EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE MERIDIAN RESOURCE CORPORATION
LOPI ACQUISITION CORP.
SHELL LOUISIANA ONSHORE PROPERTIES INC.
AND LOUISIANA ONSHORE PROPERTIES INC.
DATED MARCH 27, 1998
THIS AGREEMENT IS
SUBJECT TO BINDING ARBITRATION
TABLE OF CONTENTS
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ARTICLE I - CERTAIN DEFINITIONS..............................................2
ARTICLE II - THE MERGER
SECTION 2.1 THE MERGER.....................................6
SECTION 2.2 EFFECTIVE TIME OF THE MERGER...................7
SECTION 2.3 CERTIFICATE OF INCORPORATION...................7
SECTION 2.4 BYLAWS.........................................7
SECTION 2.5 DIRECTORS OF THE SURVIVING CORPORATION.........7
SECTION 2.6 OFFICERS OF THE SURVIVING CORPORATION..........7
SECTION 2.7 EFFECTS OF MERGER..............................7
ARTICLE III - CONVERSION OF SHARES
SECTION 3.1 EFFECT OF MERGER ON CAPITAL STOCK..............7
SECTION 3.2 EXCHANGE OF CERTIFICATES.......................8
SECTION 3.3 ADJUSTMENTS TO PREVENT DILUTION................8
SECTION 3.4 FURTHER ASSURANCES.............................9
ARTICLE IV - THE CLOSING
SECTION 4.1 CLOSING........................................9
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF TMR
SECTION 5.1 ORGANIZATION AND QUALIFICATION.................9
SECTION 5.2 SUBSIDIARIES..................................10
SECTION 5.3 CAPITALIZATION................................10
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY
APPROVALS; COMPLIANCE.........................11
SECTION 5.5 REPORTS AND FINANCIAL STATEMENTS..............13
SECTION 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE
OF UNDISCLOSED LIABILITIES....................14
SECTION 5.7 LITIGATION....................................14
SECTION 5.8 PROXY STATEMENT...............................14
SECTION 5.9 TAX MATTERS...................................15
SECTION 5.10 VOTE REQUIRED.................................15
SECTION 5.11 STATE TAKEOVER STATUTES; ABSENCE OF
SUPERMAJORITY PROVISION.......................15
SECTION 5.12 HSR EXEMPTION.................................16
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SECTION 5.13 ERISA.........................................16
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF SLOPI AND THE COMPANY
SECTION 6.1 ORGANIZATION AND QUALIFICATION................17
SECTION 6.2 SUBSIDIARIES..................................17
SECTION 6.3 CAPITALIZATION................................17
SECTION 6.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY
APPROVALS; COMPLIANCE.........................17
SECTION 6.5 FINANCIAL STATEMENTS..........................19
SECTION 6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE
OF UNDISCLOSED LIABILITIES....................19
SECTION 6.7 LITIGATION....................................20
SECTION 6.8 INFORMATION IN PROXY STATEMENT................20
SECTION 6.9 TAX MATTERS...................................20
SECTION 6.10 VOTE REQUIRED. ..............................21
SECTION 6.11 EMPLOYEE MATTERS. ...........................21
SECTION 6.12 MATERIAL CONTRACTS AND AGREEMENTS.............21
SECTION 6.13 INVESTMENT INTENT.............................21
ARTICLE VII - REPRESENTATIONS AND WARRANTIES REGARDING TMR SUB
SECTION 7.1 ORGANIZATION AND STANDING.....................22
SECTION 7.2 CAPITAL STRUCTURE.............................22
SECTION 7.3 AUTHORITY; NON-CONTRAVENTION..................22
ARTICLE VIII - CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 8.1 ORDINARY COURSE OF BUSINESS...................23
SECTION 8.2 DIVIDENDS AND OTHER PAYMENTS..................23
SECTION 8.3 ISSUANCE OF SECURITIES........................24
SECTION 8.4 CHARTER DOCUMENTS.............................24
SECTION 8.5 NO ACQUISITIONS...............................24
SECTION 8.6 NO DISPOSITIONS...............................24
SECTION 8.7 INDEBTEDNESS..................................25
SECTION 8.8 COMPENSATION, BENEFITS. .....................25
SECTION 8.9 TAX-FREE STATUS...............................25
SECTION 8.10 INSURANCE.....................................26
SECTION 8.11 COOPERATION, NOTIFICATION.....................26
SECTION 8.12 THIRD-PARTY CONSENTS..........................26
SECTION 8.13 PERMITS.......................................26
SECTION 8.14 AFFILIATE LIABILITIES.........................26
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ARTICLE IX - ADDITIONAL AGREEMENTS
SECTION 9.1 ACCESS TO INFORMATION.........................27
SECTION 9.2 TMR PROXY STATEMENT...........................27
SECTION 9.3 REGULATORY MATTERS............................28
SECTION 9.4 APPROVAL OF TMR STOCKHOLDERS..................29
SECTION 9.5 DISCLOSURE SCHEDULES; PROPRIETARY DATA........29
SECTION 9.6 PUBLIC ANNOUNCEMENTS..........................29
SECTION 9.7 NO WITHDRAWAL OF RECOMMENDATION...............30
SECTION 9.8 EXPENSES......................................30
SECTION 9.9 COVENANT TO SATISFY CONDITIONS................30
SECTION 9.10 TAX MATTERS...................................30
SECTION 9.11 WITHDRAWAL FEE................................35
SECTION 9.12 TRANSFER OF RECORD TITLE TO PROPERTIES........35
ARTICLE X - CONDITIONS
SECTION 10.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER....................................35
SECTION 10.2 CONDITIONS TO OBLIGATION OF TMR TO EFFECT
MERGER........................................36
SECTION 10.3 CONDITIONS TO OBLIGATION OF SLOPI AND
THE COMPANY TO EFFECT THE MERGER..............37
ARTICLE XI - TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION...................................38
SECTION 11.2 EFFECT OF TERMINATION.........................39
SECTION 11.3 AMENDMENT.....................................39
SECTION 11.4 WAIVER........................................40
ARTICLE XII - GENERAL PROVISIONS
SECTION 12.1 NON-SURVIVAL; INDEMNITIES.....................40
SECTION 12.2 NO BROKERS....................................42
SECTION 12.3 NOTICES.......................................42
SECTION 12.4 NO PUNITIVE DAMAGES...........................44
SECTION 12.5 BINDING ARBITRATION...........................44
SECTION 12.6 DTPA WAIVER...................................46
SECTION 12.7 MISCELLANEOUS.................................46
SECTION 12.8 INTERPRETATION................................46
SECTION 12.9 COUNTERPARTS; EFFECT..........................46
SECTION 12.10 PARTIES IN INTEREST...........................46
SECTION 12.11 SPECIFIC PERFORMANCE..........................47
SECTION 12.12 FURTHER ASSURANCES............................47
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SECTION 12.13 CONTINGENT CONSIDERATION. ...................47
SECTION 12.14 GAS IMBALANCES................................47
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EXHIBITS:
A - Directors of Surviving Corporation
B - Officers of Surviving Corporation
C - Basis of Conversion and Conversion Rights
D - Company Financial Statements
E - Form of Certificate of Designation for Series A Preferred
F - Form of Stock Rights and Restriction Agreement
G - Form of Registration Rights Agreement
H - Contingent Consideration
I - Preliminary TMR Financial Statements
SCHEDULES:
I - TMR Disclosure Schedule
II - Company Disclosure Schedule
III - True-Up Accounting Procedures and Principles
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 27, 1998 (this
"Agreement"), by and among The Meridian Resource Corporation, a corporation
formed under the laws of the State of Texas ("TMR"), LOPI Acquisition Corp, a
corporation formed under the laws of the State of Delaware and a wholly-owned
subsidiary of TMR ("TMR Sub"), Shell Louisiana Onshore Properties Inc., a
corporation formed under the laws of the State of Delaware ("SLOPI"), and
Louisiana Onshore Properties Inc. (the "Company"), a corporation formed under
the laws of the State of Delaware and a wholly-owned subsidiary of SLOPI.
WHEREAS, the respective Boards of Directors of TMR, TMR Sub, SLOPI and the
Company have approved, and TMR and the Company have declared advisable and in
the best interests of their stockholders, the merger of TMR Sub with and into
the Company (the "Merger"), pursuant to the terms and conditions set forth in
this Agreement.
WHEREAS, pursuant to the Merger, each issued and outstanding share of
common stock, par value $1.00 per share, of the Company ("Company Common Stock")
not owned directly or indirectly by TMR or the Company, will be converted into
the right to receive, on the basis herein stated (i) shares of common stock, par
value $0.01 per share, of TMR ("TMR Common Stock") and (ii) shares of the Series
A Cumulative Convertible Preferred Stock, par value $1.00 per share, of TMR (the
"TMR Series A Preferred");
WHEREAS, for federal income or tax purposes it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, TMR, TMR Sub, SLOPI and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained in this Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall have the meaning set forth in the Stock Rights and
Restriction Agreement.
"Asset Conveyance Agreements" shall have the meaning set forth in Section
9.12.
"Cairn" shall have the meaning set forth in Section 5.5(a).
"Certificate of Designation" shall mean the Statement of Designation for
the TMR Series A Preferred which is set forth as Exhibit E.
"Certificate of Merger" shall have the meaning set forth in Section 2.2.
"Chase" shall mean Chase Securities Corporation, which is acting as
financial advisor to TMR.
"Choctaw" shall mean Choctaw Pipeline Company, a Delaware corporation,
which is an Affiliate of the Company and SLOPI.
"Chase Opinion" shall mean the opinion letter dated March 27, 1998 from
Chase to TMR's Board of Directors with respect to the fairness, from a financial
point of view, of the Merger and the related transactions to TMR.
"Closing" and "Closing Date" shall have the meaning set forth in Section
4.1.
"Code" shall have the meaning set forth in the third Whereas clause of
this Agreement.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company.
"Company Disclosure Schedule" shall have the meaning set forth in the
introductory sentence of Article VI.
"Company Financial Statements" shall have the meaning set forth in Section
6.5(a).
"Company Material Adverse Change" or "Company Material Adverse Effect"
shall mean the cumulative effect of all changes or effects that are, or, so far
as can reasonably be determined, are likely to be materially adverse to the
business, operations, properties, assets, condition (financial
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or otherwise), or results of operations of the Company (with cumulative changes
or effects greater than $25,000,000 being material) or on the consummation of
the transactions contemplated by this Agreement; provided, however, that the
terms "Company Material Adverse Change" and "Company Material Adverse Effect"
shall not include normal production decline of oil and gas properties, economic,
political or legal changes affecting the oil and gas industry as a whole,
general changes in oil or gas prices or results of drilling of any undeveloped
or unevaluated leaseholds or horizons now owned or hereafter acquired.
"Company Required Consents" shall mean all required third-party consents
or other approvals not yet obtained as set forth in the Company Disclosure
Schedule.
"Company Required Statutory Approvals" shall have the meaning set forth in
Section 6.4(c).
"Confidentiality Agreement" shall have the meaning set forth in Section
9.1(b).
"Conversion Rights" shall have the meaning set forth in Section 3.1(b) and
in Exhibit C.
"Current Litigation Claims" shall have the meaning set forth in Section
12.1(c)(i).
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Disclosure Schedules" shall mean the TMR Disclosure Schedule and the
Company Disclosure Schedule, collectively.
"Effective Time" shall have the meaning set forth in Section 2.2. The
Effective Time will be on, or as soon as practicable after, the Closing Date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fee" shall have the meaning set forth in Section 9.11.
"Fully Diluted Shares" shall mean, at any time, the sum of (i) the shares
of TMR Common Stock then outstanding plus (ii) the number of shares of TMR
Common Stock reserved for issuance or issuable in connection with the exercise,
exchange or conversion of options, warrants or securities of TMR then
outstanding which are exercisable or exchangeable for shares of TMR Common Stock
or are convertible into shares of TMR Common Stock (including, without
limitation, the TMR Series A Preferred).
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean any court, governmental or regulatory
body (including a stock exchange or other self-regulatory body) or authority,
domestic or foreign.
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"XXX Xxx" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indemnification Agreement" shall have the meaning set forth in Section
9.1(c).
"Joint Venture" shall mean, with respect to any person, any corporation or
other entity (including partnerships and other business associations and joint
ventures) in which such person or one or more of its Subsidiaries owns an equity
interest that is less than a majority of any class of the outstanding voting
securities or equity, other than equity interests held for passive investment
purposes that are less than 5% of any class of the outstanding voting securities
or equity; provided, however, that the term "Joint Venture" shall not include
operating agreements, exploration alliances or other similar arrangements
relating to or associated with exploration and development of Oil and Gas
Interests not involving the sharing of equity in a legal entity.
"LOPI Properties" shall mean the properties and assets described in the
Asset Conveyance Agreements.
"Proxy Statement" shall have the meaning set forth in Section 5.8.
"Registration Rights Agreement" shall mean the form of agreement set forth
in Exhibit G.
"Representatives" shall have the meaning set forth in Section 9.1.
"SEC" shall mean the Securities and Exchange Commission.
"Secretary of State" shall have the meaning set forth in Section 2.2.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Issuance" shall have the meaning set forth in Section 5.4(a).
"Shell" shall mean Shell Oil Company, a Delaware corporation which is an
Affiliate of the Company and SLOPI.
"Shell Group" shall have the meaning set forth in Section 9.10(a)(3).
"SOVI" shall mean Shell Onshore Ventures Inc., a Delaware corporation,
which is an Affiliate of the Company and SLOPI.
"Stock Rights and Restriction Agreement" shall mean the form of agreement
set forth in Exhibit F.
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"Subsidiary" shall mean, with respect to any person, any corporation or
other entity (including partnerships and other business associations) in which a
person directly or indirectly owns at least a majority of the outstanding voting
securities or other equity interests having the power, under ordinary
circumstances, to elect a majority of the directors, or otherwise to direct the
management and policies, of such corporation or other entity. Without limiting
the foregoing, references to a Subsidiary or Subsidiaries shall include, without
limitation, Cairn as a subsidiary of TMR.
"Surviving Corporation" shall have the meaning set forth in Section 2.1.
"SWEPI" shall mean Shell Western E&P Inc., a Delaware corporation which is
an Affiliate of the Company and SLOPI.
"Tax Return" shall mean any report, return or other information required
to be supplied to a governmental entity with respect to Taxes.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts, capital stock,
production, business and occupation disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes, charges, fees, levies or
other assessments, and any expenses incurred in connection with the
determination, settlement or litigation of any liability for any of the
foregoing.
"Tax Accrual" shall have the meaning set forth in Section 9.10(a)(3).
"Tax Indemnified Party" shall have the meaning set forth in Section
9.10(f).
"Tax Indemnifying Party" shall have the meaning set forth in Section
9.10(f).
"Tax Items" shall have the meaning set forth in Section 9.10(a)(1).
"Tax Losses" shall have the meaning set forth in Section 9.10(d).
"TBCA" shall mean the Texas Business Corporation Act, as amended from time
to time.
"Termination Date" shall have the meaning set forth in Section 11.1(b).
"TMR Common Stock" shall mean the common stock, par value $0.01 per share,
of TMR.
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"TMR Disclosure Schedule" shall have the meaning set forth in the
introductory sentence of Article V.
"TMR Financial Statements" shall have the meaning set forth in Section
5.5(d).
"TMR Material Adverse Change" or "TMR Material Adverse Effect" shall mean
the cumulative effect of all changes or effects that are or, so far as can
reasonably be determined, are likely to be materially adverse to the business,
operations, properties, assets, condition (financial or otherwise), or results
of operations of TMR and its Subsidiaries taken as a whole (with cumulative
changes or effects greater than $25,000,000 being material) or on the
consummation of the transactions contemplated by this Agreement; provided,
however, that the terms "TMR Material Adverse Change" and "TMR Material Adverse
Effect" shall not include normal production decline of oil and gas properties,
economic, political or legal changes affecting the oil and gas industry as a
whole, general changes in oil or gas prices or results of drilling of any
undeveloped or unevaluated leaseholds or horizons now owned or hereafter
acquired.
"TMR Preferred Stock" shall have the meaning set forth in Section 5.3(a).
"TMR Required Consents" shall mean all required third-party consents or
other approvals set forth in the TMR Disclosure Schedule.
"TMR SEC Reports" shall have the meaning set forth in Section 5.5(b).
"TMR Series A Preferred" shall have the meaning set forth in the second
Whereas clause of this Agreement.
"TMR Special Meeting" shall have the meaning set forth in Section 9.4(a).
"TMR Stockholders' Approval" shall have the meaning set forth in Section
5.10.
"Violation" shall have the meaning set forth in Section 5.4(b).
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, TMR Sub shall be
merged with and into the Company at the Effective Time (as hereinafter defined).
Following the Merger, the separate corporate existence of TMR Sub shall
thereupon cease, and the Company shall continue as the surviving corporation
(the "Surviving Corporation") and shall succeed to and assume all the rights and
obligations of TMR Sub in accordance with the DGCL.
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SECTION 2.2 EFFECTIVE TIME OF THE MERGER. The parties acknowledge that it
is their mutual desire and intent to consummate the Merger as soon as
practicable after the date hereof. Accordingly, the parties shall use all
reasonable efforts to bring about the satisfaction as soon as practicable of all
the conditions specified in Article X and otherwise to effect the consummation
of the Merger as soon as practicable. Subject to the terms hereof, as soon as
practicable after all of the conditions set forth in Article X shall have been
satisfied or waived, the parties hereto will (i) file a certificate of merger
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and (ii) make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time, on, or as soon
as practicable after, the Closing Date, as the Certificate of Merger is duly
filed with the Secretary of State of Delaware ("Secretary of State") or at such
other time, on, or as soon as practicable after, the Closing Date, as TMR and
the Company shall agree shall be specified in the Certificate of Merger (the
"Effective Time").
SECTION 2.3 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of the Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation following the
Effective Time, until duly amended.
SECTION 2.4 BYLAWS. The Bylaws of TMR Sub as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation following
the Effective Time, until duly amended.
SECTION 2.5 DIRECTORS OF THE SURVIVING CORPORATION. Effective as of the
Effective Time, (i) the then serving directors of the Company shall resign and
(ii) the individuals listed as such in Exhibit A attached hereto shall be the
directors of the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as
the case may be.
SECTION 2.6 OFFICERS OF THE SURVIVING CORPORATION. Effective as of the
Effective Time, (i) the then serving officers of the Company shall resign and
(ii) the individuals listed as such in Exhibit B shall be the officers of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
SECTION 2.7 EFFECTS OF MERGER. The Merger shall have the effects set forth
in the DGCL, including Section 259 thereof.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 EFFECT OF MERGER ON CAPITAL STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of the Company, TMR or TMR Sub:
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(a) CANCELLATION OF CERTAIN COMPANY COMMON STOCK. Each share of Company
Common Stock, if any, that is held in the treasury of the Company shall be
canceled and cease to exist and no capital stock of TMR or other consideration
shall be delivered in exchange therefor.
(b) CONVERSION OF COMPANY COMMON STOCK. Each issued and outstanding share
of Company Common Stock (other than shares of Company Common Stock canceled
pursuant to Section 3.1(a)) shall be converted into duly authorized, validly
issued, fully paid and nonassessable shares of (i) TMR Common Stock and (ii) TMR
Series A Preferred, on the bases and in the manner specified in Exhibit C
(collectively, the "Conversion Rights"). Upon such conversion, all such shares
of Company Common Stock shall be canceled and cease to exist, and the holder of
a certificate representing such shares shall cease to have any rights with
respect thereto, except the right to receive the number of whole shares of TMR
Common Stock and TMR Series A Preferred to be issued in consideration therefor
upon the surrender of such certificate in accordance with Section 3.2 and
Exhibit C.
(c) CONVERSION OF COMMON STOCK OF TMR SUB. Each issued and outstanding
share of common stock, par value $0.01 per share, of TMR Sub shall be converted
into one fully paid and nonassessable share of common stock, par value $1.00 per
share, of the Surviving Corporation.
SECTION 3.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE. At the Effective Time, TMR and SLOPI shall exchange and
deliver to each other certificates for all shares of Company Common Stock, TMR
Common Stock and TMR Series A Preferred.
(b) NO FRACTIONAL SECURITIES. No fractional share interests will be
created because the formula for the Conversion Rights specifies that all share
calculations shall be rounded up to the nearest whole share of TMR Common Stock
or TMR Series A Preferred.
(c) CLOSING OF TRANSFER BOOKS. From and after the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of any
Company Common Stock shall thereafter be made.
SECTION 3.3 ADJUSTMENTS TO PREVENT DILUTION. Subject to the requirements
of Article VIII hereof, in the event that prior to the Effective Time there is a
change in the number of issued and outstanding shares of TMR Common Stock or
Company Common Stock, as the case may be, as a result of a reclassification,
subdivision, recapitalization, combination, exchange, stock split (including
reverse stock split), stock dividend or distribution or other similar
transaction, the Conversion Rights shall be equitably adjusted to eliminate the
effects of such event, and all references to the Conversion Rights in this
Agreement shall be deemed to be to the Conversion Rights as so adjusted.
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SECTION 3.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or TMR Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or TMR Sub, any other actions and things to vest,
perfect or conform of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
ARTICLE IV
THE CLOSING
SECTION 4.1 CLOSING. The closing of the Merger (the "Closing") shall take
place at the offices of Bracewell & Xxxxxxxxx, L.L.P., 000 Xxxxxxxxx Xxxxxx,
Xxxxxxx, Xxxxx 00000 at 10:00 a.m., local time, on the second business day
immediately following the date on which the last of the conditions set forth in
Article X is fulfilled or waived, or at such other time and date and place as
TMR and the Company shall mutually agree (the "Closing Date").
At the Closing, TMR and SLOPI shall execute and deliver to each other: (a)
the Stock Rights and Restriction Agreement, (b) the Registration Rights
Agreement and (c) the other closing documents referred to in Sections 10.1, 10.2
and 10.3.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TMR
Except as set forth in the TMR Disclosure Schedule attached hereto as
Exhibit D (the "TMR Disclosure Schedule"), TMR represents and warrants to SLOPI
and the Company as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. TMR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, and each of TMR's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each of TMR and its Subsidiaries has all requisite corporate
power and authority, and is duly authorized by all necessary regulatory
approvals and orders, to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary, other than such failures which, individually or in the
aggregate, will not have a TMR Material Adverse Effect.
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SECTION 5.2 SUBSIDIARIES.
(a) Section 5.2 of the TMR Disclosure Schedule sets forth a list as of the
date hereof of all Subsidiaries and Joint Ventures of TMR, including the name of
each such entity and the state or jurisdiction of its formation.
(b) All of the issued and outstanding shares of capital stock of each
Subsidiary of TMR are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned directly or indirectly by TMR free and clear of
any liens, claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever, and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating any such Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
SECTION 5.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of TMR consists of
100,000,000 shares of TMR Common Stock and 25,000,000 shares of preferred stock,
par value $1.00 per share ("TMR Preferred Stock").
(b) As of the close of business on January 30, 1998, 33,449,469 shares of
TMR Common Stock and no shares of TMR Preferred Stock were issued and
outstanding. As of the close of business on January 30, 1998, 46,792 shares of
TMR Common Stock were held by TMR in its treasury.
(c) All of the issued and outstanding shares of the capital stock of TMR
are validly issued, fully paid, nonassessable and free of preemptive rights.
(d) At the close of business on January 30, 1998, (i) 1,964,687 shares of
TMR Common Stock were reserved for issuance pursuant to outstanding options and
awards under TMR's employee and director stock plans as described in the TMR
Disclosure Schedule, (ii) 2,105,484 shares of TMR Common Stock were reserved for
issuance upon exercise of TMR's outstanding warrants as described in the TMR
Disclosure Schedule, and (iii) 3,099,612 shares of TMR Common Stock were
reserved for future awards under TMR's 1995 Long Term Incentive Plan and 1997
Long Term Incentive Plan. A detailed schedule of all such options, warrants and
awards is included in the TMR Disclosure Schedule, showing all dates of grant,
dates of expiration, and exercise terms, conditions and prices.
(e) The form of Certificate of Designation for the TMR Series A Preferred
has been approved by TMR's Board of Directors.
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(f) There are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, to which TMR or
any of its Subsidiaries is a party or by which any of them is bound obligating
TMR or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of TMR or other voting
securities of TMR obligating TMR to grant, extend or enter into any such
agreement or commitment.
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
(a) AUTHORITY.
(i) The Board of Directors of TMR has approved this Agreement, TMR
has all requisite power and authority to enter into this Agreement and,
subject to the approval of the issuance of shares of TMR Common Stock
pursuant to the Merger and pursuant to the terms of the TMR Series A
Preferred and the Stock Rights and Restriction Agreement (collectively,
the "Share Issuance") by the stockholders of TMR, the filing of the
Certificate of Designations with the Secretary of State of Texas pursuant
to the TBCA and TMR Required Statutory Approvals, to consummate the Merger
and the other transactions contemplated hereby.
(ii) The execution and delivery of this Agreement and the
consummation by TMR of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of TMR, subject
to approval of the Share Issuance by the stockholders of TMR.
(iii) This Agreement has been duly and validly executed and
delivered by TMR and, assuming the due authorization, execution and
delivery hereof by SLOPI and the Company, constitutes a valid and binding
obligation of TMR, enforceable against TMR in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceedings may be
brought.
(iv) All directors of TMR have advised the Company and SLOPI that
they intend to vote all their shares of TMR Common Stock in favor of the
Share Issuance.
(b) NON-CONTRAVENTION. The execution and delivery of this Agreement by TMR
do not, and the consummation of the transactions contemplated hereby and thereby
will not, violate, conflict with or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required by, or
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result in a right of termination, cancellation or acceleration of any obligation
or the loss of a material benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets
(any such violation, conflict, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") of, TMR or any of
its Subsidiaries or, to the knowledge of TMR, its Joint Ventures, under any
provisions of:
(i) the articles or certificates of incorporation, bylaws or similar
governing documents of TMR or any of its Subsidiaries or Joint Ventures;
(ii) subject to obtaining the TMR Required Statutory Approvals, any
statute, law, ordinance, rule, regulation judgment, decree, order or
injunction of any Governmental Authority applicable to TMR or any of its
Subsidiaries or Joint Ventures or any of their respective properties or
assets or business as presently conducted; or
(iii) subject to obtaining the TMR Required Consents, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement
of any kind to which TMR or any of its Subsidiaries or Joint Ventures is
now a party or by which it or any of its properties or assets may be bound
or affected;
excluding from the foregoing such Violations as would not, in the aggregate,
have a TMR Material Adverse Effect.
(c) STATUTORY APPROVALS. Except for (i) the filing with the SEC of (A) the
Proxy Statement and (B) such reports under Section 13(a) of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby, (ii) the filing of the Certificate of Merger with the
Delaware Secretary of State with respect to the Merger as provided in the DGCL
(iii) the filing of the Certificate of Designation with the Texas Secretary of
State as provided under the TBCA, and (iv) the filing of appropriate documents
with the relevant authorities in other states in which TMR is qualified to do
business, no declaration, filing, or registration with, or notice to or
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by TMR or the consummation by
TMR of the transactions contemplated hereby, the failure to obtain, make or give
which would have a TMR Material Adverse Effect (the "TMR Required Statutory
Approvals"), it being understood that references in this Agreement to
"obtaining" such TMR Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice, obtaining such
consents and approvals; and having such waiting periods expire, as are necessary
to avoid a violation of law.
(d) COMPLIANCE.
(i) To the knowledge of TMR's executive officers, neither TMR nor
any of its Subsidiaries nor, to the knowledge of TMR, any of its Joint
Ventures is in violation of or
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under investigation with respect to, or has been given notice or been
charged with any violation of any law, statute, order, rule, regulation,
ordinance or judgment (including without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for violations that do not have, and would not have, a TMR Material
Adverse Effect.
(ii) TMR, its Subsidiaries and, to the knowledge of TMR, its Joint
Ventures have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
respective business as currently conducted, except those the failure to
obtain which would not have a TMR Material Adverse Effect.
SECTION 5.5 REPORTS AND FINANCIAL STATEMENTS.
(a) Since December 31, 1993, the filings required to be made by TMR and
Cairn Energy USA, Inc. ("Cairn") under the Securities Act or the Exchange Act
have been filed with the SEC as required by each such law or regulation
including all forms, statements, reports, agreements and all documents,
exhibits, amendments and supplements appertaining thereto, and TMR have complied
in all material respects with all applicable requirements of the appropriate act
and the rules and regulations thereunder.
(b) TMR has made available to SLOPI and the Company a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by TMR and/or Cairn with the SEC since December 31, 1993 (such
documents of TMR and Cairn as filed, and any and all amendments thereto being
collectively referred to as the "TMR SEC Reports").
(c) The TMR SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed, and all forms,
reports or other documents filed by TMR with the SEC after the date hereof, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were or will
be made, not misleading.
(d) The audited consolidated financial statements and unaudited interim
financial statements of TMR included in the TMR SEC Reports have been prepared,
and the audited consolidated financial statements and unaudited interim
financial statements of TMR included in all forms, reports, or other documents
filed by TMR with the SEC after the date hereof will be prepared, (collectively,
the "TMR Financial Statements") in accordance with GAAP applied on a consistent
basis (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q) and fairly
present, or will fairly present, in all material respects the financial position
of TMR as of the respective dates thereof or the results of operations and cash
flows for the respective periods then ended, as the case may be, subject, in the
case of the unaudited interim financial statements, to normal, recurring audit
adjustments.
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(e) True, accurate and complete copies of the Articles of Incorporation
and Bylaws of TMR, as in effect on the date hereof, have been delivered to the
Company.
SECTION 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE OF UNDISCLOSED
LIABILITIES.
(a) Except as set forth in the TMR SEC Reports or as otherwise expressly
permitted by this Agreement, from December 31, 1996 through the date hereof TMR
and each of its Subsidiaries has conducted its business only in the ordinary
course of business consistent with past practice and there has not been (i) any
declaration, setting aside or payment of any dividend (whether in cash, stock or
property) with respect to any of TMR's capital stock, (ii) (A) any granting by
TMR or any of its Subsidiaries to any executive officer of TMR or any of its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of December 31, 1996, (B) any granting by TMR or any of
its Subsidiaries to any such executive officer of any increase in severance or
termination pay, except as was required under employment, severance or
termination agreements in effect as of December 31, 1996, or (C) any entry by
TMR or any of its Subsidiaries into any employment, severance or termination
agreement with any such executive officer, (iii) any damage, destruction or
loss, whether or not covered by insurance, that would have a TMR Material
Adverse Effect or (iv) the occurrence or existence of any other fact or
condition that would have a TMR Material Adverse Effect.
(b) Neither TMR nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies (i) that are accrued or
reserved against in the preliminary consolidated financial statements of TMR or
reflected in the notes thereto as of and for the year ended December 31, 1997,
copies of which are attached as Exhibit I, (ii) that were incurred after
December 31, 1997 in the ordinary course of business and would not have a TMR
Material Adverse Effect, or (iii) that are described in Section 5.6 of the TMR
Disclosure Schedule.
SECTION 5.7 LITIGATION. There are no claims, suits, actions or
proceedings, pending or, to the knowledge of the executive officers of TMR,
threatened, nor are there, to the knowledge of the executive officers of TMR,
any investigations or reviews pending or threatened against, relating to or
affecting TMR or any of its Subsidiaries or Joint Ventures, or judgments,
decrees, injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable to
TMR or any of its Subsidiaries or Joint Ventures, that would have a TMR Material
Adverse Effect.
SECTION 5.8 PROXY STATEMENT. None of the information supplied or to be
supplied by or on behalf of TMR for inclusion or incorporation by reference in
the proxy statement, at the date mailed to such TMR's stockholders and, as the
same may be amended or supplemented, at the time of the meeting, in definitive
form relating to the meeting of the stockholders of TMR to be held in
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connection with the Share Issuance (the "Proxy Statement"), will contain any
untrue statement of a material fact or omit to state any material fact with
respect to TMR or its Subsidiaries necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 5.9 TAX MATTERS.
(a) TMR and each of its Subsidiaries have filed (i) within the time and in
the manner prescribed by law, all required Tax Returns calculated on or with
reference to income, profits, earnings or gross receipts and all other Tax
Returns required to be filed that would report a material amount of Tax, and
(ii) paid all Taxes due and payable within the time and in the manner prescribed
by law except for those being contested in good faith and for which adequate
reserves have been established.
(b) As of the date hereof there are no claims, assessments, audits or
administrative or court proceedings pending against TMR or any of its
Subsidiaries for any alleged deficiency in Tax, and none of TMR or any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(c) TMR has established adequate accruals for Taxes and for any liability
for deferred Taxes in the TMR Financial Statements in accordance with GAAP.
SECTION 5.10 VOTE REQUIRED. The approval of the Share Issuance by the
affirmative vote of holders of a majority of the shares of TMR Common Stock
entitled to vote on such matter at the TMR Special Meeting (the "TMR
Stockholders' Approval") is the only vote of the holders of any class or series
of the capital stock of TMR required to approve this Agreement, the Merger and
the other transactions contemplated hereby.
SECTION 5.11 STATE TAKEOVER STATUTES; ABSENCE OF SUPERMAJORITY PROVISION.
TMR has taken all action to assure that no state takeover statute or similar
statute or regulation, shall apply to the Merger or any of the other
transactions contemplated hereby. Except for TMR Stockholders' Approval, no
other stockholder action on the part of TMR is required for approval of the
Merger, this Agreement and the transactions contemplated hereby. No provisions
of TMR's Articles of Incorporation or By-laws or other governing instruments of
its Subsidiaries or the terms of any rights plan or other takeover defense
mechanism of TMR would, directly or indirectly, restrict or impair the ability
of the TMR or the Company to consummate the Merger or the ability of any party
to consummate any of the other transactions contemplated herein or in any of the
documents attached hereto; nor will any such provisions restrict or impair the
ability of SLOPI or any Affiliate of Shell to exercise any rights to vote or
otherwise exercise any other rights of a stockholder generally, in all cases as
to any and all securities acquired pursuant to this Agreement or any of the
other transactions contemplated herein or in any of the documents attached
hereto. The Company has taken action to
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assure that the provisions of Article 13.03 of the TBCA will not apply to the
acquisition of securities acquired pursuant to this Agreement or any of the
other transactions contemplated herein or in any of the documents attached
hereto. In addition, the provisions of Article 8 of the Articles of
Incorporation of TMR will not apply to securities acquired pursuant to this
Agreement or any of the other transactions contemplated herein or in any of the
documents attached hereto.
SECTION 5.12 HSR EXEMPTION. The assets of TMR that do not fall under the
exemption from the requirements of the HSR Act specified in 16 CFR Ch. 1 ss.
802.3 (Acquisitions of carbon-based mineral reserves) are less than $15 million.
SECTION 5.13 ERISA.
(a) With respect to all employee benefit, welfare, retirement, pension and
other similar plans, TMR and its Subsidiaries have complied with all
requirements of the Employee Retirement Income Security Act and of the Code, and
all rules and regulations thereunder, except to the extent that any and all such
noncompliance would not result in any liability or liabilities to TMR or its
Subsidiaries aggregating more than $1,000,000.
(b) Except as disclosed on Section 5.13(b) of the TMR Disclosure Schedule,
TMR and its Subsidiaries have not established, and do not maintain, any
post-retirement benefits for their employees, including but not limited to
post-retirement life insurance or post-retirement medical.
(c) The agreements listed in Section 5.13(c) of the TMR Disclosure
Schedule constitute all agreements or arrangements of TMR or its Subsidiaries in
effect on the date hereof that provide for the payment of income or the
provisions of benefits (including vesting, entitlement, receipt, creation or
transfer of any rights, privileges, income or title to property or beneficial
ownership) to any employees of TMR as a result of a change of control. Except as
set forth in Section 5.13(c) of the TMR Disclosure Schedule, there is no
acceleration of payments or vesting nor any increase in benefits that would
result from the Merger, nor is there any forfeiture provision thereof that will
be altered by the Merger.
(d) Prior to the date of this Agreement, neither TMR nor any of its
Subsidiaries has made any representation to its employees as to employment
opportunities with SLOPI or benefits available to them under SLOPI employee
benefit plans.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SLOPI AND THE COMPANY
Except as set forth in the Company Disclosure Schedule attached hereto as
Schedule II (the "Company Disclosure Schedule"), SLOPI and the Company jointly
and severally represent and warrant to TMR as follows:
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SECTION 6.1 ORGANIZATION AND QUALIFICATION. Each of SLOPI and the Company
is a corporation duly organized, validly existing and in good standing, under
the laws of the State of Delaware. The Company has all requisite corporate power
and authority, and is duly authorized by all necessary regulators approvals and
orders, to own, lease and operate its assets and properties and to carry on its
business as it is now being conduced, and is duly qualified and in good standing
to do business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary, other than such failure which, individually or in the aggregate, will
not have a Company Material Adverse Effect.
SECTION 6.2 SUBSIDIARIES. The Company has no Subsidiaries or Joint
Ventures.
SECTION 6.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 3,000 shares of Company Common Stock and no shares of preferred
stock.
(b) As of the close of business on February 28, 1998, 1,000 shares of
Company Common Stock were issued and outstanding. As of the close of business on
February 28, 1998, no shares of Company Common Stock were held by the Company in
its treasury.
(c) All of the issued and outstanding shares of the capital stock of the
Company are validly issued, fully paid, nonassessable and free of preemptive
rights.
(d) There are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or obligating the Company to grant,
extend or enter into any such agreement or commitment.
SECTION 6.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE.
(a) AUTHORITY.
(i) The Board of Directors of the Company has declared the Merger
fair to and advisable and in the best interests of SLOPI, as the sole
stockholder of the Company. The Company and SLOPI have all requisite power
and authority to enter into this Agreement and, subject to the Company
Required Statutory Approvals, to consummate the transactions contemplated
hereby.
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(ii) The execution and delivery of this Agreement and the
consummation by SLOPI and the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of SLOPI and the Company.
(iii) This Agreement has been duly and validly executed and
delivered by SLOPI and the Company and, assuming the due authorization
execution and delivery hereof by TMR and TMR Sub, constitutes the valid
and binding obligation of SLOPI and the Company, enforceable against SLOPI
and the Company in accordance with its terms, except as would be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies,
including specific performance, may be subject to the discretion of any
court before which any proceeding therefor may be brought.
(b) NON-CONTRAVENTION. The execution and delivery of this Agreement by
SLOPI and the Company do not, and the consummation of the transactions
contemplated hereby and thereby will not, result in any Violation by SLOPI or
the Company under any provisions of:
(i) the certificate of incorporation, bylaws or similar governing
documents of SLOPI or the Company;
(ii) subject to obtaining the Company Required Statutory Approvals,
any statute, law, ordinance, rule, regulation judgment, decree, order or
injunction of any Governmental Authority applicable to the Company or any
of its properties or assets or business as previously conducted; or
(iii) subject to obtaining the Company Required Consents, any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement
of any kind to which the Company is now a party or by which it or any of
its properties or assets may be bound or affected;
excluding from the forgoing clauses such Violations as would not, in the
aggregate, reasonably likely have a Company Material Adverse Effect.
(c) STATUTORY APPROVALS. Except for (i) the filing by SLOPI with the SEC
of such reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated hereby and (ii) the filing of
the Certificate of Merger with the Delaware Secretary of State with respect to
the Merger as provided in the DGCL and appropriate documents with the relevant
authorities in other states in which the Company is qualified to do business, no
declaration, filing or registration with, or notice to or authorization, consent
or approval of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, the failure to obtain, make or give which
would reasonably likely have a Company Material Adverse Effect (the "Company
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Required Statutory Approvals"), it being understood that references in this
Agreement to "obtaining" such Company Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such notice;
obtaining such consents or approvals; and having such waiting periods expires as
are necessary to avoid a violation of law.
(d) COMPLIANCE.
(i) To the knowledge of the Company's executive officers, the
Company is not in violation of or under investigation with respect to, or
has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or
regulation) of any Governmental Authority, except for violations that do
not have, and, would not reasonably likely have, a Company Material
Adverse Effect.
(ii) The Company and/or its Affiliates have all permits, licenses,
franchises and other governmental authorizations, consents and approvals
necessary, to conduct the business of the Company as currently conducted,
except those the failure to obtain which would not reasonably likely have
a Company Material Adverse Effect.
SECTION 6.5 FINANCIAL STATEMENTS.
(a) The Company's unaudited statement of revenue and direct operating
expenses is attached as Exhibit D (the "Company Financial Statements"). The
Company Financial Statements will be audited before the preliminary Proxy
Statement is filed with the SEC. The Company Financial Statements fairly present
the revenues and direct lease operating expenses of the oil and gas properties
now owned by the Company for the years ended December 31, 1997, 1996 and 1995.
The Company Financial Statements do not include any balance sheets, income
statements, or statements of cash flows.
(b) True, accurate and complete copies of the Certificate of Incorporation
and By-Laws of the Company, as in effect on the date hereof, have been delivered
to TMR.
(c) As of the Closing, the Company shall have no debts or obligations
other than (i) accrued Taxes, which shall be provided for as set forth in
Section 9.10, and (ii) accounts payable and other expenditures relating to the
properties of the Company which shall be accrued and reflected in the final
closing settlement prepared in accordance with the true-up accounting procedures
in Schedule III and Sections 8.2 and 12.14.
SECTION 6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; ABSENCE OF UNDISCLOSED
LIABILITIES.
Except as otherwise expressly permitted by this Agreement, from December
31, 1997 through the date hereof the Company has conducted its business only in
the ordinary course of
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business consistent with past practice and there has not been (i) any
declaration, setting aside or payment of any dividend (whether in cash, stock or
property) with respect to any of the Company's capital stock, (ii) (A) any
granting by the Company to any executive officer of the Company of any increase
in compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of December
31, 1997, (B) any granting by the Company to any such executive officer or any
increase in severance or termination pay, except as was required under
employment, severance or termination agreements in effect as of December 31,
1997, or (C) any entry by the Company into any employment, severance or
termination agreement with any such executive officer, (iii) any damage,
destruction or loss, whether or not covered by insurance, that would have a
Company Material Adverse Effect or (iv) any other fact or condition exists that
would reasonably likely have a Company Material Adverse Effect.
SECTION 6.7 LITIGATION. There are no claims, suits, actions or
proceedings, pending or, to the knowledge of the executive officers of the
Company, threatened, nor are there, to the knowledge of the executive officers
of the Company, any investigations or reviews pending or threatened against,
relating to or affecting the Company or judgments, decrees, injunctions, rules
or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to the Company that
would have, or would reasonable likely have, a Company Material Adverse Effect.
SECTION 6.8 INFORMATION IN PROXY STATEMENT.
None of the information supplied or to be supplied by or on behalf of
SLOPI or the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is mailed to the stockholders of
TMR and, as the same may be amended or supplemented, at the time of the meetings
of TMR's stockholders to be held in connection with the Share Issuance, contain
any untrue statement of a material fact or omit to state any material fact with
respect to SLOPI or the Company necessary in order to make the statements
therein with respect to SLOPI or the Company, in light of the circumstances
under which they are made, not misleading.
SECTION 6.9 TAX MATTERS.
(a) The Company has filed (i) within the time and in the manner prescribed
by law all required Tax Returns calculated on or with reference to income,
profits, earnings or gross receipts and all other Tax Returns required to be
filed that would report a material amount of Tax, and (ii) paid all Taxes due
and payable within the time and in the manner prescribed by law except for those
being contested in good faith and for which adequate reserves have been
established by the Company.
(b) As of the date hereof there are no claims, assessments, audits or
administrative or court proceedings pending against the Company for any alleged
deficiency in Tax, and none of the
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Company has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns.
(c) All tax allocation or tax sharing agreements shall be terminated prior
to the Closing Date and, except as provided in Section 9.10, no payments are due
or will become due by the Company on or after the Closing Date pursuant to any
such agreement or arrangement.
(d) There is no claim against the Company for any Taxes, and no
assessment, deficiency or adjustment has been asserted or proposed with respect
to any Tax Return of or with respect to the Company; the Company will not be
required to include any amount in income for any taxable period beginning after
the Effective Time as a result of a change in accounting method for any taxable
period ending on or before the Effective Time or pursuant to any agreement with
any Tax authority with respect to any such taxable period.
SECTION 6.10 VOTE REQUIRED. The approval of this Agreement by SLOPI is the
only vote of holders of any class or series of the capital stock of the Company
required to approve this Agreement, the Merger and the other transactions by the
Company and SLOPI contemplated hereby.
SECTION 6.11 EMPLOYEE MATTERS. The Company has no employees and does not
maintain any employee benefit plans. Effective as of the Closing, the Company
will have no obligations with respect to any employee benefit plans or similar
arrangements.
SECTION 6.12 MATERIAL CONTRACTS AND AGREEMENTS. Section 6.12 of the
Company Disclosure Schedule sets forth a list of all contracts, agreements or
arrangements to which the Company is a party or by which the Company or its
assets are bound which (i) would be required to be filed as exhibits to an
Annual Report on Form 10-K for the year ended December 31, 1997 if the Company
were required to file as a registrant under the Exchange Act or (ii) are with an
Affiliate of the Company. The Company has provided TMR with a copy of all
documents transferring beneficial ownership or record title to the Company of
all oil and gas properties and other assets as of the date hereof, as
contemplated in the Asset Conveyance Agreements.
SECTION 6.13 INVESTMENT INTENT. SLOPI will acquire the TMR Common Stock
and the TMR Series A Preferred for investment purposes and not with a view to or
in connection with a distribution within the meaning of the Securities Act.
SLOPI understands and agrees that the certificates representing the TMR Common
Stock and TMR Series A Preferred will have a legend imprinted thereon to the
effect set forth in Section 3 of the Stock Rights and Restrictions Agreement
attached as Exhibit F. The provisions of this Section shall survive Closing.
SECTION 6.14 HSR EXEMPTION. The assets of the Company that do not fall
under the exemption from the requirements of the HSR Act specified in 16 CFR Ch.
1 ss. 802.3 (Acquisitions of carbon-based mineral reserves) are less than $15
million.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING TMR SUB
TMR and TMR Sub jointly and severally represent and warrant to SLOPI and
the Company as follows:
SECTION 7.1 ORGANIZATION AND STANDING. TMR Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. TMR Sub was organized solely for the purpose of acquiring the Company
and engaging in the transactions contemplated by this Agreement and has not
engaged in any business since it was incorporated which is not in connection
with the Merger and this Agreement.
SECTION 7.2 CAPITAL STRUCTURE. The authorized capital stock of TMR Sub
consists of 1,000 shares of common stock, par value $0.01 per share, all of
which are validly issued and outstanding, fully paid and nonassessable, free of
preemptive rights and are owned directly by TMR free and clear of all liens,
claims and encumbrances.
SECTION 7.3 AUTHORITY; NON-CONTRAVENTION. TMR Sub has all requisite power
and authority to enter into this Agreement and to consummate the Merger and the
other transactions contemplated hereby. The execution and delivery of this
Agreement by TMR Sub, the performance by TMR Sub and its obligations hereunder
and the consummation of the transactions contemplated hereby have been duly
authorized by its Board of Directors and by TMR as its sole stockholder, and,
except for the corporate filings required by sate law, no other corporate
proceedings on the part of TMR Sub are necessary to authorize this Agreement and
the Merger and the other transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by TMR Sub and, assuming the due
authorization, execution and delivery hereof by the Company and SLOPI,
constitutes a valid and binding obligation of TMR Sub enforceable against TMR
Sub in accordance with its terms, except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or other similar laws affecting the enforcement of creditors' rights
generally, and except that the availability of equitable remedies, including
specific performance, may be subject to the discretion of any court before which
any proceedings may be brought. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (with or without notice or
lapse of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of TMR Sub under, any provisions of (i) the
Certificate of Incorporation or Bylaws (true and complete copies of which as of
the date hereof have been delivered to the Company) of TMR Sub, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
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applicable to TMR Sub or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to TMR Sub or any of its properties or
assets, other than, in the case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, losses, liens, security interests, charges or
encumbrance that, individually or in the aggregate, would not materially impair
the ability of TMR Sub to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
ARTICLE VIII
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, TMR shall, and shall cause its Subsidiaries to,
and the Company shall, and shall cause its Subsidiaries to, comply with the
provisions of this Article VIII.
SECTION 8.1 ORDINARY COURSE OF BUSINESS. TMR, TMR's Subsidiaries and the
Company shall conduct their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted. TMR,
TMR's Subsidiaries and the Company shall not take or commit to any material
actions or transactions that are not in the usual, regular and ordinary course
of business, except with the prior written consent of the other parties. The
Company shall consult with TMR prior to electing to participate or not to
participate in any well, lease, or properties; and prior to electing not to
participate in any well, lease or properties shall give TMR reasonable
opportunity to advise the Company that TMR wants the Company to elect to
participate on behalf of TMR on the same terms as the Company would have
participated. If the Merger is not consummated, (i) the Company shall assign its
working interests in any such well, lease or properties to TMR, (ii) TMR shall
reimburse the Company for any costs associated with the participation by the
Company, and (iii) TMR shall receive all the benefits and bear all the
detriments of any such participation, less any benefits that otherwise would be
earned by a non-consenting party in the form of an overriding royalty or similar
interest.
SECTION 8.2 DIVIDENDS AND OTHER PAYMENTS. TMR, the Company and SLOPI shall
follow the true-up accounting procedures specified in Schedule III. TMR shall
not, nor shall it permit any of its Subsidiaries to, and the Company shall not:
(a) declare or pay any dividends or make other distributions in respect of
any of their capital stock other than to TMR or to its Subsidiaries or to the
Company, as the case may be, except that, prior to the Closing Date and
subsequent to the Company's payment of its estimated federal and state income
taxes (but excluding any deferred tax liabilities) for the taxable period
beginning October 1, 1997, and ending December 31, 1997, the Company shall be
entitled to pay to SLOPI a cash dividend equal to the excess, if any, of its
current assets over its total liabilities (excluding any liabilities associated
with deferred Taxes and gas imbalances) as of December 31, 1997; or
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(b) split, combine or reclassify any of their capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of, or in substitution for, shares of their capital stock; or
(c) redeem, repurchase or otherwise acquire any shares of their capital
stock, other than
(i) intercompany acquisitions of capital stock, or
(ii) in connection with the administration of employee benefit
and dividend reinvestment plans as in effect on the date
hereof in the ordinary course of the operation of such
plans.
SECTION 8.3 ISSUANCE OF SECURITIES. TMR shall not, and shall not permit
any of its Subsidiaries to, and the Company shall not issue, agree to issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of their capital stock or any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such shares
or convertible or exchangeable securities except for:
(a) the issuance of common stock or other securities by TMR pursuant to
the plans and arrangements listed in the TMR Disclosure Schedules in the
ordinary course of the operation of such plans and arrangements in accordance
with their current terms.
(b) existing outstanding securities and rights to acquire securities of
TMR, or
(c) issuance by a wholly-owned Subsidiary of its capital stock to TMR.
SECTION 8.4 CHARTER DOCUMENTS. TMR and the Company shall not amend or
propose to amend their respective articles or certificate of incorporation or
bylaws in any way adverse to the other; provided that TMR may increase the
number of authorized shares of TMR Common Stock to 200,000,000 in connection
with the TMR Special Meeting; provided, further, that prior to consummation of
the Merger all such shares shall remain subject to Section 8.3.
SECTION 8.5 NO ACQUISITIONS. TMR shall not, nor shall it permit any of its
Subsidiaries to, and the Company shall not, acquire, or publicly propose to
acquire, or agree to acquire, by merger or consolidation, by purchase or
otherwise, any assets of any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, in any case or in the aggregate that
involve a transaction or transactions exceeding $50,000,000, except with the
prior written consent of the other parties, which consent shall not be
unreasonably withheld.
SECTION 8.6 NO DISPOSITIONS. TMR shall not, nor shall it permit any of its
Subsidiaries to, and the Company shall not, sell, lease, license, encumber or
otherwise dispose of any assets in
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any case or in the aggregate that involve a transaction or transactions
exceeding $50,000,000, except (i) for normal extensions to or replacements of
properties in the ordinary course of business consistent with prior practice;
provided, however, this Section shall not prohibit ordinary course of business
transfers of properties in connection with the establishment of exploration
arrangements, including farmout and similar arrangements or (ii) except with the
prior written consent of the other parties.
SECTION 8.7 INDEBTEDNESS. TMR shall not, nor shall it permit any of its
Subsidiaries to, and the Company shall not incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed, including,
without limitation, the issuance of debt securities), except for:
(a) short-term indebtedness in the ordinary course of business
consistent with past practice,
(b) long-term indebtedness in connection with the refinancing of existing
indebtedness either at its stated maturity or at a lower cost of funds, or
(c) borrowings under new or existing credit facilities, except that the
aggregate principal amount of such borrowings may not exceed $202,500,000.
SECTION 8.8 COMPENSATION, BENEFITS. Except as may be required by
applicable law or by the express terms of this Agreement, TMR shall not, nor
shall it permit any of its Subsidiaries to, and the Company shall not: (a) enter
into, adopt or amend any employee benefit plan or any other contract, agreement,
commitment, arrangement, plan or policy maintained by, contributed to or entered
into by TMR or its Subsidiaries or the Company, as the case may be, or increase
the amount of or accelerate the payment or vesting of any benefit or amount
payable thereunder other than pursuant to the terms thereof or (b) increase, or
enter into any contract, agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to extend, expand or
enhance the engagement, employment or any related rights of any director,
officer or other employee of TMR, its Subsidiaries or the Company, as the case
may be, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate in the case of TMR and its
Subsidiaries or in the case of the Company, do not result in a material increase
in benefits or compensation expense to TMR, its Subsidiaries or the Company, as
the case may be, or (c) enter into or amend any employment, severance, or
special pay arrangement with respect to the termination of employment or other
similar contract, agreement or arrangement with any director or officer or other
employee other than in the ordinary course of business consistent with past
practice.
SECTION 8.9 TAX-FREE STATUS. Each party shall report, on all applicable
federal and state Tax returns, the Merger as a reorganization under Section 368
of the Code. No party shall knowingly take any action which would cause the
Merger not to qualify as a reorganization within
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the meaning of Section 368 of the Code; provided, however, that the consummation
of the Merger and the issuance of TMR Common Stock and TMR Series A Preferred
shall not be a violation of this provision.
SECTION 8.10 INSURANCE. TMR shall, and shall cause its Subsidiaries to,
and the Company shall, maintain with financially responsible insurance companies
(or through self-insurance not inconsistent with such party's past practice)
insurance in such amounts and against such risks and losses as are consistent
with each respective party's usual, regular and ordinary course of business.
SECTION 8.11 COOPERATION, NOTIFICATION. TMR and the Company shall:
(a) confer on a regular and frequent basis with one or more
representatives of the other party to discuss material operational matters and
the general status of its ongoing operations,
(b) promptly notify the other party of any significant changes in its
business, properties, assets, condition (financial or otherwise), prospects or
results of operations,
(c) advise the other party of any change or event that has had or, to the
knowledge of such party, would reasonably likely have a TMR Material Adverse
Effect or a Company Material Adverse Effect, and
(d) consult with each other prior to making any filings with any state or
federal court, administrative agency, commission or other Governmental Authority
in connection with this Agreement and the transactions contemplated hereby, and
promptly after each such filing provide the other with a copy thereof.
SECTION 8.12 THIRD-PARTY CONSENTS. Each of TMR and the Company shall use
all commercially reasonable efforts to obtain all TMR Required Consents or
Company Required Consents, as the case may be. Each party shall promptly notify
the other party of any failure or prospective failure to obtain any such
consents and, if requested by the other party, shall provide to the other party
copies of all TMR Required Consents or Company Required Consents, as the case
may be, obtained by such party.
SECTION 8.13 PERMITS. Each of TMR and the Company shall use commercially
reasonable efforts to maintain in effect all existing material permits pursuant
to which such party operates.
SECTION 8.14 AFFILIATE LIABILITIES. As of the Effective Time, the Company
shall have no liability to any Affiliate of the Company other than those that
are related to the operation of the Company in the ordinary course of business
and are considered in the True-Up Accounting Procedures specified in Schedule
III.
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ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.1 ACCESS TO INFORMATION.
(a) Upon reasonable notice, each of TMR and the Company shall, and TMR
shall cause its Subsidiaries to, afford to the officers, directors, employees,
accountants, counsel, investment bankers, financial advisors, consultants and
other representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records, including, but not limited to, Tax Returns, but excluding (i) that
information that is restricted by applicable confidentiality and secrecy
agreements, (ii) that information that a party may be restricted from disclosing
under applicable law, and (iii) the corporate proceedings of TMR or the Company
(as the case may be) in considering the Merger, and, during such period, each
shall, and shall cause its Subsidiaries to, furnish promptly to the other:
(i) a copy of each report, schedule and other document filed by it
or any of its Subsidiaries with any Governmental Authority and any other
document pertaining to the transactions contemplated hereby filed with any
Governmental Authority that is not filed as an exhibit to an SEC filing or
described in an SEC filing, and
(ii) all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such matters as may be reasonably requested
by the other party in connection with any filings, applications or
approvals required or contemplated by this Agreement.
(b) Without limiting the application of the Confidentiality Agreement
dated August 21, 1997 between TMR and SWEPI (the "Confidentiality Agreement"),
all documents and information furnished pursuant to Section 9.1(a)(ii) shall be
subject to the Confidentiality Agreement.
(c) TMR and the Company have also signed an Agreement for Indemnification
and Responsibility for Damages to the Subject Properties in connection with Site
Visits dated January 19, 1998 (the "Indemnification Agreement") in order for TMR
to make certain site visits and physical investigations in connection with its
due diligence investigations.
SECTION 9.2 TMR PROXY STATEMENT.
(a) As soon as practicable following the date of this Agreement, TMR shall
prepare and file with the SEC preliminary proxy materials and shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable. SLOPI and the Company shall cooperate
-27-
with TMR in the preparation of the Proxy Statement and shall furnish to TMR such
data and information relating to SLOPI and the Company as TMR may reasonably
request in order for TMR to comply with the Exchange Act and for the purpose of
including such data and information in the Proxy Statement. TMR shall give SLOPI
and the Company and their counsel the opportunity to review any preliminary
proxy materials and the Proxy Statement prior to their being filed with the SEC
and shall give SLOPI and the Company and their counsel the opportunity to review
all amendments and supplements thereto and all responses to requests for
additional information and replies to comments prior to their being filed with,
or sent to, the SEC. TMR will provide promptly to SLOPI and the Company copies
of all correspondence between TMR or any of its representatives and the SEC. TMR
will advise SLOPI and the Company promptly when any supplement to or amendment
of the Proxy Statement has been filed, or the issuance of any stop order, or of
any request by the SEC or the New York Stock Exchange for amendment of the Proxy
Statement.
(b) TMR shall also take such action as may be required to cause the shares
of TMR Common Stock and TMR Series A Preferred issuable in connection with the
Merger to be exempt from registration under applicable federal and state
securities laws.
(c) Each of the parties shall furnish all information concerning itself
that is required or customary for inclusion in the Proxy Statement and SLOPI
shall confirm in writing that information which is provided by it, including
without limitation, the Company Financial Statements, as audited, and if the
Proxy Statement is mailed to shareholders on or after May 14, 1998, unaudited
financial statements as of and for the three months ended March 31, 1997 and
1998, conforming the presentation of the Company Financial Statements.
(d) No representation, warranty, covenant or agreement contained in this
Agreement is made by any party hereto with respect to information supplied by
any other party hereto for inclusion in the Proxy Statement.
(e) TMR shall cause the Proxy Statement to comply as to form in all
material respects with the Exchange Act and the rules and regulations
thereunder.
(f) The parties shall take such action as may be reasonably required to
cause the shares of TMR Common Stock issuable in the Merger or upon conversion
of TMR Series A Preferred to be approved for listing on the New York Stock
Exchange.
SECTION 9.3 REGULATORY MATTERS.
(a) Each party hereto shall cooperate and use its reasonable best efforts
promptly to prepare and file all necessary permits, consents, approvals and
authorizations of all Governmental Authorities and all other persons necessary
or advisable to consummate the transactions contemplated by this Agreement,
including, without limitation, the Company Required Statutory Approvals and the
TMR Required Statutory Approvals.
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(b) TMR shall have the right to review and approve in advance all
characterizations of the information relating to TMR, on the one hand, and the
Company and SLOPI shall have the right to review and approve in advance all
characterizations of the information relating to the Company or SLOPI, on the
other hand, in either case, which appear in any filing made in connection with
the transactions contemplated by this Agreement or the Merger.
(c) The parties shall consult each other with respect to the obtaining of
all such necessary or advisable permits, consents, approvals and authorizations
of Governmental Authorities.
SECTION 9.4 APPROVAL OF TMR STOCKHOLDERS. TMR shall, as promptly as
reasonably practicable after the date hereof:
(a) take all steps reasonably necessary to duly call, give notice of,
convene and hold a special meeting of its stockholders (the "TMR Special
Meeting") for the purpose of securing the TMR Stockholders' Approval,
(b) distribute to its stockholders the Proxy Statement in accordance with
applicable law, and its Articles of Incorporation and Bylaws,
(c) recommend to its stockholders the approval of the Share Issuance;
provided that the Board of Directors of TMR may withdraw or modify its
recommendation that its shareholders approve the Share Issuance if such Board
determines in good faith, after consultation with and based on the advice of
outside counsel, the failure to withdraw or modify such recommendation could
reasonably be expected to result in a breach of its fiduciary duties under
applicable law, and
(d) cooperate and consult with SLOPI and the Company with respect to each
of the foregoing matters.
SECTION 9.5 DISCLOSURE SCHEDULES; PROPRIETARY DATA. Without limiting the
application of the Confidentiality Agreement, the parties shall use their best
efforts to keep the Disclosure Schedules confidential. Further, TMR agrees (and
shall cause any third party who merges with TMR, is a joint venturer with TMR,
is a successor in interest to TMR or its property or acquires the assets of TMR)
to maintain and safeguard any proprietary data obtained through or in connection
with the Merger in a manner at least as stringent as the industry practices for
information and data of similar type and quality.
SECTION 9.6 PUBLIC ANNOUNCEMENTS. SLOPI and the Company, on the one hand,
and TMR and TMR Sub, on the other hand, shall cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any public announcement or statement
prior to consultation with the other party, except that each party may respond
to questions from stockholders and may respond to inquiries from financial
analysts and
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media representatives in a manner consistent with its past practice and each
party may make such disclosure as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange without prior consultation to the extent such consultation is not
reasonably practicable. The parties agree that the initial press release or
releases to be issued in connection with the execution of this Agreement shall
be mutually agreed upon prior to the issuance thereof.
SECTION 9.7 NO WITHDRAWAL OF RECOMMENDATION. Neither the Board of
Directors of TMR nor any committee thereof shall, except in connection with the
termination of this Agreement pursuant to Sections 11.1(a), (b), (c) or (d),
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
SLOPI or the Company the approval or recommendation by the Board of Directors of
TMR or any such committee of this Agreement or the Merger or take any action
having such effect. Notwithstanding the foregoing, in the event the Board of
Directors of TMR determines that, in the exercise of its fiduciary obligations
(as determined in good faith after consultation with and based on the advice of
outside counsel), that the recommendation of the approval of the Share Issuance
is not in the interest of TMR and its shareholders and then the Board of
Directors of TMR may withdraw its approval or recommendation of this Agreement
and the Share Issuance.
SECTION 9.8 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
SECTION 9.9 COVENANT TO SATISFY CONDITIONS.
(a) Each of TMR, TMR Sub, SLOPI and the Company shall take all reasonable
actions necessary, to comply promptly with all legal requirements that may be
imposed on it with respect to this Agreement.
(b) Subject to the terms and conditions hereof, and taking into account
the circumstances and giving due weight to the materiality of the matter
involved or the action required, TMR, TMR Sub, SLOPI and the Company shall each
use their reasonable best efforts to take or cause to be taken all actions, and
to do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the other transactions contemplated hereby (subject to TMR Stockholders'
Approval), including fully cooperating with the other in obtaining the TMR
Required Statutory Approvals, the Company Required Statutory Approvals and all
other approvals and authorizations of any Governmental Authorities necessary or
advisable to consummate the transactions contemplated hereby.
SECTION 9.10 TAX MATTERS.
(a) (1) With respect to each Tax Return covering a taxable period
beginning on or after January 1, 1998 by or with respect to the Company (other
than the consolidated, combined, or
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unitary Tax Returns described in Section 9.10(a)(3)), TMR shall cause such Tax
Return to be accurately prepared and completed, shall cause to be included in
such Tax Return all items of income, gain, loss, deduction and credit or other
items (collectively "Tax Items") required to be included therein, and shall
timely file such Tax Returns and pay all taxes with respect to such period.
(2) SLOPI shall cause the Company to cause all Tax Returns with respect to
or which include the Company for all periods ending on or before December 31,
1997, to be accurately completed and timely filed and SLOPI shall pay or cause
to be paid all taxes with respect to such period.
(3) (A) SLOPI shall cause to be included in the consolidated federal
income Tax Returns (and the state income Tax Returns of any state that permits
consolidated, combined or unitary income Tax Returns, if any) of any affiliated
group of corporations that includes the Company (the "Shell Group") for all
periods or portions thereof relating to the Company which end on or before or
which include the Effective Time, all Tax Items of the Company which are
required to be included therein, shall file timely all such Tax Returns with the
appropriate taxing authorities and shall pay timely all Taxes due with respect
to the periods covered by such Tax Returns.
(B) In accordance with the true-up accounting procedures set forth
in Schedule III, within sixty (60) days of the Effective Time, TMR shall cause
the Company to pay to SLOPI (i) the amount of federal and state income taxes
accrued or paid (but excluding any deferred taxes) through the Effective Time
for the Company (as a separate company) with respect to the Company's taxable
income from January 1, 1998 through the Effective Time to the extent and only to
the extent such federal and state taxable income is required to be included in a
consolidated federal Tax Return or a combined state Tax Return for the Shell
Group, plus the amount of any separate company state taxes paid by SLOPI or an
affiliate or SLOPI (but excluding deferred taxes) through the Effective Time for
the Company (as a separate company) with respect to the Company's taxable income
from January 1, 1998 through the Effective Time, plus (ii) the amount of any
0000 Xxxxxxxxx xxxxx taxes that have been paid or will be paid by any member of
the Shell Group (other than the Company) for or on behalf of the Company
(collectively the "Tax Accrual"). At the Effective Time, the Company shall
provide TMR with a schedule of its calculation of the amount of such Tax
Accrual, accompanied by all accounting work papers reasonably necessary to
review the Tax Accrual calculation for material error. TMR shall have 30
business days from the Effective Time to review and approve the Company's Tax
Accrual calculation. If TMR finds no material error with respect to the Tax
Accrual calculation, then TMR shall cause the Company to pay to SLOPI the Tax
Accrual amount calculated by the Company. In the event that TMR finds a material
error, TMR shall submit the Tax Accrual calculation along with all accounting
workpapers reasonably necessary to review such Tax Accrual calculation to Price
Waterhouse within 30 business days from the Effective Time so that Price
Waterhouse may independently verify the Tax Accrual calculation and review such
calculation for material error. In the event that Price Waterhouse finds
material error with respect to the Tax Accrual calculation, then TMR shall cause
the Company within 60 business days from the Effective Time, to pay to SLOPI the
Tax Accrual amount calculated by Price Waterhouse. If
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Price Waterhouse finds no material error with respect to the Company's Tax
Accrual calculation, then TMR shall cause the Company to pay to SLOPI the Tax
Accrual amount calculated by the Company.
(4) The income of the Company will be apportioned to the period up to and
including the Effective Time and the period after the Effective Time by closing
the books of the Company as of the end of the day of the Effective Time
provided, that, TMR, SLOPI and the Company agree to report all transactions of
the Company not in the ordinary course of business occurring on the day of the
Effective Time but after the Effective Time on TMR's consolidated federal income
tax return to the extent permitted by Treasury Regulation Section
1.1502-76(b)(1)(B).
(b) Any Tax Return to be prepared pursuant to the provisions of this
Section 9.10 shall be prepared in a manner consistent with practices followed in
prior years with respect to similar Tax Returns, except for changes required by
law or regulations.
(c) (1) SLOPI and each member of the Shell Group shall grant to TMR (or
its designees) access at all reasonable times to all of the information, books
and records relating to the Company within the possession of SLOPI or any member
of the Shell Group (including work papers and correspondence with taxing
authorities), and shall afford TMR (or its designees) the right (at TMR's
expense) to take extracts therefrom and to make copies thereof, to the extent
reasonably necessary to permit TMR (or its designees) to prepare Tax Returns, to
conduct negotiations with Tax authorities, and to implement the provisions of,
or to investigate or defend any claims between the parties arising under, this
Agreement.
(2) TMR shall grant or cause the Company to grant to SLOPI (or its
designees) access at all reasonable times to all of the information, books and
records relating to the Company within the possession of TMR or the Company
(including work papers and correspondence with taxing authorities), and shall
afford SLOPI (or its designees) the right (at SLOPI's expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably necessary to
permit SLOPI (or its designees) to prepare Tax Returns, to conduct negotiations
with Tax authorities, and to implement the provisions of, or to investigate or
defend any claims between the parties arising under, this Agreement.
At SLOPI's request, TMR shall cause the Company to make or join with the
Shell Group in making any tax election after the Effective Time.
Each of the parties hereto will preserve and retain all schedules,
workpapers and other documents relating to any Tax Returns of or with respect to
the Company or to any claims, audits or other proceedings affecting the Company
until the expiration of the statute of limitations (including extensions)
applicable to the taxable period to which such documents relate or until the
final determination of any controversy with respect to such taxable period, and
until the final
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determination of any payments that may be required with respect to such taxable
period under this Agreement.
(d) SLOPI hereby agrees to defend, indemnify and hold harmless TMR and the
Company on an after tax basis from and against, and agrees to pay, all Taxes
imposed and all costs and expenses (including, without limitation, litigation
costs and reasonable attorneys' and accountants' fees and disbursements)
incurred (all herein referred to as "Tax Losses"), as a result of a claim,
notice of deficiency, or assessment by, or any obligation owing to, any taxing
authority for:
(1) any Taxes of the Company attributable to any period ending on or
before December 31, 1997; and
(2) any Taxes of any corporation (including the Company) that is or was
included in a consolidated, combined, unitary or similar Tax Return
of SLOPI or any affiliate of SLOPI: and
(3) any Taxes of SLOPI, the Company or their subsidiaries attributable
to or arising form (i) the transactions contemplated by this
Agreement excluding any Taxes resulting from TMR's actions which
would cause the merger to fail to qualify as a reorganization within
the meaning of section 368 of the Code or (ii) any transactions
occurring before the Effective Time which are outside the ordinary
course of business of the Company but only if such transactions are
entered into without the written consent of TMR.
(e) TMR agrees to defend, indemnify and hold harmless SLOPI and the
members of the Shell Group on an after tax basis from and against, and agrees to
pay, all Tax Losses incurred as a result of a claim, notice of deficiency, or
assessment by, or any obligation owing to, any taxing authority for:
(1) any Taxes of the Company with respect to any Tax Return described in
Sections 9.10(a)(1); and
(2) any Taxes owed by the Shell Group resulting from the transaction of
the Company not in the ordinary course of business occurring on the
date of the Effective Time but after the Effective Time.
(f) (1) If a claim shall be made by any taxing authority that, if
successful, would result in the indemnification of a party under this Agreement
(referred to herein as the "Tax Indemnified Party"), the Tax Indemnified Party
shall promptly notify the party obligated under this Agreement to so indemnify
(referred to herein as the "Tax Indemnifying Party") in writing; provided,
however, that no delay on the part of the Tax Indemnified Party in notifying the
Tax Indemnifying Party shall
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relieve the Tax Indemnifying Party from any obligation hereunder unless (and
then solely to the extent) the Tax Indemnifying Party is prejudiced thereby.
(2) The Tax Indemnified Party shall take such action in connection with
contesting such claim as the Tax Indemnifying Party shall reasonably request in
writing form time to time, including the selection of counsel and experts an the
execution of powers of attorney, provided that (A) within 30 days after the
notice described in Section 9.10(f)(1) has been delivered (or such earlier date
that any payment of Taxes is due by the Tax Indemnified Party but in no event
sooner than 5 days after the Tax Indemnifying Party's receipt of such notice),
the Tax Indemnifying Party requests that such claim be contested, (B) the Tax
Indemnifying Party shall have agreed to pay the Tax Indemnified Party all costs
and expenses that the Tax Indemnified Party incurs in connection with and
contesting such claim, including, without limitation, reasonable attorneys' fees
and disbursements, and (C) if the Tax Indemnified Party is requested by the Tax
Indemnifying Party to pay the Tax claimed and xxx for a refund, the Tax
Indemnifying Party shall have advanced to the Tax Indemnified Party, on an
interest-free basis, the amount of such claim. The Tax Indemnified Party shall
not make any payment of such claim for at least 30 days (or such shorter period
as may be required by applicable law) after the giving of the notice required by
Section 9.10(f)(1), shall give to the Tax Indemnifying Party any information
reasonably requested relating to such claim, and otherwise shall cooperate with
the Tax Indemnifying Party in good faith in order to contest effectively any
such claim.
(3) Subject to the provisions of Section 9.10(f)(2), the Tax Indemnified
Party shall enter into a settlement of such contest with the applicable taxing
authority or prosecute such contest to a determination in a court or other
tribunal of initial or appellate jurisdiction, all as the Tax Indemnifying Party
may request.
(4) If, after actual receipt by the Tax Indemnified Party of an amount
advanced by the Tax Indemnifying Party pursuant to Section 9.10 (f)(2)(C), the
extent of the liability of the Tax Indemnified Party with respect to the claim
shall be established by the final judgment or decree of a court or other
tribunal or final and binding settlement with an administrative agency having
jurisdiction thereof, the Tax Indemnified Party shall promptly repay to the Tax
Indemnifying Party the amount advanced to the extent of any refund received by
the Tax Indemnified Party with respect to the claim together with any interest
received thereon from the applicable taxing authority and any recovery of legal
fees from such taxing authority, net of any Taxes as re required to be paid by
the Tax Indemnified Party with respect to such refund, interest or legal fees
(calculated at the maximum applicable statutory rate of Tax without regard to
any other Tax Items). Notwithstanding the foregoing, the Tax Indemnified Party
shall not be required to make any payment hereunder before such time as the Tax
Indemnifying Party shall have made all payments or indemnities then due with
respect to the Tax Indemnified Party pursuant to this Agreement.
(5) Promptly after a final determination of the Tax Indemnifying Party
shall pay to the Tax Indemnified Party the amount of any Tax Losses to which the
Tax Indemnified Party may become entitled by reason of the provisions of this
Section 9.10(f).
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(g) Any refund of Taxes of or relating to the Company shall be paid to the
party who is responsible for indemnification with respect to such Taxes as
described in Sections 9.10(d) and (e).
(h) The representations, warranties and agreements contained in this
section 9.10 shall survive the consummation of the transactions contemplated
herein for the applicable period of the statute of limitations with respect to
such Taxes.
SECTION 9.11 WITHDRAWAL FEE. Promptly upon termination of this Agreement
by the Company pursuant to Section 11.1(g), TMR shall pay to SLOPI in cash a fee
of $4,000,000 (the "Fee") if: (i) TMR's Board of Directors or any committee
thereof shall have withdrawn or modified its recommendation that its
shareholders approve the Share Issuance, (ii) no Company Material Adverse Effect
shall have occurred, (iii) SLOPI and the Company shall have performed in all
material respects their covenants and agreements required by this Agreement, and
(iv) the representations and warranties of SLOPI and the Company set forth in
this Agreement shall have been true and correct in all material respects.
SECTION 9.12 TRANSFER OF RECORD TITLE TO PROPERTIES. All properties listed
in the Asset Conveyance Agreements, dated October 1, 1997, between SWEPI and the
Company, SOVI and the Company and Choctaw and the Company, as amended and
previously provided to TMR (collectively, the "Asset Conveyance Agreements")
have been or will be conveyed of record to the Company in accordance with the
terms of those Asset Conveyance Agreements.
ARTICLE X
CONDITIONS
SECTION 10.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger or cause the
Merger to be effected shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, except, to the extent permitted by
applicable law, that such conditions may be waived in writing pursuant to
Section 11.5:
(a) STOCKHOLDER APPROVAL. The TMR Stockholders' Approval shall have
been obtained.
(b) NO INJUNCTION OR DAMAGES. No suit, action or other proceeding shall be
pending by any Governmental Authority in which it is sought to restrain or
prohibit the performance of or to obtain damages or other relief in connection
with this Agreement or the transactions contemplated hereby, and no temporary
restraining order or preliminary or permanent injunction or other order by any
federal or state court preventing consummation of the Merger or ordering damages
in connection therewith shall have been issued and continue in effect, and the
Merger and the other transactions contemplated hereby shall not have been
prohibited under any applicable federal or state law or regulation.
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(c) LISTING OF SHARES. The shares of TMR Common Stock issuable in the
Merger pursuant to Article III or upon conversion of TMR Series A Preferred
shall have been approved for listing on the New York Stock Exchange, upon
official notice of issuance.
(d) STATUTORY APPROVALS. The Company Required Statutory Approvals, the TMR
Required Statutory Approvals or matters related thereto shall have been obtained
at or prior to the Effective Time, any such approvals shall have become or
resulted in final orders at or prior to the Effective Time, and no such final
order shall impose terms or conditions that would have, or would be reasonably
likely to have, a TMR Material Adverse Effect or a Company Material Adverse
Effect.
(e) Contemporaneously with the Closing under this Agreement, those certain
Service Agreements dated September 24, 1997 between (i) the Company and Shell
Oil Company and (ii) the Company and SWEPI shall be terminated and all accounts
receivable and payable thereunder through the Closing Date shall be settled in
cash in accordance with Schedule III, True-Up Accounting Procedures.
SECTION 10.2 CONDITIONS TO OBLIGATION OF TMR TO EFFECT MERGER. The
obligation of TMR to effect the Merger or cause the Merger to be effected shall
be further subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by TMR in writing pursuant to
Section 11.4:
(a) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. SLOPI and the Company shall
have performed in all material respects their agreements and covenants contained
in or contemplated by this Agreement required to be performed by them at or
prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
SLOPI and the Company set forth in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing Date as if
made on and as of the Closing Date, except as otherwise contemplated by this
Agreement.
(c) CLOSING CERTIFICATES. TMR shall have received a certificate signed by
the President and Treasurer of each of SLOPI and the Company, dated the Closing
Date and given in their corporate capacities and not individually, to the effect
that, to each such officer's knowledge, the conditions set forth in Section
10.2(a), (b) and (d) have been satisfied.
(d) COMPANY MATERIAL ADVERSE EFFECT. No Company Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance that would
have, or would be reasonably likely to have, a Company Material Adverse Effect.
(e) OPINION OF XXXXX X. XXXXXX. TMR shall have received opinions of Xxxxx
X. Xxxxxx, counsel for the Company, SLOPI and SWEPI, in form and substance
satisfactory to TMR,
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addressed to TMR and dated the Closing Date, which opinion may be based on
appropriate representations of the Company, SLOPI and SWEPI.
(f) COMPANY REQUIRED CONSENTS. The Company Required Consents shall have
been obtained except those that in the aggregate would not result in and would
not reasonably be likely to result in a Company Material Adverse Effect.
(g) FAIRNESS OPINION. The Chase Opinion shall not have been withdrawn.
(h) TITLE CONVEYANCES. The provisions of the Asset Conveyance Agreements
shall have been complied with.
SECTION 10.3 CONDITIONS TO OBLIGATION OF SLOPI AND THE COMPANY TO EFFECT
THE MERGER. The obligation of SLOPI and the Company to effect the Merger or
cause the Merger to be effected shall be further subject to the satisfaction, on
or prior to the Closing Date, of the following conditions, except as may be
waived by the Company in writing pursuant to Section 11.4.
(a) PERFORMANCE OF OBLIGATIONS OF TMR. TMR shall have performed in all
material respects its agreements and covenants contained in or contemplated by
this Agreement required to be performed by it at or prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
TMR set forth in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as if made on and as
of the Closing Date, except as otherwise contemplated by this Agreement.
(c) CLOSING CERTIFICATES. The Company shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of TMR, dated
the Closing Date and given in their corporate capacities and not individually,
to the effect that, to each such officer's knowledge, the conditions set forth
in Sections 10.3(a), (b) and (d) have been satisfied.
(d) TMR MATERIAL ADVERSE EFFECT. No TMR Material Adverse Effect shall have
occurred and there shall exist no fact or circumstance that would have, or would
be reasonably like to have, a TMR Material Adverse Effect.
(e) OPINION OF FULBRIGHT & XXXXXXXX, L.L.P. The Company and SLOPI shall
have received an opinion of Fulbright & Xxxxxxxx, L.L.P., in form and substance
satisfactory to the Company and SLOPI, addressed to the Company and SLOPI and
dated the Closing Date, which opinion may be based on appropriate
representations of TMR.
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(f) TMR REQUIRED CONSENTS. The TMR Required Consents shall have been
obtained except those that in the aggregate would not result in and would not
reasonably be likely to result in a TMR Material Adverse Effect.
(g) CERTIFICATE OF DESIGNATIONS. The Certificate of Designations for the
TMR Series A Preferred shall have been filed with and accepted by the Texas
Secretary of State.
(h) CHASE WAIVER. TMR shall have obtained from The Chase Manhattan Bank
its consent for the Merger and the issuance of TMR Common Stock and TMR Series A
Preferred thereunder, as contemplated by this Agreement.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Closing Date, whether before or after
approval by the stockholders of TMR or the Company:
(a) by mutual written consent of the Boards of Directors of the Company
and TMR;
(b) by either of the Company or TMR, by written notice to the other, if
the Effective Time shall not have occurred on or before August 1, 1998
("Termination Date") provided that the right to terminate this Agreement under
this Section 11.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before the Termination
Date; or
(c) by either of the Company or TMR, by written notice to the other party,
if the TMR Stockholders' Approval shall not have been obtained at a duly held
TMR Special Meeting, including any adjournments thereof; or
(d) by either of the Company or TMR, if any state or federal law, order,
rule or regulation is adopted or issued, that has the effect, as supported by
the written opinion of outside counsel for such party, of prohibiting the
Merger, or by either of the Company or TMR, if any court of competent
jurisdiction in the United States or any State shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
the Merger, and such order, judgment or decree shall have become final and
nonappealable; or
(e) by TMR, by written notice to the Company, if there shall have been any
material breach of any representation or warranty, or any material breach of any
covenant or agreement, of SLOPI or the Company hereunder, and such breach shall
not have been remedied within ten (10)
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business days after receipt by SLOPI and the Company of notice in writing from
TMR, specifying the nature of such breach and requesting that it be remedied; or
(f) by the Company, by written notice to TMR, if there shall have been any
material breach of any representation or warranty, or any material breach of any
covenant or agreement, of TMR hereunder, and such breach shall not have been
remedied within ten (10) business days after receipt by TMR of notice in writing
from the Company, specifying the nature of such breach and requesting that it be
remedied; or
(g) if the Board of Directors of TMR or any committee thereof shall, under
any circumstances, withdraw or modify in a manner adverse to the Company or
SLOPI its recommendation that TMR's shareholders approve the Share Issuance,
then by the Company, by written notice to TMR, within a period of ten (10) days
after the date of announcement of such withdrawal or modification.
SECTION 11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or TMR pursuant to Section 11.1, there shall be
no liability on the part of the Company, SLOPI or TMR or their respective
officers or directors hereunder, except that
(a) Section 9.1(b) (Confidentiality Agreement), Section 9.1(c)
(Indemnification Agreement), Section 9.5 (Disclosure Schedules; Proprietary
Data), Section 9.8 (Expenses), Section 9.11 (Withdrawal Fee) and Article XII
(General Provisions) shall survive, and
(b) no such termination shall relieve any party from liability by reason
of any willful breach of any agreement, representation, warranty or covenant
contained in this Agreement.
SECTION 11.3 AMENDMENT.
(a) This Agreement may be amended by the parties hereto pursuant to action
of their respective Boards of Directors, at any time before or after approval
hereof by the stockholders of TMR or the Company and prior to the Effective
Time, but after such approvals, no amendment shall:
(i) alter or change the amount or kind of shares to be received or
exchanged for or on conversion of any class or series of capital stock of either
corporation as provided under Article II, or
(ii) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially and adversely affect the rights of holders of Company Common Stock,
TMR Common Stock or TMR Series A Preferred.
(b) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
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SECTION 11.4 WAIVER. At any time prior to the Effective Time, to the
extent permitted by applicable law, the parties hereto may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by a duly authorized
officer of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 NON-SURVIVAL; INDEMNITIES.
(a) SURVIVAL OR NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties, covenants and agreements in this
Agreement and in the Disclosure Schedules, and all liability with respect
thereto, shall not survive the Merger and shall terminate as of the Merger,
except the covenants and agreements contained in Article III (Conversion of
Shares), Article XII (General Provisions), Section 5.3 (Capitalization), Section
6.3 (Capitalization), the last two sentences of Section 8.1 (Ordinary Course of
Business), Section 8.9 (Tax-Free Status), Section 8.14 (Affiliate Liabilities),
Section 9.1(b) (Confidentiality Agreement), Section 9.1(c) (Indemnification
Agreement), Section 9.5(c) (Disclosure Schedules; Proprietary Data), Section 9.8
(Expenses), Section 9.10 (Tax Matters), Section 9.11 (Withdrawal Fee), Section
9.12 (Transfer of Record Title to Properties), Section 11.2 (Effect of
Termination) and Schedule III (True-Up Procedures), each of which shall survive
in accordance with its terms.
(b) TAX REORGANIZATION INDEMNIFICATION. TMR has no plan or intention and
shall not knowingly take any action which would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368 of the Code (and
any comparable provisions of applicable state law). Without limiting the
foregoing, (i) TMR will characterize the Merger as such a reorganization for
purposes of any income tax returns and other filings, and (ii) TMR has no plan
or intention to and will not liquidate, merge, transfer or reorganize the
Company or permit the Company to transfer, sell, or otherwise dispose of any of
the Company's assets, if such action would cause the Merger to fail to qualify
as a reorganization within the meaning of Section 368 of the Code. If TMR's
actions, other than TMR's actions in the consummation of the Merger and the
issuance of TMR Common Stock and TMR Series A Preferred, shall cause the Merger
to fail to qualify as a reorganization within the meaning of Section 368 of the
Code, then TMR shall assume and accept the tax liability associated with such
non-qualification and indemnify SLOPI and the Shell Group, on an after-tax
basis, for such tax liability. If both TMR's and SLOPI's actions, other than
TMR's actions in the consummation of the Merger and the issuance of TMR Common
Stock and TMR Series A Preferred, cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368 of the
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Code, then each party shall bear and accept the responsibility and Tax liability
associated with their respective actions, and TMR shall indemnify SLOPI for its
portion of such Tax liability.
(c) POST CLOSING INDEMNIFICATION.
(i) BY SLOPI--LITIGATION. From and after the Effective Time, SLOPI
shall defend, indemnify and hold harmless the Company and the Surviving
Corporation against and in respect of those certain claims, costs, expenses,
liabilities, damages and judgments (collectively, "Claims") relating to the
litigation and claims described in Section 6.7 of the Company Disclosure
Schedule; provided, that to the extent that TMR, the Company or the Surviving
Corporation realizes a benefit after the Effective Time from the matters
identified in Section 6.7 of the Company Disclosure Schedule such benefit shall
offset the amount and indemnification to which the Company or Surviving
Corporation shall be entitled; and, provided further that no such
indemnification shall be provided as to that portion of matters within the
control of the Company, TMR or the Surviving Corporation after the Effective
Time or with respect to that portion of matters attributable to the continuation
of policies, calculations or procedures by TMR or the Surviving Corporation
after the Effective Time (collectively, the "Current Litigation Claims").
(ii) BY SLOPI--UNKNOWN CLAIMS. From and after the Effective Time,
SLOPI shall indemnify, defend and hold the Company and the Surviving Corporation
against and in respect of all Claims (other than the Current Litigation Claims)
that are (w) expressly and definitively made or claimed by bona fide third
parties against the Company or the Surviving Corporation prior to the date which
is one (1) year after the Effective Time, but not if made thereafter, and (x)
exceed, in the aggregate, a threshold basket of $7,500,000 and then only to the
extent, if any, of such excess, and (y) arise out of events occurring in the
conduct of the Company's business, assets and operations or circumstances
existing with respect to the Company's business, assets and operations, in each
case accrued and attributable up to and including, but not after, the Effective
Time; provided, however, that no indemnification shall be provided with respect
to that portion of matters that are attributable to the policies, calculations
or procedures that are continued by TMR or the Surviving Corporation after the
Effective Time.
(iii) BY TMR. From and after the Effective Time, TMR will indemnify,
defend and hold harmless SLOPI and any of SLOPI's Affiliates (other than the
Company and TMR) against and in respect of all Claims made by bona fide third
parties against SLOPI or any of SLOPI's Affiliates (other than the Company or
TMR) relating to the Company and its business, assets and operations (y) that
arise on or after, or are accrued or attributable to any time on or after
Effective Time or (z) are asserted against the Company or the Surviving
Corporation on or after the date which is one (1) year after the Effective Time,
irrespective of when the underlying events or circumstances occurred; provided,
however, that Section 9.10 (Tax Matters) shall be given full effect
notwithstanding the foregoing.
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(iv) The indemnifying party shall, at its expense, control the
defense and settlement of all Claims as to which indemnification is being
provided. An indemnified party, at its expense, shall have the right to
participate in the defense, but shall have no control over the defense or
settlement.
(D) THE FOREGOING INDEMNIFICATION IN THIS SECTION 12.1 IS TO BE GIVEN
EXPRESS AND FULL EFFECT EVEN IF, AS A RESULT THEREOF, AN INDEMNIFIED PARTY WOULD
BE INDEMNIFIED AGAINST ITS OWN NEGLIGENCE (WHETHER SOLE, CONCURRENT OR
CONTRIBUTORY) OR ITS STRICT (STATUTORY) LIABILITY. NOTHING IN THIS SECTION
12.1(D) SHALL EXPAND OR CONTRACT THE EXPRESS LANGUAGE OF THE FOREGOING
PROVISIONS OF SECTION 12.1.
SECTION 12.2 NO BROKERS.
(a) SLOPI and the Company represents and warrants that no broker, finder
or investment bank is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of SLOPI or the Company.
(b) TMR represents and warrants that, except for Chase, no broker, finder
or investment bank is entitled to any brokerage, finder's or other fee or
commission in connection with the transaction contemplated by this Agreement
based upon arrangements made by or on behalf of TMR.
SECTION 12.3 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) if delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) five (5)
days after being mailed by registered or certified mail (return receipt
requested) to the parties, in each case to the following addresses (or at such
other address for a party as shall be specified by like notice);
(i) if to SLOPI:
Shell Louisiana Onshore Properties Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
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with a copy to:
Shell Oil Company Legal Firm
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
(ii) if to the Company:
Louisiana Onshore Properties Inc.:
000 Xxxxx Xxxxx Xxxxxxx
X.X. Xxx 000
Xxxxxxx, Xxxxx 00000
Attention: X.X. Xxxx
Fax: (000) 000-0000
with a copy to:
Shell Oil Company Legal Firm
Xxx Xxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
(iii) if to TMR or TMR Sub:
The Meridian Resource Corporation
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Chairman and
Chief Executive Officer
Fax: (000) 000-0000
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with a copies to:
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxx Xxxx., 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention Xxxx X. Xxxxxxxxxxx
Fax: (000) 000-0000
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx
Fax: (000) 000-0000
SECTION 12.4 NO PUNITIVE DAMAGES. NOTWITHSTANDING ANYTHING TO THE
CONTRARY, NO PARTY SHALL BE ENTITLED TO RECOVER FROM ANY OTHER PARTY ANY LOSSES,
COSTS, EXPENSES, OR DAMAGES ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH
OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT IN ANY AMOUNT
IN EXCESS OF THE ACTUAL COMPENSATORY DAMAGES, ARBITRATION COSTS AND REASONABLE
ATTORNEY FEES AND EXPENSES TO ENFORCE THIS AGREEMENT, SUFFERED BY SUCH PARTY.
ALL PARTIES WAIVE ANY RIGHT TO RECOVER PUNITIVE, SPECIAL, EXEMPLARY AND
CONSEQUENTIAL DAMAGES ARISING UNDER THIS AGREEMENT OR IN CONNECTION WITH OR WITH
RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT. HOWEVER, THE
FOREGOING SHALL NOT LIMIT ANY INDEMNIFICATION OBLIGATIONS HEREUNDER OR PRECLUDE
ONE PARTY FROM BEING INDEMNIFIED BY ANOTHER PARTY AGAINST SUCH OBLIGATIONS.
SECTION 12.5 BINDING ARBITRATION. Any controversy or claim, whether based
on contract, tort, statute or other legal or equitable theory (including but not
limited to any claim of fraud, misrepresentation or fraudulent inducement or any
question of validity or effect of this Agreement, including this clause) arising
out of or related to this Agreement (including any amendments or extensions and
any agreements attached as Exhibits hereto), or the breach or termination
thereof shall be settled by arbitration in accordance with the then current CPR
Institute for Dispute Resolution Rules for Non-administered Arbitration of
Business Disputes, and this provision. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. xx.xx. 1-16 to the exclusion of any
provision of state law inconsistent therewith or which would produce a different
result, and judgment upon the award rendered by the arbitrators may be entered
by any court having jurisdiction.
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The arbitration shall be held in Houston, Texas, or at some other location
as mutually agreed upon by the parties. There shall be three arbitrators. TMR
and SLOPI shall each select an arbitrator, and those arbitrators shall select
the third arbitrator. To the extent the parties' dispute(s) concern matters of
(i) oil and gas law, geology and/or petroleum engineering and/or (ii)
environmental law and/or environmental science, then each arbitrator must be
trained and knowledgeable in such matters.
The arbitrators shall determine the claims of the parties and render a
final award. The arbitrators shall set forth the reasons for the award in
writing.
All statutes of limitations and defenses based upon passage of time
applicable to any claim of a defending party (including any counterclaim or
set-off) shall be tolled while the arbitration is pending.
The obligation to arbitrate all controversial claims shall extend to the
successors, assigns and third party beneficiaries of the parties.
The arbitrators shall order the parties to promptly exchange copies of all
documents regarding the materials in dispute, potential facts, witness lists and
expert witness lists, and, if requested by a party, to produce other relevant
documents, to answer up to ten (10) interrogatories (including subparts), to
respond to up to ten (10) requests for admissions (which shall be deemed
admitted if not denied) and to produce for deposition and, if requested, at the
hearing any or all listed witnesses, both fact and expert, within such party's
control. Any additional discovery shall only occur by agreement of the parties
or as ordered by the arbitrators upon a finding of good cause.
Each party shall bear its own costs, expenses and attorney's fees;
provided that if court proceedings to stay litigation or compel arbitration are
necessary, any party who, in such court proceedings, unsuccessfully opposes
implementation of any part of these arbitration requirements shall pay all
reasonable associated costs, expenses, and attorney's fees in connection with
such court proceeding.
In order to prevent irreparable harm, the arbitrators shall have the power
to grant temporary or permanent injunctive or other equitable relief. Prior to
the appointment of an arbitrator a party may, notwithstanding any other
provision of this Agreement, seek temporary injunctive relief from any court of
competent jurisdiction; provided that the party seeking such relief shall (if
arbitration has not already been commenced) simultaneously commence arbitration.
Such court ordered relief shall not continue more than ten (10) days after the
appointment of the arbitrators (or in any event for longer than sixty (60)
days). Except as required by law (and then only after prior notice to the other
party), no party shall disclose the facts of the underlying dispute or the
contents or result of the arbitration without the prior consent of all parties.
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If any part of this arbitration provision is held to be unenforceable, it
shall be severed and shall not affect either the duty to arbitrate or any other
part of this provision.
SECTION 12.6 DTPA WAIVER. ALL PARTIES HEREBY WAIVE, TO THE EXTENT (IF ANY)
APPLICABLE, THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT (OTHER THAN THE PROVISIONS OF SECTION 17.555 THEREOF, WHICH ARE
NOT WAIVED).
SECTION 12.7 MISCELLANEOUS.
(a) This Agreement, including the documents and instruments referred to
herein, (i) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof other than the
Indemnification Agreement and the Confidentiality Agreement, (ii) shall not be
assigned by operation of law or otherwise, and (iii) shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of laws statutes, rules or principles.
(b) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect. The parties hereto shall
negotiate in good faith to replace any provision of this Agreement so held
invalid or unenforceable with a valid provision that is as similar as possible
in substance to the invalid or unenforceable provision.
SECTION 12.8 INTERPRETATION. When reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article, Section
or Exhibit of this Agreement, as the case may be, unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense.
SECTION 12.9 COUNTERPARTS; EFFECT. The Agreement may be executed in one or
more counterparts each of which shall be deemed to be an original, but of which
shall constitute one and the same agreement.
SECTION 12.10 PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any person any rights
or remedies of any nature whatsoever under or by reason of this Agreement.
-46-
SECTION 12.11 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 12.12 FURTHER ASSURANCES. Each party hereto shall execute such
further documents and instruments and take such further actions as may
reasonably be requested by other party hereto in order to consummate the Merger
in accordance with the terms hereof.
SECTION 12.13 CONTINGENT CONSIDERATION. Pursuant to the terms of Exhibit
H, and upon the occurrence of the events specified therein, TMR shall, to the
extent required thereby, issue and deliver to SLOPI additional fully paid and
non-assessable shares of TMR Common Stock.
SECTION 12.14 GAS IMBALANCES. TMR acknowledges that the Surviving
Corporation will assume all liabilities with respect to the gas imbalances shown
on Section 6.5 of the Company Disclosure Schedule.
-47-
IN WITNESS WHEREOF, TMR, TMR Sub, SLOPI and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
"SLOPI" "TMR"
SHELL LOUISIANA ONSHORE THE MERIDIAN RESOURCE
PROPERTIES INC. CORPORATION
By: /s/ X. X. XXXXXXX By: /s/ XXXXXX X. XXXXXX, XX.
Name: X. X. Xxxxxxx Name: Xxxxxx X. Xxxxxx, Xx.
Title:President Title:Chief Executive Officer
"Company" "TMR Sub"
LOUISIANA ONSHORE PROPERTIES LOPI ACQUISITION CORP.
INC.
By: /s/ X. X. XXXXXXX By: /s/ XXXXXX X. XXXXXX, XX.
Name: X. X. Xxxxxxx Name: Xxxxxx X. Xxxxxx, Xx.
Title:President Title:Chief Executive Officer
-48-
Limited Joinder and Guaranty by Shell Western E&P Inc.:
In order to induce TMR and TMR Sub to execute and deliver this Merger Agreement,
and in consideration thereof, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, Shell Western E&P, Inc., a Delaware
corporation ("SWEPI"), hereby absolutely and unconditionally guarantees to the
Company and the Surviving Corporation (as their respective interests may
appear), as primary obligor and not merely as surety, the full and prompt
payment and performance when due and compliance by SLOPI with all of SLOPI's
obligations under Sections 9.10, (Tax Matters), 9.12 (Transfer of Record Title
of Properties), 12.1(c) (Post Closing Indemnification) and Schedule III (True-Up
Accounting Procedures) of the Merger Agreement (collectively, the "Guaranteed
Obligations"). The obligations of SWEPI hereunder are absolute, present and
continuing obligations which are not conditional upon the exercise of any
remedies against SLOPI or the making of a demand against SLOPI or the filing of
a suit to obtain or assert a claim for personal judgment against SLOPI for the
Guaranteed Obligations or the making of an effort at collecting the Guaranteed
Obligations from SLOPI, or the taking of any other action with respect to SLOPI,
it being expressly acknowledged and agreed that SWEPI shall be directly
obligated hereunder for all amounts payable by SLOPI pursuant to the Guaranteed
Obligations. SWEPI has all requisite power and authority to enter into this
Guaranty. The execution and delivery of this Guaranty by SWEPI have been duly
authorized by all necessary corporate action on the part of SWEPI. This Guaranty
has been duly and validly executed and delivered by SWEPI and constitutes the
valid and binding obligation of SWEPI, enforceable against SWEPI in accordance
with its terms, except as would be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies, including specific performance, may be subject to the
discretion of any court before which any proceeding therefor may be brought. The
execution and delivery of this Guaranty by SWEPI do not result in any violation
by SWEPI under any provisions of: the certificate of incorporation, bylaws or
similar governing documents of SWEPI; any judgment, decree, order or injunction
of any Governmental Authority applicable to SWEPI or any of its properties or
assets or any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which SWEPI is now a party or by which it or any of
its properties or assets may be bound or affected; excluding from the forgoing
clauses such violations as would not, in the aggregate, be reasonably likely to
have a material adverse effect on SWEPI.
-49-
SHELL WESTERN E&P INC.
By: /s/ Y. N. YOUSSEF
Name: Y. N. Youssef
Title:Attorney-in-fact
-50-
EXHIBIT A
DIRECTORS OF SURVIVING CORPORATION
Xxxxxx X. Xxxxxx, Xx.
Xxxxxxx X. Xxxxxx
Xxxxx X. XxXxxx
A-1
EXHIBIT B
OFFICERS OF SURVIVING CORPORATION
Xxxxxx X. Xxxxxx, Xx. - Chief Executive Officer and Chairman
of the Board
Xxxxxxx X. Xxxxxx - President
X. Xxxxxxx Gessenger - Chief Financial Officer
Xxxxx X. XxXxxx - Vice President, Treasurer and
Assistant Secretary
Xxxxxxx Xxxx - Secretary
Xxxxx XxXxxxxxx - Executive Vice President
B-1
EXHIBIT C
BASIS OF CONVERSION AND CONVERSION RIGHTS
Upon consummation of the Merger, SLOPI shall receive a total 12,082,030
shares of Common Stock and a number of shares of Preferred Stock calculated as
provided below:
The Preferred Stock to be issued to SLOPI upon consummation of the Merger
shall be convertible into a number of shares of Common Stock calculated by the
following formula:
Fully-Diluted Shares of Common Stock on the Effective Date DIVIDED
BY .601 = "Total Post Closing Diluted Common Stock."
"Total Post Closing Diluted Common Stock" MULTIPLIED BY .399 =
"Total SLOPI Beneficial Ownership."
"Total SLOPI Beneficial Ownership" LESS 12,082,030 = The number of
shares of Common Stock into which the Preferred Stock issued to
SLOPI upon consummation of the Merger is convertible.
The Conversion Price per share of Preferred Stock issued on the Effective
Date shall be calculated utilizing the following formula:
$135,000,000 DIVIDED BY the number of shares of Common Stock into
which the Preferred Stock issued to SLOPI upon consummation of the
Merger is convertible (calculated above).
The number of shares of Preferred Stock to be issued on the Effective Date
shall be calculated as follows:
The total votes outstanding immediately following the Effective Time
are equal to the sum of the number of shares of Common Stock
immediately prior to the Effective Time PLUS 12,082,030 (Common
Stock to be issued at the Effective Time), the total of which is
DIVIDED BY .92.
Total Votes Outstanding Immediately following the Effective Time
MULTIPLIED BY .08 = number of shares of Preferred Stock.
However, in the event that the closing price of the Common Stock at the
Effective Time is equal to or less than $6.00 or equal to or greater than $12.00
per share, the calculation of the number of shares of Preferred Stock issued in
the Merger shall be adjusted so that the ratio of votes represented by the
C-1
Preferred and the Common Stock does not jeopardize the qualification of the
Merger as a tax-free reorganization under Section 368 of the Code; provided,
however, the calculation of the number of shares of Common Stock into which the
Preferred Stock is convertible, and the related conversion price, shall not
change.
Stated Value per share of Preferred Stock shall be calculated as follows:
$135,000,000 DIVIDED BY Number of Shares of Preferred Stock.
C-2
EXHIBIT D
COMPANY FINANCIAL STATEMENTS
(OMITTED)
EXHIBIT E
Form of Certificate of Designation
for
TMR SERIES A PREFERRED
E-1
THE MERIDIAN RESOURCE CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF A SERIES OF PREFERRED
STOCK BY RESOLUTION OF THE BOARD OF DIRECTORS PROVIDING FOR AN ISSUE OF ______
SHARES OF PREFERRED STOCK DESIGNATED SERIES A CUMULATIVE CONVERTIBLE PREFERRED
STOCK.
The Meridian Resource Corporation, a Texas Corporation (the "Company"),
pursuant to the provisions of Article 2.12 of the Texas Business Corporation Act
("TBCA"), does hereby state and certify that, pursuant to the authority
expressly vested in the Board of Directors of the Company by the Second Amended
and Restated Articles of Incorporation of the Company, as amended, that the
Board of Directors, at a meeting thereof duly called and held on March , 1998,
at which meeting a quorum was present and acting throughout, duly adopted the
following resolutions providing for the issue of shares of Preferred Stock
hereinafter referred to, and further providing with respect to such issue of
shares of Preferred Stock for such powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, as are hereinafter set
forth, in addition to those set forth in said Articles of Incorporation;
RESOLVED, that pursuant to Article Four of the Second Amended and Restated
Articles of Incorporation of the Company, as amended (which authorizes the
Company to issue up to 25,000,000 shares of Preferred Stock, par value $1.00 per
share), the Board of Directors hereby provides for the issue of a series of up
to _______________ shares of Preferred Stock designated "Series A Cumulative
Convertible Preferred Stock"; and
RESOLVED, that the powers, designations, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations or restrictions thereof, of the shares of the Series A Cumulative
Convertible Preferred Stock shall be as follows:
SECTION 1. DESIGNATION AND RANK. The designation of the series of
Preferred Stock created by this resolution shall be "Series A Cumulative
Convertible Preferred Stock", and the number of shares constituting this Series
shall have a stated value of [$135 million divided by the number of shares
issued] per share (the "Stated Value"). The shares of this Series shall rank
prior to the Junior Stock (as defined in Section 8) as to distribution of assets
and payments of dividends.
SECTION 2. DIVIDENDS.
(a) Shares of this Series shall be entitled to receive, when and as
declared by the Board of Directors, a cash dividend at the dividend rate of four
percent (4%) per annum (the "Dividend Rate") on the Stated Value per share of
this Series, and no more; provided, however, that dividends shall cease to
accrue on shares of the Series on the following schedule: ________ shares [1/3]
on the third anniversary of the date of original issuance (the "Sub-Series
A-I"); ____ shares [1/3] on the fourth anniversary of the date of original
issuance (the "Sub-Series A-II"); and ____ shares [1/3] on the fifth anniversary
of the date of original issuance (the "Sub-Series A-III") (collectively, the
"Sub-Series"). The certificates evidencing shares of the Series will specify
whether the shares represented thereby are designated Sub-Series A-I, Sub-Series
A-I or Sub- Series A-III. Dividends shall be cumulative, shall accrue (whether
or not declared and whether or not there shall be funds legally available for
the payment of dividends) from the data of original issuance and shall be
payable in arrears, out of assets legally available therefor, when and as
declared by the Board of Directors of the Company, on January 1, April 1, July
1, and October 1 of each year in which dividends are payable, commencing , 1998,
(except that if any such date is a Saturday, Sunday or a Business Day then such
dividend shall be payable without interest on the next day that is not a
Saturday, Sunday or Business Day) (each three-month period expiring on a
dividend payment date being referred to herein as a "Dividend Period").
Dividends shall be paid to the holders of record of shares of each Sub-Series
entitled thereto as they appear on the stock register of the Company on such
record dates, not exceeding 30 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors. Dividends on account of arrears for
any past Dividend Periods (an "Arrearage") may be declared and paid at any time,
without reference to any regular dividend payment date, to holders of record on
such date, not exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors. Until paid in full, each Arrearage shall also
accrue dividends at the rate of 4% per annum. All dividends and Arrearages
respectively, shall be declared and paid pro rata on all Sub-Series, based on
the aggregate of the accrued dividends, Arrearages and dividends on Arrearages,
respectively, for the various Sub-Series.
(b) No dividends (other than a dividend in Junior Stock or other than as
provided in Section 2(b)) shall be declared or paid or set apart for payment on
Junior Stock for any period unless (i) full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for such payment on this Series for all Dividend
Periods terminating on or prior to the date of payment of such full cumulative
dividends Holders of shares of this Series shall not be entitled to any
dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends.
(c) So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Junior Stock or other than as provided in Section
2(b)) shall be declared or paid or set aside for payment or other distribution
declared or made upon the Junior Stock, nor shall any Junior
-2-
Stock be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of any
shares of Junior Stock) by the Company (except by conversion into or in exchange
for Junior Stock) unless, in each case, full cumulative dividends on all
outstanding shares of this Series then payable shall have been paid.
(d) Dividends payable on this Series for a period less than a full
Dividend Period shall be computed on the basis of the ratio of the number of
days in such partial period to the actual number of days in such full Dividend
Period.
SECTION 3. VOTING AND ELECTION OF DIRECTORS.
(a) The holders of outstanding shares of this Series shall be entitled to
vote, with the Common Stock and any other capital stock voting with the Common
Stock, with respect to all matters for which a vote of the holders of Common
Stock is taken. Each holder of outstanding shares of this Series shall be
entitled to that number of votes as are equal to the number of shares of this
Series held by such holder. The record date for holders of shares of the Series
entitled to vote on any matters submitted to the holders of Common Stock for
their vote, whether at an annual or special meeting of shareholders or by
unanimous written consent, shall be the same date as the record date established
for the Common Stock.
(b) So long as any shares of this Series remain outstanding, the
affirmative vote or consent of the holders of a majority of the shares of this
Series outstanding at the time, voting as a single class, given in person or by
proxy, either in writing or at a meeting, shall be necessary to permit, effect
or validate any of the following: (i) the authorization, creation or issuance,
or any increase in the authorized or issued amount, of any class of series of
Senior Stock or Parity Stock (both as defined in Section 8) or (ii) the
amendment, restatement, modification, alteration or repeal of any of the
provisions of this Certificate of Designation.
(c) Until the earlier of (i) the termination of the Stock Rights and
Restrictions Agreement to be entered into on or about _____________, 1998, as it
may be amended from time to time (the "SLOPI Agreement"), between the Company
and Shell Louisiana Onshore Properties, Inc., a Delaware Corporation ("SLOPI")
or (ii) SLOPI and its Affiliates shall Beneficially Own shares of Common Stock
constituting less than 21% of the then outstanding shares of Common Stock, then,
in connection with each election of directors of the Company, whether at an
annual or special meeting, the holders of this Series shall be entitled to elect
at such meeting a number of directors (the "Preferred Directors") such that,
after giving effect to the election of such persons to the Board of Directors of
the Company, the number of Preferred Directors then serving on the Board of
Directors of the Company shall equal the product (rounded downward to the
nearest whole number, but, in any event, not less than one) of (i) the total
number of directors constituting the entire Board of Directors multiplied by
(ii) 20% (the "Director Percentage").
-3-
(d) If at any time the number of directors constituting the Board of
Directors of the Company shall decrease so that the holders of the Series would
be entitled to designate fewer directors than are then serving as Preferred
Directors, the holders of the Series, one or more of the Preferred Directors
shall resign so that the percentage of the Board of Directors consisting of
Preferred Directors does not exceed the Director Percentage (rounded downward to
the nearest whole number but in no event less than one); provided, that, if a
Preferred Director does not resign, the members of the Board of Directors who
are not Preferred Directors shall be entitled to remove such Preferred Director.
Further, (i) upon termination of the SLOPI Agreement in accordance with its
terms or (ii) the conversion of all outstanding shares of this Series into
Common Stock, all Preferred Directors then serving as directors of the Company
shall immediately cease to be members of the Company's Board of Directors and
shall be deemed to have resigned on the date of such termination.
(e) (i) In the event that any Preferred Director shall cease to serve as a
director for any reason (other than as set forth in Section (d) immediately
above), the vacancy resulting thereby shall be filled by appointment by any
Preferred Director remaining, and in the absence of action by the remaining
Preferred Directors, by the holders of the Series, and such Preferred Director
shall thereafter serve until the expiration of the term of the Preferred
Director replaced by such new Preferred Director.
(ii) Subject to the provisions of Section 3(f) below, if there shall
exist at any time any vacancy or vacancies on the Board of Directors of the
Company as a result of any increase in the number of directors that constitutes
the entire Board of Directors of the Company, which the directors of the Company
then in office intend to fill in accordance with the Company's then existing
Articles of Incorporation, by-laws and applicable law, the holders of the Series
shall be entitled to designate one or more persons to fill such vacancy or
vacancies if and to the extent necessary so that, after giving effect to the
filling of such vacancy or vacancies, the number of Preferred Directors then
serving on the Board of Directors of the Company shall equal the Director
Percentage (rounded downward to the nearest whole number but in no event less
than one).
(f) Notwithstanding anything to the contrary contained herein, no
Preferred Director may be a person who previously has been a director of the
Company and was properly removed for cause from the Board of Directors of the
Company or a person who has been convicted of a felony or a crime involving
moral turpitude.
(g) At all times when there is a Preferred Director on the Company's Board
of Directors, at least one shall be a member of each Audit Committee of the
Board of Directors. All members of the Audit Committee shall have access to the
Company's independent accountants and all audit and tax work papers to the same
extent as any other member of the Audit Committee.
-4-
(h) The Preferred Directors will be furnished with all information that is
provided to all other directors of the Company (in their capacities as such) at
the same time as such information is furnished to such other directors (in their
capacities as such).
(i) All Preferred Directors shall comply with the retirement policies of
the Company as in effect on the date hereof or as hereafter amended or modified
from time to time by the Board of Directors of the Company or its stockholders;
provided that no such amendment or modification to such policies shall be
binding upon a Preferred Director unless at least one Preferred Director shall
have voted in favor of such amendment or modification at the meeting, or in the
action in lieu of a meeting, of the Board of Directors of the Company at or in
which it is considered.
(j) The election of Preferred Directors or approval under paragraph (b)
above shall be by holders of a majority of the issued and outstanding Series as
reflected on the stock books of the Company on the applicable record date, or if
by written consent, on the date of such consent. The record date for holders of
shares of the Series entitled to vote on matters pursuant to this Section 3 at a
meeting of the holders of the Series shall be established by the Board of
Directors of the Company and shall not precede 60 days before such meeting.
Special meetings of the holders of the Series may be called by any holder of
more than 25% of the outstanding shares of the Series, except that the Company
may call a special meeting of the holders of the Series in connection with any
action to be voted on pursuant to paragraph (b) above. Any action taken by
written consent of the holders of the Series need not be unanimous and such
action will be effective upon delivery of such written consent to the Secretary
of the Company.
SECTION 4. LIQUIDATION. In the event of any complete liquidation,
dissolution or winding-up of the Company, whether voluntary or involuntary the
holders of shares of this Series shall each be entitled to receive out of assets
of the Company, whether such assets are capital or surplus, for each share of
this Series a sum equal to the Stated Value plus the amount of any accrued and
unpaid dividends on such share plus interest accrued but unpaid on any
Arrearage, before any distribution shall be made to the holders of Junior Stock
of the Company, and if the assets of the Company shall be insufficient to pay in
full such amounts, then such assets shall be distributed among the holders of
this Series ratably in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in full.
SECTION 5. CONVERSION.
(a) Each share of this Series shall be convertible at the option of the
record holder thereof at any time by presentation of the certificate
representing such share by the record holder in person or by registered mail,
return receipt requested with postage prepaid thereof, at the principal office
of the Company, and at such other offices, if any, as the Board of Directors may
determine, into the
-5-
number of fully paid and nonassessable shares of Common Stock determined by
dividing the Stated Value by the Conversion Price in effect on the Conversion
Date.
(b) The conversion price initially shall be $_______ (the "Conversion
Price") and shall be subject to adjustment from time to time as follows:
(i) If the Company, at any time while any shares of this Series are
outstanding, shall (A) pay a stock dividend or stock dividends or
otherwise make a distribution or distributions on shares of its capital
stock payable in shares of Common Stock (or in securities convertible into
shares of Common Stock), (B) except as set forth in clause (A) above, pay
a stock dividend or make a distribution on shares of its capital stock
payable in shares of its capital stock of any class other than Common
Stock or a class convertible into Common Stock, (C) subdivide outstanding
shares of Common Stock into a larger number of shares, (D) combine
outstanding shares of Common Stock into a smaller number of shares, or (E)
issue by reclassification of shares of Common Stock any shares of capital
stock of the Company of any class or classes, the Conversion Price in
effect immediately prior to such action shall be adjusted so that the
holder of any shares of this Series thereafter surrendered for conversion
shall be entitled to receive the number and class or classes of shares of
the capital stock of the Company which he would have owned or have been
entitled to receive immediately after the happening of any of the events
described above, had such shares of this Series been converted on or
immediately prior to the record date for such dividend or distribution or
the effective date of such subdivision, combination or reclassification,
as the case may be. An adjustment made pursuant to this subsection 5(b)(i)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(ii) If the Company, at any time while any shares of this Series are
outstanding, shall issue rights or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after the record date
mentioned below) to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value of Common Stock at
the record date mentioned below, the Conversion Price at which each share
of this Series shall thereafter be convertible shall be reduced by
multiplying the Conversion Price in effect immediately prior to such
record date by a fraction, of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate
offering price of the total number of shares so offered would purchase
-6-
at such Per Share Market Value. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately
after the record date for the determination of stockholders entitled to
receive such rights or warrants. However, upon the expiration of any right
or warrant to purchase Common Stock the issuance of which resulted in an
adjustment in the Conversion Price of the shares of this Series pursuant
to this Subsection 5(b)(ii), if any such right or warrant shall expire and
shall not have been fully exercised, the Conversion Price per share of
Common Stock at which each share of this Series shall thereafter be
convertible shall immediately upon such expiration be recomputed and
effective immediately upon such expiration be increased to the price which
it would have been (but reflecting any other adjustments in the Conversion
Price made pursuant to the provisions of this Section 6 after the issuance
of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights or warrants been made on the basis
of offering for subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or
warrants which were actually exercised. No adjustment shall be made
pursuant to this Section 5(b)(ii) if rights and warrants are also
distributed to the holders of this Series on the basis of the number of
shares of Common Stock then issuable on conversion of the shares of this
Series.
(iii) If the Company, at any time while shares of this Series are
outstanding, shall distribute to all holders of Common Stock evidences of
its indebtedness or assets (excluding cash dividends or cash distributions
paid out of earned surplus) or rights or warrants to subscribe for or
purchase any security (excluding those referred to in Subsection 5(b)(ii)
above) then in each such case the Conversion Price per share of Common
Stock at which each share of this Series shall thereafter be convertible
shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction, of which
the denominator shall be the Per Share Market Value of Common Stock
determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock, less
the then fair market value (as determined by the Board of Directors of the
Company (the "Board") in good faith, whose determination shall be
conclusive if made in good faith; provided, however, that in the event of
a distribution or series of related distributions exceeding 10% of the net
assets of the Company, then such fair market value shall be determined by
a nationally recognized or major regional investment banking firm or firm
of independent certified public accountants of recognized standing (which
may be the firm that regularly examines the financial statements of the
Company) selected in good faith by the Board, and in either case shall be
described in a statement provided to all registered holders of this
Series) of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date
mentioned above. No adjustment shall be made pursuant
-7-
to this subsection 5(b)(iii) if such evidence of indebtedness or assets
are also distributed to the holders of this Series on the basis of the
number of shares of Common Stock then issuable on the conversion of the
shares of this Series.
(iv) No notification to the holders of any adjustment in the
Conversion Price otherwise required by this Section 5 shall be required
unless such adjustment would require an increase or decrease of at least
1% in such price; provided, however, that any adjustment which by reason
of this subsection 5(b)(iv) is not required to be made shall be carried
forward and taken into account in any subsequent adjustments, and that
upon presentment of shares of this Series for conversion, all adjustment
shall be made calculating the conversion rights of such holder. All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.
(v) Subject to (iv) above, whenever the Conversion Price is
adjusted, as herein provided, the Company shall promptly mail to each
registered holder of shares of this Series a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment. Such notice prepared in good faith
shall be conclusive evidence of the correctness of such adjustment absent
manifest error.
(vi) In case:
(A) the Company shall declare a dividend (or any other
distribution) on the Common Stock payable otherwise than in cash out
of its earned surplus; or
(B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to the holders of
the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or
(D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock
of the Company (other than a subdivision or combination of the
outstanding shares of Common Stock), any consolidation or merger to
which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(E) of the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company,
-8-
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the shares of this series, and shall cause to be
mailed to the holders of record of the shares of this Series at their last
addresses as they shall appear upon the stock books of the Company, at least 10
days prior to the applicable record date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(c) In case of any reclassification of the Common Stock, then the holders
of the shares of this Series then outstanding shall have the right thereafter to
convert such shares only into the kind and amount of shares of stock and other
securities and property receivable upon or deemed to be held following such
reclassification by a holder of a number of shares of the Common Stock of the
Company into which such shares of this Series could have been converted
immediately prior to such reclassification. This provision shall similarly apply
to successive reclassifications.
(d) In case of any consolidation or merger of the Company with or into
another Person in which the Company is not the surviving entity or any
compulsory share exchange pursuant to any of which the Common Stock is converted
into other securities, cash or property (any such event being hereinafter
referred to as "Reorganization"), then the terms of such Reorganization shall
provide that each holder of share of this Series then outstanding shall have the
right to receive in exchange therefor the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization
("Reorganization Consideration") by a holder of the number of shares of the
Common Stock of the Company into which (x) a share of this Series (or
Sub-Series) could have been converted as of the effective date of the
Reorganization, plus (y) the Arrearage (if any) on a share of this Series could
have been exchanged as of the effective date of the Reorganization.
(e) In case at any time conditions shall arise by reason of action taken
by the Company, which, in the opinion of the Board of Directors of the Company,
are not adequately covered by the other provisions hereof and which might
materially and adversely affect the rights of the holders of shares of this
Series, the Board of Directors of the Company shall appoint a firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company), who
shall give their opinion as to the adjustment, if any
-9-
(not inconsistent with the standards established in this Section 5, of the
Conversion Price (including, if necessary, any adjustment as to the securities
into which shares of this Series may thereafter be convertible) which is or
would be required to preserve the rights of the holders of shares of this
Series. The Board of Directors of the Company shall make the adjustment
recommended forthwith upon the receipt of such opinion or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
investment banking firm or firm of accountants giving the aforesaid opinion
would result in an increase of the Conversion Price to more than the Conversion
Price then in effect.
Section 6. MATTERS RELATING TO ISSUANCE OF COMMON STOCK. The following
provisions shall be applicable to issuances of Common Stock upon conversion of
shares of this Series.
(a) The Company covenants that it will at all times reserve and keep
available, out of its authorized and unissued Common Stock solely for the
purpose of issuance upon conversion of this Series as herein provided, free from
preemptive rights or any other actual or contingent purchase rights of Persons
other than the holders of shares of this Series, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
this Series. The Company covenants that all shares of Common Stock that shall be
so issuable shall upon issue be duly and validly issued and fully paid and
nonassessable.
(b) The Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but may, if otherwise
permitted, make a cash payment in respect of any final fraction of a share based
on the Per Share Market Value at such time. If the Company elects not, or is
unable, to make such a cash payment, the holder of a share of this Series shall
be entitled to receive, in lieu of the final fraction of a share, one whole
share of Common Stock.
(c) The issuance of certificates for shares of Common Stock on conversion
of this Series shall be made without charge to the holders thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided, that the Company shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the holder of the shares of this Series converted was made and the Company
shall not be required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
(d) The exercise by a holder of shares of this Series of the conversion
rights granted herein is subject in all respects to and conditioned upon
compliance by the parties with the HSR Act, and rules and regulations
promulgated pursuant thereto, to the extent that said act, rules and regulations
are applicable to such exercise. The Company and such holder agree to make such
filings
-10-
with and provide such information to the Federal Trade Commission and the
Department of Justice with respect to such exercise as are required in
connection with the HSR Act in a timely manner and to join each others request
for early termination. The Company and such holder will use such reasonable
efforts to obtain all governmental approval required to permit such exercise and
to cause early termination of the waiting period under the HSR Act.
SECTION 7. AUTOMATIC CONVERSION. If on or after __________________, 2001
[third anniversary of issuance], (a) any shares of this Series have not been
converted into shares of Common Stock and (b) the mean average Per Share Market
Value exceeds 150% of the Conversion Price for 75 consecutive Trading Days, then
all such shares of this Series shall automatically be converted into the number
of shares of Common Stock determined by dividing the Stated Value by the
Conversion Price in effect at the time of conversion.
SECTION 8. DEFINITIONS. For the purposes hereof, the following terms shall
have the following respective meanings:
"Affiliate" shall mean, with respect to any specified Person, any other
Person, directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, "controlling,"
"controlled by," and "under common control with") means the power to direct or
cause the direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract, or
otherwise and, and with respect to a corporation or partnership, control shall
mean direct or indirect ownership of more than fifty percent (50%) of the voting
stock or general partnership interest or voting interest in any such corporation
or partnership.
"Arrearage" has the meaning specified in Section 2(a).
"Arrearage Exchange" has the meaning specified in Section 2(b).
"Beneficially Own" shall have the meaning assigned to such term in Rule
13d-3 under the Exchange Act in effect on the date hereof. "Beneficial Owner"
and "Beneficial Ownership" shall have correlative meanings.
"Business Day" shall mean any day that commercial banks located in
Houston, Texas are legally open for business.
"Change of Control" shall mean the acquisition by a Person other than
SLOPI or its Affiliates of Beneficial Ownership of more than 50% of the then
outstanding shares of Common Stock.
-11-
"Common Stock" means shares now or hereafter authorized of the class of
Common Stock, $0.01 par value, of the Company presently authorized and stock of
any other class into which such shares may hereafter have been reclassified or
changed.
"Conversion Date" means the date the stock certificate is received by the
Company for conversion in accordance with Section 5(a).
"Conversion Price" has the meaning specified in Section 5(b).
"Dividend Period" has the meaning specified in Section 2(a).
"Dividend Rate" has the meaning specified in Section 2(a).
"Exchange Notice" has the meaning specified in Section 2(b).
"Fully Diluted Shares" means, at any time, the sum of the shares of Common
Stock then outstanding or committed plus the number of shares of Common Stock
for issuance or issuable in connection with the exercise, exchange or conversion
of options, warrants or securities of the Company then outstanding or committed
which are or are to be exercisable or exchangeable for shares of Common Stock or
are or are to be convertible into shares of Common Stock (including, without
limitation, this Series).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"Junior Stock" means the Common Stock of the Company and any other stock
of the Company over which shares of this Series has a preference as to
distribution of assets and payment of dividends.
"Parity Stock" means any stock of the Company ranking as to distribution
of assets and payment of dividends on a parity with this Series.
"Per Share Market Value" means on any particular date (a) the last sale
price per share of the Common Stock on such date on the principal stock exchange
on which the Common Stock has been listed or, if there is no such price on such
date, then the last sale price on such exchange on the date nearest preceding
such date, or (b) if the Common Stock is not listed on any stock exchange, the
final bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq National Market at the close of business on such date, or
the last sales price if such price is reported and final ibid prices are not
available, or (c) if the Common Stock is not quoted on the Nasdaq National
Market, the bid price for a share of Common Stock in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices), or (d)
if the Common Stock is no longer publicly traded, as determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) selected in good
faith by the Board of Directors of the Company, provided, that none of
-12-
the transactions related to the foregoing shall include purchases by any
"affiliate" (as such term is defined in the General Rules and Regulations under
the Securities Act of 1933) of the Company.
"Person" means any individual, firm, partnership, association, group (as
such term is defined in Section 13(d)(3) of the Exchange Act, as in effect on
the date hereof), corporation, trust, business trust or other entity, and
includes any successor (by merger or otherwise) of any such entity.
"Preferred Stock" means the Company's Preferred Stock, par value $0.01 per
share.
"Reorganization" has the meaning specified in Section 5(d).
"Reorganization Consideration" has the meaning specified in Section 5(d).
"Senior Stock" means any stock of the Company which has a priority over
shares of this Series as to payment of dividends or distribution of assets of
the Company.
"SLOPI" means Shell Louisiana Onshore Properties, Inc., a Delaware
corporation.
"Stated Value" has the meaning specified in Section 1.
"Trading Day" means (a) a day on which the Common Stock is traded on the
principal stock exchange on which the Common Stock has been listed, or (b) if
the Common Stock is not listed on any stock exchange, a day on which the Common
Stock is quoted in the over-the-counter market, as reported by National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), or (c)
if the Common Stock is not quoted by NASDAQ, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices).
-13-
IN WITNESS WHEREOF, The Meridian Resource Corporation has caused this
Certificate to be signed by a duly authorized officer, this _____ day
of______________, 1998.
THE MERIDIAN RESOURCE CORPORATION
By: Xxxxxx X. Xxxxxx, Xx.
Chief Executive Officer and
Chairman of the Board
ATTEST:
By:
-14-
EXHIBIT F
FORM OF STOCK RIGHTS AND RESTRICTION AGREEMENT
F-1
STOCK RIGHTS AND RESTRICTIONS AGREEMENT
STOCK RIGHTS AND RESTRICTIONS AGREEMENT, dated as of ________ ___, 1998,
between The Meridian Resource Corporation, a Texas corporation ("TMR"), and
Shell Louisiana Onshore Properties Inc., a Delaware corporation ("SLOPI").
RECITALS:
A. After giving effect to the Closing (as defined below), SLOPI owns
__________ shares of Common Stock (the "Common Shares") and __________ shares of
Preferred Stock (the "Preferred Shares") (together with any additional Common
Shares or Preferred Shares which SLOPI or any Affiliate of Shell (as defined
below) may from time to time own (collectively, the "Shares")).
B. After giving effect to the Closing, the number of directors
constituting the whole Board of Directors of TMR is seven (7) and the following
person is the initial Preferred Director (as defined below): X.X. Xxxx.
C. The Boards of Directors of TMR and SLOPI deem it advisable to establish
certain rights and restrictions with respect to the Shares.
ACCORDINGLY, premises considered, the parties have entered into this
Agreement.
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the meanings indicated:
(a) "Affiliate" shall mean, with respect to any specified Person,
any other Person, directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For the purposes
of this definition, "control" (including, with correlative meanings,
"controlling," "controlled by," and "under common control with") means the power
to direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract, or otherwise and, with respect to a corporation or partnership,
control shall mean direct or indirect ownership of more than fifty percent (50%)
of the voting stock or general partnership interest or voting interest in any
such corporation or partnership.
(b) "Allocated Price Per Share" shall mean the then existing
conversion price of the Preferred Shares (or if all of the Preferred Shares
shall have been converted, the conversion price that would have then been in
existence had the Preferred Shares not been so converted) as the same may be
adjusted from time to time in accordance with the terms thereof.
(c) "Applicable Percentage" shall mean 21%.
(d) "Average Per Share Market Value" of shares of Common Stock shall
mean the average of the Per Share Market Value of such shares for the 30 Trading
Days immediately preceding (and excluding) the relevant date.
(e) "Beneficially Own" shall have the meaning assigned to such term
in Rule 13d- 3 under the Exchange Act in effect on the date hereof. "Beneficial
Owner" and "Beneficial Ownership" shall have correlative meanings.
(f) "Business Combination Transaction" shall mean a merger,
consolidation, "business combination" as defined in Part Thirteen of the TBCA as
in effect on the date hereof, compulsory share exchange, recapitalization or
other transaction in which TMR is a constituent corporation or to which TMR is a
party and pursuant to which the shares of Common Stock are exchanged for cash,
securities or other property or a sale of all or substantially all of the assets
of TMR and its Subsidiaries, taken as a whole; provided that none of the
following shall be deemed a Business Combination Transaction for purposes of
this Agreement: (i) a merger, consolidation, compulsory share exchange,
recapitalization or other transaction in which the Beneficial Ownership of the
capital stock of TMR or the surviving corporation of the transaction (or of the
ultimate parent of TMR or of such surviving corporation) immediately after the
consummation of such transaction is substantially the same as the ownership of
the capital stock of TMR immediately prior to the consummation of the
transaction or (ii) a merger (A) in which TMR is the surviving corporation, (B)
in which all shares of Common Stock immediately prior to the consummation of
such merger remain outstanding immediately after the consummation thereof, (C)
as a result of the consummation of which no Person will own a majority of the
then outstanding shares of Common Stock and (D) following the consummation of
which the Continuing Directors will represent a majority of the Board of
Directors of TMR.
(g) "Certificate of Designation" for the Preferred Shares shall have
the meaning assigned to such term in the Merger Agreement.
(h) "Closing" shall have the meaning assigned to such term in the
Merger Agreement.
-2-
(i) "Common Shares" shall have the meaning set forth in Recital A.
(j) "Common Stock" shall mean TMR's common stock, par value $0.01
per share, and any shares of common stock or similar securities into which the
common stock of TMR are hereafter reclassified into or exchanged for.
(k) "Continuing Director" shall mean (i) any member of the Board of
Directors of TMR, while such person is a member of such Board of Directors, who
(1) was a member of the Board of Directors of TMR prior to the Effective Time or
(2) is recommended or elected to the Board of Directors by a majority of the
Continuing Directors to fill a vacancy arising as a result of an increase in the
number of directors of TMR occurring after the date hereof, and (ii) any
successor of a Continuing Director, while such successor is a member of the
Board of Directors of TMR, who is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors. Notwithstanding
anything to the contrary in this definition, for purposes of this Agreement, the
SLOPI Designee(s) or Preferred Director(s) shall not be considered Continuing
Directors.
(l) "Deficiency Amount" shall mean with respect to any sale by SLOPI
or its Affiliates of Common Shares which were issued upon the conversion of
Preferred Shares, (i) the product of (x) the number of Common Shares sold by
SLOPI or its Affiliates in such sale at a per share price that is less than the
Allocated Price Per Share, times (y) the amount by which the per share sales
price is less than the Allocated Price Per Share. If Common Shares are sold in a
Public Offering, then the net proceeds to selling shareholder (after reasonable
and customary underwriting discounts, commissions, placement fees and expenses
of sale, excluding expenses for Security Holder's legal counsel) shall be deemed
to be the sales price. If Common Shares are sold in a Private Placement or any
transaction other than Public Offering, then the sales price shall be deemed to
be the greater of (i) the actual sales price or (ii) the Average Per Share
Market Value of the Common Stock relating to the date of such sale.
(m) "Director Election Date" shall have the meaning set forth in
Section 2.2(b).
(n) "Director Percentage" shall have the meaning set forth in
Section 2.2(b).
(o) "Effective Time" shall have the meaning assigned to such term in
the Merger Agreement.
(p) "E&P Company" shall have the meaning set forth in the definition
of Private Placement.
(q) "Excess Shares" shall have the meaning set forth in Section 2.5.
-3-
(r) "Exchangeable Security" shall mean a security of any type,
including but not limited to debt, equity, warrants or other rights, issued by
TMR or representing the right to acquire Voting Shares from TMR upon exchange,
conversion or exercise thereof.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute as in effect from time to time.
(t) "Fully Diluted Shares" shall mean, at any time, the sum of (i)
the shares of Common Stock then outstanding plus (ii) the number of shares of
Common Stock reserved for issuance or issuable in connection with the exercise,
exchange or conversion of options, warrants or securities of TMR then
outstanding which are exercisable or exchangeable for shares of Common Stock or
are convertible into shares of Common Stock (including, without limitation, the
Preferred Shares).
(u) "Merger Agreement" shall mean the Agreement and Plan of Merger
dated Xxxxx 00, 0000 xxxxx XXX, XXXX Acquisition Corp., SLOPI, and Louisiana
Onshore Properties Inc.
(v) "Per Share Market Value" means on any particular date (a) the
last sale price per share of the Common Stock on such date on the principal
stock exchange on which the Common Stock has been listed or, if there is no such
price on such date, then the last price on such exchange on the date nearest
preceding such date, or (b) if the Common Stock is not listed on any stock
exchange, the final bid price for a share of Common Stock in the
over-the-counter market, as reported by The Nasdaq Stock Market at the close of
business on such date, or the last sales price if such price is reported and
final bid prices are not available, or (c) if the Common Stock is not quoted on
The Nasdaq Stock Market, the bid price for a share of Common Stock in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices), or (d) if the Common Stock is no longer publicly traded,
as determined by one of the investment banking firms listed on Schedule I, as
selected by SLOPI.
(w) "Person" shall mean any individual, firm, partnership,
association, group (as such term is defined in Section 13(d)(3) of the Exchange
Act, as in effect on the date hereof), corporation, trust, business trust or
other entity, and includes any successor (by merger or otherwise) of any such
entity.
(x) "Preferred Director" shall have the meaning assigned to such
term in the Certificate of Designation for the Preferred Stock.
-4-
(y) "Preferred Shares" shall have the meaning set forth in Recital
A.
(z) "Preferred Stock" shall mean TMR's Series A Cumulative
Convertible Preferred Stock, par value $1.00 per share.
(aa) "Private Placement" shall mean a Transfer of Shares pursuant to
a transaction not involving a Pubic Offering; provided, however, that (A) the
sale of Shares pursuant to a tender or exchange offer is not a Private
Placement; (B) a Private Placement shall not include a Transfer to any Person
who, directly or indirectly, has as one of its material businesses the
exploration, development or production of crude oil or natural gas (an "E&P
Company") if, as a result of such Private Placement, such E&P Company would
Beneficially Own and/or have the right to acquire upon conversion of shares of
Preferred Stock, such number of shares of Common Stock as would constitute 10%
or more of the then outstanding shares of Common Stock, (x) unless any such E&P
Company acquiring such amount of securities enters into an agreement with TMR
limiting the Transfer of such shares on substantially the same terms as this
Agreement except that the term of such agreement shall be 10 years from the date
of such agreement and (y) if any such E&P Company is acquiring registration
rights under the Registration Rights Agreement (as defined in the Merger
Agreement), it must agree that, although any underwriter for such E&P Company
shall have customary access to TMR to perform its due diligence obligations,
such underwriter will be subject to confidentiality obligations that prohibit
the sharing or disclosure of non-public information with such E&P Company; and
(C) a private placement shall not include a Transfer of Shares to any Person in
which following such Transfer such Person Beneficially Owns or has the right to
acquire upon conversion of the Preferred Stock more than 10% of the Common Stock
of TMR unless such Person enters into an agreement with TMR with terms and
conditions restricting the Transfer of such Shares substantially similar to
those contained herein except that the term of such agreement shall be for 10
years from the date of such agreement. For purposes of the foregoing, in
determining whether any Person Beneficially Owns shares of Common Stock or
shares of Preferred Stock, SLOPI and its Affiliates shall be entitled to rely
exclusively on the existence or non-existence of any reports on Schedule 13D
that may have been filed by such Person with the SEC, without having to make any
inquiry of such Person or otherwise.
(bb) "Public Offering" shall mean a firm commitment underwritten
public offering pursuant to a registration statement which has been declared
effective by the SEC under the Securities Act.
(cc) "Relevant Date" shall have the meaning set forth in Section 2.4(k).
(dd) "Rule 144" and "Rule 145" shall mean Rule 144 and Rule 145
adopted by the SEC under the Securities Act, or any successor rule.
-5-
(ee) "SEC" shall mean the Securities and Exchange Commission.
(ff) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute as in effect from time to time.
(gg) "Shares" shall have the meaning set forth in Recital A.
(hh) "Shell" shall mean Shell Oil Company, a Delaware corporation,
which is an Affiliate of SLOPI.
(ii) "Subsidiary" shall mean, with respect to any Person, any other
Person of which at least a majority of the voting power of the voting equity
securities or voting equity interest is owned, directly or indirectly, by such
Person.
(jj) "SLOPI" shall have the meaning set forth in the first paragraph
hereof; and the term "SLOPI" shall include SLOPI and its Affiliates unless the
context otherwise requires.
(kk) "SLOPI Designee(s)" shall have the meaning set forth in Section
2.2(b) hereof.
(ll) "TBCA" shall have the meaning set forth in Section 2.1(c).
(mm) "TMR" shall have the meaning set forth in the first paragraph
of this Agreement.
(nn) "Trading Days" means (a) a day on which the Common Stock is
traded on the principal stock exchange on which the Common Stock has been
listed, or (b) if the Common Stock is not listed on any stock exchange, a day on
which the Common Stock is quoted in the over-the-counter market, as reported by
The Nasdaq Stock Market, or (c) if the Common Stock is not quoted on The Nasdaq
Stock Market, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices).
(oo) "Transfer" shall have the meaning set forth in Section 2.4
hereof.
(pp) "Voting Shares" shall mean the Common Stock and any other
securities of TMR having voting power under ordinary circumstances with respect
to the election of directors of TMR.
-6-
2. SHARE RIGHTS AND RESTRICTIONS.
2.1 LIMITATION ON CERTAIN TRANSACTIONS.
(a) Except as otherwise permitted by this Agreement, SLOPI
agrees that SLOPI shall not, during the period from the date of this Agreement
until its termination, (i) engage, or propose to engage, in any Business
Combination Transaction with TMR, or (ii) make any proposal to TMR, the Board of
Directors of TMR or the shareholders of TMR with respect to a tender offer or
exchange offer for shares of Common Stock or a liquidation of TMR, unless either
(A) such transaction shall have been approved by a majority of the Continuing
Directors or (B) (x) the third anniversary of the date of this Agreement shall
have occurred and (y) on the date when such transaction is proposed, either no
Preferred Director(s) or SLOPI Designee(s) shall be serving on the Board of
Directors of TMR or SLOPI and its Affiliates collectively shall Beneficially Own
less than 21% of the then outstanding Common Stock.
(b) Except as otherwise permitted by this Agreement, SLOPI
agrees that SLOPI shall not, during the period from the date of this Agreement
until its termination, (i) request or solicit any Person (A) to make a tender or
exchange offer for shares of Common Stock or (B) to make a proposal for a
Business Combination Transaction, unless either (A) a majority of the Continuing
Directors shall have approved of SLOPI taking such action or (B) (x) the third
anniversary of the date of this Agreement shall have occurred on the date when
such action is first requested or solicited by SLOPI and (y) either no SLOPI
Designee(s) or Preferred Director(s) shall be serving on the Board of Directors
of TMR or SLOPI and its Affiliates shall collectively Beneficially Own less than
21% of the then outstanding Common Stock.
(c) In connection with the Merger, TMR's Board of Directors
has taken all action to assure that (i) no state takeover statute or similar
statute will apply to the Merger or to any of the transactions contemplated in
the Merger Agreement or the items referenced to in Section 2.3(w), (x), (y) and
(z), (ii) Article Eight of TMR's Articles of Incorporation will not apply to the
Merger or any of the transactions contemplated in the Merger Agreement or in the
documents attached thereto, and (iii) Part Thirteen of the Texas Business
Corporation Act ("TBCA") will not apply to the Merger or any of the transactions
contemplated in the Merger Agreement or the items referenced to in Section
2.3(w), (x), (y) and (z). Further, TMR has no "poison pill" or takeover defense
mechanism other than Article Eight of TMR's Articles of Incorporation except
those that exclude SLOPI and its Affiliates from all effects thereof. TMR shall
not amend or modify any of the foregoing actions nor shall TMR implement any
new, additional, amended or modified poison pill or takeover defense mechanism,
unless, in each and every such case, provision shall be made to exclude SLOPI
and its Affiliates from all effects thereof. This Section 2.1(c) shall survive
the termination of this Agreement.
-7-
(d) TMR and SLOPI agree that the operative provisions, as
presently in effect, of Article Eight of TMR's Articles of Incorporation and
Part Thirteen of the TBCA will apply to any business combination transaction
covered by said Article Eight or Part Thirteen between SLOPI and its Affiliates
and TMR for the term of this Agreement, notwithstanding that the operative
provisions of said Article Eight and Part Thirteen might otherwise be applicable
for a shorter period of time.
2.2 TMR BOARD OF DIRECTORS.
(a) Subject to restrictions of applicable law and unless this
Agreement has been terminated, on the Director Election Date (defined below),
TMR shall appoint SLOPI Designee(s) (defined below) to fill the vacancies
created by the removal of the Preferred Director(s) in accordance with the
Certificate of Designation for the Preferred Stock, to serve until their
successors are elected or their earlier resignation or removal.
(b) From and after the date on which all the Preferred Shares
shall have been converted into Common Stock (the "Director Election Date") and
until the earlier of (i) termination of this Agreement or (ii) SLOPI and its
Affiliates shall Beneficially Own Shares constituting less than 21% of the then
outstanding shares of Common Stock, then, in connection with each election of
directors of TMR, whether at an annual or special meeting, TMR will nominate,
and, subject to the fiduciary obligations of the TMR directors, solicit proxies
for, in accordance with its procedures for the nomination of, and solicitation
of proxies for, management-slate directors, a number of persons designated by
SLOPI (all such persons who, at any time, are or were designated by SLOPI for
purposes of this Agreement are referred to herein as the "SLOPI Designee(s)")
such that, after giving effect to the election of such persons to the Board of
Directors of TMR, the number of SLOPI Designees then serving on the Board of
Directors of TMR shall equal the product (rounded downward to the nearest whole
number, but, in any event, not less than one) of (i) the total number of
directors constituting the entire Board of Directors of TMR multiplied by (ii)
20% (the "Director Percentage").
(c) If at any time the number of directors constituting the
Board of Directors of TMR shall decrease so that SLOPI would be entitled to
designate fewer directors than are then serving as SLOPI Designees, SLOPI shall
cause one or more of the SLOPI Designees serving as TMR directors to resign so
that the percentage of the Board of Directors consisting of SLOPI Designees does
not exceed the Director Percentage (rounded downward to the nearest whole
number, but, in any event, not less than one); provided, that in no event will
there ever be less than one SLOPI Designee. Further, upon termination of this
Agreement in accordance with its terms, SLOPI shall cause all SLOPI Designees
then serving as directors of TMR to resign immediately.
-8-
(d) (i) In the event that any SLOPI Designee shall cease to
serve as a director for any reason (other than as set forth in Section 2.2(c)),
the vacancy resulting thereby shall be filled by the remaining directors of the
Company in accordance with its Articles of Incorporation, by-laws and applicable
law by a new SLOPI Designee and such new SLOPI Designee shall thereafter serve
until the expiration of the term of the SLOPI Designee replaced by such new
SLOPI Designee.
(ii) Subject to the provisions of Section 2.2(e), if,
after the Director Election Date, there shall exist at any time any vacancy or
vacancies on the Board of Directors of TMR as a result of any increase in the
number of directors that constitutes the entire Board of Directors of TMR, which
the directors of TMR then in office intend to fill in accordance with TMR's
Articles of Incorporation, by-laws and applicable law, SLOPI shall be entitled
to designate one or more persons as SLOPI Designees to fill such vacancy or
vacancies if and to the extent necessary so that, after giving effect to the
filling of such vacancy or vacancies, the number of SLOPI Designees then serving
on the Board of Directors of TMR shall equal the Director Percentage (rounded
downward to the nearest whole number, but, in any event, not less than one). TMR
agrees to take all actions appropriate or necessary to ensure that any SLOPI
Designees designated pursuant to the preceding sentence are appointed to the
Board of Directors of TMR to fill any such vacancy or vacancies filled by the
Board of Directors of TMR as provided in the preceding sentence.
(e) Notwithstanding anything to the contrary contained herein,
no SLOPI Designee may be a person who previously has been a director of TMR and
was properly removed for cause from the Board of Directors of TMR or a person
who has been convicted of a felony or a crime involving moral turpitude.
(f) The SLOPI Designees will be furnished with all information
that is provided to all other directors of TMR (in their capacities as such) at
the same time as such information is furnished to such other directors (in their
capacities as such).
(g) SLOPI shall cause all SLOPI Designees serving as directors
of TMR to comply with the retirement policies of TMR as in effect on the date
hereof or as hereafter amended or modified from time to time by the Board of
Directors of TMR or its shareholders; provided that no such amendment or
modification to such policies shall be binding upon SLOPI or the SLOPI Designees
unless at least one SLOPI Designee shall have voted in favor of such amendment
or modification at the meeting, or in the action in lieu of a meeting, of the
Board of Directors of TMR at or in which it is considered.
(h) At all times when there is a SLOPI Designee on TMR's Board
of Directors, at least one SLOPI Designee shall be a member of each Audit
Committee of the Board of Directors. Each SLOPI Designee who is a member of the
Audit Committee shall have
-9-
unrestricted access to TMR's independent accountants and all audit and tax work
papers to the same extent as any other member of the Audit Committee.
2.3 LIMITATION ON ACQUISITION OF ADDITIONAL SHARES BY SLOPI. From
and after the date hereof, SLOPI shall not acquire any shares of Common Stock,
other than the Common Shares and the Preferred Shares owned by SLOPI as of the
Effective Time and after giving effect to the Closing, (i) without the prior
written consent of a majority of the Continuing Directors or (ii) unless (A) the
third anniversary of the date of this Agreement shall have occurred and (B) at
the time of such acquisition no SLOPI Designee(s) or Preferred Director(s) shall
be serving on the Board of Directors of TMR or SLOPI and its Affiliates would
collectively Beneficially Own less than 21% of the then outstanding Common
Stock; provided, however, that nothing in this Section 2.3 shall limit SLOPI's
power and right (w) to convert shares of Preferred Stock into shares of Common
Stock, or (x) to purchase or acquire shares as a result of any stock dividend or
stock split, reclassification of the Common Stock, or the exercise or conversion
of any security received by SLOPI from TMR in respect of its Shares, or (y) to
receive shares of Common Stock pursuant to Section 2.7 to make up a Deficiency
Amount or (z) to acquire shares of Common Stock or any TMR Exchangeable Security
pursuant to Section 2.6 or to convert, exchange or exercise any such TMR
Exchangeable Security.
2.4 RESTRICTIONS ON TRANSFER. From and after the date hereof until
the termination of this Agreement, SLOPI and its Affiliates shall not sell,
transfer or otherwise convey (when used as a verb, "Transfer" and, any sale,
transfer or other conveyance, a "Transfer") Beneficial Ownership of any Shares
(including Shares subject to Exchangeable Securities), without the prior written
consent of a majority of the Continuing Directors, which consent shall not be
unreasonably withheld, except that, in any event, any and all of the following
Transfers shall be permitted:
(a) One or more Transfers to Shell or a direct or indirect
Affiliate of Shell, provided that Shell and each such Affiliate of Shell agrees
in writing with TMR to be bound by the same restrictions as are applicable to
SLOPI hereunder.
(b) One or more Transfers to TMR or a to a direct or indirect
Subsidiary of TMR (pursuant to a tender offer or otherwise).
(c) One or more Transfers pursuant to a merger, consolidation
or compulsory share exchange, in which TMR is a constituent corporation.
(d) One or more Transfers made as a pro rata dividend or
distribution to the holders of the common stock of SLOPI or its Affiliates,
provided, unless such dividend or distribution is to the public shareholders of
any of the Royal Dutch/Shell Group of Companies, such holders agree in writing
with TMR to be bound by the same restrictions as SLOPI hereunder.
-10-
(e) One or more Transfers to any Person (other than SLOPI or
any Affiliate of Shell) who shall have commenced a tender or exchange offer for
shares of Common Stock if, at the time of public announcement of the tender or
exchange offer: (i) SLOPI and its Affiliates collectively Beneficially Own less
than 21% of the then outstanding shares of Common Stock and no SLOPI Designee or
Preferred Director is serving on the TMR Board of Directors, or (ii) SLOPI and
its Affiliates collectively Beneficially Own more than 21% of the then
outstanding shares of Common Stock or any SLOPI Designee or Preferred Director
is serving on the TMR Board of Directors, unless SLOPI and any Affiliates first
provide to TMR a preferential right to purchase, for cash, all such shares which
SLOPI and any Affiliates would be willing to tender or exchange at a price of
105% of the tender offer price which SLOPI and any Affiliates would be willing
to accept (which shall be the market value of the security to be exchanged on
such date if publicly traded or the cash equivalent value as reasonably
determined in good faith by SLOPI and its Affiliates). With respect to clause
(ii) above, SLOPI and its Affiliates shall give TMR notice of its willingness to
accept the tender or exchange offer at least 10 calendar days prior to its then
stated expiration date and, if TMR desires to exercise its preferential purchase
right, it must so notify SLOPI and its Affiliates in writing within said 10
calendar day period. Once TMR has given notice to SLOPI and its Affiliates that
TMR will exercise such preferential right, then, on such then stated expiration
date of the tender or exchange offer, TMR will be obligated to close the
purchase and pay in full in cash, and SLOPI and its Affiliates will be obligated
to sell, at the applicable 105% price notwithstanding anything that may
otherwise occur with respect to the tender or exchange offer, including, without
limitation, withdrawal, extension, modification, or increase or decrease in the
tender or exchange price or other consideration. Once TMR has not exercised a
preferential right to purchase with respect to a particular tender or exchange
offer made by a particular Person, then SLOPI and its Affiliates shall not
thereafter be required to make any additional preferential purchase rights
available to TMR with respect to such particular tender or exchange offer, even
if in such tender or exchange offer there is an extension or modification of or
an increase or decrease in price or other consideration, in any tender or
exchange offer made by such particular Person; provided, however, that SLOPI
will be required to provide to TMR a preferential purchase right with respect to
any tender or exchange offer made by each other Person or with respect to any
new tender or exchange offer by such particular Person which SLOPI and its
Affiliates would be willing to accept.
(f) From and after the following anniversaries of the date of
this Agreement, SLOPI and its Affiliates may, collectively, sell the following
percentages of the number of their Common Shares in one or more Public
Offerings, Private Placements and/or transactions described below in paragraphs
(h), (i), or (j):
-11-
PERCENTAGE OF COMMON SHARES
PERMITTED TO TRANSFER*
ANNIVERSARY OF ----------------------------
THIS AGREEMENT INCREMENTAL* AGGREGATE*
-------------- ------------ ----------
Second 25% 25%
Third 25% 50%
Fourth 25% 75%
Fifth 25% 100%
--------------------
*These time restrictions and percentages will also apply to any
shares of Common Stock acquired by SLOPI and its Affiliates upon
conversion of any Preferred Shares into Common Shares, which will
result in additional Common Shares that can be Transferred based on
the percentage limitations being applied to a greater number of
Common Shares.
Notwithstanding the above, if, at any time or from time to time, SLOPI or any of
its Affiliates receive Common Shares pursuant to Section 2.7 to make up a
Deficiency Amount, then immediately the same number of Common Shares will be
available for Transfer . Such increased availability for Transfer and any actual
Transfer(s) will not reduce or delay other Transfers otherwise permitted to be
made in accordance with the foregoing.
(g) From and after the following anniversaries of the date of
this Agreement, SLOPI may sell the following percentages of the number of its
Preferred Shares in one or more Private Placements:
PERCENTAGE OF
PREFERRED SHARES
PERMITTED TO TRANSFER
ANNIVERSARY OF ----------------------------
THIS AGREEMENT INCREMENTAL AGGREGATE
-------------- ----------- ---------
Third 33 1/3% 33 1/3%
Fourth 33 1/3% 66 2/3%
Fifth 33 1/3% 100%
-12-
(h) Subject to paragraphs (f) and (g), as such may be modified
pursuant to paragraph (k) below, one or more Transfers in accordance with Rule
144 or Rule 145.
(i) Subject to paragraphs (f) and (g) as such may be modified
pursuant to paragraph (k) below, one or more Transfers of Shares in a Public
Offering or in a public offering (other than a Public Offering) made pursuant to
a registration statement which has been declared effective by the SEC under the
Securities Act (any such Public Offering or public offering, a "Registered
Transaction"); provided, however, that, in connection with any such Registered
Transaction, SLOPI and the Company shall obtain from the managing underwriter of
such Public Offering or from each broker through which such public offering is
made, as the case may be, a commitment to use its reasonable best efforts to
make a broad public distribution of the Shares (including an indirect
distribution of Shares as a result of a distribution of Exchangeable Securities)
to be Transferred in such Registered Transaction. The managing underwriter or
broker, as the case may be, will be advised that, for purposes of this
Agreement, a "broad public distribution" means a distribution such that no
Person is allocated for purchase in such Registered Transaction a number of
Shares in excess of (A) 5% of the then outstanding shares of Common Stock (after
giving effect to the offering of the Common Shares and any other securities
being offered by TMR concurrently therewith in such Registered Offering) or (B)
in the case of a Public Offering, in excess of 20% of the number of shares of
Common Shares being offered in such Public Offering, provided that, in the case
of this clause (B), there shall be disregarded Common Shares allocated for
purchase by a mutual fund, a pension fund, an investment adviser (which
investment adviser shall be registered under the Investment Advisers Act of
1940, as amended) for any mutual fund or pension fund, or any party who is
entitled to report such party's holdings of Common Stock on Schedule 13G
promulgated under the Exchange Act in light of that party's investment intent.
(j) Notwithstanding paragraphs (f) or (g), as such may be
modified pursuant to paragraph (k) below, such numbers of shares of Common Stock
as are equal to the numbers of shares that SLOPI and its Affiliates may from
time to time have received pursuant to Section 2.7 to make up a Deficiency
Amount.
(k) Notwithstanding paragraphs (f) and (g) above, if (i) TMR
shall ever, in connection with a merger, consolidation, share exchange, or
acquisition of a business or properties or similar transaction, sell or issue or
commit to sell or issue 5,000,000 (as adjusted for stock splits, reverse splits,
reclassifications, and similar actions) or more shares of Common Stock or TMR
Exchangeable Securities that, at the time of issuance, sale or commitment and
assuming full conversion, exchange or exercise thereof, represent 5,000,000 (as
adjusted for stock splits, reverse splits, reclassifications, and similar
actions) or more of the Voting Shares and (ii) at or prior to the meeting of the
TMR Board of Directors approving any such transaction the TMR Board of Directors
shall not have received an opinion letter from an investment banking firm of
national recognition
-13-
to the effect that the contemplated transaction is fair, from a financial point
of view, to TMR, then (x) SLOPI and its Affiliates will, immediately or at any
time thereafter, be permitted to Transfer an additional number of Common Shares
equal to the number of shares of Common Stock and/or the Common Stock equivalent
of the Voting Shares represented by the transaction as to which the requisite
fairness opinion was not obtained, and (y) if such would result in earlier or
greater Transfers by SLOPI and its Affiliates, the tables in paragraphs (f) and
(g) shall upon the date of issuance, sale or commitment (the "Relevant Date") be
revised to read, in their entirety:
For paragraph (f):
PERCENTAGE OF COMMON
SHARES PERMITTED TO TRANSFER*
-------------------------------
DATE INCREMENTAL* AGGREGATE *
---- ------------ -----------
Immediately 25% 25%
1 year after Relevant Date 25% 50%
2 years after Relevant Date 25% 75%
3 years after Relevant Date 25% 100%
--------------------
*These time restrictions and percentages will also apply to any
shares of Common Stock acquired by SLOPI upon conversion of any
Preferred Shares into Common Shares, which will result in additional
Common Shares that can be Transferred based on the percentage
limitations being applied to a greater number of Common Shares.
For paragraph (g):
PERCENTAGE OF PREFERRED
SHARES PERMITTED TO TRANSFER
----------------------------
DATE INCREMENTAL AGGREGATE
---- ----------- ---------
Immediately 33 1/3% 33 1/3%
1 year after Relevant Date 33 1/3% 66 2/3%
2 years after Relevant Date 33 1/3% 100%
-14-
2.5 VOTING OF COMMON SHARES. During the term of this Agreement and
prior to the conversion of all of the Preferred Shares, the following provisions
will apply: SLOPI and its Affiliates shall be entitled to vote, in its or their
complete discretion, and on all matters, such number of its Common Shares that,
when added to the votes represented by the Preferred Shares, constitute an
aggregate of up to 23% of the then outstanding votes eligible to be cast for
such matter. After the conversion of all the Preferred Shares, SLOPI and its
Affiliates shall be entitled to vote, in its or their complete discretion, and
on all matters, such number of its Common Shares that constitute up to 23% of
the then outstanding votes eligible to be cast for such matter. If only a
portion of the Preferred Shares has been converted, the voting shall be prorated
between the Common Stock and Preferred Stock for a total of up to 23% of the
then outstanding eligible votes to be cast for such matter. With respect to
those Common Shares, if any, that are in excess of the above amounts of the then
outstanding votes eligible to be cast for such matter (the "Excess Shares"),
SLOPI shall vote such Excess Shares pro rata with the votes of all shares, other
than the Excess Shares, that are actually voted for, against or abstain from
voting on each matter. Notwithstanding the previous sentence, SLOPI shall have
complete discretion in voting all of its Common Shares and Preferred Shares on
any matter (i) that constitutes a Business Combination Transaction, (ii) that
would involve a change of control of TMR (for purposes of this section a change
in control shall mean the acquisition by a Person other than SLOPI or its
Affiliates of Beneficial Ownership of more than 50% of the then outstanding
shares of Common Stock), or (iii) with respect to which a vote is taken when any
of the following shall have occurred or shall exist: (w) the Average Per Share
Market Value for TMR's Common Stock with respect to the day in which the matter
is voted upon has been less than $5.50 per share (such amount to be
appropriately adjusted to give effect to stock splits, reverse splits, stock
dividends, reclassifications, share exchanges, dividends and distributions for
which adjustments to the conversion price of the Preferred Shares may be made),
(x) there are any accrued but unpaid dividends on any Preferred Shares, (y) TMR
shall have failed to issue the additional shares of Common Stock required to be
issued pursuant to Section 2.7, or (z) there shall be a continuing and uncured
default by TMR of any of its material obligations under this Agreement, the
Certificate of Designation or Registration Rights Agreement (both as defined in
the Merger Agreement) or the Merger Agreement. The foregoing does not limit or
restrict SLOPI's or its Affiliates' complete discretion in voting its or their
Preferred Shares.
2.6 RIGHT TO PARTICIPATE IN CERTAIN ISSUANCES BY TMR.
(a) If, when, and for so long as, SLOPI and its Affiliates
Beneficially Own shares of Common Stock that would constitute, after giving
effect to the proposed transaction (but not prior to the proposed transaction),
less than the Applicable Percentage of the then outstanding shares of Common
Stock, TMR shall not issue any shares of Common Stock or any Exchangeable
Securities, for any consideration or in any type of transaction, unless TMR
shall have first complied with, in the case of an issuance other than pursuant
to Public Offering, the provisions of Section 2.6(b) or, in the case of a Public
Offering, the provisions of Section 2.6(c).
-15-
(b) If TMR determines to issue any shares of Common Stock or
any Exchangeable Security, other than in a Public Offering, then TMR shall
provide written notice of such determination to SLOPI, which notice shall
include all the terms of such issuance and shall offer to SLOPI the right to
purchase, at the same price and on the same terms as TMR proposes to issue such
shares of Common Stock or Exchangeable Security to others (or, if TMR proposes
to issue such shares of Common Stock or any Exchangeable Security other than for
cash, at a cash price equal to the current market price of the Common Stock or
if a Exchangeable Security, such value to be determined by agreement between TMR
or SLOPI, or if the parties are unable to agree, by an investment banking firm
or other asset valuation firm of national reputation selected by SLOPI from
Schedule I attached hereto (as such Schedule I may be amended in writing from
time to time by both TMR and SLOPI) with the consent of a majority of the
Continuing Directors, which consent shall not be unreasonably withheld, the cost
of which shall be borne by TMR) a number or amount of the shares of Common Stock
or Exchangeable Securities proposed to be issued that represents the right to
acquire upon exercise, exchange or conversion of such Exchangeable Securities a
number of Voting Shares so that, upon closing of the transaction, SLOPI and its
Affiliates will Beneficially Own the Applicable Percentage of the then to be
outstanding Common Stock (the "Offer Notice"). If SLOPI determines to accept the
offer contained in the Offer Notice, SLOPI shall deliver a written notice to TMR
indicating its acceptance within 10 days after its receipt of the Offer Notice,
which notice shall indicate whether SLOPI has accepted such offer in whole or in
part, and, if accepted in part, the number or amount of shares of Common Stock
or Exchangeable Securities as to which such offer has been accepted (an
"Acceptance Notice"). Any acceptance of the offer contained in an Offer Notice
by delivery of an Acceptance Notice shall be irrevocable and shall constitute a
commitment by SLOPI to purchase from TMR, and by TMR to sell to SLOPI, the
number or amount of shares of Common Stock or Exchangeable Securities covered by
such Acceptance Notice upon the terms contained in the Offer Notice.
(c) If at any time and from time to time, (i) TMR determines
to issue any shares of Common Stock or any Exchangeable Security in a Public
Offering, and (ii) as a result thereof SLOPI and its Affiliates would
Beneficially Own less than the Applicable Percentage of the then to be
outstanding shares of Common Stock, then (y) TMR shall provide written notice of
such determination to SLOPI, which notice shall include the proposed size and
other terms of such issuance, to the extent then known, the name or names of any
managing underwriter or placement agent(s) and the date when it is proposed that
any such issuance will be made, and (z) TMR shall either sell directly or cause
the underwriters or placement agent(s) to offer to SLOPI the right to purchase
from TMR directly or from the underwriters or placement agent(s), at the
applicable
-16-
offering price, a number or amount of the shares of Common Stock, Exchangeable
Securities or other securities proposed to be issued that, if purchased by
SLOPI, would permit SLOPI and its Affiliates to Beneficially Own a number of
shares of Common Stock equal to Applicable Percentage of the then to be
outstanding Common Stock after closing the proposed issuance.
2.7 TMR SUPPORT OF CERTAIN STOCK SALES.
(a) In the event that, from time to time, SLOPI and/or any Affiliate
of SLOPI or of Shell shall sell any of the Common Shares to be issued upon
conversion of Preferred Shares and the net proceeds (after reasonable and
customary commissions, underwriters discounts, placement fees and expenses of
sale, excluding expenses of legal counsel for the selling shareholder(s))
received by SLOPI or such Affiliate for such Common Shares shall result in a
Deficiency Amount, then TMR shall, at its option, (i) pay to SLOPI an amount of
cash equal to the Deficiency Amount or (ii) issue to SLOPI or such Affiliate
additional fully paid and non-assessable shares of Common Stock equal in value
to the Deficiency Amount. All shares of Common Stock issued by TMR in respect of
a Deficiency Amount (i) shall be valued in the manner set forth in the
definition of Deficiency Amount and (ii) shall be issued as of the closing of
such sale. If TMR issues shares of Common Stock in respect of a Deficiency
Amount, then TMR will cause such shares to be listed for trading on the
principal stock exchange for the Common Stock.
(b) In the event, (i) SLOPI shall propose to Transfer Shares
to a person who has committed to purchase such Shares pursuant to a transaction
not involving a Public Offering at a time when SLOPI is authorized to sell such
Shares, (ii) under the terms of this Agreement, such person would be required to
enter into an agreement with TMR and such person and TMR are unable to effect
such agreement, and (iii) SLOPI shall subsequently sell such Shares pursuant to
a Public Offering, TMR shall pay the reasonable and customary commissions,
underwriters discounts and expenses of sale payable by SLOPI in such sale,
excluding expenses of legal counsel for SLOPI. If this Section 2.7(b) shall be
applicable in the circumstances, then this Section shall control over Section
2.C (11) g of the Registration Rights Agreement.
3. STOCK CERTIFICATES AND OTHER RESTRICTIONS.
3.1 ENDORSEMENT OF CERTIFICATES.
(a) All certificates representing Shares shall, subject to
Section 3.1(c), bear the following legend:
"THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF A STOCK
RIGHTS AND RESTRICTIONS AGREEMENT BETWEEN THE MERIDIAN
RESOURCE CORPORATION AND SHELL LOUISIANA ONSHORE
-17-
PROPERTIES, INC. DATED AS OF ________ , 1998. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL BUSINESS OFFICE OF THE
MERIDIAN RESOURCE CORPORATION."
(b) All certificates representing Shares shall, subject to
Section 3.1(c), bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE CONVEYED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO RULE 144
UNDER THE ACT, UNLESS THE COMPANY SHALL HAVE BEEN FURNISHED WITH AN
OPINION OF COUNSEL, WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR TMR ENERGY CORPORATION, THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED."
(c) After such time as either of the legends set forth in
Sections 3.1(a) and (b) is no longer required hereunder (including without
limitation as a result of the termination of this Agreement in accordance with
its terms) or if the securities represented by a certificate have been
registered under the Securities Act pursuant to an effective registration
statement or are to be sold pursuant to Rule 144, or if the Company shall have
been furnished with an opinion of counsel, which opinion shall be reasonably
satisfactory to counsel for TMR, that registration under the Securities Act is
not required, as the case may be, then, in any such event, upon the request of
SLOPI, TMR shall cause such certificate or certificates to be exchanged for a
certificate or certificates that do not bear any legend.
3.2 IMPROPER TRANSFER. Any attempt by SLOPI or its Affiliates to
Transfer any Shares other than in accordance with this Agreement shall be null
and void and neither TMR nor any transfer agent for such securities shall be
required to give any effect to such attempted Transfer in its stock records.
4. GENERAL PROVISIONS.
4.1 REPRESENTATIONS AND WARRANTIES.
(a) TMR represents and warrants to SLOPI that (i) TMR is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power and authority to enter into
this Agreement and to carry out its obligations
-18-
hereunder, (ii) the execution and delivery of this Agreement by TMR and the
consummation by TMR of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of TMR and no other
corporate proceedings on the part of TMR are necessary to authorize this
Agreement or any of the transactions contemplated hereby, and (iii) this
Agreement has been duly executed and delivered by TMR and constitutes a valid
and binding obligation of TMR, and, assuming this Agreement constitutes a valid
and binding obligation of SLOPI, is enforceable against TMR in accordance with
its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and similar laws affecting creditors' rights
generally from time to time and to general principles of equity.
(b) SLOPI represents and warrants to TMR that (i) SLOPI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder, (ii) the execution
and delivery of this Agreement by SLOPI and the consummation by SLOPI of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of SLOPI and no other corporate proceedings on the
part of SLOPI are necessary to authorize this Agreement or any of the
transactions contemplated hereby, and (iii) this Agreement has been duly
executed and delivered by SLOPI and constitutes a valid and binding obligation
of SLOPI, and, assuming this Agreement constitutes a valid and binding
obligation of TMR, is enforceable against SLOPI in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting creditors' rights generally
from time to time and to general principles of equity.
4.2 AMENDMENT AND MODIFICATION; WAIVER OF COMPLIANCE. This Agreement
may be amended or waived only by written instrument duly executed by the
parties. In the event of the amendment or modification of this Agreement in
accordance with its terms, the Board of Directors of TMR shall adopt any
amendment to the by-laws of TMR that may be required as a result of such
amendment or modification to this Agreement, and, if required, shall propose any
amendment to the Certificate of Incorporation that may be required as a result
of such amendment or modification to this Agreement to the TMR shareholders
entitled to vote thereon at a meeting duly called and held for such purpose, and
shall recommend that the TMR shareholders vote in favor of such amendment to the
Certificate of Incorporation.
4.3 INJUNCTIVE RELIEF. Each of the parties hereto hereby
acknowledges that in the event of a breach by any of them of any material
provision of this Agreement, the aggrieved party may be without an adequate
remedy of law. Each of the parties therefore agrees that in the event of a
breach of any material provision of this Agreement the aggrieved party may elect
to institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this
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Agreement. By seeking or obtaining any such relief, the aggrieved party will not
be precluded from seeking or obtaining any other relief to which it may be
entitled in equity or at law.
4.4 BYLAWS. At all times while this Agreement shall be in effect,
TMR shall cause its Bylaws to conform to the provisions of this Agreement,
including by causing its Bylaws to be amended.
4.5 NO ADOPTION OR AMENDMENT OF RIGHTS PLAN. During the term of this
Agreement, TMR's Board of Directors shall not adopt any shareholder rights plan
or amend any rights plan without the approval of a majority of the SLOPI
Designee(s) or Preferred Director(s) then on the Board of Directors of TMR
unless such plan exempts SLOPI and its Affiliates from all effects thereof.
4.6 LIMITATION ON REDUCTIONS OF PUBLIC FLOAT BY TMR. TMR shall not
take any action, including without limitation an acquisition by TMR or any of
its Affiliates of shares of Common Stock then outstanding, or a recapitalization
by TMR, which would reduce the number of shares of Common Stock held by Persons
other than SLOPI, TMR or any Affiliate of either SLOPI or TMR to less than the
minimum number required to maintain TMR's listing on the New York Stock
Exchange, without the prior written consent of SLOPI.
4.7 GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to the principles of conflicts of law
thereof.
4.8 TERMINATION.
(a) This Agreement may be terminated:
(i) by the mutual written consent of the parties
hereto;
(ii) by SLOPI or TMR if SLOPI shall have become the
Beneficial Owner of less than 10% of the Fully Diluted Shares; or
(iii) by SLOPI if any Person (other than SLOPI or any
Affiliate of SLOPI) shall have proposed to TMR a Business Combination
Transaction and a majority of the Continuing Directors shall have approved such
proposal or shall have retained (or authorized TMR to retain) the services of an
investment banking firm and shall have instructed such investment banking firm
to solicit indications of interest with respect to a Business Combination
Transaction; provided that, if a proposal with respect to a Business Combination
Transaction referred to in this clause (iii) shall have been terminated or
withdrawn by the Person who made such proposal and
-20-
SLOPI shall have withdrawn, terminated or permitted to expire any tender or
exchange offer or proposal with respect to a Business Combination Transaction
made by SLOPI, then the provisions of this Agreement shall thereafter be
reinstated (without liability to any party for any failure to have complied with
the terms and provisions of this Agreement during the period when it shall have
been terminated in accordance with this Section 4.8(a)(iii)) and this Agreement
shall thereafter continue in full force and effect in accordance with its terms;
or
(iv) by SLOPI if (A) any Person other than SLOPI or its
Affiliates shall have acquired Beneficial Ownership of 20% (or, if lower, the
percentage specified in the definition of "Affiliated Shareholder" in Part
Thirteen of the TBCA, as amended from time to time), or more of the Voting
Shares and such Person shall not have entered into an agreement with TMR
containing restrictions and other provisions at least as favorable to TMR as
those contained in this Agreement; or
(v) by SLOPI if the Continuing Directors shall not
constitute a majority of the Board of Directors of TMR; or
(vi) by SLOPI if TMR shall have breached any material
provision of this Agreement, the Merger Agreement, or the Certificate of
Designation or the Registration Rights Agreement (both as defined in the Merger
Agreement) and SLOPI shall have delivered a written notice of such breach to
TMR; provided that, if such breach is reasonably susceptible of cure and TMR
shall proceed diligently to cure such breach, then this Agreement shall not be
terminated unless such breach shall not have been cured on or prior to the fifth
day after the delivery of written notice by SLOPI to TMR that TMR has breached a
material provision of any such instrument; or
(vii) by SLOPI if (x) TMR shall seek relief under any
bankruptcy,insolvency, receivership, custodianship, trusteeship, liquidation,
reorganization, composition, readjustment, moratorium or similar law (an
"Insolvency Law"); or (y) a proceeding or case shall be commenced under an
Insolvency Law by a third party against TMR and such proceeding or case shall
continue undismissed or unstayed for 60 days; or (z) an order for relief under
an Insolvency Law shall be entered against TMR.
(b) Unless this Agreement shall have been earlier terminated
as provided in Section 4.8(a), this Agreement shall terminate on the 10th
anniversary of the date of this Agreement.
4.9 NOTICES. All notices, requests, demands or other communications
required or permitted by this Agreement shall be in writing and effective when
received, and delivery shall be made personally or by registered or certified
mail, return receipt requested, postage prepaid, or overnight courier or
confirmed facsimile transmission, addressed as follows:
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(a) If to TMR:
The Meridian Resource Corporation
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Chairman and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Fulbright & Jaworksi L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
(b) If to SLOPI:
Shell Louisiana Onshore Properties Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Shell Oil Company Legal Firm
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
4.10 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
-22-
4.11 ENTIRE AGREEMENT. Except as otherwise expressly stated herein,
this Agreement constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof. Except for the permitted Transfers to
Shell and Affiliates of Shell or SLOPI and except as otherwise expressly
permitted or contemplated herein, the rights and obligations under this
Agreement shall not be assigned by operation of law or otherwise. Nothing in
this Agreement shall be construed as prohibiting TMR from effecting a merger,
consolidation or other similar transaction with another entity, provided that
(i) the operative terms of this Agreement shall be applied in respect of any
such transaction and (ii) under the express terms of such transaction this
Agreement will be continued in effect by TMR or any successor thereto.
4.12 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and to Shell and the Affiliates
of Shell and SLOPI if they receive Permitted Transfers in accordance with this
Agreement. Nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement, except as expressly
otherwise contemplated herein.
4.13 HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
4.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
4.15 AUDIT RIGHTS. SLOPI shall have the right to perform, directly
or through its representatives, periodic audits of TMR and its subsidiaries. The
audits may cover financial transactions, operational matters, and other areas
deemed appropriate. The audit frequency will not be more than once a year. The
scope of the audits will be determined by SLOPI. SLOPI will utilize TMR's
independent auditor, Ernst & Young LLP or such other firm as may then be TMR's
outside auditors ("E&Y"), to conduct the audits as long as E&Y performs to
SLOPI's satisfaction. SLOPI reserves the right to use a different E&Y partner to
conduct any audit. SLOPI personnel or representatives may participate in the
audit and/or review all audit work papers. SLOPI will bear the cost of the
audits.
-23-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION
By:
Name:
Title:
SHELL LOUISIANA ONSHORE PROPERTIES INC.
By:
Name:
Title:
-24-
SCHEDULE I
LIST OF ACCEPTABLE INVESTMENT BANKING
AND ASSET VALUATION FIRMS
1. Xxxxxxx Xxxxx
2. CS First Boston
3. Xxxxxxx Xxxxx
4. Chase Securities
5. Xxxxx Xxxxxx
6. Xxxxxxxxx Lufkin Xxxxxxxx
7. Xxxxxx Xxxxxxx
8. Xxxx Xxxxxxxx
9. Xxxxxx Xxxxxxx
10. Xxxxxx Xxxx
The above list may be revised from time to time by a written instrument signed
by both TMR and SLOPI.
S-1
EXHIBIT G
FORM OF REGISTRATION RIGHTS AGREEMENT
G-1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated ____________, 1998 by and between The
Meridian Resource Corporation, a Texas corporation (the "Company"), and Shell
Louisiana Onshore Properties Inc., a Delaware corporation ("Security Holder").
W I T N E S S E T H:
WHEREAS, the Company and Security Holder have entered into an Agreement
and Plan of Merger dated as of March 27, 1998 (the "Merger Agreement") which
provides, among other things, for the execution of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement the parties hereto agree as follows:
Section 1. DEFINITIONS. The terms defined in this Section, whenever used
in this Agreement, shall, unless the context otherwise requires, have the
respective meanings hereinafter specified. Terms not defined in this Agreement,
and defined in the Merger Agreement have the meanings assigned them in the
Merger Agreement.
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the Company's authorized Common Stock, par value
$0.01 per share.
"Company" shall mean The Meridian Resource Corporation, a Texas
corporation, and any successor corporation by merger, consolidation or otherwise
and any parent corporation resulting from the merger or consolidation of the
Company with or into a subsidiary of another corporation.
"Eligible Stock" means the issued and outstanding shares of Common Stock
(i) that have been issued pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") by and among the Company, the Security Holder, LOPI
Acquisition Corp. and Louisiana Onshore Properties, Inc., (ii) that have been
issued upon conversion of the Series A Convertible Preferred Stock issued
pursuant to the Merger Agreement; (iii) that have been purchased by the Security
Holder upon the exercise of its rights pursuant to the Stock Rights and
Restrictions Agreement; and (iv) that may be issued pursuant to Section 2.7 of
the Stock Rights and Restriction Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Person" shall mean an individual, a corporation, a partnership, a trust,
an unincorporated organization or a government or any agency or political
subdivision thereof.
"Public Offering" shall mean a firm commitment underwritten public
offering pursuant to a registration statement under the Securities Act.
"Registrable Securities" shall mean that portion of the shares of Eligible
Stock that any Security Holder is permitted to sell under Section 2.4(f) of the
Stock Rights and Restriction Agreement, as such Section may be adjusted in
accordance with terms of such Agreement.
"Registration" shall mean the registration under the Securities Act of
Registrable Securities pursuant to either Section 2.A hereof or 2.B hereof.
"Registration Statement" shall mean a registration statement filed under
the Securities Act or a similar document filed pursuant to any other statute
then in effect corresponding to the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"Security Holder" shall mean Shell Louisiana Onshore Properties Inc., a
Delaware corporation, its permitted assigns, or any affiliate thereof holding
Common Stock or any successor corporation to any of the foregoing by merger or
consolidation or otherwise.
"Stock Rights and Restrictions Agreement" means that certain Stock Rights
and Restrictions Agreement of even date herewith between the Company and the
Security Holder.
Section 2. REGISTRATION RIGHTS.
A. DEMAND REGISTRATIONS. Subject to the provisions of Section 5 in the
event of assignment of this Agreement, if the Company shall receive a written
request from Security Holder requesting that the Company file a Registration
Statement relating to Registrable Securities, the Company will as promptly as
practicable prepare and file a Registration Statement and use reasonable best
efforts to cause the Registration Statement to become effective; subject,
however, to the following provisions:
-2-
(1) the Company shall be required to file no more than an aggregate
of 5 Registration Statements on behalf of Security Holder (or Security Holders
in the event of an assignment of this Agreement) pursuant to this Subsection
2.A, plus any number of additional Registration Statements (not to exceed an
aggregate of an additional 5) as to which, at the time of the first filing with
the SEC, the Security Holder (or Security Holders in the event of an assignment
of this Agreement) and its underwriter(s) have reasonably estimated that the
price to the public of the Registrable Securities to be sold (before discounts,
commissions, and expenses) will be equal to or greater than $50,000,000;
(2) the Company shall not be obligated (i) to file a requested
Registration in the event that the aggregate number of Registrable Securities to
be included in such requested Registration is less than 2 1/2% of the issued and
outstanding Common Stock; or (ii) to prepare or file such Registration Statement
or an amendment or supplement thereto, and may suspend sales, at any time when
the Company reasonably determines (by action of the Company's Board of Directors
or an officer duly authorized by the Board of Directors to make such decision)
that the filing thereof at the time requested, or the offering of Registrable
Securities pursuant thereto, would materially and adversely affect a pending or
proposed offering of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction relating
to the Company or negotiations, discussions or pending proposals with respect
thereto or require premature disclosure of information not otherwise required to
be disclosed to the potential detriment of the Company; PROVIDED, HOWEVER, that
such period of sale or distribution shall resume after any such suspension for a
number of days necessary to keep such Registration effective for permitted sales
thereunder for a term of 90 days. The filing of a Registration Statement, or any
amendment or supplement thereto, by the Company may not be deferred, and the
sale and distribution of shares may not be suspended, in each case pursuant to
the foregoing provisions, for more than 60 days after the abandonment or
consummation (or the completion of the distribution of securities in the case of
a public offering) of any of the proposals or transactions described therein or,
in any event, for more than 120 days during any one year;
(3) a Registration Statement filed pursuant to a request of Security
Holder shall first include all Registrable Securities requested to be included
by Security Holder and, only after such inclusion, may, include securities of
the Company being sold for the account of the Company provided, however, that
securities to be offered on behalf of the Company will be included in such
Registration Statement only to the extent that, in the reasonable opinion of the
managing underwriter for the Public Offering of Registrable Securities on behalf
of Security Holder, such inclusion will not materially adversely affect the
distribution of Registrable Securities on behalf of Security Holder;
(4) the selection of an underwriter for a Public Offering of
Registrable Securities by Security Holder shall be subject to the approval of
the Company, which shall not be unreasonably withheld;
-3-
(5) for purposes of paragraph (1) of this Subsection A, if a
requested Registration Statement is filed and the Company otherwise complies
with its obligations hereunder, but the Registration Statement is withdrawn by
Security Holder due to a delay in the offering requested by the Company for a
period of more than 15 business days pursuant to Section 2, then no requested
Registration Statement shall be deemed to have been filed; and
(6) no Other Holder (as defined below) shall be entitled to include
securities or piggyback in any Registration demanded by Security Holder.
B. INCIDENTAL/"PIGGY-BACK" REGISTRATIONS. If the Company at any time
proposes to file a Registration Statement (other than a Registration Statement
filed pursuant to Subsection A of this Section) under the Securities Act
relating to a Public Offering of Common Stock to be sold for cash that would
permit the registration of Registrable Securities, it will give Security Holder
as much advance notice, in writing, as is reasonably practicable under the
circumstances, but in any event not less than 5 days, before the filing with the
Commission of such Registration Statement, which notice shall set forth the
securities proposed to be registered. The notice shall offer to include in such
filing such amount of Registrable Securities as Security Holder may request. If
Security Holder wishes to have Registrable Securities registered for sale in the
Public Offering pursuant to this Subsection B, it shall advise the Company in
writing within 20 days after the date of receipt of such offer from the Company
(or such shorter period, but in any event not less than 5 days, as the Company
shall specify in its notice to Security Holder), setting forth the amount of
Registrable Securities for which registration is requested. If the managing
underwriter of the proposed Public Offering of Common Stock by the Company shall
advise the Company in writing that, in the reasonable opinion of the managing
underwriter, the distribution of the Registrable Securities requested by
Security Holder to be included in the Registration Statement concurrently with
securities being registered for sale by the Company would materially adversely
affect the distribution of such securities by the Company and Security Holder,
then the Company shall so advise the Security Holder and the number of
securities that are entitled to be included in the registration and underwriting
shall be allocated as follows: (i) in the event a Registration Statement is
being filed in connection with the exercise of registration rights by a security
holder other than the Security Holder (an "Other Holder"), all of any Other
Holder's shares of Common Stock shall be included in the registration and the
remaining number of securities that are entitled to be included in the
registration shall be allocated (A) 80% to the Company and any other
shareholders (not including the Other Holder or the Security Holder) whose
shares are to be included in such Registration Statement and (B) 20% to the
Security Holder, and (ii) in the event the registration is not being filed in
connection with the exercise of registration rights of any Other Holder (a) 80%
to the Company and any other shareholders (not including Security Holder) whose
shares are to be included in such Registration Statement and (b) 20% to Security
Holder. If any Person does not agree to the terms of any such underwriting, such
Person shall be excluded therefrom by written notice from the Company or the
underwriter.
-4-
Nothing contained in this Subsection B shall, however, limit the
Company's right to cancel, postpone or withdraw any such registration proposed
by the Company for any reason.
Any obligation of the Company to effect a registration pursuant to
this Subsection B shall be conditioned upon Security Holder entering into an
underwriting agreement with the Company and the managing underwriters of the
registered offering of the type described in paragraph (10) of Subsection C.
C. REGISTRATION PROCEDURES. If the Company is required by the provisions
of Subsections A or B of this Section 2 to effect the Registration of any of the
Registrable Securities under the Securities Act, the Company will, as soon as in
reasonably practicable:
(1) Prepare and file with the Commission a Registration Statement
with respect to such securities and use its reasonable best efforts to cause
such Registration Statement to become and, subject to paragraph (2) of this
Subsection C, remain effective.
(2) Keep such Registration effective, and the prospectus used in
connection therewith, current for a period of ninety (90) days or until the
Security Holder has completed the distribution described in the Registration
Statement relating thereto, whichever first occurs (the "Selling Period");
provided, however, that (a) the Selling Period shall be extended for a period of
time equal to any period that Security Holder refrains from selling any
securities included in such registration pursuant to a suspension under
Subsection A.
(3) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
such prospectus current in compliance with Section 10 of the Securities Act, and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Common Stock covered by such Registration Statement;
provided, however, that the Company shall have no obligation under this
paragraph (3) after the period required by paragraph (2) of this Subsection C
has lapsed.
(4) Furnish to Security Holder such number of copies of such
Registration Statement and of each amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus, summary
prospectus and prospectus supplement), in conformity with the requirements of
the Securities Act, and such other documents, as Security Holder may reasonably
require in order to facilitate the public offering, sale or other disposition of
the Registrable Securities owned by Security Holder.
-5-
(5) Use reasonable best efforts to register or qualify the Common
Stock covered by such Registration Statement under such other securities or blue
sky laws of jurisdictions in the United States of America as Security Holder
shall reasonably request (excluding however any jurisdiction in which the filing
would subject the Company to additional tax liability, and any jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration or qualification which consent would not
be required but for this paragraph (5)), and do such other acts and things as
may be required to enable Security Holder to consummate the public sale or other
disposition in such jurisdictions of the Registrable Securities owned by
Security Holder.
(6) Otherwise use reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement which
satisfies the provisions of Section 11(a) of the Securities Act.
(7) Immediately notify Security Holder at any time when a prospectus
is required to be delivered under the Securities Act within the Selling Period
referred to in paragraph (2) of this Subsection C, of the Company becoming aware
that the prospectus included in the Registration Statement, or as such
prospectus may be amended or supplemented, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading in light of
the circumstances then existing, and at the request of Security Holder to
promptly prepare and furnish to Security Holder a number of copies of an amended
or supplemental prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the light of the circumstances then existing. In the
event the Company shall give any such notice, Security Holder shall immediately
suspend use of the prospectus and the Selling Period shall be extended by the
number of days during the period from and including the date of the giving of
such notice to and including the date when Security Holder shall have received
the copies of such supplemented or amended prospectus.
(8) In the event that the Company suspends use by Security Holder of
a prospectus relating to an offering of Registrable Securities pursuant to a
suspension under Subsection A, because the Company is conducting negotiations
for a material business combination or due to pending material developments or
events that have not yet been publicly disclosed and as to which the Company
believes public disclosure will be prejudicial to the Company, the Company shall
deliver notice in writing to the effect of the foregoing and, upon receipt of
such notice, the Security Holder shall not use the prospectus, and the Selling
Period shall cease to run or will not commence, until such Security Holder has
received copies of the supplemented or amended prospectus provided for in
paragraph 3 of this Subsection C, or until it is advised in writing by the
-6-
Company that the prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such prospectus. The Company will use reasonable best efforts to
ensure that the use of the prospectus may be resumed, and the Selling Period
will commence, as promptly as is practicable and, in any event, promptly after
the earlier of (x) public disclosure of such material business combination or
pending material development or event sufficient to permit an affiliate of the
Company to sell Common Stock or (y) in the judgment of the Company, public
disclosure of such material business combination or material development or
event would not be prejudicial to the Company.
(9) Use its reasonable best efforts to list such Registrable
Securities on the primary securities exchange or other trading market on which
the Common Stock is then listed, if such Registrable Securities are not already
so listed and if such listing is then permitted under the rules of such exchange
or other trading market, and to provide a transfer agent and registrar for such
Registrable Securities covered by such Registration Statement not later than the
effective date of such Registration Statement.
(10) Enter into such agreements (including an underwriting agreement
in customary form and containing customary provisions relating to legal opinions
and accountants' letters and customary representations and warranties and
customary provisions for mutual indemnification and contribution between the
Company and the underwriters for Security Holder) and take such other actions as
Security Holder may reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities.
(11) Make available for inspection by Security Holder, by any
underwriter participating in any disposition to be effected pursuant to such
Registration Statement and by any attorney, accountant or other agent retained
by Security Holder or any such underwriter, all customary financial and other
records, customary corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all customary
information requested by Security Holder, such underwriter, attorney, accountant
or agent, as is reasonably needed in connection with such Registration
Statement; provided such parties execute confidentiality agreements reasonably
acceptable to the Company.
Except as otherwise provided in Section 2.7(b) of the Stock Rights
and Restriction Agreement, underwriting discounts and commissions attributable
to securities offered on behalf of Security Holder plus the fees and expenses of
separate counsel for Security Holder incurred in connection with effecting a
Registration pursuant to this Section 2 shall be borne by Security Holder. All
other expenses incurred in connection with the Registration Statement shall be
borne by the Company.
-7-
It shall be a condition precedent to the obligation of the Company
to take any action pursuant to this Section 2 in respect of the Registrable
Securities which are to be registered at the request of Security Holder that
Security Holder shall furnish to the Company such information regarding the
securities held by it and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action taken by the Company.
D. INDEMNIFICATION.
(1) In the event of any Registration of any Registrable Securities
under the Securities Act pursuant to this Section 2, the Company agrees to
indemnify and hold harmless Security Holder, its directors, officers and
employees, and each other Person, if any, who controls Security Holder within
the meaning of Section 15 of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which Security Holder or any such
director, officer, employee or controlling Person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Registration Statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
shall reimburse Security Holder or such director, officer, employee or
controlling Person for reasonable legal or any other expenses reasonably
incurred by Security Holder or such director, officer, employee or controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall 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 any alleged untrue statement or alleged
omission made in such Registration Statement, preliminary prospectus,
prospectus, or amendment or supplement in reliance upon and in conformity with
written information furnished to the Company in writing for use therein; and
provided, further, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the prospectus if such untrue statement or alleged untrue
statement or omission or alleged omission has been the subject of a notice given
to Security Holder pursuant to paragraph (7) of Subsection C if Security Holder
after receipt of such notice and prior to the receipt of a corrected prospectus
sold a Registrable Security to the Person asserting such loss, claim, damage,
liability or expense who purchased such Registrable Security which is the
subject thereof form Security Holder. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Security
Holder or such director, officer, employee or participating Person or
controlling Person, and shall survive the transfer of such securities by
Security Holder.
-8-
(2) Security Holder agrees to indemnify and hold harmless the
Company, its directors, officers and employees and each other Person, if any,
who controls the Company against any losses, claims, damages or liabilities
joint or several, to which the Company or any such director, officer, or
employee or any such Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which Registrable Securities
were registered under the Securities Act at the request of Security Holder, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (ii) any alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
alleged untrue statement or alleged omission was made in such Registration
Statement, preliminary prospectus, prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company in writing by Security Holder for use therein, and shall reimburse the
Company or such director, officer, employee or other Person for any reasonable
legal or any other expenses reasonably incurred in connection with investigating
or defending any such loss, claim, damage, liability or action.
(3) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraphs of this Subsection E, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligation under this
Subsection D to the extent the indemnifying party is not materially prejudiced
by such failure. In case any such action is brought against an indemnified
party, the indemnified party shall permit the indemnifying party to assume the
defense of such action or proceeding, provided that counsel for the indemnifying
party, who shall conduct the defense of such action or proceeding shall be
approved by the indemnified party (whose approval shall not be unreasonably
withheld) and the indemnified party may participate in such defense at such
indemnified party's expense unless in the opinion of counsel to such indemnified
party a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim that would prevent the indemnified party's
counsel from adequately representing both parties, in which event the
indemnifying party shall pay the reasonable fees and expense of separate counsel
for the indemnified party. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. The
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate
-9-
firm for all indemnified parties. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent.
(4) Indemnification similar to that specified in the preceding
paragraphs of this Subsection E shall be given by the Company and Security
Holder (with such modifications as shall be appropriate) with respect to
liability related to any required registration or other qualification of
Registrable Securities under any Federal or state law or regulation of
governmental authority other than the Securities Act.
(5) If the indemnification provided for in this Subsection D is
unavailable or insufficient to hold harmless an indemnified party under
paragraphs (1) or (2) above, then the indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraphs (1) or (2) above, in
such proportion as is appropriate to reflect the relative fault of the Company
on the one hand and Security Holder on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equity considerations. 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
or Security Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and Security Holder agree that it would not be just and
equitable if contributions pursuant to this paragraph (5) were to be determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first sentence of
this paragraph (5). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
paragraph (5) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim (which shall be limited as provided in paragraph (3) above
if the indemnifying party has assumed the defense of any such action in
accordance with the provisions thereof) which is the subject of this paragraph
(5). Notwithstanding the provisions of this paragraph (5), in respect of any
loss, claim, damage or liability based upon any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact which relates to information other than information supplied by Security
Holder, Security Holder shall not be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities
offered by it and distributed to the public were offered to the public exceeds
the amount of any damages which Security Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. Promptly after receipt
by an indemnified party under this paragraph (5) of notice of the commencement
of any action against such party in respect of which a claim for contribution
may be made against an
-10-
indemnifying party under this paragraph (5), such indemnified party shall notify
the indemnifying party in writing of the commencement thereof if the notice
specified in paragraph (3) above has not been given with respect to such action;
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party under this paragraph
(5) to the extent such omission is not prejudicial.
E. PUBLIC AVAILABILITY OF INFORMATION. The Company shall comply with all
public information reporting requirements of the Commission, to the extent
required from time to time to enable Security Holder to sell Registrable
Securities without Registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of Security Holder, the
Company will deliver to Security Holder a written statement as to whether it has
complied with such requirements.
F. SUPPLYING INFORMATION. The Company shall cooperate with Security Holder
in supplying such information as may be necessary for Security Holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Registrable Securities.
G. SPECIFIC PERFORMANCE. Each party hereto acknowledges and agrees that
each other party hereto would be irreparably harmed and would have no adequate
remedy of law if any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly, it
is agreed that, in addition to any other remedies by law or in equity which may
be available, the parties hereto shall be entitled to obtain temporary and
permanent injunctive relief with respect to any breach or threatened breach of,
or otherwise obtain specific performance of the covenants and other agreements
contained in this Agreement.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Security Holder that (a) the Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, (b) the execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby, and (c) this Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, and, assuming this Agreement constitutes a valid and
binding obligation of Security Holder is enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance and similar laws
-11-
affecting creditors, rights generally from time to time and to general
principles of equity, and except as the enforceability thereof may be limited by
considerations of public policy.
Section 4. REPRESENTATIONS AND WARRANTIES OF SECURITY HOLDER. Security
Holder represents and warrants to the Company that (a) it is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Security Holder and the consummation by Security Holder of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Security Holder and no other corporate
proceedings on the part of Security Holder are necessary to authorize this
Agreement or any of the transactions contemplated hereby, and (c) this Agreement
has been duly executed and delivered by Security Holder and constitutes a valid
and binding obligation of Security Holder, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, is enforceable
against Security Holder in accordance with its terms subject to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance and
similar laws affecting creditors' rights generally from time to time and to
general principles of equity, and except as the enforceability thereof may be
limited by considerations of public policy.
Section 5. STOCK RIGHTS AND RESTRICTIONS AGREEMENT. This Agreement shall
be in all respects subject to the terms and conditions of the Stock Rights and
Restrictions Agreement between the parties hereto and of even date herewith. As
provided in the next sentence, this Agreement may be assigned by Security
Holder, in whole or in part, in connection with any transfer (one or more) of
Registrable Securities that is permitted under the Stock Rights and Restrictions
Agreement except for transfers (i) in a Public Offering or (ii) pursuant to Rule
144 or Rule 145; provided, however, that any such transferee who is not an
Affiliate of Security Holder must acquire from the Security Holder a number of
Registrable Securities equal to at least 25% of the Eligible Stock then held by
Security Holder and its Affiliates. In order for any such transferee to be
entitled to the benefits of this Agreement and thereby become a "Security
Holder," such transferee must agree to be bound by this Agreement by executing a
counterpart of this Agreement. In the event of an assignment or partial
assignment of this Agreement pursuant to this Section 5, notices and requests to
and from the Company pursuant to this Agreement shall continue to be made only
to and from the Security Holder until such time as Security Holder shall
otherwise advise the Company in writing from time to time that a
transferee-Security Holder(s) will give and receive notices and requests.
In the event that any such transferee-Security Holder is an E&P Company
(as defined in the Stock Rights and Restriction Agreement), then any underwriter
for such E&P Company shall have customary access to perform its due diligence
obligations with respect to any Registration Statement subject to
confidentiality obligations that prohibit the sharing or disclosure of
information with such E&P Company, and no such E&P Company shall, by virtue of
this Agreement, have access to non-public information of the Company.
-12-
No transfer or assignment of this Agreement shall increase the number of
Registrations which the Company is obligated to make under this Agreement.
Section 6. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or transmitted
by telex, telegram or facsimile transmission or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Security Holder, to:
Shell Louisiana Onshore Properties Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
with a copy to:
Shell Oil Company Legal Firm
X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: 000-000-0000
(b) if to the Company, to:
The Meridian Resource Corporation
00000 X. Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx., Chairman and
Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Fulbright & Jaworksi L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
Fax: (000) 000-0000
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Section 7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, which together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their officers thereunto duly authorized.
THE MERIDIAN RESOURCE CORPORATION
By
Name
Title
SHELL LOUISIANA ONSHORE PROPERTIES
INC.
By
Name
Title
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EXHIBIT H
CONTINGENT CONSIDERATION
For purposes of this Agreement, the parties agree that the Company's
federal income tax basis in its assets as of the Effective Time is $36 million
(the "Agreed Tax Basis"). In the event that (i) the Company is entitled to
increase the tax basis of its assets held at the Effective Time for periods
during either 1997 or 1998 through the Effective Time, which adjustment has the
effect of increasing the Company's Agreed Tax Basis in its assets by more than
100 percent (the "Threshold Amount"), and (ii) such increased tax basis is
available to the Company after the Closing, the parties agree as follows:
Notwithstanding any provision in this Agreement or the Stock Rights and
Restrictions Agreement which might otherwise limit the acquisition by SLOPI or
any of it Affiliates of additional shares of TMR Common Stock, to the extent
that TMR's consolidated federal income tax group actually realizes a cash
benefit as a result of such increase in basis in the Company's assets in excess
of the Threshold Amount with respect to any consolidated federal income tax
return which includes the Company for any period ending before the tenth
anniversary of the Closing, TMR shall issue and deliver to SLOPI an additional
number of shares of TMR Common Stock equal in value to 60% of such cash benefit.
Such additional shares of TMR Common Stock shall be delivered within 30 days
after the date of filing of TMR's federal income tax return for each year in
which TMR or the Company realizes such cash benefit. For purposes of this
Agreement, in determining whether a reduction in TMR's federal income tax has
actually been realized, TMR shall be entitled to utilize all other deductions,
expenses, and credits of all members of its affiliated group before utilizing
any tax benefits arising from such increase in tax basis of the Company's
assets. For purposes of issuing additional shares of TMR Common Stock, all such
shares shall be valued at the "Average Per Share Market Value" with respect to
the date of issuance (as such term is defined in the Stock Rights and
Restriction Agreement).
H-1
SCHEDULE I
TMR DISCLOSURE SCHEDULE
(OMITTED)
SCHEDULE II
COMPANY DISCLOSURE SCHEDULE
(OMITTED)
SCHEDULE III
TRUE-UP ACCOUNTING PROCEDURES AND PRINCIPLES
OPERATIONS AND PRODUCTION AFTER 12/31/97
SLOPI DIVIDEND AND OPERATIONS ON AND AFTER 1/1/98
Although Closing will occur after 1/1/98, the parties agree that, in general,
the economic benefits and burdens relating to the LOPI Properties prior to
1/1/98 shall be for the benefit of SLOPI and that the benefits and burdens
relating to the LOPI Properties on and after 1/1/98 shall be for the benefit of
TMR. In order to divide the benefits and burdens relating to the LOPI Properties
in such a manner, the parties hereby agree to the following:
(1) SLOPI will have received a dividend (the "SLOPI Dividend") by the
Company in an amount in accordance with Section 8.2(a) relating to
the period beginning 10/1/97 and ending 12/31/97 such that the
accounts and records of the Company following payment of the SLOPI
Dividend reflect or include only the following: (i) the benefits
from all Production and Proceeds from the LOPI Properties in respect
of operations on or after January 1, 1998, including all Revenues,
(ii) the burdens of all Production and Proceeds from the LOPI
Properties in respect of operations on or after January 1, 1998,
including all Expenditures on or after January 1, 1998, (iii) all
assets and liabilities relating to Suspense Funds for the LOPI
Properties (which assets and liabilities shall "net" to zero; (iv)
all property, plant and equipment that are LOPI Properties; and (v)
all liabilities associated with deferred taxes and gas imbalances.
(2) The Company shall accrue an amount for taxes described in Section
9.10(a)(3) of the Agreement relating to the taxable period beginning
January 1, 1998.
REVENUES
Oil, gas and natural gas liquids production revenues accounted for shall include
(i) the actual value received of production sold or transferred and recorded in
accordance with GAAP and the appropriate adjustments for royalties, and other
contractual provisions, Revenues will specifically exclude (a) products
purchases for resale, (b) production and severance taxes, and (c) any marketing
fees paid to affiliates. Other revenues will include miscellaneous revenues and
expenses associated with oil and gas operations.
III-1
PRODUCTION AND PROCEEDS
Production and Proceeds shall include, without limitation, proceeds from any
imbalance and oil in storage above the pipeline connection, and take-or-pay
collections/rights and accounts receivable attributable to production and all
other monetary payments (including, without limitation, proceeds from the sale
of mineral production, credits, tax refunds, insurance proceeds, salvage
payments and reimbursement of joint operating costs and expenses) attributable
to the ownership, use or production of the LOPI Properties.
EXPENDITURES
Expenditures shall include (i) all direct expenditures incurred to operate and
maintain xxxxx and related equipment, including, such expenditures as operating
labor, repairs and maintenance, materials, supplies, and fuel consumed in
operations, reconditioning and recompletion activities, (ii) exploration costs
associated with geological and geophysical activity (including, but not limited
to seismic activity to the extent title is owned by LOPI), acquiring, carrying
and retaining undeveloped properties (other than the LOPI Properties), and
drilling exploratory xxxxx determined to be productive or non-productive
(excluding non-producing amortization), (iii) severance and ad valorem taxes,
(iv) regulatory fees, (v) processing, compression, dehydration and separation
fees and transportation and gathering costs, (vi) all capital expenditures
associated with drilling, completing and equipping the operations, and (vii)
operating overhead charges of $1.64 per net barrel equivalent of production
calculated on the basis of 6mcf per barrel of oil equivalent.
SUSPENSE FUNDS
Suspense Funds shall include the amount of money representing the aggregate
amount of all suspense accounts associated with the LOPI Properties, including
accounts receivable from interest owners relating to the LOPI Properties on
account of revenue settlement disbursements, whether incurred prior to, on or
after 1/1/98, provided that, the assets constituting Suspense Funds are at least
equal to the liabilities constituting Suspense Funds; and PROVIDED FURTHER, that
Suspense Funds shall not include any associated amounts for administrative and
legal expenses relating to periods prior to 1/1/98, it being understood that
such administrative and legal expenses associated with Suspense Funds prior to
1/1/98 shall be for the account of SLOPI and administrative and legal expenses
associated with Suspense Funds on or after 1/1/98 (other than internal and
affiliate charges, which shall be included in the operating overhead charges
provided above) shall be for the account of TMR.
INTERIM ACCOUNTING PAYMENT AND COLLECTION SERVICES
From 1/1/98 until Closing, SLOPI shall, for the account of and in consideration
of the overhead charges set forth in clause (vii) of the definition of
Expenditures, provide all necessary and appropriate financial accounting
services for the Properties and all related operations and
III-2
administration of the LOPI Properties in the same manner and to the same extent
provided by Shell prior to 1/1/98, taking into account and acting consistent
with the provisions in this agreement. Shell shall, for the account of and at
the sole cost to the Company, pay all expenditures which are the obligations of
the Company and collect all proceeds and other monetary payments which are
allocated to the Company.
POST CLOSING SETTLEMENT
Within sixty (60) business days after Closing, SLOPI and its Affiliates shall
make a final post-closing settlement to account for all revenues, expenditures,
accruals for taxes described in Section 9.10(a)(3) of the Agreement and other
obligations associated with the period starting with 1/1/98 and inclusive
through the Effective Time to insure the division of economic benefits and
burdens as contemplated under these true-up accounting principles. SLOPI and its
Affiliates shall provide TMR with access to the post closing settlement
calculation and the work papers related thereto. If after such 60 business day
period, TMR shall have an objection to the calculation of the post closing
settlement, then the parties shall attempt to resolve such dispute over the 15
business day period following the delivery of the post closing statement. If no
objections are made during such 15 business day period, the applicable party
shall pay the other party in cash the net amount owed pursuant to the post
closing settlement, and if there is a dispute, the net amount of any undisputed
amounts. If disputes with respect to the final settlement cannot be resolved
within the 15 business day period, then either party with notice to the other
party may submit the matters in dispute to Xxxxxx Xxxxxxxx & Co. or such other
nationally recognized independent accounting firm as may be approved by the
parties, which firm shall render an opinion on such disputed matters. Within
five days of the delivery of such opinion, the amounts owed as determined by
such accounting firm shall be paid in cash by the owing party to the other
party.
ACCOUNTING INFORMATION TO BE PROVIDED TO SLOPI BY TMR
TMR shall provide SLOPI financial information necessary for SLOPI to recognize
and disclose its interest in TMR in accordance with SEC requirements. This will
include access to information necessary to convert TMR's financial records to
successful efforts accounting and the costs of conversion from full cost to
successful efforts shall be borne by SLOPI. For the 10-Q reporting periods
ending March 31, June 20 and September 30 of each year, TMR shall provide such
information on or about the 30th day following the end of the applicable period,
absent special circumstances in which case it will be provided as soon as
practicable, but in no event later than the 40th day following the end of the
applicable period. For calendar year periods, TMR shall provide such information
on or about the 60th day following the end of the period, absent special
circumstances in which case it will be provided as soon as reasonably
practicable, but in no event later than March 15 of the following calendar year.
III-3
