of
this Agreement, at all times during the term of this
Agreement (i) Sonat or one of its Subsidiaries shall
own
100% of the Class A Common Stock and Enron or one
of
its Subsidiaries shall own 100% of the Class B Common
Stock, (ii) no Capital Stock shall be issued to or
owned
or held by a Person who is not a Principal or a Subsidiary
of a Principal and (iii) no Capital Stock shall
be
issued after the date hereof to a Subsidiary of a
Principal unless such Subsidiary enters into an agreement
with
the other Principal, satisfactory in form and substance
to such other Principal, pursuant to which it agrees
to
be bound by all the terms and provisions of this
Agreement applicable to its Parent.
(b) Transfers
of Shares Between Principals and Their
Subsidiaries.
Notwithstanding any other provisions
of
this Agreement, Capital Stock issued to or owned
or
held by a Principal or Subsidiary thereof may be
transferred by such Principal or Subsidiary, as the
8.
case
may
be, to any Subsidiary of such Principal or, in the
case
of Capital Stock issued to or owned or held by such
Subsidiary, to such Principal, provided that (i) all
such
Capital Stock shall then be held solely by such Principal or Subsidiary, (ii)
notice of such transfer is given
to
the other Principal by the Principal making such
transfer or whose Subsidiary is making such transfer,
(iii) any Subsidiary of any Principal to which any Capital
Stock is to be transferred enters into an agreement
with
the other Principal, satisfactory in form and substance to such other Principal,
pursuant to which it agrees to be bound by all the terms and provisions of
this
Agreement applicable to its Parent, and (iv) prior to
the
occurrence of any Subsidiary which owns Capital Stock
ceasing to be a Subsidiary of a Principal, such Subsidiary
shall transfer and such Principal shall acquire
all such Capital Stock.
(c)
Disposition
of Shares.
Neither
Principal nor any Subsidiary of a Principal (nor any pledgee or mortgagee
of
a Principal or Subsidiary thereof) may directly or
indirectly (including without limitation any sale of a
Subsidiary that owns Capital Stock) sell or transfer or
otherwise dispose of any Capital Stock owned or held by
it
except with the written consent of the other Principal
or
as expressly permitted by
9.
this
Section 3 or by Sections
15 or 16 of this Agreement. No Capital Stock owned
or
held by either Principal or any Subsidiary of such
Principal may be sold or transferred pursuant to the
provisions of the following Section 3(d) unless all such
stock held by such Principal or Subsidiary is sold and
transferred at the same time at a fixed price, payable in cash, to a single
purchaser, all as hereinafter provided. No Capital Stock may be offered for
sale
or sold
under the provisions of Section 3(d) if the terms of
the
proposed sale by the Selling Principal (as hereinafter
defined) require the proposed purchaser to undertake
any obligations or liabilities other than payment of the purchase price in
cash,
the filing and prosecution
of any necessary notices to, and applications
for
any necessary approvals of, regulatory authorities, and compliance with the
provisions of this Agreement.
As
used
herein, the term *sell, transfer or otherwise
dispose of" does not include any transfer pursuant to
a sale
or lease of all or substantially all the assets
of
either Principal or any merger or consolidation
of
either Principal, provided that any transferee or
successor (and, if applicable, the ultimate parent of any
such
transferee or successors) shall, by
10.
agreement
or
operation of law, be bound by the terms and provisions of this Agreement as
a
Principal.
(d)
Sale
of Shares.
Subject
to the limitations set
forth
in Section 3(h), in the event that either Principal desires to sell or cause
to
be sold all the Capital
Stock owned by it or its Subsidiary to a third party
for
cash, such Principal or its Subsidiary (the "Selling
Principal") shall first offer or cause to be offered
such stock for sale to the other Principal (the Purchasing
Principal") at the same price as that provided
for
in any bona fide offer received by the Selling Principal
for the purchase of such stock which the Selling Principal is prepared to
accept, in accordance with the
following provisions of this Section 3(d):
(i) The
Selling Principal shall give notice in
writing to the Purchasing Principal stating that the
Selling Principal desires to sell or cause to be
sold
all the Capital Stock held by the Selling Principal,
specifying the price and the party from which
such offer has been received, offering such stock to the Purchasing Principal
and attaching a copy
of
such offer.
(ii) Within
60
days from the receipt of such notice,
the Purchasing Principal shall deliver a notice
to
the Selling Principal stating whether the
11.
Purchasing
Principal accepts the offer of the Selling
Principal; if the Purchasing Principal fails to deliver such notice within
such
60-day period, the Purchasing
Principal shall be deemed conclusively to
have
delivered a notice stating that the Purchasing Principal does not accept such
offer.
(iii) In
the
event that, within 60 days from the
receipt of the notice of the Selling Principal referred
to in Section 3(i) above, the Purchasing
Principal delivers a notice to the Selling Principal
to the effect that such Purchasing Principal
accepts the offer of the Selling Principal, delivery
of such notices shall constitute an agreement binding on the Selling Principal
and the Purchasing
Principal to sell and purchase all of the Capital
Stock to be sold by the Selling Principal, subject
to the approval of any regulatory authority having
jurisdiction, at the price stated in the offer
of
the Selling Principal.
(iv) If
the
Purchasing Principal declines the offer
or
fails to accept the offer of the Selling Principal
within the period specified in Section 3(d)(ii),
the Selling Principal shall be free until the
expiration of the six-month period referred to in
paragraph (v) below to sell
12.
such
Capital Stock to
the
purchaser at the price specified in the notice
referred to in Section 3(d)(1), provided that
the
purchaser shall, before such sale, have entered into an agreement with the
other
Principal, in
form
and substance reasonably satisfactory to the
other
Principal, whereby such purchaser assumes the same obligations and becomes
entitled to the same benefits as the Selling Principal under the terms of this
Agreement.
(v) In
the
event that the Selling Principal does
not
complete such a sale within a period of six
months from the date upon which the Selling Principal gave notice to the
Purchasing Principal of
its
desire to sell the Capital Stock, all the provisions
of this Section 3(d) shall apply to any future
sale or offer for sale of the Capital Stock held
by
the Selling Principal.
(vi) Each
transaction of purchase and sale pursuant
to the foregoing provisions of this Section
3(d)
shall be completed by payment of the purchase
price to the Selling Principal in immediately
available funds against delivery of the certificates
for the Capital Stock duly endorsed in blank, free and clear of all liens,
claims or encumbrances
and with requisite transfer taxes, if any,
fully paid. Any such transaction
13.
of
purchase and sale pursuant to Section 3(d)(iii) shall be closed
at
such time and place as shall be agreed upon
by
the Purchasing and Selling Principals or, if
no
such agreement is reached, during normal business
hours at the principal office of Citrus on the
120th
day following the date the Purchasing Principal
delivers notice accepting the offer of the
Selling Principal or, if such day shall not be a
business day, on the first business day thereafter
during normal business hours.
(vii)
In
the event that Sonat or a Subsidiary shall
purchase the Capital Stock owned by Enron or its
Subsidiary pursuant to this Section 3(d), the Operating
Agreement shall thereupon terminate. In the
event
that the Capital Stock owned by Enron or its
Subsidiary shall be sold to a third party pursuant
to
this Section 3(d) and the Operating Agreement
shall not be assigned to such third party, the Operating
Agreement shall thereupon terminate.
(e)
Pledge
of Shares and Rights under this Agreement.
The
provisions of subsections (a), (c) and (d) of this Section 3 shall not apply
to
any pledge or mortgage by
any
Principal or any Subsidiary thereof of the Capital
Stock
owned or held by it or its rights under this
14.
Agreement
if such pledge or mortgage is required or provided
for under the terms of any mortgage, trust indenture
or other agreement or amendment thereto now in effect or hereafter executed
pursuant to which any indebtedness for borrowed money or securities of such
Principal
or Subsidiary may be issued and outstanding, and
any
such pledge or mortgage may be made at any Lime without the consent of the
other
Principal; provided, however,
that any disposition of such stock upon foreclosure
of such pledge or mortgage shall be governed by the
provisions of this Agreement, including the provisions of subsections (c) and
(d) of this Section 3.
(f)
Opinion
of Counsel. The
parties hereto understand
that the shares of Common Stock which are owned by HNG
and
the shares of Common Stock which have been acquired
by Sonat have not been and will not be registered under the Securities Act
of
1933 pursuant to an exemption from the registration provisions of such
Act.
Each
of the Principals hereby agrees (on behalf of itself and of its Subsidiaries)
that the Common Stock which
has
been acquired by it and any other Capital Stock
hereafter acquired by it pursuant to an exemption from
the
registration provisions of such Act shall not be
sold,
transferred, pledged or hypothecated unless there
is
furnished an opinion of counsel satisfactory to Citrus
that
15.
registration
of such stock under such Act is not
required. The provisions of this subsection (f) shall
remain in effect until, in the opinion of counsel for
Citrus, they are no longer required.
(g) Legend
on Certificates.
As long
as this Agreement
shall continue in effect, the following legend shall
be
written, printed or stamped on all certificates for
shares of Capital Stock: "The
transfer of shares of stock represented by
this
certificate is restricted by the terms and conditions
of an agreement dated June 30, 1986, among
Sonat Inc., Enron Corp., Houston Natural Gas Corporation
and Citrus Corp. A copy of said Agreement is on file at the office of Citrus
Corp.”
(h) Limitations.
Capital
Stock may only be sold or
transferred pursuant to Section 3(d) if the notice referred to in Section
3(d)(i) pursuant to which such sale
is
made, either to a third party or to the Purchasing
Principal, is given by the Selling Principal to the Purchasing Principal during
one of the following time periods: (i) the period of 180 days following the
fifth anniversary of the date of this Agreement, (ii) the period
of
180 days following the tenth anniversary of the
date
of this Agreement, or (iii) any time after the fifteenth
anniversary of the date of this Agreement. The
16.
limitations
of this Section 3(h) shall not apply to any
disposition of Capital Stock upon foreclosure of a pledge
or
mortgage pursuant to Section 3(e).
4. Board
of Directors.
As
provided in the Restated Certificate
of Incorporation of Citrus, the holders of the Class
A
Common Stock shall be entitled to elect three members
of
the Board of Directors of Citrus, designated Class A Directors,
and the holders of the Class B Common Stock shall be
entitled to elect three members of the Board of Directors,
designated Class B Directors. As provided in Article
III of the Bylaws, any "Important Matter" (as defined
therein) of Citrus shall be submitted to, and require
the approval of, the Board of Directors of Citrus and
any
"Important Matter" of a subsidiary of Citrus shall be
submitted to, and require the approval of, Citrus as its sole
stockholder. The Principals acknowledge that although all
necessary approvals by the Principals and the Boards of Directors
of Citrus or its subsidiaries have been duly given and
received for entering into and performing the Synergy Agreements,
further Board approvals may be required with respect to implementation of the
Capacity and Expansion Agreement
in instances where Florida Gas chooses to construct expansion facilities, and
the Interconnection Agreement. The Principals hereby agree, however, that no
further approvals by the Principals or the Boards of Directors of Citrus
or
its subsidiaries are necessary for implementation of
the
Gas
17.
Supply
Agreement in accordance with its terms, the
Agreement for Sale and Purchase of Natural Gas, and expansion
under the Capacity and Expansion Agreement in instances
where Southern Natural constructs such expansion facilities
at its own cost and expense. The Principals further
agree that without further approval of the Board of Directors of Citrus, neither
Citrus nor its subsidiaries shall enter into any contracts with the Principals
or their Affiliates
or any amendment of such contracts or amend any contract
existing on March 27, 1906 between Citrus or its subsidiaries
on the one hand and the Principals or their Affiliates
on the other hand except those transportation agreements
permitted under the terms of the Bylaws; provided,
however, that no further approvals by the Principals or
the
Boards of Directors of citrus or its subsidiaries are necessary
for any action required to implement all contracts between
Florida Gas and the Principals or their Affiliates that
were
in existence on March 27, 1986.
5. Chairman
of the Board.
Enron
shall have the right to
nominate the first Chairman of the Board of Directors of Citrus.
Thereafter, the right to nominate the Chairman of the
Board
will alternate annually between Enron and Sonat. Sonat
and
Enron agree to use their best efforts to cause the election of the persons
so
nominated.
18.
6. Informal
Meeting of Principals. In
the
event that, from
time
to time, the Board of Directors of Citrus shall be unable
to
reach agreement upon various matters submitted to it,
the
Principals, acting through their respective executive
officers, shall hold informal meetings to discuss and resolve
such matters. The Principals will seek to cause any conclusions
arrived at during such meetings to be implemented,
where necessary, by actions of the Board of Directors
of Citrus.
7. Performance
of Agreements.
Each of
the Principals hereby
agrees, on behalf of itself and any Subsidiary which is
a
stockholder of Citrus, that it or such Subsidiary will at
all
times vote as a stockholder of Citrus, and use all reasonable
efforts to cause those individuals whom it or such
Subsidiary has elected to the Board of Directors of Citrus
to
vote as directors of Citrus, in such a manner as to
ensure
that the terms and intentions of this Agreement and
the
Bylaws of Citrus are carried out and observed.
8. Principal
Office of Citrus.
Citrus
shall establish and
maintain its principal business and operating office at the
principal office of Enron in Houston, Texas, until such time
as
such principal office may be changed by the Board of Directors
of Citrus.
9. Auditors.
The
independent auditors for Citrus shall be
selected by the Board of Directors of Citrus.
19.
10. Inspection;
Books and Records.
Employees and agents
of
each principal shall have access to the pipelines and properties of Citrus
and
its subsidiaries at all times during normal business hours for the purpose
of
inspecting such
pipelines and properties and the operations thereon. Citrus
and its subsidiaries shall keep accurate and complete books and records and
such
books and records shall be available
for inspection and review by employees and agents of
each
Principal at all times during normal business hours.
Citrus shall furnish the Principals during normal business
hours with such additional information and documents
regarding Citrus and its subsidiaries, as the Principals
may from time to time reasonably request. The costs
and
expenses incurred in connection with any inspection
or review permitted pursuant to this Section 10 shall be borne by the Principal
making such inspection or review.
11. Operating
Agreement.
Sonat
shall have the right to enforce
the provisions of the Operating Agreement in the event
Citrus shall fail to do so, and to select an arbitrator
and prosecute such arbitration in accordance with the procedures
set forth in the Operating Agreement.
12. Pipeline
Expansion.
The
entire economic benefits and
opportunities of the Expansion will be the benefits and opportunities
of Citrus and its subsidiaries. Subject to the approval by the Board of
Directors of Citrus of the necessary
contracts and
20.
further
subject to receipt of any required regulatory approvals, each Principal agrees
to provide or cause to be provided one-half of the required funds
necessary for the Expansion, which funds for each Principal
shall not exceed $100 millions In addition, each Principal
or its designee, shall have the right to furnish one-half
of the volume of natural gas required for the expansion to be provided by
Florida Gas pursuant to certain agreements
relating to the Expansion.
13. Financing.
The
Principals will cause Citrus to seek
long-term borrowings in such amounts and on such terms as the Principals
mutually deem most appropriate and economical, and will cause Citrus to execute
such instruments and documents
as may reasonably be requested in connection with such
financing.
14. Voting
Securities of the Principals. Each
Principal represents and warrants that as of
the
date hereof neither it nor any of its Affiliates or
Associates beneficially owns any Voting Securities of the
other
Principal or any options or other rights to acquire (through purchaser exchange,
conversion or otherwise)
any such Voting Securities.
(a) Each
principal represents and warrants that as of the date hereof neither it nor
any
of its Affiliates or Associates beneficially owns any Voting Securities of
the
other Principal or any options or other rights to acquire (through purchase,
exchange, conversion or otherwise) any such Voting Securities.
21.
(b) Enron
agrees that, for a period of fifteen years
from the date of this Agreement, without the prior written consent of Sonat,
it
will not and it will cause each
of
its Affiliates and Associates controlled by Enron to not, directly or
indirectly, alone or in concert with others, (i) acquire, offer to acquire
or
agree to acquire, by purchase, gift or otherwise, any Voting Securities (or
any
options or rights to acquire, by purchase, exchange or otherwise, Voting
Securities) of Sonat, (ii) make any proposal for or offer of any business
combination or purchase or sale of assets involving Sonat, (iii) make, or in
any
way participate in, any "solicitation" of "proxies" (as such terms are used
in
the proxy rules of the Securities and Exchange Commission),
or seek to advise or influence any person or
entity
with respect to the voting of, or giving of consents
with respect to, any Voting Securities of Sonat,
or
(iv) otherwise act to seek to control or influence the management, board of
directors, policies or
affairs of Sonat.
(c)
Sonat
agrees that, for a period of fifteen years
from the date of this Agreement, without the prior written consent of Enron,
it
will not and it will cause each
of
its Affiliates and Associates controlled by Sonat
to
not, directly or indirectly, alone or in concert
with
others, (i) acquire, offer to acquire or agree to acquire, by purchase, gift
or
otherwise, any Voting Securities
(or any options or rights to acquire, by purchase,
exchange or otherwise,
22.
Voting
Securities) of Enron,
(ii) make any proposal for or offer of any business
combination or purchase or sale of assets involving Enron,
(iii) make, or in any way participate in, any "solicitation" of "proxies" (as
such terms are used in the
proxy
rules of the Securities and Exchange Commission),
or
seek to advise or influence any person or entity
with respect to the voting of, or giving of consents
with respect to, any Voting Securities of Enron, or
(iv)
otherwise act to seek to control or influence the
management, board of directors, policies or affairs of
Enron.
15.
Buy-Sell
Rights. (a)
Subject to Section 15(e), after the fifteenth anniversary of the date of this
Agreement, either Principal
may
offer to purchase all the Capital Stock owned by
the
other Principal or its Subsidiary. The Principal making
such offer to purchase (the "Offeror") shall notify
the other Principal (the "Offeree") of such offer to
purchase by delivering to the Offeree a written notice
of
such offer (the "Buy-Sell Notice"). The Buy-Sell Notice shall (i) state the
purchase price offered for
such
Capital Stock, which purchase price shall be payable
in cash, (ii) include a certificate of the Offeror
to the effect that the Offeror has all requisite corporate
power and
23.
authority,
and the financial resources,
to consummate the proposed purchase, and (iii)
specify a business day for the consummation of the proposed
purchase, which day shall not be less than 120 days
nor
more than 150 days after delivery of the Buy-Sell Notice to the
Offeree.
(b)
Upon
delivery of the Buy-Sell Notice, the Offeree
shall, within 60 days thereafter, by written notice
elect either (i) to sell to the Offeror all the Capital Stock owned by the
Offeree or its Subsidiary ("Offeree
Capital Stock") or (ii) to purchase from the Offeror
all the Capital Stock owned by the Offeror or its
Subsidiary ("Offeror Capital Stock"), in each case in cash at the purchase
price
stated in the Buy-Sell Notice.
If the Offeree elects to purchase the Offeror Capital
Stock, its notice of such election shall (i) include a certificate of the
Offeree to the effect that the
Offeree has all requisite corporate power and authority,
and
the financial resources, to consummate the proposed
purchase, and (ii) specify a business day for the
consummation of the proposed purchase by the Offeree,
which day shall not be later than the day specified
in the Buy-Sell Notice.
(c)
If
the
Offeree shall not have delivered a notice of its election to purchase all the
Offeror Capital
Stock
by the date specified in Section 15(b), the Offeror
shall
24.
purchase
from the Offeree or its Subsidiary,
and the Offeree shall sell or cause to be sold to the
Offeror, all the Offeree Capital Stock in accordance with the Buy-Sell Notice.
If the Offeree shall have delivered
a notice of its election to purchase all the Offeror Capital Stock by the date
specified in Section 15(b)
the
Offeree shall purchase from the Offeror or its
Subsidiary, and the Offeror shall sell or cause to be
sold
to the Offeree, all the Offeror Capital Stock in accordance
with the Offeree's notice of election. In either
case, such purchase and sale shall take place at the
offices of Citrus during normal business hours on the
business day specified in the applicable notice, and the seller shall deliver
certificates representing all the Capital Stock owned by it to the purchaser,
endorsed in
blank,
against payment therefor in immediately available
funds, free and clear of all liens, claims or encumbrances
and with requisite transfer taxes, if any, fully
paid. No Capital Stock may be offered for sale or sold
under the provisions of this Section 15(c) if the terms
of
the proposed sale by the Offeror require the Offeree
to undertake any obligations or liabilities other
than payment of the purchase price in cash, the filing
and prosecution of any necessary notices to, and
25.
applications
for any necessary approvals of, regulatory authorities, and compliance with
the
provisions of this Agreement.
(d) If
all
requisite approvals in respect of such purchase and sale shall not have been
obtained by the specified date of such purchase and sale, despite the reasonable
efforts of the Principals to obtain Such approvals, neither Principal shall
be
obligated to consummate such transactions all offers and elections made pursuant
to this Section 15 shall be deemed to have been withdrawn,
and this Section 15 shall continue to apply to
subsequent offers and elections. Each Principal agrees
to
use all reasonable efforts to cooperate with the
other
Principal and Citrus in obtaining any regulatory
approvals necessary for the purchase and sale of any
Capital Stock pursuant to this Section 15.
(e) A
Buy-Sell Notice may not be given pursuant to Section
15(a) during the period of 180 days following the
giving of a notice under Section 3(d)(i) with respect
to a proposed sale of Capital Stock.
16.
Change
of Control. (a)
If a
Principal (the "Non-Electing Principal") suffers
a
Change of Controls the other Principal (the "Electing Principal") shall
thereafter have the option either to (i) purchase all the Capital Stock owned
by
the
26.
Non-Electing
Principal or its Subsidiary (the "Non-Electing
Principal's Shares") !or a cash purchase price equal
to
either (at the election of the Electing Principal)
the
Formula Price or the fair market value of the Non-Electing
Principal's Shares on the last day of the month
preceding the date on which an Election Notice (as defined
in Section 16(b) shall be delivered pursuant to Section 16(b), as determined
by
an appraisal in accordance with Section 16(c), or (ii) require the
Non-Electing
Principal to purchase all of the shares of Capital Stock
owned by the Electing Principal or its Subsidiary (the
"Electing Principal's Shares") for a cash purchase price equal to either (at
the
election of the Electing Principal)
the Formula Price or the fair market value of the
Electing Principal's Shares on the last day of the month
preceding the date on which an Election Notice (as defined
in Section 16(b)) shall be delivered pursuant to Section
16(b), as determined by an appraisal in accordance with Section 16(c). Either
of
such options shall be
exercisable at the time and in the manner set forth in
Section 16(b).
(b)
Each
Principal shall give prompt written notice
of
any Change of Control suffered by it to the other
Principal. If the Electing Principal desires to exercise
either of its options under Section 16(a)(i) or Section
16(a)(ii), the Electing Principal shall deliver a
written
notice of its exercise (the "Election
27.
Notice")
to
the
Non-Electing Principal within 180 days after the later
of
(i) receipt of a written notice from the Non-Electing
Principal of a Change of Control or (ii) the date
on
which the Electing Principal otherwise becomes aware
of
such a Change of Control. Such notice shall also
contain am election of the method to determine the purchase
price for the shares of Capital Stock being bought
or
sold. The closing of the transaction elected by
the
Electing Principal shall occur (A) 60 days from the
date
of its exercise, (B) 10 days after a final determination
of the Formula Price or the completion of the
appraisal of the fair market value of the shares of Capital
Stock in accordance with Section 16(c), as the case may be, or (C) within 10
days following the obtaining of all regulatory approvals (if any) and the
expiration of all regulatory waiting periods (if any) necessary
to
complete such transaction, whichever is latest.
The purchase price, however determined, shall be
payable by wire transfer of immediately available funds
at
the closing against delivery of certificates representing
such shares duly endorsed in blank, free and
clear
of all liens, claims or encumbrances and with requisite
transfer taxes, if any, fully paid. No Capital
Stock may be sold
28.
under
the
provisions of this Section
16(b) if the terms of such sale require the proposed
purchaser to undertake any obligations or liabilities
other than payment of the purchase price in cash,
the
filing and prosecution of any necessary notices
to, and applications for any necessary approvals of,
regulatory authorities, and compliance with the provisions
of this Agreement.
(c
) If
the
Electing Principal elects to have an appraisal
of the fair market value of the shares of the Capital
Stock as permitted by Section 16(a) of this Section
16, such fair market value shall be an amount mutually
agreed to by the Principals' respective investment
bankers, and the Principals agree to engage their respective
investment bankers as promptly as practicable for
this
purpose. If the two investment bankers of the Principals
have not mutually agreed to such fair market value
within 30 days from the date the Electing Principal exercises its option
pursuant to this Section 16, such
investment bankers will select a third investment banker
to
make such fair market value determination. The
fair
market value determination of the third investment
banker shall be rendered within 30 days of such investment
banker's selection and shall be conclusive and
binding on the Principals. Each Principal shall bear
50%
of the cost of employing the third investment banker.
29.
(d) In
the
event of a dispute as to the computation
of
the Formula Price, the Principals shall promptly submit
such dispute to the accounting firm which is acting
as
auditor for Citrus for resolution, and the determination
by such firm shall be conclusive and binding
on
the Principals. Each Principal shall bear 50% of the
cost
of employing such firm.
(e) If
Enron
(or any successor to Enron) sells the Capital
Stock owned by it or its Subsidiary pursuant to this
Section 16 (irrespective of which Principal has suffered a Change of Control),
the Operating Agreement shall
be
assigned to the purchaser.
(f) If
Sonat
(or any successor to Sonat) sells its Capital
Stock pursuant to this Section 16 (irrespective of which Principal has suffered
a Change of Control) and the purchase price is the Formula Price, the provisions
of the Synergy Agreements with respect to future rights of expansion and other
rights of Sonat or its Affiliates in
such
Synergy Agreements which have not been implemented
will thereupon terminate, but in other respects the Synergy Agreements and
other
agreements which have been
implemented pursuant thereto will continue in full force
and
effect.
30.
(g)
If
Sonat (or any successor to Sonat) sells its Capital
Stock pursuant to this Section 16 (irrespective of which Principal has suffered
a Change of Control) and the
purchase price is as determined by appraisal, the provisions
of the Synergy Agreements and other agreements
which have been implemented pursuant thereto will continue
in full force and effect without modification.
17.
Term
of Agreement.
This
Agreement shall continue in
effect
for an initial term of 15 years from the date of this
Agreement (unless prior to such date one Principal shall
have purchased all of the Capital Stock of the other Principal
pursuant to the other provisions hereof) and thereafter
for so long as the Capital Stock of Citrus shall be
held
by two Principals or Subsidiaries thereof. Termination
of
this Agreement prior to such 15 year term shall not affect the obligations
of
Sonat and Enron in Section 14 of this
Agreement, which shall continue in full force and effect
for the remainder of such 15 year period. In the event
that a Principal shall sell its Capital Stock pursuant to
Section 3, such selling Principal shall cease to be a Principal
within the
31.
meaning
of this Agreement and shall no longer
be
bound by the provisions of this Agreement (except, in
the
case of Sonat or Enron, for its continuing obligations
under Section 14).
18. Notice.
Any
notice, request, instruction, correspondence
or other document to be given hereunder by either party
to
the other (herein collectively called "Notice) shall
be
in writing and delivered personally or mailed by certified
mail, postage prepaid and return receipt requested,
or by telegram or telecopier, as follows:
To
Sonat:
Sonat
Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ North First National - Southern Natural
Bldg.
▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
President
Telecopier:
▇▇▇-▇▇▇-▇▇▇▇
To
Enron:
Enron
Corp.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
President
Telecopier:
▇▇▇-▇▇▇-▇▇▇▇
To
HNG:
Houston
Natural Gas Corporation
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention:
President
Telecopier:
▇▇▇-▇▇▇-▇▇▇▇
To
Citrus:
Citrus
Corp.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇
Attention
President
Telecopier:
▇▇▇-▇▇▇-▇▇▇▇
32.
Notice
given by personal delivery or mail shall be effective upon
actual receipt. Notice given by telegram or telecopier shall be effective upon
actual receipt if received during the recipient's normal business hours, or
at
the beginning of
the
recipient's next business day after receipt if not received
during the recipient's normal business hours. All Notices
by telegram or telecopier shall be confirmed promptly
after transmission in writing by certified mail or personal
delivery. Any party may change any address to which
Notice is to be given to it by giving Notice as provided
above of such change of address.
19. Governing
Law.
The
provisions of this Agreement and
the
documents delivered pursuant hereto shall be governed
by and construed in accordance with the laws of the State
of
Delaware (excluding any conflicts-of-law rule or principle
that might refer same to the laws of another jurisdiction),
except to the extent that same are mandatorily
subject to the laws of another jurisdiction pursuant to
the
laws of such other jurisdiction.
20. Headings.
The
headings of the several Sections herein
are inserted for convenience of reference only and are
not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
21. Successors
Bound.
Except
as set forth herein, this Agreement may
33.
not
be
assigned by any party without the consent
of
the other parties. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns.
22.
No
Waiver. No
modification or waiver of this Agreement
shall be binding unless executed in writing by the party
to
be bound thereby. No waiver of any of the provisions
of
this Agreement shall be deemed or shall constitute a
waiver
of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing
waiver unless otherwise expressly provided.
IN
WITNESS WHEREOF, Sonat, Enron, HNG and Citrus have caused
this Agreement to be signed in multiple originals by their respective officers
thereunto duly authorized all as of
the
date first above written.
SONAT
INC.
By
/s/▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Vice
President and
General
Counsel
ENRON
CORP.
By /s/▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
Executive
Vice President
Law
and
Corporate Development
34.
HOUSTON
NATURAL GAS CORPORATION
By
/s/▇▇▇▇
▇. ▇▇▇▇▇▇
Vice
President and
Associate
General Counsel
CITRUS
CORP.
By
/s/▇▇▇▇▇
▇. ▇▇▇▇▇▇
President
and Chief
Operating
Officer
GWO/778
35.