AMENDMENT NO. 1 TO PUT/CALL AGREEMENT
This Amendment No. 1 to Put/Call Agreement (this "AMENDMENT") is dated
as of September 4, 1998, by and between Mercury Exploration Company, a Texas
corporation ("MERCURY"), Trust Company of the West, in the capacity set
forth on the signature page hereto ("TCW"), and amends that certain Put/Call
Agreement dated as of April 9, 1998 between Mercury and TCW (the "PUT/CALL
AGREEMENT"; capitalized words used herein and not otherwise defined shall
have the meaning ascribed to them in the Put/Call Agreement).
As a condition to TCW's entering into that certain Consent and Voting
Agreement dated the date hereof concerning the merger (the "MSR-QRI MERGER")
of MSR with and into QRI pursuant to that certain Agreement and Plan of
Reorganization dated the date hereof between QRI and MSR (the "MSR-QRI MERGER
AGREEMENT"), the parties hereto hereby agree as follows:
1. The following is added as a new Section 1.1A immediately following
Section 1.1 of the Put/Call Agreement:
"Section 1.1A. PUT RIGHT OF TCW--XXXXXX WARRANTS. If any of the
Xxxxxx Warrants (as defined below) are exercised, redeemed, sold,
exchanged, or otherwise transferred for value or converted into other
securities of any entity (other than such adjustments required under the
terms of such Xxxxxx Warrants in connection with reorganizations,
consolidations or mergers, including the MSR-QRI Merger pursuant to the
MSR-QRI Merger Agreement) at any time during which TCW or any of its
affiliates owns any of the Shares, then TCW and any such affiliate shall
automatically have the right, exercisable at its option for up to 180 days
after TCW receives written notice from a member of the Xxxxxx Group that
such event has occurred (with a specific reference to this Section 1.1A of
the Put/Call Agreement) (the "OPTION PERIOD"), to sell to Mercury, and
Mercury shall be obligated to purchase and pay for, all of the Shares then
owned by TCW and any affiliate thereof for the Xxxxxx Warrant Put Price (as
defined below). TCW shall exercise the put option set forth in this
paragraph by delivering a written notice of such exercise to Mercury within
the Option Period at the address set forth below. Notwithstanding the
foregoing, this paragraph does not apply to the exercise of Xxxxxx Warrants
by Mercury to purchase up to an aggregate of (i) prior to the consummation
of the MSR-QRI Merger, 1,000,000 shares of MSR common stock or (ii)
following and giving effect to the consummation of the MSR-QRI Merger,
100,000 shares of QRI common stock, in each case as adjusted for stock
splits, stock dividends, recapitalizations and other similar transactions
(other than any such transaction effected prior to the consummation of the
MSR-QRI Merger) solely for the purpose of delivering such shares of MSR
common stock or QRI common stock to employees, independent consultants or
directors of Mercury upon the exercise of options granted to such persons;
provided that not more than 10% of such shares referenced in (i) and (ii)
shall be beneficially owned in the aggregate by members of the Xxxxxx Group
or any affiliate or family member thereof. Notwithstanding Section 1.6(f)
below, this Section 1.1A shall not be assigned by TCW or any of its
affiliates to persons other than TCW and its affiliates. In the event that
the MSR-QRI Merger Agreement is terminated without the consummation of the
MSR-QRI Merger, this Section 1.1A shall be null and void and without any
force or effect as of the date of such termination."
For purposes hereof, "XXXXXX WARRANTS" shall mean the Common Stock
Warrants issued by Mercury Montana, Inc. (now known as MSR) to Mercury,
Xxxxx Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and Xxxx Xxxxxx Self
(collectively, the "XXXXXX GROUP"), each dated March 7, 1997 and each
having an exercise price per share of $1.25, as the same may be amended
from time to time (the "XXXXXX WARRANTS").
For purposes hereof, "XXXXXX WARRANT PUT PRICE" shall mean the amount
that would be payable by Mercury to TCW and its affiliates for the number
of shares sold to Mercury under this Section 1.1A if Mercury had exercised
its Call Right and purchased that number of Shares pursuant to Section 1.3
below on the date such sale closes.
2. Section 1.3 of the Put/Call Agreement is hereby amended in its
entirety to read as follows:
"Section 1.3 CALL RIGHT OF MERCURY. During the period commencing on
the date hereof and ending on and including the earlier of (a) the sixth
anniversary of the closing date of the MSR Merger, or (b) December 31, 2005
so long as there shall not be outstanding any uncured breach by Mercury or
any affiliate of Mercury of any material obligation or duty to TCW under
any Royalty Documents (as defined in the Reorganization Agreement), Mercury
shall have the right, at its option, to purchase from TCW and pay for in
cash, and TCW shall be obligated to sell to Mercury, all of the Shares,
other than shares that have been sold by TCW or by its Affiliates in either
case in an arms' length transaction, for the cash purchase price described
below. In the event Mercury exercises the foregoing option at any time
prior to October 9, 1999, the cash purchase price per share shall be an
amount equal to the difference of (a) $1,057.69 (as adjusted to reflect an
adjustment to the number of Shares as provided in Section 1.5 below) minus
(b) the quotient of (i) 50 % of the sum of (A) the amounts received by TCW,
the Grantee under the Royalty Documents ("GRANTEE") or a Permitted
Transferee (as defined below) (1) as proceeds of the overriding royalties
granted and conveyed in the Royalty Conveyance (as defined below) during
and with respect to the period from and after April 9, 1998 to the date of
such purchase or (2) net cash sales proceeds received by TCW, Grantee or a
Permitted Transferee (after deduction of all commissions and other costs of
sale including transaction costs) from the sale of any of the overriding
royalties granted and conveyed in the Royalty Conveyance prior to the date
of such purchase plus (B) the amounts (the "PROJECTED XXX AMOUNT")
projected to be received by TCW, Grantee or a Permitted Transferee as
proceeds of the overriding royalties granted and conveyed in the Royalty
Conveyance during the period from the date of such purchase to October 9,
1999 which Projected XXX Amount shall be determined by the mutual agreement
of Mercury and TCW or, if such parties are unable to agree, by the
independent engineer preparing the latest annual engineering report
covering the properties burdened by the Royalty Conveyance pursuant to the
Stockholders Agreement (as defined in the Reorganization Agreement) using
the same assumptions and parameters as used in such annual engineering
report, divided by (ii) 13,000 (as adjusted to reflect an adjustment to the
number of Shares as provided in Section 1.5 below) (the "PRE-OCTOBER 1999
PRICE"). In the event that Mercury and TCW shall be unable to agree on the
Projected XXX Amount or the independent engineer is unable to determine
such amount by the date of the scheduled closing of the exercise of such
purchase option by Mercury, such purchase shall nevertheless close on the
scheduled closing date using as
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the Projected XXX Amount for the purpose of calculating the amount payable
at closing the amount estimated by TCW in good faith to be the Projected
XXX Amount and there shall be a cash adjustment between the parties as
appropriate within three (3) business days of the final determination of
the Projected XXX Amount either by the mutual agreement of Mercury and TCW
or, if such parties are unable to agree, by the independent engineer. In
the event Mercury exercises the purchase option described herein at any
time on or after October 9, 1999, the cash purchase price shall be equal
to that amount necessary to cause TCW to receive on the date of purchase a
nominal 25% cash-on-cash internal rate of return on $10,000,000 from
April 9, 1998 to the date of receipt of such cash payment. A nominal
cash-on-cash internal rate of return shall be deemed to have been received
on such amount when the aggregate of the net present values as of April 9,
1998 of Cash Proceeds (as defined below) actually received after April 9,
1998 by TCW or Grantee is equal to or greater than $10,000,000. In
calculating such net present values, Cash Proceeds received shall be
discounted quarterly using the discount factors set forth on Schedule 1
hereto. As used herein, Cash Proceeds shall include (1) all dividends and
distributions received by TCW with respect to the Shares, (2) the net cash
sales proceeds received by TCW or its Affiliates (after deduction of all
commissions and other costs of sale including transaction costs) from the
sale of any Shares to a party in an arms' length sale and (3) 50% of all
amounts received as (a) proceeds of the overriding royalties granted and
conveyed in the Royalty Conveyance by TCW or Grantee under the Royalty
Documents or any assignee thereof in a Permitted Transfer (as defined in
the Stockholders Agreement) (a "PERMITTED TRANSFEREE") but not any other
assignee thereof during and with respect to the period from and after
April 9, 1998 to the date of purchase or (b) net cash sales proceeds
received by TCW, Grantee or any Permitted Transferee (after deduction of
all commissions and other costs of sale including transaction costs) from
the sale of any of the overriding royalties granted and conveyed in the
Royalty Conveyance. Mercury shall exercise the foregoing option by
delivering a written notice of such exercise to TCW at the address set
forth below. Any sale of any Shares by TCW or by its Affiliates in either
case in an arms' length transaction shall result in such Shares that are
sold no longer being subject to Mercury's right to purchase hereunder;
PROVIDED, HOWEVER, that prior to any sale of Shares by TCW prior to
October 9, 1999, TCW shall give Mercury written notice of TCW's intent to
sell such Shares and Mercury shall have the right, at its option, for a
period of 10 days after the date of such notice to purchase from TCW and
pay for the Shares for a cash purchase price equal to the Pre-October 1999
Price. As used herein the term "Royalty Conveyance" shall mean the Royalty
Conveyance as referred to and amended by the Amendment to Royalty
Conveyance dated as of April 9, 1998.
3. Section 1.5 of the Put/Call Agreement is hereby amended in its
entirety to read as follows:
"Section 1.5. ADJUSTMENTS OF SHARES. In the event that the Shares
are exchanged for other securities of QRI or of a surviving entity
resulting from a merger or other business combination involving QRI or any
successor to QRI, then reference to the "Shares" herein shall refer to such
other securities. In addition, if TCW or any of its affiliates should
receive in respect of the Shares any additional shares issued pursuant to
any stock split, stock dividend, recapitalization or similar transaction by
QRI or any such surviving entity, then references herein to the "Shares"
shall include such additional shares, and appropriate adjustment shall be
made hereunder, including without limitation,
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adjustment to any per share purchase price expressed herein, to reflect
such stock split, stock dividend, recapitalization or similar transaction.
If the number of Shares is reduced pursuant to any stock combination by
QRI or such surviving entity, appropriate adjustment shall likewise be
made to reflect such combination.
If TCW or any of its affiliates should acquire any additional shares
of QRI common stock other than pursuant to any such combination, split,
reclassification or stock dividend or similar transaction regarding the
Shares ("ADDITIONAL TCW SHARES") while any of such parties owns any of the
Shares, then any subsequent sale, transfer or other disposition of shares
of QRI common stock by TCW or any of its affiliates shall be treated, for
purposes of this Put/Call Agreement, as a sale, transfer or other
disposition of the Shares rather than Additional TCW Shares until TCW and
its affiliates no longer own any of the Shares."
4. The following is added as a new Section 1.7 after
Section 1.6 of the Put/Call Agreement:
"Section 1.7. SPECIFIC PERFORMANCE. Upon default of a party's
obligations hereunder to purchase and pay for any of the Shares when due,
the non-defaulting party may notify the defaulting party that the
non-defaulting party is holding the Shares for account of the defaulting
party, whereupon the Shares will be deemed to have been tendered and
delivered to, and accepted by, the defaulting party and the defaulting
party shall thereupon become obligated to pay, and the non-defaulting party
shall be entitled to proceed against the defaulting party for payment of,
the aggregate purchase price as calculated hereunder. Each party agrees
that the non-defaulting party is entitled to specific performance of the
defaulting party's obligation to pay the aggregate purchase price and each
party hereby waives, and agrees that it will not raise, any defense to such
an action for specific performance of such party's obligation to purchase
and pay for the Shares based upon any obligation of the non-defaulting
party to mitigate damages or upon the non-defaulting party having an
adequate remedy at law."
5. The following is added as Section 1.6(g) of the Put/Call
Agreement:
(g) SURRENDER OF LETTER OF CREDIT. Within five (5) business days of
Mercury providing written notice to TCW of the consummation of the MSR-QRI
Merger, TCW shall surrender to Mercury that certain Irrevocable Standby
Letter of Credit No. 950445, dated April 10, 1998 by NationsBank of Texas,
N.A. (the "BANK") in favor of TCW for cancellation by the Bank and deliver
to Mercury a cover letter from TCW addressed to the Bank and authorizing
the cancellation of such letter of credit.
6. Except as amended as set forth above the Put/Call Agreement shall
remain in full force and effect.
7. Mercury hereby represents and warrants to TCW that the Xxxxxx
Warrants have been owned beneficially and of record by the Xxxxxx Group since
they were originally issued and have not been amended, modified, exercised,
exchanged or converted for value or for other securities since their original
issuance date other than adjustments to account for (a) the merger of Mercury
Montana, Inc. and MSR, (b) the Agreement Regarding Warrants between the
Xxxxxx Group, Joint Energy Development Investment Limited Partnership and TCW
dated the
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date hereof and (c) this Amendment. Any breach of the foregoing
representations and warranties shall be deemed an exercise of the Xxxxxx
Warrants under Section 1.1A of the Put/Call Agreement, as amended hereby,
entitling TCW to the option set forth in such Section 1.1A.
8. This Amendment shall be governed by and construed in accordance
with the laws of the state of Texas without giving effect to the principles
of conflicts of laws thereof and may be signed in any number of counterparts.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO AMENDMENT NO. 1 TO PUT/CALL AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have entered into
this Amendment as of the date first written above.
MERCURY EXPLORATION COMPANY
By: /s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
Vice President
TRUST COMPANY OF THE WEST, a California trust
company, as Sub-Custodian for Mellon Bank for
the benefit of Account No. CPFF 869-3062
By: TCW ASSET MANAGEMENT COMPANY, a
California corporation, as Investment Manager
under that certain Agreement, dated as of
June 13, 1994, between TCW Asset Management
Company and Xxxxxx Xxxxxxx Group, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx
Managing Director
By: /s/ Xxxx XxxXxxxx
-------------------------------
Xxxx XxxXxxxx
Senior Vice President
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