Document:

exv10wa

 

EXHIBIT 10. A

EXECUTION COPY

El Paso Corporation

4.99% Convertible Perpetual Preferred Stock

PURCHASE AGREEMENT

April 11, 2005

Banc of America Securities LLC

Deutsche Bank Securities Inc.

Citigroup Global Markets Inc.

Credit Suisse First Boston LLC

J.P. Morgan Securities Inc.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Morgan Stanley & Co. Incorporated

Goldman, Sachs & Co.

ABN AMRO Rothschild LLC

BNP Paribas Securities Corp.

HVB Capital Markets, Inc.

Scotia Capital (USA) Inc.

SG Americas Securities, LLC

Fortis Securities LLC

c/o

Banc of America Securities LLC

9 West 57th Street

New York, New York 10019

and

Deutsche Bank Securities Inc.

60 Wall Street

New York, New York 10005

Ladies and Gentlemen:

      El Paso Corporation, a Delaware corporation (the “Company”), proposes, subject to the
terms and conditions contained herein, to issue and sell to the

 

 

several initial purchasers named in Schedule I hereto (the “Initial Purchasers”)
750,000 shares of its 4.99% Convertible Perpetual Preferred Stock, par value $0.01 per share and
liquidation preference $1,000 per share, which shall have the rights, powers and preferences set
forth in the Certificate of Designations (the “Certificate of Designations”) of 4.99%
Convertible Perpetual Preferred Stock (the “Firm Securities”). The Company also proposes
to issue and sell at the option of Banc of America Securities LLC and Deutsche Bank Securities Inc.
an additional 150,000 shares of its 4.99% Convertible Perpetual Preferred Stock (the “Option
Securities” and together with the Firm Securities, the “Securities”) as set forth
below.

      The Securities will be convertible into shares of common stock of the Company, par value $3.00
per share (“Common Stock”), in the manner described in the Certificate of Designations. The
shares of Common Stock into which the Securities may be converted are referred to herein as the
“Underlying Securities”.

      The sale of the Securities and the Underlying Securities will be made without registration
under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on
applicable exemptions from the registration requirements of the Securities Act. The Initial
Purchasers have advised the Company that the Initial Purchasers will offer and sell the Securities
purchased by them hereunder (the “Offering”) in accordance with Section 3 hereof as soon as
they deem advisable.

      In connection with the Offering, the Company has prepared (i) a preliminary Offering
Memorandum, dated April 5, 2005 (including the information incorporated by reference therein, the
“April 5, 2005 Offering Memorandum”), (ii) a preliminary Offering Memorandum, dated April
8, 2005 (including the information incorporated by reference therein, and together with the April
5, 2005 Offering Memorandum, the “Preliminary Offering Memorandum”), and (iii) a final
Offering Memorandum, dated April 11, 2005 (including the information incorporated by reference
therein, the “Offering Memorandum”). Each of the Preliminary Offering Memorandum and the
Offering Memorandum sets forth or incorporates by reference certain information regarding the
Company, the Securities and the Underlying Securities. The Company hereby confirms that it has
authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendment or supplement thereto, in connection with the Offering. Unless stated to the contrary,
all references herein to the Offering Memorandum are to the Offering Memorandum at the date thereof
and are not meant to include any amendment or supplement, or any information incorporated by
reference therein subsequent to the date thereof, and any references herein to the terms “amend”,
“amendment” or “supplement” with respect to the Offering Memorandum shall be deemed to refer to and
include any information filed under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), subsequent to the date of the Offering Memorandum which is incorporated by
reference therein.

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      In connection with the Offering , the Company also proposes to enter into a Registration
Rights Agreement, to be dated as of the Closing Date (as defined in Section 2(a) hereof), between
the Company and the Initial Purchasers (the “Registration Rights Agreement”).

      In consideration of the mutual agreements contained herein and of the interests of the parties
in the transactions contemplated hereby, the parties hereto agree as follows:

      1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company represents and warrants to each Initial Purchaser as follows:

      (a) the Company has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Delaware, with the corporate power and authority
to own its properties and conduct its business as described in the Offering Memorandum;
each of the subsidiaries of the Company set forth in Schedule III hereto (each, a
“Significant Subsidiary” and collectively, the “Significant
Subsidiaries”), has been duly incorporated or formed, as the case may be, and is an
existing corporation, limited liability company or limited partnership in good standing
under the laws of the jurisdiction of its incorporation or formation, as the case may be,
with the corporate or other power and authority to own its properties and conduct its
business as described in the Offering Memorandum; and each of the Company and its
Significant Subsidiaries is duly qualified to transact business as a foreign corporation,
limited liability company or limited partnership in good standing in all other
jurisdictions in which the conduct of its business requires such qualification, except to
the extent that the failure to be so qualified would not have a material adverse effect on
the financial condition, business, properties or results of operations of the Company and
its subsidiaries, taken as a whole (a “Material Adverse Effect”);

      (b) the outstanding equity interests of each of its Significant Subsidiaries have
been duly authorized and validly issued, are fully paid and non-assessable (other than the
shares of Series A Preferred Stock of El Paso Tennessee Pipeline Co.) and are owned by the
Company or another subsidiary of the Company free and clear of all liens, claims, or
adverse interests of any nature, except for the equity interests of ANR Pipeline Company,
El Paso Natural Gas Company and Tennessee Gas Pipeline Company that are pledged pursuant
to that certain Amended and Restated Security Agreement, dated as of November 23, 2004,
among the Company and the other parties thereto;

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      (c) the Securities have been duly and validly authorized by all necessary corporate
action on the part of the Company and, when issued and delivered against payment therefor
in accordance with the terms of this Agreement and the Certificate of Designations, the
Securities will be validly issued, fully paid and non-assessable, will not be subject to
any preemptive or similar rights, and will be convertible at the option of the holders
thereof into the Underlying Securities in accordance with the Certificate of Designations;

      (d) the outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and non-assessable; none of the outstanding shares
of capital stock of the Company was issued in violation of any preemptive or similar
rights of any stockholder of the Company; the Underlying Securities have been duly
authorized and reserved, and when issued and delivered upon conversion of the Securities
will be validly issued, fully paid and non-assessable; and no preemptive or similar rights
of stockholders exist with respect to any of the Underlying Securities;

      (e) this Agreement has been duly authorized, executed and delivered by the Company,
and the Company has full corporate power and authority to authorize, issue and sell the
Securities as contemplated by this Agreement;

      (f) the Certificate of Designations has been duly authorized by the Company and will
be filed with the Secretary of State of the State of Delaware on or before the Closing
Date; and the Certificate of Designations conforms in all material respects to the
description thereof contained in the Offering Memorandum;

      (g) the Registration Rights Agreement has been duly authorized by the Company and,
when duly executed and delivered by the Company and assuming due authorization, execution
and delivery thereof by the other parties thereto, will constitute a valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by (i) the effects of
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other
similar laws relating to or affecting creditors’ rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law) and (iii) an implied
covenant of good faith and fair dealing; and the Registration Rights Agreement conforms to
the description thereof contained in the Offering Memorandum in all material respects.

      (h) the Company has an authorized capitalization as set forth in the Offering
Memorandum; and all of the Underlying Securities conform

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to the description thereof contained in the Offering Memorandum in all material
respects;

      (i) except, in each case, as described in the Offering Memorandum or as disclosed in
the Company’s public filings pursuant to the Securities Act or the Exchange Act, there are
no outstanding securities of the Company convertible into, exchangeable for or evidencing
the right to purchase or subscribe for any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants or rights of any character
obligating the Company to issue any shares of its capital stock or any securities
convertible or exchangeable into or evidencing the right to purchase or subscribe for any
shares of such stock;

      (j) the documents incorporated by reference in each of the Preliminary Offering
Memorandum and the Offering Memorandum, when they became effective or at the time they
were or hereafter are filed with the Securities and Exchange Commission (the
“Commission”), conformed, or will conform, in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission thereunder and,
when read together with the other information in the Preliminary Offering Memorandum or
the Offering Memorandum (each, as amended or supplemented, if applicable), as the case may
be, at the Closing Date (as defined in Section 2(a) hereof) and at the Option Closing Date
(as defined in Section 2(b) hereof), as the case may be, do not and will not include any
untrue statement of a material fact and do not and will not omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;

      (k) each of the Preliminary Offering Memorandum, the Offering Memorandum and any
amendment or supplement thereto, if applicable, at the Closing Date and at the Option
Closing Date, as the case may be, do not and will not include any untrue statement of a
material fact and do not and will not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company makes no
representation or warranty as to statements in or omissions from the Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or supplement thereto made in
reliance upon and in conformity with written information relating to the Initial
Purchasers furnished to the Company by the Initial Purchasers specifically for use
therein, it being understood and agreed that the only such information is that described
as such in Section 7(b) hereof; and provided, further, that this Section 1(k) shall not
apply to any untrue statement of a material fact in, or any omission of a material fact
from, the Preliminary Offering Memorandum to the extent such misstatement or omission is
corrected in the Offering Memorandum;

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      (l) the financial statements incorporated by reference in the Offering Memorandum
present fairly in all material respects the consolidated financial position of the Company
and its consolidated subsidiaries as of the dates shown and their results of operations
and cash flows for the periods shown and, except as otherwise disclosed in the Offering
Memorandum, such consolidated financial statements have been prepared in conformity with
generally accepted accounting principles in the United States applied on a consistent
basis;

      (m) PricewaterhouseCoopers LLP, who have certified certain of the financial
statements included or incorporated by reference in the Offering Memorandum, are
independent public accountants as required by the Securities Act and the applicable rules
and regulations thereunder;

      (n) except as disclosed in the Offering Memorandum and the documents incorporated by
reference therein, there are no pending actions, suits or proceedings against or affecting
the Company, any of its Subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its Significant Subsidiaries would,
individually or in the aggregate, have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations under this
Agreement or the Registration Rights Agreement, or which are otherwise material in the
context of the sale of the Securities; and no such actions, suits or proceedings are, to
the Company’s knowledge, threatened or contemplated;

      (o) except as disclosed in the Offering Memorandum, the Company and its Significant
Subsidiaries have good and indefeasible title to all real properties and all other
properties and assets owned by them, in each case free from liens, encumbrances and
defects that would materially affect the value thereof or materially interfere with the
use made or to be made thereof by them; and, except as disclosed in the Offering
Memorandum, the Company and its Significant Subsidiaries hold any leased real or personal
property under valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them;

      (p) except as disclosed in the Offering Memorandum, since the date of the latest
audited financial statements incorporated by reference in the Offering Memorandum, there
has been no material adverse change, or any development or event involving a prospective
material adverse change, in the financial condition, business, properties, results of
operations or prospects of the Company and its subsidiaries, taken as a whole (a
“Material Adverse Change”);

      (q) neither the Company nor any of its Significant Subsidiaries is or, with the
giving of notice or lapse of time or both, will be, (i) in

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violation of its charter, bylaws or similar organizational documents, (ii) in default
in the performance of any obligation, agreement, covenant or condition contained in any
indenture, mortgage, lease or other agreement or instrument that is material to the
Company and its subsidiaries, taken as a whole, or to which the Company or any Significant
Subsidiary or their respective properties are bound (collectively, “Contracts”),
(iii) in default in the performance of any obligation, agreement, covenant or condition
contained in the $3,000,000,000 Amended and Restated Credit Agreement, dated as of
November 23, 2004, among the Company, certain subsidiaries of the Company party thereto
and the lenders party thereto (the “Credit Agreement”), and except in the case of the
foregoing clause (ii) for any such defaults as would not, individually or in the
aggregate, have in a Material Adverse Effect;

      (r) the execution, delivery and performance by the Company of this Agreement and the
Registration Rights Agreement, the issuance and sale of the Securities to the Initial
Purchasers by the Company pursuant to this Agreement, the issuance by the Company of the
Underlying Securities, and the Company’s compliance with the Certificate of Designations
will not result in a breach or violation of any of the terms or provisions of, or
constitute a default under, (i) any statute, rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the Company or
any Significant Subsidiary or any of their properties, (ii) any Contract, (iii) the Credit
Agreement, or (iv) the charter, bylaws or similar organizational documents of the Company
or any such Significant Subsidiary, except in the case of the foregoing clauses (i) and
(ii) for any such breaches or violations as would not, individually or in the aggregate,
have a Material Adverse Effect or adversely affect the transactions contemplated by this
Agreement or the Registration Rights Agreement in any material respect;

      (s) the Company and each of its Significant Subsidiaries hold all material licenses,
certificates and permits from governmental authorities which are necessary to the conduct
of their businesses, except as would not, individually or in the aggregate, have a
Material Adverse Effect;

      (t) neither the Company nor, to the Company’s knowledge, any of its affiliates, has
taken or may take, directly or indirectly, any action intended to cause or result in the
stabilization or manipulation of the price of the Securities;

      (u) except for (i)the filing of the Shelf Registration Statement (as such term is
defined in the Registration Rights Agreement), (ii) the filing of the Certificate of
Designations with the Delaware Secretary of State, (iii) the Commission’s declaration that
the Shelf Registration Statement has been declared effective, (iv) compliance with the
rules and

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regulations of the National Association of Securities Dealers, Inc. (the
“NASD”) and (v) such actions as shall be required or advisable to qualify the
Securities under state securities or “Blue Sky” laws, no consent, approval, authorization
or order of, or filing or registration with, any court or governmental agency or body is
required for the execution, delivery and performance by the Company of this Agreement and
the Registration Rights Agreement and the consummation of the transactions contemplated
hereby or thereby;

      (v) the Company is not and, after giving effect to the Offering, the sale of the
Securities and the application of the net proceeds therefrom, will not be an “investment
company” as such term is defined in the Investment Company Act of 1940, as amended (the
“Investment Company Act”) and the applicable rules and regulations thereunder;

      (w)
except as disclosed in the Company’s Annual Report on Form 10-K/A for the year
ended December 31, 2004, the Company is not aware of any (i) failure on its part to
maintain effective disclosure controls and procedures and internal control over financial
reporting, each as defined in Rule 13a-15 under the Exchange Act, (ii) material weakness
(as described in Auditing Standard No. 2 promulgated by the Public Company Accounting
Oversight Board) in the Company’s internal control over financial reporting (whether or
not remediated) or (iii) change in the Company’s internal control over financial reporting
that has materially adversely affected, or is reasonably likely to materially adversely
affect, the Company’s internal control over financial reporting;

      (x) except as disclosed in the Offering Memorandum or the documents incorporated by
reference therein, neither the Company nor any of its subsidiaries is in violation of any
statute, rule, regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic
substances, the protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, “environmental laws”), owns or operates or,
to the knowledge of the Company, previously owned or operated any real property
contaminated with any substance that is subject to any environmental laws, or is liable
for any off-site disposal or contamination pursuant to any environmental laws, except for
any such violations, contaminations, liabilities or claims as would not, individually or
in the aggregate, have a Material Adverse Effect;

      (y) the Company and each of its Significant Subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the conduct of their
respective businesses and the value of their respective properties and as is customary for
companies engaged in

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similar businesses, except as would not, individually or in the aggregate, have a
Material Adverse Effect;

      (z) there are no business relationships or related-party transactions involving the
Company or any of its subsidiaries or any other person required to be described by the
Company in its Annual Report on Form 10-K/A for the year ended December 31, 2004 pursuant to
Item 404 of Regulation S-K under the Securities Act which have not been described as
required;

      (aa) neither the Company, nor any of its affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act, each, an “Affiliate”), nor any person
acting on its or their behalf has, directly or indirectly, made offers or sales of any
security (as defined in the Securities Act), or solicited offers to buy any security,
under circumstances that would require the registration of the Securities or the
Underlying Securities under the Securities Act;

      (bb) none of the Company or any of its subsidiaries (other than the Initial
Purchasers in connection with the transactions contemplated by this Agreement, about which
no representation is made by the Company) has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of, any
“security” (as defined in the Securities Act) that is or will be integrated with the sale
of the Securities or the Underlying Securities in a manner that would require registration
under the Securities Act of the Securities or the Underlying Securities;

      (cc) neither the Company, nor any of its Affiliates, nor any person acting on its or
their behalf has engaged in any form of general solicitation or general advertising (as
those terms are used in Rule 502(c) of Regulation D under the Securities Act) in
connection with any offer or sale of the Securities or the Underlying Securities;

      (dd) the Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the
Securities Act;

      (ee) the Company is subject to and in compliance with the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act;

      (ff) the purchase and sale of the Securities pursuant hereto (including the Initial
Purchasers’ proposed offering of the Securities on the terms and in the manner set forth
in the Offering Memorandum and Section 3 hereof) and the conversion of the Securities into
the Underlying Securities in accordance with the terms of the Certificate of Designations
is exempt from the registration requirements of the Securities Act;

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      (gg) the Company is in compliance with Section 402 of the Sarbanes-Oxley Act of 2002,
as it relates to loans, in all material respects and has made all certifications required
to be made pursuant to Section 302 and Section 906 of such Act; and

      (hh) no holder of securities of the Company (other than the Registrable Securities
(as defined in the Registration Rights Agreement)) will be entitled to have such
securities registered under the registration statements required to be filed by the
Company pursuant to the Registration Rights Agreement.

      2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES.

      (a) On the basis of the representations, warranties and covenants herein contained,
and subject to the conditions herein set forth, the Company agrees to issue and sell to
the several Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company the Firm Securities set forth opposite each Initial
Purchaser’s name in Schedule I hereto at a purchase price of $965.00 per share (the
“Purchase Price”). Each Security will be convertible into shares of Common Stock
in the manner provided in the Certificate of Designations and at the conversion rate set
forth in the Certificate of Designations (the “Conversion Rate”), which Conversion
Rate is subject to adjustment in certain events as provided in the Certificate of
Designations. Delivery of and payment for the Firm Securities shall be made at the
offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017 at 9:30
A.M., New York City time, on the fourth full business day following the date of this
Agreement, or at such other place, time or date not later than five business days
following the date of this Agreement as the Initial Purchasers and the Company may agree
upon. Such time and date of delivery against payment are herein referred to as the
“Closing Date”. As used herein, “business day” means a day on which the
New York Stock Exchange is open for trading and on which banks in New York are open for
business and are not permitted by law or executive order to be closed.

      (b) In addition, on the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company hereby grants an
option to Banc of America Securities LLC and Deutsche Bank Securities Inc. (“the
Representatives”) to purchase, severally and not jointly, for their own respective
accounts, the Option Securities at the Purchase Price set forth in Section 2(a) hereof.
The option granted hereby may be exercised in whole or in part by giving written notice
(i) at any time before the Closing Date and (ii) at any time and from time to time within
30 days after the date of this Agreement by the Representatives to the Company, setting
forth the number of Option Securities as to which the Representatives are exercising the
option and

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the time and date for delivery of and payment for such Option Securities. The time
and date for delivery of and payment for such Option Securities shall be determined by the
Representatives but shall not be later than ten full business days after the exercise of
such option, nor in any event prior to the Closing Date (such time and date being herein
referred to as the “Option Closing Date”). If the date of exercise of the option
is two or more days before the Closing Date, the notice of exercise shall set the Closing
Date as the Option Closing Date. The Representatives may cancel such option at any time
prior to its expiration by giving written notice of such cancellation to the Company. On
each Option Closing Date, each Representative agrees, severally and not jointly, to
purchase one-half of the total number of Option Securities to be purchased on such Option
Closing Date.

      3. OFFERING BY THE INITIAL PURCHASERS.

      (a) It is understood that the Initial Purchasers will offer and sell the Securities
in accordance with this Section as soon as the Initial Purchasers deem it advisable to do
so. The Securities are to be initially offered at an offering price of $975.00 per share.
The Initial Purchasers may from time to time thereafter change the price and other
selling terms.

      (b) Each of the Initial Purchasers and its selling affiliates represents and warrants
to the Company that it is an accredited investor within the meaning of Regulation D under
the Securities Act.

      (c) Each Initial Purchaser understands and acknowledges that the Securities and the
Underlying Securities have not been and will not be registered under the Securities Act
(except as contemplated by the Registration Rights Agreement) and may not be offered or
sold, except in compliance with the registration requirements of the Securities Act or
pursuant to an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act. Accordingly, each Initial Purchasers agrees that it
will offer and sell the Securities only to persons that it reasonably believes to be
qualified institutional buyers as defined in Rule 144A under the Securities Act.

      (d) Each Initial Purchaser agrees that neither it nor any person acting on its behalf
has engaged or will engage in any form of general solicitation or general advertising (as
those terms are used in Rule 502(c) of Regulation D under the Securities Act) in
connection with any offer or sale of the Securities.

      4. COVENANTS OF THE COMPANY.

      The Company covenants and agrees with the Initial Purchasers that:

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      (a) The Company will furnish to the Initial Purchasers and counsel for the Initial
Purchasers, without charge, until the earlier of (x) nine months after the date hereof and
(y) the completion of the resale of the Securities by the Initial Purchasers (as notified
by the Initial Purchasers to the Company), as many copies of the Preliminary Offering
Memorandum and Offering Memorandum, any documents incorporated by reference therein and
any supplements or amendments thereto as they may reasonably request.

      (b) The Company will not amend or supplement the Offering Memorandum, other than by
filing documents under the Exchange Act which are incorporated by reference therein,
unless the Initial Purchasers previously have been advised of and furnished with a copy of
such amendment or supplement within a reasonable period of time prior to the date of such
amendment or supplement and the Initial Purchasers shall have given their consent to such
amendment or supplement. If, prior to the date on which all of the Securities have been
sold by the Initial Purchasers, any event shall occur as a result of which the Initial
Purchasers reasonably conclude that any amendment or supplement to the Offering Memorandum
is necessary in order to correct a material misstatement in or omission from the Offering
Memorandum (or is necessary to comply with applicable law or to make the statements
therein, in the light of the circumstances under which they were made, not misleading),
then the Company shall use its commercially reasonable efforts forthwith to prepare and
furnish, at the expense of the Company, an appropriate amendment or supplement. The
Company will advise the Initial Purchasers of the time when any amendment or supplement to
the Offering Memorandum has been made or when any document filed under the Exchange Act
which is incorporated by reference in the Offering Memorandum has been filed with the
Commission and will provide evidence satisfactory to the Initial Purchasers of each such
amendment, supplement or filing.

      (c) The Company will cooperate with the Initial Purchasers in endeavoring to qualify
the Securities for sale under the securities laws of such jurisdictions as the Initial
Purchasers may reasonably have designated in writing and will make such applications, file
such documents and furnish such information as may be reasonably required for that
purpose; provided that the Company shall not be required to (i) qualify as a foreign
corporation or to file a general consent to service of process in any jurisdiction where
it is not now so qualified or required to file such a consent or (ii) subject itself to
taxation in respect of doing business in any jurisdiction where it is not currently
subject to taxation.

      (d) The Company will not, without the prior written consent of the Representatives,
directly or indirectly offer, sell, pledge, contract to sell (including any short sale),
grant any option to purchase or otherwise

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dispose of any shares of Common Stock or enter into any Hedging Transaction (as
defined below) relating to the Common Stock for a period from the date hereof until and
including the date that is 90 days after the date of the Offering Memorandum. “Hedging
Transaction” means any short sale (whether or not against the box) or any purchase, sale
or grant of any right (including, without limitation, any put or call option) with respect
to any security (other than a broad-based market basket or index) that includes, relates
to or derives any significant part of its value from the Common Stock. The foregoing
sentence shall not apply to (i) the Securities to be sold hereunder, (ii) the issuance by
the Company of shares of Common Stock upon conversion of the Securities pursuant to the
terms of the Certificate of Designations, (iii) shares of capital stock issued pursuant to
stock option and other compensatory arrangements existing on the date of the Offering
Memorandum, and (iv) the sale by the Company’s pension plan of up to 4,572,128 shares of
Common Stock after the filing by the Company of its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.

      (e) The Company will not, nor will it permit any of its controlled affiliates to,
resell any Securities that have been acquired by any of them.

      (f) Except as contemplated by the Registration Rights Agreement, none of the Company,
any of its controlled affiliates or any person acting on its behalf will, directly or
indirectly, make offers or sales of any security, or solicit offers to buy any security,
under circumstances that would require the registration of the Securities or the
Underlying Securities under the Securities Act.

      (g) None of the Company, any of its controlled affiliates or any person acting on its
behalf will engage in any form of general solicitation or general advertising (as those
terms are used in Rule 502(c) of Regulation D under the Securities Act) in connection with
any offer or sale of the Securities in the United States.

      (h) So long as any of the Securities or the Underlying Securities are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company
will, during any period in which it is not subject to or in compliance with Section 13 or
15(d) of the Exchange Act or exempt from such reporting requirements pursuant to and in
compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder of such
restricted securities and to each prospective purchaser (as designated by such holder) of
such restricted securities, upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Securities Act. This
covenant is intended to be for the benefit of the holders, and the

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prospective purchasers designated by such holders, from time to time of such
restricted securities.

      (i) The Company will cooperate with the Initial Purchasers and use its commercially
reasonable efforts to arrange to have the Securities be designated by the Nasdaq Stock
Market, Inc. as PORTAL-eligible securities in accordance with the rules and regulations of
the NASD.

      (j) The Company will use its commercially reasonable efforts to cause the Underlying
Securities to be approved for supplemental listing on the New York Stock Exchange on or
prior to the Closing Date and to ensure that the Underlying Securities remain authorized
for listing following the Closing Date.

      (k) The Company shall apply the net proceeds of its sale of the Securities in the
manner set forth under the caption “Use of Proceeds” in the Offering Memorandum.

      (l) The Company shall not invest, or otherwise use, the net proceeds received by the
Company from its sale of the Securities in such a manner as would require the Company to
register as an “investment company” under the Investment Company Act.

      (m) The Company will not take, directly or indirectly, any action designed to cause
or result in, or that has constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock.

      (n) Until the earlier of (x) the three-year anniversary of the Closing Date and (y)
the date that no Securities remain outstanding, the Company will furnish to the
Representatives and, upon request, and to the extent not available through the
Commission’s EDGAR system, to each of the other Initial Purchasers, as soon as practicable
after the end of each fiscal year, a copy of the Company’s annual report to stockholders
for such year; and the Company will furnish to the Representatives and, upon request, and
to the extent not available through the Commission’s EDGAR system, to each of the other
Initial Purchasers, as soon as available, a copy of each report and any definitive proxy
statement of the Company filed with the Commission under the Exchange Act or mailed to
holders of the Securities or any securities of the Company that have been registered under
Section 12 of the Exchange Act.

      5. COSTS AND EXPENSES.

            The Company will pay all costs, expenses and fees incident to the performance of its
obligations under this Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company;

14

 

the fees and disbursements of counsel for the Company; the cost of printing and delivering to,
or as reasonably requested by, the Initial Purchasers copies of the Preliminary Offering Memorandum
and the Offering Memorandum and any supplements or amendments thereto and the printing and
production of all other documents connected with the transactions contemplated herein (including
this Agreement, the Certificate of Designations, the Registration Rights Agreement and any other
related agreements); the listing fee of the New York Stock Exchange; the expenses arising from
having the Securities designated as eligible for trading in the PORTAL market; the expenses
associated with the preparation, issuance and delivery to the Initial Purchasers of the Securities;
and the expenses, including the reasonable fees and disbursements of counsel for the Initial
Purchasers, incurred in connection with the qualification of the Securities under state securities
or “Blue Sky” laws. The Company shall not, however, be required to pay for any of the Initial
Purchasers’ expenses (other than those related to qualification under state securities or “Blue
Sky” laws) except that, if this Agreement shall not be consummated because the conditions in
Section 6 hereof are not satisfied, or because this Agreement is terminated by the Initial
Purchasers pursuant to Section 9 hereof, or by reason of any failure, refusal or inability on the
part of the Company to perform any undertaking or satisfy any condition of this Agreement or to
comply with any of the terms hereof on their part to be performed, unless such failure, refusal or
inability is due primarily to the default or omission of the Initial Purchasers, the Company shall
reimburse the Initial Purchasers for their reasonable out-of-pocket expenses, including fees and
disbursements of Davis Polk & Wardwell, counsel for the Initial Purchasers, reasonably incurred in
connection with investigating, marketing and proposing to market the Securities or in contemplation
of performing their obligations hereunder; but the Company shall not in any event be liable to the
Initial Purchasers for damages on account of loss of anticipated profits from the sale by the
Initial Purchasers of the Securities. Subject to the preceding sentence, each party, including the
Company, on the one hand, and the Initial Purchasers, on the other, will pay its own expenses in
connection with attending or hosting meetings with prospective purchasers of the Securities from
the Initial Purchasers, including the costs attributable to the use of a private airplane to attend
such meetings to the extent one is so used.

      6. CONDITIONS OF OBLIGATIONS OF THE INITIAL PURCHASERS.

      The obligation of the Initial Purchasers to purchase the Firm Securities on the Closing Date
and the Option Securities, if any, on the Option Closing Date are subject to the accuracy, as of
the Closing Date or the Option Closing Date, as the case may be, of the representations and
warranties of the Company contained herein, and to the performance by the Company of its covenants
and obligations hereunder and to the following additional conditions:

      (a) The Initial Purchasers shall have received on the Closing Date or the Option
Closing Date, as the case may be, the opinion of

15

 

Andrews Kurth LLP, special counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Initial Purchasers and
substantially in the form attached as Exhibit A hereto.

      (b) The Initial Purchasers shall have received on the Closing Date or the Option
Closing Date, as the case may be, the opinion of Robert W. Baker, Executive Vice President
and General Counsel of the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Initial Purchasers and substantially in the form of
Exhibit B hereto.

      (c) The Initial Purchasers shall have received an opinion, dated the Closing Date or
the Option Closing Date, as the case may be, of Davis Polk & Wardwell, counsel for the
Initial Purchasers, with respect to certain legal matters relating to this Agreement, and
such other related matters as the Initial Purchasers may reasonably require. In rendering
such opinion, Davis Polk & Wardwell shall have received and may rely upon such
certificates and other documents and information as they may reasonably request to pass
upon such matters.

      (d) The Initial Purchasers shall have received, on each of the date hereof, the
Closing Date and, if applicable, the Option Closing Date, letters dated the date hereof,
the Closing Date or the Option Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Initial Purchasers and counsel for the Initial Purchasers,
of PricewaterhouseCoopers LLP confirming that they are independent public accountants
within the meaning of the Securities Act and the applicable published rules and
regulations thereunder and stating that in their opinion the financial statements and
schedules of the Company examined by them and incorporated by reference in the Offering
Memorandum comply in form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the respective related
published rules and regulations; and containing such other statements and information as
is ordinarily included in accountants’ “comfort letters” to initial purchasers with
respect to the financial statements and certain financial information contained or
incorporated by reference in the Offering Memorandum.

      (e) The Initial Purchasers shall have received on the Closing Date and, if
applicable, the Option Closing Date, as the case may be, a certificate or certificates of
the Chief Financial Officer and one additional executive officer of the Company who is
knowledgeable about the Company’s financial matters to the effect that, as of the Closing
Date or the Option Closing Date, as the case may be, to the best of his or her knowledge
after reasonable investigation:

16

 

      (i) the representations and warranties of the Company contained in Section
1 hereof are true and correct in all material respects (except for those
representations and warranties as are qualified by materiality, which are true
and correct in all respects) as of the Closing Date or the Option Closing Date,
as the case may be;

      (ii) he or she has carefully examined the Offering Memorandum (including
the documents of the Company incorporated by reference therein) and, in his or
her opinion, as of the Closing Date or Option Closing Date, as the case may be,
the statements contained in the Offering Memorandum (including the documents of
the Company incorporated by reference therein) with respect to the Company are
true and correct in all material respects, and with respect to the Company such
Offering Memorandum (including the documents of the Company incorporated by
reference therein) does not omit to state a material fact required to be stated
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

      (iii) since the respective dates as of which information is given in the
Offering Memorandum, there has not been any Material Adverse Change or any
development involving a prospective Material Adverse Change, whether or not
arising in the ordinary course of business; and

      (iv) the Company has, in all material respects, performed all covenants and
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date or the Option Closing Date, as the case may be.

      (f) The Company shall have furnished to the Initial Purchasers such further
certificates and documents as the Initial Purchasers may reasonably have requested.

      (g) The Underlying Securities shall have been approved for supplemental listing,
subject to official notice of issuance, on the New York Stock Exchange and the Securities
shall have been designated as PORTAL-eligible securities.

      (h) Subsequent to the execution and delivery of this Agreement and prior to the
Closing Date, there shall not have occurred any downgrading, nor shall any notice have
been given of any intended or potential downgrading or of any review for a possible change
that does not indicate the direction of the possible change, in the rating accorded any of
the Company’s securities or the rating of any of the Company’s

17

 

subsidiaries by any “nationally recognized statistical rating organization”, as such
term is defined for purposes of Rule 436(g)(2) under the Securities Act.

      (i) The Registration Rights Agreement shall have been executed and delivered by all
the parties thereto.

      (j) The Company shall have caused each officer and director of the Company set forth
in Schedule II hereto to furnish to the Representatives, on or prior to the date of this
agreement, a letter or letters, in substantially the form attached as Exhibit C hereto,
and such letter or letters shall be in full force and effect.

      (k) The Certificate of Designations shall have been duly filed with the Secretary of
State of the State of Delaware.

      (l) The Initial Purchasers shall have received letters, dated the Closing Date or the
Option Closing Date, as the case may be, and addressed to the Initial Purchasers, from
Ryder Scott Company, L.P., independent petroleum engineers for the Company, in form and
substance reasonably satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers.

      The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance
with the provisions hereof only if they are in all material respects satisfactory to the Initial
Purchasers.

      If any of the conditions hereinabove provided for in this Section 6 shall not have been
fulfilled when and as required by this Agreement to be fulfilled, the Initial Purchasers may
terminate their obligations hereunder by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the case may be.

      In such event, the Company and the Initial Purchasers shall not be under any obligation to
each other (except to the extent provided in Sections 5 and 7 hereof).

      7. INDEMNIFICATION.

      (a) The Company agrees:

      (i) to indemnify and hold harmless each Initial Purchaser and the
affiliates, directors, officers, agents, representatives and employees of each
Initial Purchaser and each person, if any, who controls each Initial Purchaser
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, against any losses, claims, damages or liabilities to which
such Initial Purchaser or any such affiliate,

18

 

director, officer, agent, representative, employee or such controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of or are based upon (x) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or supplement thereto, or
(y) the omission or alleged omission to state therein a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading or (z) any failure by the Company to perform its
obligations under Section 4 hereof (provided that the Company shall not be
liable under this clause (z) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such failure was attributable
to the gross negligence or willful misconduct of the Initial Purchasers);
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in any Preliminary Offering Memorandum, the Offering Memorandum,
or any amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by any Initial Purchaser
specifically for use in the preparation thereof, it being understood and agreed
that the only such information is that described as such in Section 7(b) hereof;
and provided, further, that the Company will not be liable to any Initial
Purchaser or any person controlling such Initial Purchaser with respect to any
such untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum that is corrected in the
Offering Memorandum (or any amendment or supplement thereto) if the person
asserting any such loss, claim, damage or liability purchased Securities from
such Initial Purchaser but was not sent or given a copy of the Offering
Memorandum (as amended or supplemented), unless such failure to deliver the
Offering Memorandum (as amended or supplemented) was a result of noncompliance
by the Company with Section 4 hereof; and

      (ii) to reimburse each Initial Purchaser and each such affiliate, director,
officer, agent, representative and employee and each such controlling person
upon demand for any legal or other out-of-pocket expenses reasonably incurred by
such Initial Purchaser, such affiliate, director, officer, agent, representative
or employee or such controlling person in connection with investigating or
defending or appearing as a third-party witness in

19

 

connection with any such loss, claim, damage or liability, action or
proceeding or in responding to a subpoena or governmental inquiry related to the
Offering, whether or not such Initial Purchaser or any such controlling person
is a party to any action or proceeding. In the event that it is finally
judicially determined that such Initial Purchaser was not entitled to receive
payments for legal and other expenses pursuant to this subparagraph, such
Initial Purchaser will promptly return all sums that had been advanced pursuant
hereto.

      (b) Each Initial Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors and officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the Company or
any such director, officer or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary Offering
Memorandum, the Offering Memorandum or any amendment or supplement thereto, or (ii) the
omission or the alleged omission to state therein a material fact required to be stated
therein to make the statements therein, in the light of the circumstances under which they
were made, not misleading; and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Initial Purchaser will be liable in each case to
the extent, but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission has been made in any Preliminary Offering Memorandum, the
Offering Memorandum or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by any Initial Purchaser
specifically for use in the preparation thereof, it being understood and agreed that the
only such information consists of the following information in the Offering Memorandum
furnished on behalf of each Initial Purchaser: the table in the first paragraph, the
eighth paragraph and the ninth paragraph, in each case under the caption “Plan of
Distribution.”. This indemnity agreement will be in addition to any liability which the
Initial Purchasers may otherwise have.

      (c) In case any proceeding (including any governmental investigation) shall be
instituted involving any person in respect of which indemnity may be sought pursuant to
this Section 7, such person (the “indemnified party”) shall promptly notify the
person against whom such indemnity may be sought (the “indemnifying party”) in
writing. No indemnification provided for in Section 7(a) or (b) shall be available to

20

 

any party who shall fail to give notice as provided in this Section 7(c) if the party
to whom notice was not given was unaware of the proceeding to which such notice would have
related and was materially prejudiced by the failure to give such notice, but the failure
to give such notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise than on
account of the provisions of Section 7(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party) and shall pay as incurred the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30 days of
presentation) the fees and expenses of the counsel retained by the indemnified party in
the event (i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iii) the indemnifying party shall have
failed to assume the defense of and employ counsel acceptable to the indemnified party
within a reasonable period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such firm shall
be designated in writing by the Representatives in the case of parties indemnified
pursuant to Section 7(a) and by the Company in the case of parties indemnified pursuant to
Section 7(b). The indemnifying party shall not be liable for any settlement of any
proceeding effected without its prior written consent, but if settled with such consent or
if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify
the indemnified party from and against any loss or liability by reason of such settlement
or judgment. In addition, the indemnifying party will not, without the prior written
consent of the indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding of which indemnification
may be sought hereunder (whether or not any indemnified party is an actual or potential
party to such claim, action or proceeding) unless such settlement, compromise or consent
(x) includes an unconditional release of each

21

 

indemnified party from all liability arising out of any and all claims that are the
subject matter of such action or proceeding and (y) does not include a statement as to an
admission of fault, culpability or a failure to act by or on behalf of any indemnified
party.

      (d) To the extent the indemnification provided for in this Section 7 is unavailable
to or insufficient to hold harmless an indemnified party under Section 7(a) or (b) above
in respect of any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in such proportion
as is appropriate to reflect the relative benefits received by the Company on the one hand
and the Initial Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one hand and the
Initial Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchasers on the other
shall be deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total discounts and
commissions received by the Initial Purchasers. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Initial Purchasers on the other
and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Initial Purchasers
agree that it would not be just and equitable if contributions pursuant to this Section
7(d) were determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this Section.
The amount paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), (i) the Initial
Purchasers shall not be required to contribute any amount in excess of the discounts and
commissions applicable to the Securities purchased by the Initial Purchasers and (ii) no
person guilty of fraudulent misrepresentation

22

 

(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation.

      (e) In any proceeding relating to any Preliminary Offering Memorandum, the Offering
Memorandum or any supplement or amendment thereto, each party against whom contribution
may be sought under this Section 7 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing from such
court may be served upon it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join it as an additional
defendant in any such proceeding in which such other contributing party is a party.

      (f) Any losses, claims, damages, liabilities or expenses for which an indemnified
party is entitled to indemnification or contribution under this Section 7 shall be paid by
the indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution agreements contained
in this Section 7 and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of the Initial Purchasers or any affiliate, director,
officer, agent, representative or employee of any Initial Purchaser or any person
controlling the Initial Purchasers, the Company, any director or officer of the Company or
any person controlling the Company, (ii) acceptance of any Securities and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any Initial
Purchaser or any affiliate, director, officer, agent, representative or employee of the
Initial Purchasers or any person controlling any Initial Purchaser, or to the Company, any
director or officer of the Company or any person controlling the Company, shall be
entitled to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.

      8. NOTICES.

            All communications hereunder shall be in writing and, except as otherwise provided herein,
shall be mailed, delivered, telecopied, faxed or telegraphed and confirmed as follows: if to the
Initial Purchasers, c/o Banc of America Securities LLC, 9 West 57th Street, New York,
New York 10019; Attention: Syndicate Department, Fax: (212) 933-2217 and Deutsche Bank Securities
Inc., 60 Wall Street, New York, New York 10005; Attention: Syndicate, Fax: (212) 797-9344, with a
copy to Attention: General Counsel, Fax: (212) 797-4564, and; if to the Company, to El Paso
Building, 1001 Louisiana Street, Houston, Texas 77002, Attention: Robert W. Baker, Executive Vice
President and General Counsel, Fax: (713) 420-5043, with a copy to Andrews Kurth
LLP, 600 Travis, Suite 4200, Houston, Texas 77002, Attention: G. Michael O’Leary, Fax: (713)
238-7130.

23

 

      9. TERMINATION.

      (a) This Agreement may be terminated by the Initial Purchasers by notice to the
Company at any time prior to the Closing Date or the Option Closing Date (if different
from the Closing Date and then only as to Option Securities) if any of the following has
occurred: (i) since the date as of which information is given in the Offering Memorandum,
any Material Adverse Change or any development involving a prospective Material Adverse
Change, whether or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or other national or
international calamity or crisis or change in economic or political conditions if the
effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on
the financial markets of the United States would, in the sole judgment of the Initial
Purchasers, make it impracticable or inadvisable to market the Securities or to enforce
contracts for the sale of the Securities, (iii) suspension of trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National Market or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on any such exchange or market, (iv) the enactment,
publication, decree or other promulgation of any statute, regulation, rule or order of any
court or other governmental authority which in the opinion of the Initial Purchasers
materially and adversely affects or may materially and adversely affect the business or
operations of the Company, (v) the declaration of a banking moratorium by United States or
New York State authorities, (vi) any downgrading, or placement on any watch list for
possible downgrading, in the rating of any of the Company’s debt securities by any
“nationally recognized statistical rating organization” (as defined for purposes of Rule
436(g) under the Exchange Act), (vii) the suspension of trading of the Common Stock by the
New York Stock Exchange, the Commission, or any other governmental authority, or (viii)
the taking of any action by any governmental body or agency in respect of its monetary or
fiscal affairs which in the reasonable opinion of the Initial Purchasers has a material
adverse effect on the securities markets in the United States; or

      (b) as provided in Section 6 of this Agreement.

      10. DEFAULTING INITIAL PURCHASERS.

      (a) If, on the Closing Date, or the Option Closing Date, as the case may be, any one
or more of the Initial Purchasers shall fail or refuse to purchase Securities that it has
or they have agreed to purchase hereunder on such date, and the aggregate number of
Securities which

24

 

such defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of Securities to be
purchased on such date, the other Initial Purchasers shall be obligated severally in the
proportions that the number of Firm Securities set forth opposite their respective names
in Schedule I hereto bears to the aggregate number of Firm Securities set forth opposite
the names of all such non-defaulting Initial Purchasers, or in such other proportions as
you may specify, to purchase the Securities which such defaulting Initial Purchaser or
Initial Purchasers agreed but failed or refused to purchase on such date.

      (b) If, on the Closing Date, any Initial Purchaser or Initial Purchasers shall fail
or refuse to purchase the Firm Securities which it or they have agreed to purchase
hereunder on such date and the aggregate number of Securities with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Securities to be
purchased on such date, and arrangements satisfactory and arrangements satisfactory to the
Company for the purchase of the Firm Securities are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of the Company,
except to the extent provided in Sections 5, 7 and 12. If arrangements satisfactory to
the Company for the purchase of the Firm Securities are made within 36 hours after such
default, the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the Offering
Memorandum or in any other documents or arrangements may be effected. Any action taken
under this Section 10 shall not relieve any defaulting Initial Purchasers from liability
in respect of any default of such Initial Purchasers under this Agreement.

      11. SUCCESSORS.

            This Agreement has been and is made solely for the benefit of the Initial Purchasers and the
Company and their respective successors and assigns, and the officers, directors and controlling
persons referred to herein, and no other person will have any right or obligation hereunder. No
purchaser of any of the Securities from the Initial Purchasers shall be deemed a successor or
assign merely because of such purchase.

      12. MISCELLANEOUS.

            The reimbursement, indemnification and contribution agreements contained in this Agreement and
the representations, warranties and covenants in this Agreement shall remain in full force and
effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on
behalf of the Initial Purchasers or any controlling person thereof, or by or on behalf of the
Company or its directors or officers and (c) delivery of and payment for the Securities under this
Agreement.

25

 

            This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.

            This Agreement shall be governed by, and construed in accordance with, the laws of the State
of New York.

26

 

      If the foregoing letter is in accordance with your understanding of our agreement, please sign
and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among
the Company and the Initial Purchasers in accordance with its terms.

	 	 	 	 	 
	 	Very truly yours,

EL PASO CORPORATION

 	 
	 	By:  	/s/ John Hopper
 	 
	 	 	Name:  	John Hopper 	 
	 	 	Title:  	Vice President 	 
	 

The foregoing Agreement
is hereby confirmed and accepted as
of the date first above written.

BANC OF AMERICA SECURITIES
LLC

DEUTSCHE BANK SECURITIES INC.

Acting as Representatives of the several
Initial Purchasers named in the attached
Schedule I

BANC OF AMERICA SECURITIES LLC

		
	By:  	/s/ Vincent T. Cubbage
 

Name: Vincent T. Cubbage

Title:   Managing Director

DEUTSCHE BANK SECURITIES INC.

		
	By:  	/s/ Michael V. Johnson
 

Name: Michael V. Johnson

Title:   Managing Director

		
	By:  	/s/ Joel D. Foote
 

Name: Joel D. Foote

Title:   Managing Director

27<PAGE>
                                                                    EXHIBIT 10.1

                           RESTRICTED STOCK AGREEMENT

        THIS RESTRICTED STOCK AGREEMENT, dated as of _____________, 20__ (the
"Effective Date"), is made by and among Arden Realty, Inc., a Maryland
corporation (the "Company"), Arden Realty Limited Partnership, a Maryland
limited partnership (the "Partnership"), and _____________, an employee of the
Company (the "Holder"):

        WHEREAS, the Company and the Partnership have established the Second
Amended and Restated 1996 Stock Option and Incentive Plan of Arden Realty, Inc.
and Arden Realty Limited Partnership (the "Plan");

        WHEREAS, the Company wishes to carry out the Plan (the terms of which
are hereby incorporated by reference and made a part of this Agreement);

        WHEREAS, the Plan provides for the issuance of shares of the Company's
Common Stock (as defined herein) subject to certain restrictions thereon; and

        WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), has determined that it would be to the advantage and in the
best interest of the Company and its stockholders to obtain and retain the
services of key Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company.

        NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I.
                                   DEFINITIONS

        1.1 General. Wherever the following terms are used in this Agreement
they shall have the meanings specified below, unless the context clearly
indicates otherwise. Capitalized terms not defined herein shall have the
meanings assigned to such terms in the Plan. The masculine pronoun shall include
the feminine and neuter, and the singular the plural, where the context so
indicates.

        1.2 Change in Control. For purposes of this Agreement, a "Change in
Control" shall mean the occurrence of any of the following events:

                (a) the individuals constituting the Board as of the Effective
        Date (the "Incumbent Board") cease for any reason to constitute at least
        two-thirds (2/3rds) of the Board; provided, however, that if the
        election, or nomination for election by the Company's stockholders, of
        any new director was approved by a vote of at least two-thirds (2/3rds)
        of

<PAGE>

        the Incumbent Board, such new director shall be considered a member of
        the Incumbent Board;

                (b) an acquisition of any voting securities of the Company (the
        "Voting Securities") by any "person" (as the term "person" is used for
        purposes of Section 13(d) or Section 14(d) of the Securities Exchange
        Act of 1934, as amended (the "1934 Act")) immediately after which such
        person has "beneficial ownership" (within the meaning of Rule 13d-3
        promulgated under the 1934 Act) ("Beneficial Ownership") of 20% or more
        of the combined voting power of the Company's then outstanding Voting
        Securities; or

                (c) approval by the stockholders of the Company of:

                        (i) a merger, consolidation, share exchange or
                reorganization involving the Company, unless

                                (ii) the stockholders of the Company,
                        immediately before such merger, consolidation, share
                        exchange or reorganization, own, directly or indirectly
                        immediately following such merger, consolidation, share
                        exchange or reorganization, at least 80% of the combined
                        voting power of the outstanding voting securities of the
                        corporation that is the successor in such merger,
                        consolidation, share exchange or reorganization (the
                        "Surviving Company") in substantially the same
                        proportion as their ownership of the Voting Securities
                        immediately before such merger, consolidation, share
                        exchange or reorganization; and

                                (iii) the individuals who were members of the
                        Incumbent Board immediately prior to the execution of
                        the agreement providing for such merger, consolidation,
                        share exchange or reorganization constitute at least
                        two-thirds (2/3rds) of the members of the board of
                        directors of the Surviving Company;

                        (ii) a complete liquidation or dissolution of the
                Company; or

                        (iii) an agreement for the sale or other disposition of
                all or substantially all of the assets of the Company.

                (d) any Person is or becomes the Beneficial Owner of securities
        of the Company representing ten percent (10%) or more of the combined
        voting power of the Company's then outstanding securities and (A) the
        identity of the Chief Executive Officer of the Company is changed during
        the period beginning sixty (60) days before the attainment of the ten
        percent (10%) beneficial ownership and ending two (2) years thereafter,
        or (B) individuals constituting at least one-third (1/3) of the members
        of the Board at the beginning of such period shall leave the Board
        during the period beginning sixty (60) days before the attainment of the
        ten percent (10%) beneficial ownership and ending two (2) years
        thereafter.

                                       2
<PAGE>

        1.3 Consultant. "Consultant" shall mean any consultant or adviser if:

                (a) the consultant or adviser renders bona fide services to the
        Company;

                (b) the services rendered by the consultant or adviser are not
        in connection with the offer or sale of securities in a capital-raising
        transaction and do not directly or indirectly promote or maintain a
        market for the Company's securities; and

                (c) the consultant or adviser is a natural person who has
        contracted directly with the company to render such services.

        1.4 Disability. "Disability" shall mean permanent and total disability
(within the meaning of Section 22(e)(3) of the Code).

                                  ARTICLE II.
                            AWARD OF RESTRICTED STOCK

        2.1 Award of Shares. For good and valuable consideration which the
Committee has determined to exceed the par value of its Common Stock, on the
date hereof the Company issues to the Holder _________ shares of its Common
Stock (the "Shares") upon the terms and conditions set forth in this Agreement.

        2.2 Consideration to the Company. As partial consideration for the
issuance of the Shares by the Company, the Holder agrees to remain in the employ
of or as a Consultant to the Company, the Partnership, or any Subsidiary
(whichever is applicable), as applicable, with such duties and responsibilities
as the Company, the Partnership or any Subsidiary (as applicable) shall from
time to time prescribe, for a period of at least one year after the Shares are
issued. Nothing in this Agreement or in the Plan shall confer upon the Holder
any right to continue in the employ of or in the service of the Company, the
Partnership or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company, the Partnership or any Subsidiary which are hereby
expressly reserved, to discharge a Holder who is an Employee or Consultant at
any time for any reason whatsoever, with or without cause.

                                       3
<PAGE>

                                  ARTICLE III.
                                  RESTRICTIONS

        3.1 Forfeiture. Upon the Holder's Termination of Employment or
Termination of Consultancy (each as defined in the Plan), all of the Unreleased
Shares (as defined below) shall thereupon be forfeited immediately and without
any further action by the Company (the "Forfeiture Restriction").

        3.2 Release of Shares from Restrictions.

                (a) Subject to Sections 3.1, 3.5, 3.6 and 4.4, each Share shall
        be released from the Forfeiture Restriction and the Transfer Restriction
        in accordance with the following schedule:

                Twenty (20%) of the Shares (rounded down to the next whole
                number of shares) shall be released from the Forfeiture
                Restriction and the Transfer Restriction on each anniversary of
                the grant date, so that all of the Shares shall be released from
                the Forfeiture Restriction and the Transfer Restriction on the
                fifth (5th) anniversary after the grant date.

                (b) Any of the Shares which, from time to time, have not yet
        been released from the Forfeiture Restriction and the Transfer
        Restriction are referred to herein as "Unreleased Shares."

                (c) In the event of a Change of Control, or the death or
        Disability of the Holder, all of the Unreleased Shares shall cease to be
        subject to the Forfeiture Restriction or the Transfer Restriction.

        3.3 Legend. Certificates representing Shares issued pursuant to this
Agreement shall, until such Shares are released from the Forfeiture Restriction
and the Transfer Restriction and new certificates are issued therefor, bear the
following legend:

        "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
        FORFEITURE AND CERTAIN RESTRICTIONS ON TRANSFERABILITY UNDER THE TERMS
        OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN ARDEN REALTY,
        INC. (THE "COMPANY"), ARDEN REALTY LIMITED PARTNERSHIP AND THE
        REGISTERED OWNER OF SUCH SHARES, AND SUCH SHARES MAY NOT BE, DIRECTLY OR
        INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED
        OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES, EXCEPT PURSUANT TO THE
        PROVISIONS OF SUCH AGREEMENT."

        3.4 Issuance of Certificates for Vested Shares. Subject to Section 3.7,
upon the release of Shares from the Forfeiture Restriction and the Transfer
Restriction, the Company shall cause new certificates to be issued with respect
to such vested Shares and delivered to the Holder or his legal representative,
free from the legend provided for in Section 3.3. Such vested Shares shall cease
to be subject to the terms and conditions of this Agreement.

                                       4
<PAGE>

        3.5 Restrictions On New Shares. In the event that the Holder receives
any new or additional or different shares or securities which are attributable
to the Holder in his capacity as the registered owner of Shares then subject to
Forfeiture Restriction and the Transfer Restriction, such new or additional or
different shares or securities shall be considered to be Shares under this
Agreement and shall be subject to the Forfeiture Restriction and the Transfer
Restriction, unless the Board or the Committee provides otherwise.

        3.6 Section 83(b). The Holder covenants that he will not make an
election under Section 83(b) of the Code with respect to the receipt of any of
the Shares.

        3.7 Tax Withholding. Notwithstanding anything to the contrary in this
Agreement, the Company shall be entitled to require payment in cash or deduction
from other compensation payable to the Holder of any sums required by federal,
state or local tax law to be withheld with respect to the issuance, lapsing of
restrictions on or exercise of the Shares. The Board or the Committee may, in
their discretion, allow the Holder to deliver shares of Common Stock owned by
the Holder duly endorsed for transfer to the Company with an aggregate Fair
Market Value on the date of delivery equal to the statutory minimum sums to be
withheld. The Company shall not be obligated to deliver any new certificate
representing vested Shares to the Holder or his legal representative unless and
until the Holder or his legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable to
the taxable income of the Holder resulting from the grant of the Shares or the
lapse or removal of the Forfeiture Restriction and the Transfer Restriction.

                                   ARTICLE IV.
                                  MISCELLANEOUS

        4.1 Unreleased Shares Not Transferable. Unless otherwise permitted by
the Committee pursuant to the Plan, no Unreleased Shares or any interest or
right therein or part thereof shall be liable for the debts, contracts or
engagements of the Holder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect (the
"Transfer Restriction"); provided, however, that this Section 4.1 shall not
prevent transfers by will or by applicable laws of descent and distribution. In
case of a permitted transfer, the transferee or other recipient shall receive
and hold the Shares so transferred subject to the provisions of this Agreement,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section. Any transferee shall acknowledge the same by signing
a copy of this Agreement. Transfer or sale of the Shares is subject to
restrictions on transfer imposed by any applicable state and federal securities
laws.

        4.2 Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock pursuant to this Agreement prior to fulfillment of all of the following
conditions:

                (a) The admission of such shares to listing on all stock
        exchanges on which such class of stock is then listed; and

                                       5
<PAGE>

                (b) The payment by the Holder of all amounts required to be
        withheld, under federal, state and local tax laws, with respect to the
        issuance of Shares and/or the lapse or removal of the Forfeiture
        Restriction and/or the Transfer Restriction; and

                (c) The lapse of such reasonable period of time as the Committee
        may from time to time establish for reasons of administrative
        convenience.

                (d) The completion of any registration or other qualification of
        such shares under any state or federal law or under rulings or
        regulations of the Securities and Exchange Commission or of any other
        governmental regulatory body, which the Committee shall, in its absolute
        discretion, deem necessary or advisable; and

                (e) The obtaining of any approval or other clearance from any
        state or federal governmental agency which the Committee shall, in its
        absolute discretion, determine to be necessary or advisable.

                                       6
<PAGE>

        4.3 Escrow.

                (a) Holder hereby authorizes and directs the Secretary of the
        Company, or such other person designated by the Company, to transfer the
        Unreleased Shares as to which the Forfeiture Option is effective from
        Holder to the Company.

                (b) To insure the availability for delivery of Holder's
        Unreleased Shares upon forfeiture pursuant to Section 3.1, Holder hereby
        appoints the Secretary, or any other person designated by the Company as
        escrow agent, as its attorney-in-fact to sell, assign and transfer unto
        the Company, such Unreleased Shares, if any, forfeited pursuant to the
        Forfeiture Option and shall, upon execution of this Agreement, deliver
        and deposit with the Secretary of the Company, or such other person
        designated by the Company, the share certificates representing the
        Unreleased Shares, together with the stock assignment duly endorsed in
        blank, attached hereto as Exhibit A. The Unreleased Shares and stock
        assignment shall be held by the Secretary in escrow, pursuant to the
        Joint Escrow Instructions of the Company and Holder attached as Exhibit
        B hereto, until the Forfeiture Restriction becomes effective as provided
        in Section 3.1, until such Unreleased Shares are vested, or until such
        time as this Agreement no longer is in effect. Upon vesting of the
        Unreleased Shares, the escrow agent shall promptly deliver to the Holder
        the certificate or certificates representing such Shares in the escrow
        agent's possession belonging to the Holder, and the escrow agent shall
        be discharged of all further obligations hereunder; provided, however,
        that the escrow agent shall nevertheless retain such certificate or
        certificates as escrow agent if so required pursuant to other
        restrictions imposed pursuant to this Agreement.

                (c) The Company, or its designee, shall not be liable for any
        act it may do or omit to do with respect to holding the Shares in escrow
        and while acting in good faith and in the exercise of its judgment.

        4.4 Ownership Limit and REIT Status. The Forfeiture Restriction and/or
the Transfer Restriction on the Shares shall not lapse if the lapsing of such
restrictions would likely result in any of the following:

                (a) a violation of the restrictions or limitations on ownership
        provided for from time to time under the terms of the organizational
        documents of the Company; or

                (b) income to the Company that could impair the Company's status
        as a real estate investment trust, within the meaning of Section 856
        through 860 of the Code.

        4.5 Notices. Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Holder shall be addressed to him at the address given
beneath his signature hereto. By a notice given pursuant to this Section 4.5,
either party may hereafter designate a different address for notices to be given
to it or him. Any notice which is required to be given to the Holder shall, if
the Holder is then deceased, be given to the Holder's personal representative if
such representative has previously informed the Company of his status and
address by written notice under this Section 4.5. Any notice shall have been
deemed duly given when enclosed in a properly sealed envelope or wrapper

                                       7
<PAGE>

addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.

        4.6 Rights as Stockholder. Except as otherwise provided herein, upon
delivery of the Shares to the escrow holder pursuant to Section 4.3, the Holder
shall have all the rights of a stockholder with respect to said shares, subject
to the restrictions herein, including the right to vote the shares and to
receive all dividends or other distributions paid or made with respect to the
Shares; provided, however, that any and all shares of Common Stock received by
the Holder with respect to such Shares as a result of stock dividends, stock
splits or any other form of recapitalization shall also be subject to the
Forfeiture Restriction and the Transfer Restriction until such restrictions on
the underlying Shares lapse or are removed pursuant to this Agreement.

        4.7 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of this Agreement.

        4.8 Conformity to Securities Laws. The Holder acknowledges that the Plan
and this Agreement are intended to conform to the extent necessary with all
provisions of all applicable federal and state laws, rules and regulations
(including but not limited to, the Securities Act and the Exchange Act) and to
such approvals by any listing, regulatory or other governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Notwithstanding anything herein to the contrary, this
Agreement shall be administered, and the Shares shall be issued, only in such a
manner as to conform to such laws, rules and regulations. To the extent
permitted by applicable law, the Plan, this Agreement and the Shares issued
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

        4.9 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Agreement, the Plan,
the Shares and this Agreement shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, this Agreement and the Shares issued hereunder shall be deemed amended
to the extent necessary to conform to such applicable exemptive rule.
Furthermore, notwithstanding any other provision of the Plan or this Agreement,
the Shares shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Agreement shall be deemed amended to the
extent necessary to conform to such requirements unless the Committee shall have
determined that the Shares are not intended to so qualify.

        4.10 Governing Law. The laws of the State of Maryland shall govern the
interpretation, validity, administration, enforcement and performance of the
terms of this Agreement regardless of the law that might be applied under
principles of conflicts of laws.

        4.11 Survival of Terms. This Agreement shall apply to and bind Holder
and the Company and their respective permitted assignees and transferees, heirs,
legatees, executors, administrators and legal successors.

                                       8
<PAGE>

        4.12 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

        4.13 Assignment. Except as otherwise provided herein, the Company's
rights and obligations hereunder may be assigned to any Company Subsidiary or to
any successor pursuant to a merger, consolidation or similar event. Subject to
the foregoing, this Agreement and the respective rights and obligations of the
parties hereto shall inure to the benefit of and be binding upon, the successors
and assigns of the parties.

        4.14 Invalid Provision. The invalidity or unenforceability of any
particular provision hereof shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted.

                                       9
<PAGE>

               IN WITNESS HEREOF, this Agreement has been executed and delivered
by the parties hereto.

Holder:                                      ARDEN REALTY, INC., a Maryland
                                             corporation

---------------------------------------

---------------------------------------
Address

---------------------------------------
City, State, Zip Code                        By:
                                                --------------------------------
---------------------------------------           VICTOR J. COLEMAN
Holder's Taxpayer Identification Number      Its: President and COO

                                             ARDEN REALTY LIMITED PARTNERSHIP,
                                             a Maryland Limited Partnership

                                             By: ARDEN REALTY, INC.,

                                                 a Maryland corporation

                                                 Its:  Sole General Partner

                                             By:
                                                --------------------------------
                                                VICTOR J. COLEMAN
                                                Its: President and COO

                                       10
<PAGE>

                                    EXHIBIT A

                     ASSIGNMENT SEPARATE FROM CERTIFICATE(S)

        FOR VALUE RECEIVED I, ________________, hereby sell, assign and transfer
unto _______________________________________________________ (__________) shares
of the Common Stock of Arden Realty, Inc. registered in my name on the books of
said corporation represented by Certificate No(s). ________________________
herewith and do hereby irrevocably constitute and appoint ______________________
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

        This Assignment Separate from Certificate(s) may be used only in
accordance with the Restricted Stock Agreement between Arden Realty, Inc., Arden
Realty Limited Partnership and the undersigned dated ______________, _____.

Dated:                ,                 Signature:
      ----------------  --------                  ------------------------------

INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Restricted Stock Agreement, without
requiring additional signatures on the part of Purchaser.

<PAGE>

                                    EXHIBIT B

                            JOINT ESCROW INSTRUCTIONS

                                                        _________________, _____

Arden Realty, Inc.
Attn: Secretary

        As Escrow Agent for Arden Realty, Inc. and Arden Realty Limited
Partnership (together the "Company") and the undersigned purchaser of stock of
the Company (the "Purchaser"), you are hereby authorized and directed to hold
the documents delivered to you pursuant to the terms of that certain Restricted
Stock Agreement ("Agreement") between the Company and the undersigned, in
accordance with the following instructions:

        1. In the event of forfeiture of any of the shares owned by Purchaser
pursuant to the Forfeiture Restriction set forth in the Agreement, the Company
and/or any assignee of the Company (referred to collectively for convenience
herein as the "Company") shall give to Purchaser and you a written notice
specifying the number of shares of stock forfeited and the date of forfeiture.
Purchaser and the Company hereby irrevocably authorize and direct you to effect
the forfeiture contemplated by such notice in accordance with the terms of said
notice.

        2. As of the date of forfeiture indicated in such notice, you are
directed (a) to date the stock assignments necessary for the forfeiture and
transfer in question, (b) to fill in the number of shares being forfeited and
transferred, and (c) to deliver the same, together with the certificate
evidencing the shares of stock to be forfeited and transferred, to the Company
or its assignee.

        3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares. Purchaser does hereby irrevocably
constitute and appoint you as Purchaser's attorney-in-fact and agent for the
term of this escrow to execute, with respect to such securities, all documents
necessary or appropriate to make such securities negotiable and to complete any
transaction herein contemplated, including but not limited to the filing with
any applicable state blue sky authority of any required applications for consent
to, or notice of transfer of, the securities. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder
of the Company while the stock is held by you.

        4. Upon written request of Purchaser, but no more than once per calendar
year, unless the Forfeiture Restriction has been triggered, you will deliver to
Purchaser a certificate or certificates representing the number of shares of
stock as are not then subject to the Forfeiture Restriction. Within one hundred
twenty (120) days after any voluntary or involuntary termination of Purchaser's
services to the Company for any or no reason, you will deliver to Purchaser a
certificate or certificates representing the aggregate number of shares held or
issued

<PAGE>

pursuant to the Agreement and not forfeited pursuant to the Forfeiture
Restriction set forth in Section 3 of the Agreement.

        5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

        6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

        7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.

        8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

        9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

        10. You shall not be liable for the expiration of any rights under any
applicable state, federal or local statute of limitations or similar statute or
regulation with respect to these Joint Escrow Instructions or any documents
deposited with you.

        11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and the Company
shall reimburse you for any reasonable attorneys' fees incurred in connection
therewith.

        12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.

                                       2
<PAGE>

        13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

        14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

        15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
addresses set forth on the signature pages hereto or at such other addresses as
a party may designate by ten (10) days' advance written notice to each of the
other parties hereto.

        16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.

        17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.

        18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, excluding
that body of law pertaining to conflicts of law.

                                       3

<PAGE>

                                            ARDEN REALTY, INC.

                                            By:
                                               ---------------------------------
                                               VICTOR J. COLEMAN
                                            Its: President and COO

                                            Address:

                                            11601 Wilshire Boulevard, Suite 400
                                            Los Angeles, CA 90025

                                            ARDEN REALTY LIMITED PARTNERSHIP

                                            By:  ARDEN REALTY, INC.
                                            Its: Sole General Partner

                                            By:
                                               ---------------------------------
                                               VICTOR J. COLEMAN
                                            Its: President and COO

                                            Address:

                                            11601 Wilshire Boulevard, Suite 400
                                            Los Angeles, CA 90025

                                            PURCHASER:

                                            ------------------------------------

                                            Address:

                                            ------------------------------------

                                            ------------------------------------

                                       4
<PAGE>

                                            ESCROW AGENT:

                                            By:
                                               ---------------------------------
                                            Name:
                                                 -------------------------------
                                            Title:
                                                  ------------------------------

                                            Address:

                                            11601 Wilshire Boulevard, Suite 400
                                            Los Angeles, CA 90025

                                       5

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