Exhibit 4
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DOMAIN ENERGY CORPORATION
1100 Louisiana, Suite 1500
Xxxxxxx X. Xxxxx P.O. Box 2511
President and CEO Houston, TX 77252-2511
Tel 000 000 0000
Fax 000 000 0000
June 6, 1997
First Reserve Fund VII, Limited Partnership
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Re: Domain Energy Corporation
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Gentlemen:
Reference is made to the Subscription Agreement between First Reserve
Fund VII, Limited Partnership ("Fund VII") and Domain Energy Corporation
("Domain") dated as of December 31, 1996 (the "Subscription Agreement"); the
U.S. $8,000,000 Subordinated Promissory Note from Domain Energy Guarantor
Corporation ("Domain Guarantor") made payable to your order dated December 31,
1996 (the "Note"); the Securityholders Agreement among Domain and its
securityholders dated December 31, 1996 (the "Securityholders Agreement"); and
the letter agreement between Domain and Fund VII dated April 9, 1997 (the
"Existing Letter Agreement"). Capitalized terms used and not otherwise defined
herein are used with the respective meanings ascribed thereto in the
Subscription Agreement, the Note, the Securityholders Agreement or the
Existing Letter Agreement.
1. The Michigan Transaction. As a result of the consummation of the
transactions (the "Michigan Transaction") contemplated by the Purchase and
Sale Agreement among Michigan Gas Fund I, Encap Ventures 1993 Limited
Partnership, Domain and Energy Acquisition Corporation and the repayment of
the Bank One Loan in connection therewith, the obligation of Domain Guarantor
to pledge the Collateral to the Bank has terminated. However, notwithstanding
Section 5(b) of the Note, Fund VII agrees that Domain Guarantor shall not be
required to liquidate the Collateral and repay the principal amount of the
Loan in the amount of the Collateral so liquidated until the first to occur of
(i) written notice from Domain to Fund VII and First Reserve Corporation
("First Reserve") that Domain has suspended the registration process for the
Subject Qualified Public Offering ("Suspension Notice") (which notice Domain
agrees to give promptly upon its decision to suspend the registration process
for such offering); and (ii) September 30, 1997. In consideration of the
foregoing, Domain agrees to cause Domain Guarantor not to pay any dividend or
otherwise
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advance, pay or distribute any funds to Domain representing the Collateral or
the proceeds of any liquidation of the Collateral until the Note is repaid or
the Option is exercised.
2. The Option. To facilitate the Subject Qualified Public Offering
process, Fund VII agrees to exercise the Option concurrently with the
consummation of the Subject Qualified Public Offering; provided, however,
notwithstanding Section 1.1(b) of the Subscription Agreement, the number of
Option Shares to be issued upon such exercise of the Option shall equal the
quotient of $8,681,000 divided by the initial price per share for which shares
of Domain's Common Stock are offered and sold to the public in the Subject
Qualified Public Offering (the "Public Offering Price"), rounded to the
nearest whole number. If Domain consummates the Subject Qualified Public
Offering, the Option will be deemed to have been exercised and the Option
Shares will be issued upon (i) delivery to Domain of the Buyer Subordinated
Note as otherwise provided in the Subscription Agreement and (ii) payment by
Fund VII of $500,000 in cash to Domain (the "Exercise Date"). If Domain
provides Funds VII with a Suspension Notice, or in the event that the Subject
Qualified Public Offering shall not have been consummated by September 30,
1997, Domain may within thirty (30) days thereof request Fund VII to exercise
the Option as otherwise provided in the Subscription Agreement, in which case
Fund VII will comply with such request; provided, in such event, upon such
exercise the Company will pay Fund VII interest in cash at the rate provided
in paragraph 3 below. At the election of Fund VII, Domain's obligation to pay
such cash interest upon exercise of the Option may be satisfied in whole or in
part by issuance of such number of shares at $3,151.4354 per share as will
equal the amount of the cash interest payment obligation satisfied thereby.
3. Interest. If the principal amount of the Loan is repaid or
discharged other than upon exercise of the Option concurrently with
consummation of the Subject Qualified Public Offering, such repayment shall
include interest accrued through the date that the Bank One Loan is repaid at
the rate provided in the Note, and interest accrued thereafter to the date of
repayment of the Loan at the weighted average interest rate during such period
applicable to outstanding borrowings under the Credit Agreement dated as of
December 31, 1996 among Domain and its Subsidiary Guarantors, the Lenders
party thereto and The Chase Manhattan Bank, as agent. If the principal amount
of the Loan is discharged upon exercise of the Option concurrently with
consummation of the Subject Qualified Public Offering, Domain shall pay to
Fund VII in cash on the Exercise Date an amount equal to interest accrued on
the Loan from June 16, 1997 to the Exercise Date at the rate provided in the
Note.
4. Transaction Fee. Domain hereby confirms its agreement to pay First
Reserve a fee of $500,000 for services rendered in connection with the Stock
Purchase Agreement and the consummation of the transactions contemplated
thereby (the "Transaction Fee"). The Transaction Fee will be payable as
follows: (i) if the Subject Qualified Public Offering is consummated on or
before September 30, 1997, the Transaction Fee shall be paid in cash on the
date on which the Subject Qualified Public Offering is consummated and (ii) if
(A) the Subject Qualified Public Offering shall not have been consummated by
September 30, 1997, or (B) if Domain shall at an earlier date provide First
Reserve with a Suspension Notice, payment of the Transaction Fee shall be made
in cash no later than October 31, 1997.
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5. Purchase for Investment. Fund VII acknowledges that the Option
Shares have not been and will not be registered or qualified under the
Securities Act of 1933, as amended, or any state securities law and may be
sold or otherwise disposed of in the absence of such registration only
pursuant to an exemption from such registration and any other applicable
securities laws. Fund VII is acquiring the Option Shares solely for its own
account and for the purpose of investment and not with a view to or for sale
in connection with any disposition thereof and there is no present intention
or plan to effect any resale, assignment or distribution of any of the Option
Shares. Domain confirms that the Option Shares will be Registrable Securities
for all purposes of the Securityholders Agreement.
6. Piggyback Registration Rights. Fund VII hereby acknowledges that,
as required by Section 6.2 of the Securityholders Agreement, it received
notice of Domain's intention to register Common Stock under the Securities Act
pursuant to the Subject Qualified Public Offering. Fund VII hereby
acknowledges that it has waived its right to request that Domain register any
of Fund VII's Registrable Securities pursuant to the Subject Qualified Public
Offering.
7. Existing Letter Agreement. To the extent inconsistent herewith,
the terms of the Existing Letter Agreement are superseded by the terms of this
letter agreement. Without limiting the foregoing, paragraph 5 of the Existing
Letter Agreement shall have no force or effect.
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If the foregoing accurately sets forth our understanding with respect
to the matters covered above, please so indicate by executing each copy hereof
and returning one fully executed copy to the undersigned.
DOMAIN ENERGY CORPORATION
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
President & CEO
Agreed to and accepted
this 6th day of June 1997
FIRST RESERVE FUND VII,
LIMITED PARTNERSHIP
by First Reserve Corporation,
Managing General Partner
By: /s/ Xxxxxxxx X. Xxxxxx
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Xxxxxxxx X. Xxxxxx
Managing Director
FIRST RESERVE CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx
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Xxxxxxxx X. Xxxxxx
Managing Director
