EXHIBIT 10.22
BUSINESS OPPORTUNITIES AGREEMENT
This BUSINESS OPPORTUNITIES AGREEMENT (this "Agreement"), dated as of
December 13, 1999, is entered into by Union Oil Company of California, a
California corporation ("Union Oil"), Titan Resources Holdings, Inc., a newly
formed Delaware corporation and wholly owned subsidiary of Union Oil (the
"Company"), TRH, Inc., a newly formed Delaware corporation and a wholly owned
subsidiary of the Company ("Sub"), and Titan Exploration, Inc., a Delaware
corporation ("Titan").
This Agreement is being executed and delivered simultaneously with the
execution and delivery of the Agreement and Plan of Merger dated December 13,
1999 (the "Merger Agreement") among Union Oil, the Company, Sub and Titan.
Pursuant to the Merger Agreement, Sub will be merged with and into Titan, which
will be the Surviving Corporation. All capitalized terms used and not defined
herein (as well as the terms "affiliate" and "person") have the meanings
attributable to them in the Merger Agreement. As a result of the Merger, Union
Oil will own a majority of the outstanding capital stock of the Company, and the
Company will own all of the outstanding capital stock of the Surviving
Corporation.
Titan believes that it and its stockholders will benefit from the
Merger and that the Merger is in its best interest and in the best interest of
its stockholders. Union Oil, however, is unwilling to enter into the Merger
Agreement unless Titan and the Company enter into this Agreement because Union
Oil engages in the exploration for and the development, production and marketing
of natural gas and crude oil in the United States. The businesses in which Union
Oil engages are similar to those in which Titan and its subsidiaries engage and
in which the Company and its subsidiaries, including the Surviving Corporation,
will engage following the Merger.
As the owner of a controlling interest in the Company following the
Merger, Union Oil may owe certain duties to the Company. Pursuant to a
Stockholders Agreement entered into simultaneously with the execution and
delivery of this Agreement, Union Oil will have the right to nominate certain
persons ("Designees") to serve on the board of directors of the Company
following the Merger. Certain of the Designees may be directors of or employed
by Union Oil or companies in which Union Oil has an interest, other than the
Company and its subsidiaries. These Designees will have duties to the Company
and duties to Union Oil or such other companies.
The law relating to duties that Union Oil or its Designees may owe to
the Company is not clear. The application of such law to particular
circumstances is often difficult to predict, and if a court were to hold that
Union Oil or one of its Designees breached any such duty Union Oil or such
Designee could be held liable for damages in a legal action brought on behalf of
the Company.
In order to induce Union Oil to enter into the Merger Agreement, Titan
and the Company are willing to enter into this Agreement in order to renounce,
effective upon
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consummation of the Merger, any interest or expectancy either of them or their
subsidiaries may have in the classes or categories of business opportunities
specified herein that are presented to or identified by Union Oil or any of its
Designees, as more fully described herein. As a result of this Agreement, Union
Oil may continue to conduct its business and to pursue certain business
opportunities without an obligation to offer such opportunities to the Company
or any of its subsidiaries, and any Designee may continue to discharge his or
her responsibilities as a director or employee of Union Oil or any company in
which Union Oil has an interest.
In consideration of the foregoing, the mutual covenants, rights, and
obligations set forth in this Agreement, and the benefits to be derived
herefrom, and other good and valuable consideration, the receipt and the
sufficiency of which each of the parties hereto acknowledges and confesses, the
parties hereto agree as follows:
1. Scope of Business of the Company and its Subsidiaries Following the
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Merger. The Company and Titan covenant and agree that, following consummation of
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the Merger, except with the consent of Union Oil (which it may withhold in its
sole discretion), the Company and its subsidiaries will not engage in any
business other than the E&P Business and will not pursue any business
opportunity that involves any direct or indirect ownership interest in any
properties located outside the areas onshore shown on the map attached hereto
(collectively, the "Designated Areas"). The Company and Titan hereby renounce,
effective upon consummation of the Merger, any interest or expectancy in any
business opportunity that does not consist exclusively of the E&P Business
within the Designated Areas. "E&P Business" means the oil and gas exploration,
exploitation, development and production business and includes without
limitation (a) the ownership of oil and gas property interests (including
working interests, mineral fee interests and royalty and overriding royalty
interests), (b) the ownership and operation of real and personal property used
or useful in connection with exploration for Hydrocarbons, development of
Hydrocarbon reserves upon discovery thereof and production of Hydrocarbons from
xxxxx located on oil and gas properties and (c) debt of or equity interests in
corporations, partnerships or other entities engaged in the exploration for
Hydrocarbons, the development of Hydrocarbon reserves and the production and
sale of Hydrocarbons from xxxxx located on oil and gas properties in which the
entity conducting the E&P Business owns an interest; but such term does not
include the oilfield service business. "Hydrocarbons" means oil, gas or other
liquid or gaseous hydrocarbons or other minerals produced from oil and gas
xxxxx. "Subsidiaries" means all entities controlled, directly or indirectly, by
the Company. Notwithstanding the foregoing, nothing in this Agreement shall
prohibit the Company and its subsidiaries from purchasing securities of any
class registered under Section 12 of the Securities Exchange Act of 1934
(regardless of the types or locations of businesses in which the issuer thereof
engages) if following any such purchase the Company and its subsidiaries own, in
the aggregate, less than 5% of such class.
2. Corporate Opportunities. The Company and Titan recognize that Union
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Oil and its Designees (i) participate and will continue to participate in the
E&P Business, directly and through affiliates, (ii) may have interests in,
participate with, and maintain
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seats on the boards of directors of or serve as officers or employees of other
companies engaged in the E&P Business and (iii) may develop business
opportunities for Union Oil and its affiliates and such other companies. The
Company and Titan recognize that Union Oil, its Designees and such affiliates
and other companies may be engaged in E&P Business in competition with the
Company and/or its subsidiaries. The Company and Titan (a) acknowledge and agree
that neither Union Oil, its affiliates nor its Designees nor any such company
shall be restricted or proscribed by the relationship between Union Oil and the
Company, or otherwise, from engaging in the E&P Business or any other business,
regardless of whether such business activity is in direct or indirect
competition with the business or activities of the Company and its subsidiaries,
on any basis other than that which is inconsistent with the standards set forth
in Section 3 hereof, (b) acknowledge and agree that, as long as their activities
are conducted in accordance with the standards set forth in Section 3 hereof,
neither Union Oil nor any Designee or affiliate of Union Oil nor any such other
company shall have any obligation to offer the Company or any of its
subsidiaries any business opportunity, (c) renounce any interest or expectancy
in any business opportunity pursued by Union Oil, any affiliate of Union Oil,
any Designee or any such company in accordance with the standards set forth in
Section 3 hereof and (d) waive any claim that any business opportunity pursued
by Union Oil, any affiliate of Union Oil, any Designee or any such company
constitutes a corporate opportunity of the Company or any of its subsidiaries
that should have been presented to the Company, unless such business opportunity
was pursued in violation of the standards set forth in Section 3 hereof.
3. Standards for Separate Conduct of Business. Union Oil, any
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affiliate of Union Oil, any Designee or any other company in which Union Oil has
an interest or of which a Designee is a director, officer or employee shall be
deemed to meet the standards set forth in this Section 3 if its businesses are
conducted through the use of its own personnel and assets and not with the use
of any personnel or assets of the Company. Without limiting the foregoing, such
standards will be met with respect to a business opportunity only if (a) it is
identified by or presented to personnel of Union Oil, such affiliate of Union
Oil, such Designee or such other company and developed and pursued solely
through the use of their personnel and assets (and not based on confidential
information disclosed by or on behalf of the Company in or during the course of
such Designee's relationship with the Company), and (b) it did not come to the
attention of such Designee solely in, and as a direct result of, his or her
capacity as a director of the Company; provided that (i) if such opportunity is
separately identified by Union Oil or one of its affiliates or such other
company or separately presented to Union Oil or one of its affiliates or such
other company by a person other than such Designee, Union Oil, such affiliate or
such company shall be free to pursue such opportunity even if it also came to
the Designee's attention solely as a result of and in his or her capacity as a
director of the Company and (ii) if such opportunity is presented to or
identified by a Designee other than solely as a result of and in his or her
capacity as a director of the Company, Union Oil or such affiliate or such other
company shall be free to pursue such opportunity even if it also came to the
Designee's attention as a result of and in his or her capacity as a director of
the Company. Nothing in this Agreement will allow a Designee to usurp a
corporate opportunity solely for his or her personal benefit (as opposed to
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pursuing, for the benefit of Union Oil, an affiliate or Union Oil or any such
other company, an opportunity in accordance with the standards set forth in this
Section 3).
4. Termination of Section 1. Section 1 of this Agreement will terminate
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at such time as Union Oil no longer owns, directly or indirectly, capital stock
of the Company representing at least 35% of the ordinary voting power for the
election of directors of the Company.
5. Waiver. If the Company seeks a waiver of provisions of this
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Agreement, the Company shall submit to Union Oil a written request, accompanied
with materials that provide a basis for the request and assist Union Oil in
considering the request. Union Oil shall respond to the request within five
business days of its receipt of the request, unless it determines that it
requires additional information before responding, in which case it shall notify
the Company of its request for additional information. Within five business days
of receipt of the Company's response to its request for additional information,
Union Oil shall notify the Company of its decision as to the request for a
waiver. Union Oil may withhold such waiver in its sole discretion or grant a
conditional or limited waiver, and Union Oil shall have no duty, fiduciary or
otherwise, to grant any such waiver.
4. Miscellaneous.
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This Agreement may be signed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original, and such
counterparts together shall constitute one instrument. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the date set forth above.
TITAN RESOURCES HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Vice President
UNION OIL COMPANY OF CALIFORNIA
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
Executive Vice President,
North American Energy
Operations and Chief
Financial Officer
TRH, INC.
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx
Vice President
TITAN EXPLORATION, INC.
By: /s/ Xxxx X. Xxxxxxxxx
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Xxxx X. Xxxxxxxxx
President and Chief
Executive Officer
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