EXHIBIT 2.3
[Execution Copy]
AGREEMENT AND PLAN OF MERGER
AMONG
TITAN EXPLORATION, INC.,
TITAN BAYOU BENGAL HOLDINGS, INC.
AND
CARROLLTON RESOURCES, L.L.C.
NOVEMBER 4, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER..................................................... 1
1.1 The Merger.............................................. 1
1.2 Closing Date............................................ 2
1.3 Consummation of the Merger.............................. 2
1.4 Effects of the Merger................................... 2
1.5 Articles of Organization; Operating Agreement........... 2
1.6 Managers and Officers................................... 2
1.7 Conversion of Securities................................ 2
1.8 Exchange; Fractional Shares............................. 3
1.9 Taking of Necessary Action; Further Action.............. 3
1.10 Adjustment.............................................. 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES................................. 4
2.1 Representations and Warranties of Carrollton............ 4
(a) Organization and Qualification of Carrollton......... 4
(b) Organization and Qualification of the Subsidiary..... 4
(c) Capitalization....................................... 5
(d) Authorization and Validity of Agreement.............. 5
(e) No Approvals or Notices Required; No Conflict........ 6
(f) Financial Statements................................. 6
(g) Conduct of Business in the Ordinary Course;
Absence of Certain Changes and Events................ 7
(h) Litigation........................................... 7
(i) Compliance with Laws and Permits..................... 7
(j) Employees; Employee Benefit Plans.................... 7
(k) Severance Payments................................... 8
(l) Taxes................................................ 8
(m) Books and Records.................................... 9
(n) Voting Requirements.................................. 9
(o) Environmental Matters................................ 9
(p) Insurance............................................ 10
(q) Title to Oil and Gas Interests....................... 11
(r) Oil and Gas Operations............................... 11
(s) Hydrocarbon Sales and Purchase Agreements............ 11
(t) Intellectual Property................................ 11
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(u) Financial and Commodity Hedging...................... 12
(v) Maintenance of Machinery............................. 12
(w) Gas Imbalances; Calls on Production; Prepayments..... 12
(x) Royalties............................................ 12
(y) Payout Balances...................................... 12
(z) Plugging and Abandonment Liabilities................. 12
(aa)1997 Exploration Activities.......................... 13
(bb) Disclosure.......................................... 13
(cc) Brokerage Fees...................................... 13
(dd) Affiliated Transactions............................. 13
(ee) Accredited Investors................................ 13
2.2 Representations and Warranties of Titan and Sub........... 13
(a) Organization and Compliance with Law................. 13
(b) Capitalization....................................... 14
(c) Authorization and Validity of Agreement.............. 15
(d) No Approvals or Notices Required; No Conflict with
Instruments to which Titan or any of the
Titan Subsidiaries is a Party....................... 15
(e) Commission Filings; Financial Statements.............. 15
(f) Litigation............................................ 16
(g) Interim Operations of Sub............................. 16
(h) Disclosure............................................ 16
(i) Brokerage Fees........................................ 17
ARTICLE III
COVENANTS OF CARROLLTON PRIOR TO THE EFFECTIVE TIME........ 17
3.1 Conduct of Business by Carrollton Pending the Merger 17
3.2 Vote of Members of Carrollton....................... 19
3.3 No Solicitation..................................... 19
3.4 Affiliates' Agreements.............................. 19
3.5 Access to Information; Confidentiality.............. 20
ARTICLE IV
COVENANTS OF TITAN PRIOR TO THE EFFECTIVE TIME............. 20
4.1 Conduct of Business by Titan Pending the Merger....... 20
4.2 Registration Statement................................ 20
4.3 Reservation of Titan Stock............................ 21
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ARTICLE V
ADDITIONAL AGREEMENTS...................................... 21
5.1 Filings; Consents; Reasonable Efforts................ 21
5.2 Notification of Certain Matters...................... 21
5.3 Agreement to Defend.................................. 21
5.4 Expenses............................................. 22
5.5 Indemnification...................................... 22
5.6 Carrollton Employees................................. 22
5.7 Tax Treatment........................................ 22
5.8 HSR Act Notification................................. 22
5.9 Public Announcements................................. 23
5.10 Indemnification of Brokerage......................... 23
ARTICLE VI
CONDITIONS.................................................. 23
6.1 Conditions to Obligation of Each Party to
Effect the Merger..................................... 23
6.2 Additional Conditions to Obligations of Titan......... 24
6.3 Additional Conditions to Obligations of Carrollton.... 25
ARTICLE VII
MISCELLANEOUS.............................................. 25
7.1 Termination.......................................... 25
7.2 Effect of Termination................................ 26
7.3 Waiver and Amendment................................. 27
7.4 Nonsurvival of Representations, Warranties and
Agreements.......................................... 27
7.5 Assignment........................................... 27
7.6 Notices.............................................. 27
7.7 Governing Law........................................ 28
7.8 Severability......................................... 28
7.9 Counterparts......................................... 28
7.10 Headings............................................. 28
7.11 Entire Agreement; Third Party Beneficiaries.......... 28
7.12 Disclosure Letters................................... 28
ARTICLE VIII
DEFINITIONS................................................ 29
8.1 Certain Defined...................................... 29
8.2 Certain Additional Defined Terms...................... 31
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of the 4th day of November,
1997 (the "Agreement"), is among Titan Exploration, Inc., a Delaware corporation
("Titan"), Titan Bayou Bengal Holdings, Inc., a newly-formed Delaware
corporation and a wholly-owned subsidiary of Titan ("Sub"), and Carrollton
Resources, L.L.C., a Louisiana limited liability company ("Carrollton").
WHEREAS, the respective Boards of Directors of Titan and Sub, and the
Managers of Carrollton, have determined that the acquisition by Titan of
Carrollton is desirable and in the best interests of the stockholders and
members of the respective companies;
WHEREAS, the respective Boards of Directors of Titan and Sub, and the
Managers of Carrollton, have approved the acquisition of Carrollton by Titan
pursuant to the terms of this Agreement;
WHEREAS, the respective Boards of Directors of Titan and Sub, the Managers
of Carrollton, have approved the merger of Sub with and into Carrollton (the
"Merger"), whereby the Class A, Class B and Class C membership units of
Carrollton (collectively, the "Membership Units") will be converted into shares
of common stock, par value $.01 per share, of Titan ("Titan Common Stock"), upon
the terms and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, the parties intend 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");
WHEREAS, the parties intend that this Agreement, as it relates to the
Merger, shall constitute a "plan of reorganization" within the meaning of
Treasury Regulation Section 1.368-3; and
WHEREAS, the parties hereto desire to set forth certain representations,
warranties and covenants made by each to the other as an inducement to the
consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Titan, Sub and Carrollton hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Louisiana Limited Liability Company
Act (the "LLLC") and the General Corporation Law of the State of Delaware (the
"DGCL"), at the Effective Time (as defined in Section 1.3) Sub shall be merged
with and into Carrollton. As a result of the Merger, the separate corporate
existence of Sub shall cease and Carrollton shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Entity").
1.2 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxx Xxxxxx,
L.L.P., Texaco Center, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxx, as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VI or at such other time and place and on such other date as Titan and
Carrollton shall agree; provided, that the closing conditions set forth in
Article VI shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date".
1.3 Consummation of the Merger. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
each of the Secretary of State of Louisiana and the Secretary of State of
Delaware a certificate of merger in such forms as required by, and executed in
accordance with, the relevant provisions of the LLLC and the DGCL. The
"Effective Time" of the Merger as that term is used in this Agreement shall mean
such time as the certificates of merger are duly filed with the Secretary of
State of Louisiana and the Secretary of State of Delaware or at such later time
(not to exceed 90 days from the date the certificates are filed) as is specified
in the certificates of merger pursuant to the mutual agreement of Titan, Sub and
Carrollton.
1.4 Effects of the Merger. The Merger shall have the effects set forth in
the applicable provisions of the LLLC and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
properties, rights, privileges, powers and franchises of Carrollton and Sub
shall vest in the Surviving Entity, without any transfer or assignment having
occurred, and all debts, liabilities and duties of Carrollton and Sub shall
attach to the Surviving Entity, all in accordance with the LLLC and the DGCL.
1.5 Articles of Organization; Operating Agreement.
(a) The Articles of Organization of Carrollton, as in effect
immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Entity and thereafter shall continue to be
its Articles of Organization until amended as provided therein and under
the LLLC.
(b) The Operating Agreement of Carrollton, as in effect immediately
prior to the Effective Time, shall be the operating agreement of the
Surviving Entity and thereafter shall continue to be its operating
agreement until amended as provided therein and under the LLLC; provided
that at the Effective Time, such operating agreement shall be deemed to be
amended to eliminate separate classes of Membership Units.
1.6 Managers and Officers. The directors of Sub immediately prior to the
Effective Time shall become the managers of the Surviving Entity at and after
the Effective Time, each to hold office in accordance with the Articles of
Organization and Operating Agreement of the Surviving Entity, and the officers
of Sub immediately prior to the Effective Time shall be the officers of the
Surviving Entity at and after the Effective Time, in each case until their
respective successors are duly elected or appointed and qualified.
1.7 Conversion of Securities. Subject to the terms and conditions of this
Agreement, at the Effective Time (regardless of whether such Membership Units
are Class A, Class B or Class C Membership Units), by virtue of the Merger and
without any action on the part of Titan, Sub or their stockholders or Carrollton
or its Members:
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(a) Each Membership Unit issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive .5499791
(the "Exchange Ratio") of a share of Titan Common Stock.
(b) Each share of common stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one membership unit of the Surviving Entity.
1.8 Exchange; Fractional Shares.
(a) As soon as practicable after the Effective Time, each owner of
Membership Units shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of whole shares of
Titan Common Stock into which the Membership Units shall have been
converted as aforesaid, in such denominations and registered in such names
as such holder may request. Each holder of Membership Units who would
otherwise be entitled to a fraction of a share of Titan Common Stock shall
be paid an amount in cash in accordance with the provisions of Section
1.8(c). Until so exchanged, each Membership Unit shall represent solely the
right to receive Titan Common Stock and cash in lieu of fractional shares,
if any.
(b) All shares of Titan Common Stock issued upon the exchange of
Membership Units in accordance with the terms hereof (including any cash
paid pursuant to Section 1.8(d)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such Membership Units. At and
after the Effective Time, there shall be no further transfers of Membership
Units that were outstanding immediately prior to the Effective Time.
(c) No fraction of a share of Titan Common Stock shall be issued, but
in lieu thereof each holder of Membership Units who would otherwise be
entitled to a fraction of a share of Titan Common Stock shall be paid an
amount in cash equal to the value of such fraction of a share based upon
the closing sales price of Titan Common Stock, as reported on the NMS on
the last day on which there is a reported trade in the Titan Common Stock
prior to the date on which the Effective Time occurs. No interest shall be
paid on such amount. All Membership Units held by a record holder shall be
aggregated for purposes of computing the number of shares of Titan Common
Stock to be issued pursuant to this Article I and cash in lieu of
fractional shares payable hereunder.
(d) None of Titan, Sub, Carrollton, the Surviving Entity or their
transfer agents shall be liable to a holder of the Membership Units of
Carrollton for any amount properly paid to a public official pursuant to
applicable property, escheat or similar laws.
(e) As soon as practicable after the Effective Time, Titan's transfer
agent shall mail and otherwise make available to each holder of Membership
Units a form of letter of transmittal and instructions for use in effecting
the conversion thereof and payment therefor, which letter of transmittal
shall comply with all applicable rules of the NMS.
1.9 Taking of Necessary Action; Further Action. The parties hereto shall
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Merger as promptly as possible. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Entity with full
right, title
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and possession to all assets, property, rights, privileges, powers and
franchises of Carrollton or Sub, such persons shall direct their respective
officers and directors or managers, as applicable, to take all such lawful and
necessary action.
1.10 Adjustment. In the event of any stock split, combination,
reclassification, recapitalization, exchange, stock dividend or other
distribution payable in Titan Common Stock with respect to shares of Titan
Common Stock (or if a record date with respect to any of the foregoing actions
should occur) during the period between the date of this Agreement and the
Effective Time, then the number of shares of Titan Common Stock into which each
Membership Unit is to be converted pursuant to this Agreement shall be adjusted
to reflect any such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Carrollton. Carrollton hereby
represents and warrants to Titan that:
(a) Organization and Qualification of Carrollton. Carrollton is duly
organized, validly existing and in good standing under the laws of the
State of Louisiana and has all requisite power and authority and all
necessary governmental authorizations to own, lease and operate all of its
properties and assets and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing
or to have such authority would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 2.1(a) of the
disclosure letter delivered by Carrollton to Titan on the date hereof (the
"Carrollton Disclosure Letter"), Carrollton is duly qualified to do
business, and is in good standing, in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified does not and would
not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. No actions or proceedings to dissolve
Carrollton are pending. Carrollton has heretofore delivered to Titan true
and complete copies of Carrollton's Articles of Organization and its
Operating Agreement (the "Carrollton Organizational Documents") as in
existence on the date hereof.
(b) Organization and Qualification of the Subsidiary. Except for
Carrollton Resources, Corp., a Louisiana corporation (the "Carrollton
Subsidiary"), Carrollton does not own, directly or indirectly, the capital
stock or other securities of any corporation or partnership or have any
direct or indirect equity or ownership interest in any other person.
Section 2.1(b) of the Carrollton Disclosure Letter lists the authorized (in
the case of capital stock) and outstanding capital stock or other equity
interests of the Carrollton Subsidiary. The Carrollton Subsidiary is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Louisiana. The Carrollton Subsidiary is duly
qualified to do business and is in good standing in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified does not and would
not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Carrollton Subsidiary has all
requisite corporate power
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and authority to own, lease, and operate its properties and to carry on its
business as now being conducted. No actions or proceedings to dissolve the
Carrollton Subsidiary are pending. All outstanding shares of capital stock
of the Carrollton Subsidiary have been validly issued and are fully paid
and nonassessable. No shares of capital stock or other equity interests of
the Carrollton Subsidiary are subject to, nor have any been issued in
violation of, preemptive or similar rights.
(c) Capitalization.
(i) As of the date hereof there are issued and outstanding
1,636,425.6. Membership Units in Carrollton, which Membership Units
represent all of the outstanding equity interests in Carrollton. The
Membership Units and the holders thereof (the "Members") are as set
forth in Section 2.1(c)(i) of the Carrollton Disclosure Letter. All
Membership Units are validly issued, fully paid and nonassessable and
no holder thereof is entitled to preemptive rights. Except as set
forth in the Carrollton Organizational Documents, Carrollton is not a
party to, and is not aware of, any voting agreement, voting trust or
similar agreement or arrangement relating to any class or series of
its equity interests, or any agreement or arrangement providing for
registration rights with respect to any Membership Units or other
securities of Carrollton. At the Closing there will not be any
Membership Units or other equity securities of Carrollton outstanding
other than the Membership Units set forth in Section 2.1(c)(i) of the
Carrollton Disclosure Letter.
(ii) Section 2.1(c)(ii) of the Carrollton Disclosure Letter sets
forth all outstanding options, warrants, scrip, rights to subscribe
for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of
any class of equity interests of Carrollton or any Carrollton
Subsidiary, or contracts, understandings or arrangements to which
Carrollton or any Carrollton Subsidiary is a party, or by which
Carrollton or any Carrollton Subsidiary is or may be bound, to issue
additional Membership Units or equity interests or options, warrants,
scrip or rights to subscribe for, or securities or rights convertible
into or exchangeable for, any Membership Units or other equity
interests (collectively, the "Carrollton Options"). On or prior to
the Closing, Carrollton shall take all such action necessary to cancel
all of the Carrollton Options, and no holder of Carrollton Options
shall have the right to acquire Membership Units or other equity
securities of Carrollton as a consequence of the exercise of any
Carrollton Options.
(iii) All outstanding shares of capital stock of the Carrollton
Subsidiary are owned by Carrollton, free and clear of all Encumbrances.
(d) Authorization and Validity of Agreement. Carrollton has all
requisite power and authority to enter into this Agreement and to perform
its obligations hereunder. The execution and delivery by Carrollton of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action (subject only,
with respect to the Merger, to approval of this Agreement by its Members as
provided for in Section 3.2). On or prior to the date hereof the Managers
of Carrollton (the "Managers") determined to recommend approval of the
Merger to the Members of Carrollton, and such determination is in effect as
of the date hereof. This Agreement has been duly executed and delivered by
Carrollton and is the valid and binding obligation of Carrollton,
enforceable against Carrollton in accordance with its terms.
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(e) No Approvals or Notices Required; No Conflict. Except as set
forth in Section 2.1(e) of the Carrollton Disclosure Letter, neither the
execution and delivery of this Agreement nor the performance by Carrollton
of its obligations hereunder, nor the consummation of the transactions
contemplated hereby by Carrollton, will (i) conflict with the Carrollton
Organizational Documents or the charter or bylaws of the Carrollton
Subsidiary; (ii) assuming satisfaction of the requirements set forth in
clause (iii) below, violate any provision of law applicable to Carrollton
or the Carrollton Subsidiary; (iii) except for (A) requirements of Federal
or state securities laws, (B) requirements arising out of the HSR Act, (C)
requirements of notice filings in such foreign jurisdictions as may be
applicable, and (D) the filing of articles of merger in accordance with the
LLLC and the DGCL, require any consent or approval of, or filing with or
notice to, any Governmental Entity, domestic or foreign, under any
provision of law applicable to Carrollton or the Carrollton Subsidiary; or
(iv) require any consent, approval or notice under, or violate, breach, be
in conflict with or constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the creation or imposition of
any lien upon any properties, assets or business of Carrollton or the
Carrollton Subsidiary under, any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract,
instrument, partnership agreement or other agreement or commitment or any
order, judgment or decree to which Carrollton or the Carrollton Subsidiary
is a party or by which Carrollton or the Carrollton Subsidiary or any of
their assets or properties is bound or encumbered, except (A) those that
have already been given, obtained or filed, (B) those that are required
pursuant to bank loan agreements or leasing arrangements, as set forth in
Section 2.1(e) of the Carrollton Disclosure Letter, which will be obtained
prior to the Effective Time, and (C) those that, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. No property
of Carrollton or the Carrollton Subsidiary is subject to a preferential
right to purchase that is applicable to the transactions contemplated by
this Agreement
(f) Financial Statements. Carrollton has delivered to Titan accurate
and complete copies of (i) Carrollton's audited consolidated balance sheet
as of December 31, 1996, and the related audited consolidated statements of
income, members' equity and cash flows and changes in financial position
for the year then ended, and the notes and schedules thereto, together with
the unqualified report thereon of Xxxxxx Xxxxxxxx LLP, independent public
accountants (the "Audited Financial Statements"), and (ii) Carrollton's
unaudited consolidated balance sheet as of June 30, 1997 (the "Latest
Balance Sheet"), and the related unaudited consolidated statements of
income, members' equity and cash flows and changes in financial position
for the six-month period then ended (the "Unaudited Financial
Statements") (collectively, the "Financial Statements"). The Financial
Statements (i) represent actual bona fide transactions, (ii) have been
prepared from the books and records of Carrollton and the Carrollton
Subsidiary in conformity with generally accepted accounting principles
applied on a basis consistent with preceding years throughout the periods
involved, except that the Unaudited Financial Statements may not be
accompanied by notes or other textual disclosure required by generally
accepted accounting principles, and (iii) accurately, completely, and
fairly present Carrollton's consolidated financial position as of the
respective dates thereof and its consolidated results of operations and
cash flows and changes in financial position for the periods then ended. As
of the date hereof, Carrollton has no liabilities, absolute or contingent,
that may reasonably be expected to have a Material Adverse Effect on
Carrollton and the Carrollton Subsidiaries that are not reflected in the
Financial Statements, except (i) those incurred in the ordinary course of
business consistent with past operations and not relating to the borrowing
of money, and (ii) those set forth in Section 2.1(f) of the Carrollton
Disclosure Letter.
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(g) Conduct of Business in the Ordinary Course; Absence of Certain
Changes and Events. Since January 1, 1997, except as contemplated by this
Agreement or as set forth in Section 2.1(g) of the Carrollton Disclosure
Letter, Carrollton and the Carrollton Subsidiary have conducted their
business only in the ordinary and usual course, and there has not been (i)
any Material Adverse Effect pertaining to Carrollton and the Carrollton
Subsidiary, or any condition, event or development that reasonably may be
expected to result in any such Material Adverse Effect; (ii) any material
change by Carrollton in its accounting methods, principles or practices;
(iii) any revaluation by Carrollton or the Carrollton Subsidiary of any of
their assets, including, without limitation, writing down the value of
properties or assets or writing off notes or accounts receivable other than
in the ordinary course of business; (iv) any entry by Carrollton or the
Carrollton Subsidiary into any commitment or transaction material to
Carrollton and the Carrollton Subsidiary, taken as a whole; (v) any
increase in indebtedness for borrowed money; (vi) any granting of a
security interest or lien on any material property or assets of Carrollton
and the Carrollton Subsidiary, taken as a whole, other than Permitted
Encumbrances; or (vii) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or any other
increase in the compensation payable or to become payable to any officers
or key employees of Carrollton or the Carrollton Subsidiary.
(h) Litigation. Except as set forth in Section 2.1(h) of the
Carrollton Disclosure Letter, there are no claims, actions, suits,
investigations, inquiries or proceedings pending or, to the knowledge of
Carrollton, overtly threatened against or affecting Carrollton or the
Carrollton Subsidiary or any of their respective properties at law or in
equity, or any of their respective employee benefit plans or fiduciaries of
such plans, or before or by any Governmental Entity or before any
arbitration board or panel, wherever located.
(i) Compliance with Laws and Permits. Each of Carrollton and the
Carrollton Subsidiary (i) has complied with all Applicable Laws (including
without limitation Applicable Laws relating to securities, properties,
production, sales, gathering and transportation of hydrocarbons, employment
practices, terms and conditions of employment, wages and hours, safety,
occupational safety, product safety, and civil rights) other than
violations which do not and would not reasonably be expected to have a
Material Adverse Effect; (ii) has obtained and hold all material permits,
licenses, variances, exemptions, orders, franchises, approvals and
authorizations of all Governmental Entities necessary for the lawful
conduct of its business or the lawful ownership, use and operation of its
assets; (iii) has not received any written notice, which has not been
dismissed or otherwise disposed of, that it has not so complied; and (iv)
has not been charged or, to the best knowledge of Carrollton, threatened
with, or, to the best knowledge of Carrollton, under investigation with
respect to, any violation of any Applicable Law relating to any aspect of
the business of Carrollton or the Carrollton Subsidiary other than
violations which do not and would not reasonably be expected to have a
Material Adverse Effect.
(j) Employees; Employee Benefit Plans.
(i) Section 2.1(j) of the Carrollton Disclosure Letter sets forth
a list of all employees of Carrollton and the Carrollton Subsidiary,
as well as the title and annual compensation of each such employee.
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(ii) None of Carrollton, the Carrollton Subsidiary nor any
corporation, trade, business or entity under common control with
Carrollton or the Carrollton Subsidiary within the meaning of Section
414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA
contributes to or has an obligation to contribute to, or has at any
time contributed to or had an obligation to contribute to, a plan
subject to Title IV of ERISA, including, without limitation, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(k) Severance Payments. Neither Carrollton nor the Carrollton
Subsidiary owes or will owe a severance payment or similar obligation to
any of their respective employees, officers or Managers as a result of the
Merger or the transactions contemplated by this Agreement, nor will any of
such persons be entitled to an increase in severance payments or other
benefits as a result of the Merger or the transactions contemplated by this
Agreement in the event of the subsequent termi nation of their employment.
(l) Taxes. All Tax Returns of or relating to any Tax that are
required to be filed on or before the Closing Date by or with respect to
Carrollton or the Carrollton Subsidiary, or any other corporation that is
or was a member of an affiliated group (within the meaning of Section
1504(a) of the Code) of corporations of which Carrollton was a member for
any period ending on or prior to the Closing Date, have been or will be
duly and timely filed, and all Taxes, including interest and penalties, due
and payable pursuant to such Tax Returns have been paid or adequately
provided for in reserves established by Carrollton. All U.S. Federal
income Tax Returns of or with respect to Carrollton or the Carrollton
Subsidiary have been audited by the applicable Governmental Entity, or the
applicable statute of limitations has expired, for all periods up to and
including the tax year ended December 31, 1993. There is no material claim
against Carrollton or the Carrollton Subsidiary with respect to any Taxes,
and no material assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of or with respect to Carrollton or
the Carrollton Subsidiary that has not been adequately provided for in
reserves established by Carrollton. The total amounts set up as
liabilities for current and deferred Taxes in the Financial Statements have
been prepared in accordance with generally accepted accounting principles
and are sufficient to cover the payment of all material Taxes, including
any penalties or interest thereon and whether or not assessed or disputed,
that are, or are hereafter found to be, or to have been, due with respect
to the operations of Carrollton and the Carrollton Subsidiary through the
periods covered thereby. Carrollton and the Carrollton Subsidiary have (and
as of the Closing Date will have) made all deposits (including estimated
tax payments for taxable years for which the consolidated federal income
tax return is not yet due) required with respect to Taxes. No waiver or
extension of any statute of limitations as to any federal or local Tax
matter has been given by or requested from Carrollton or the Carrollton
Subsidiary. Except for statutory liens for current Taxes not yet due, no
liens for Taxes exist upon the assets of either Carrollton or the
Carrollton Subsidiary. Neither Carrollton nor the Carrollton Subsidiary
has filed consolidated income Tax Returns with any corporation, other than
consolidated federal and state income Tax Returns by Carrollton, for any
taxable period which is not now closed by the applicable statute of
limitations. Neither Carrollton nor the Carrollton Subsidiary has any
deferred intercompany gain within the meaning of Treasury Regulation
Section 1.1502-13 or any predecessor provision.
Following the Merger, Carrollton will hold at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of
its gross assets held immediately prior to the Merger. For purposes of
this representation, amounts paid by Carrollton to Members who receive
8
cash or other property, amounts used by Carrollton to pay reorganization
expenses, and all redemptions and distributions (except for regular, normal
dividends) made by Carrollton will be included as assets of Carrollton
immediately prior to the Merger. As of the Closing Date, there is no plan
or intention by the Members of Carrollton to sell, exchange or otherwise
dispose of a number of shares of Titan Common Stock received in the Merger
that would reduce the Carrollton Members' ownership of Titan Common Stock
to a number of shares having a value, as of the date of the Merger, of less
than 50% of the value of all of the formerly outstanding Membership Units
as of the same date. For purposes of this representation, Membership Units
exchanged for cash or other property or exchanged in lieu of fractional
shares of Titan Common Stock will be treated as outstanding Carrollton
Membership Units on the date of the Merger. Moreover, the shares of Titan
Common Stock or Membership Units held by the Carrollton Members and
otherwise sold, redeemed or disposed of prior or subsequent to the Merger
will be considered in making this representation.
(m) Books and Records. All books, records and files of Carrollton
and the Carrollton Subsidiary (including those pertaining to oil and gas
properties, xxxxx and other assets, those pertaining to the production,
gathering, transportation and sale of hydrocarbons, and corporate,
accounting, financial and employee records) (i) have been prepared,
assembled and maintained in accordance with usual and customary policies
and procedures and (ii) fairly and accurately reflect in all material
respects the ownership, use, enjoyment and operation by Carrollton and the
Carrollton Subsidiary of their respective assets.
(n) Voting Requirements. The affirmative vote of the holders of 66%
of the outstanding Membership Units voting together rather than separately
as a class is the only vote of the holders of any class or series of the
Members of Carrollton necessary to approve this Agreement and the Merger.
(o) Environmental Matters. Except as would not reasonably be
expected to have a Material Adverse Effect:
(i) Each of Carrollton and the Carrollton Subsidiary has conducted
its business and operated its assets, and is conducting its business
and operating its assets, in material compliance with all Applicable
Laws pertaining to health, safety, the environment, Hazardous Material
(as such term is defined in CERCLA), or Solid Wastes (as such term is
defined in RCRA) (such Applicable Laws as they now exist or are
hereafter enacted and/or amended are collectively, for purposes of
this Agreement, called "Environmental Laws"), including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (as amended, for purposes of this Section,
called "CERCLA"), the Resource Conservation and Recovery Act of 1976,
as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, and the Hazardous and Solid Waste
Amendments of 1984 (as amended, for purposes of this Section, called
"RCRA");
(ii) Neither Carrollton nor the Carrollton Subsidiary has been
notified by any Governmental Entity that any of the operations or
assets of any of such persons is the subject of any investigation or
inquiry by any Governmental Entity evaluating whether any material
remedial action is needed to respond to a release of any Hazardous
Material or to
9
the improper storage or disposal (including storage or disposal at
offsite locations) of any Hazardous Material;
(iii) Neither Carrollton nor the Carrollton Subsidiary and, to
Carrollton's knowledge, no other person has filed any notice under any
federal, state or local law indicating that (i) Carrollton or the
Carrollton Subsidiary is responsible for the improper release into the
environment, or the improper storage or disposal, of any Hazardous
Material, or (ii) any Hazardous Material is improperly stored or
disposed of upon any property of any of Carrollton or the Carrollton
Subsidiary;
(iv) Neither Carrollton nor the Carrollton Subsidiary has any
material contingent liability in connection with (A) the release into
the environment at or on any property now or previously owned or
leased by any of such persons, or (B) storage or disposal of any
Hazardous Material;
(v) In the last six years, neither Carrollton nor the Carrollton
Subsidiary has received any claim, complaint, notice, inquiry or
request for information which remains unresolved as of the date hereof
with respect to any alleged material violation of any Environmental
Law or regarding potential material liability under any Environmental
Law relating to operations or conditions or any facilities or property
owned, leased or operated by any of such persons;
(vi) No property now or previously owned, leased or operated by
Carrollton or the Carrollton Subsidiary is listed on the National
Priorities List pursuant to CERCLA or on any similar federal or state
list as sites requiring investigation or cleanup;
(vii) Neither Carrollton nor the Carrollton Subsidiary is directly
transporting, has directly transported, is directly arranging for the
transportation of, or has directly transported, any Hazardous Material
to any location which is listed on the National Priorities List
pursuant to CERCLA or on any similar federal or state list or which is
the subject of federal, state or local enforcement actions that may
lead to material claims against such company for remedial work, damage
to natural resources or personal injury, including claims under
CERCLA;
(viii) There are no sites, locations or operations at which either
Carrollton or the Carrollton Subsidiary is currently undertaking any
remedial or response action relating to any disposal or release of any
Hazardous Material, as required by Environmental Laws; and
(ix) All underground storage tanks and solid waste disposal
facilities owned or operated by Carrollton or the Carrollton
Subsidiary are used and operated in material compliance with
Environmental Laws.
(p) Insurance. All material properties and material risks of
Carrollton and the Carrollton Subsidiary are covered by valid and currently
effective insurance policies or binders of insurance or programs of self-
insurance in such types and amounts and with such deductible amounts as are
consistent with customary practices and standards of companies engaged in
businesses and operations similar to those of Carrollton and the Carrollton
Subsidiary. Neither
10
Carrollton nor the Carrollton Subsidiary shall have any liability for
retroactive price adjustments arising under such insurance coverage based
on levels of actual activity during the time period of such coverage. Set
forth on Section 2.1(p) of the Carrollton Disclosure Letter is a list of
all (i) policies of fire, liability, casualty, life and other insurance
currently in force, and (ii) the termination dates for each such policy.
(q) Title to Oil and Gas Interests. Section 2.1(q) of the Carrollton
Disclosure Letter contains a complete list of the Oil and Gas Interests of
Carrollton and the Carrollton Subsidiaries. Each of the Oil and Gas
Interests has the applicable "net revenue interest" and "working interest"
set forth in Section 2.1(q) of the Carrollton Disclosure Letter. The title
of Carrollton or the Carrollton Subsidiary to each of the Oil and Gas
Interests is Defensible Title. Except as shown on Section 2.1(q) of the
Carrollton Disclosure Letter, none of the Oil and Gas Interests is burdened
by any production payment, net profits interest, reversionary interest or
similar interest. The oil and gas leases included within the Oil and Gas
Interests are in full force and effect and are not in dispute by any of the
parties to such leases.
(r) Oil and Gas Operations. Except as otherwise set forth in Section
2.1(r) of the Carrollton Disclosure Letter:
(i) All xxxxx included in the Oil and Gas Interests of Carrollton
have been drilled and (if completed) completed, operated and produced
in accordance with generally accepted oil and gas field practices and
in compliance in all material respects with Applicable Law, except
where any failure or violation could not reasonably be expected to
have a Material Adverse Effect on Carrollton.
(ii) Proceeds from the sale of hydrocarbons produced from
Carrollton's Oil and Gas Interests are being received by Carrollton in
a timely manner and are not being held in suspense for any reason
(except for amounts, individually or in the aggregate, not in excess
of $50,000 and held in suspense in the ordinary course of business).
(s) Hydrocarbon Sales and Purchase Agreements. Section 2.1(s) of the
Carrollton Disclosure Letter contains a complete list of the Hydrocarbon
Agreements to which either Carrollton or the Carrollton Subsidiary is a
party. Except as otherwise set forth in Section 2.1(s) of the Carrollton
Disclosure Letter, each of the Hydrocarbon Agreements is valid, binding and
in full force and effect, and no party is in material breach or default of
any Hydrocarbon Agreement, and no event has occurred (including for this
purpose, the execution of this Agreement or the consummation of the Merger)
that with notice or lapse of time (or both) would constitute a material
breach or default or permit termination, modification or acceleration under
any Hydrocarbon Agreement.
(t) Intellectual Property. Carrollton and the Carrollton Subsidiary
either own or have valid licenses or other rights to use all patents,
copyrights, trademarks, software, databases, geological data, geophysical
data, seismic or seismic interpretational data, engineering data, maps,
interpretations and other technical information used in their businesses as
presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for
companies engaged in the business of the exploration and production of oil,
gas, condensate and other hydrocarbons. There are no limitations contained
in the agreements of the type described in the immediately preceding
sentence which, upon consummation of the
11
Merger, will alter or impair any such rights, breach any such agreement
with any third party vendor, or require payments of additional sums
thereunder. Carrollton and the Carrollton Subsidiary are in compliance in
all material respects with such licenses and agreements and there are no
pending or threatened claims, actions, suits or proceedings challenging or
questioning the validity or effectiveness of any license or agreement
relating to such property or the right of Carrollton or the Carrollton
Subsidiary to use, copy, modify or distribute the same.
(u) Financial and Commodity Hedging. Carrollton has no outstanding
hydrocarbon and financial hedging positions (including fixed price
controls, collars, swaps, caps, xxxxxx and puts) as of the date hereof.
(v) Maintenance of Machinery. All equipment and machinery owned by
Carrollton or the Carrollton Subsidiary has had reasonable and prudent
maintenance upkeep and repair since the date it was acquired thereby.
(w) Gas Imbalances; Calls on Production; Prepayments. Except as is
reflected in Section 2.1(w) of the Carrollton Disclosure Letter, (i)
neither Carrollton nor the Carrollton Subsidiary has received any
deficiency payments under gas contracts for which any party has a right to
take deficiency gas therefrom nor received any payments for production
which are subject to refund or recoupment out of future production; (ii)
no prepayment for hydrocarbon sales has been received by Carrollton nor the
Carrollton Subsidiary for hydrocarbons which have not been delivered as of
the date hereof; and (iii) no party has a call or preferential right to
purchase production from any of Carrollton's or the Carrollton Subsidiary's
Oil and Gas Interests.
(x) Royalties. To the knowledge of Carrollton (after due inquiry) as
to xxxxx not operated by Carrollton or the Carrollton Subsidiary, and
without qualification as to knowledge as to all xxxxx operated by
Carrollton or the Carrollton Subsidiary, all royalties, overriding
royalties, compensatory royalties and other payments due from or in respect
of production with respect to Carrollton's or the Carrollton Subsidiary's
Oil and Gas Interests, have been or will be, prior to the Effective Time,
properly and correctly paid or provided for in all material respects,
except for those for which Carrollton or any Carrollton Subsidiary has a
valid right to suspend.
(y) Payout Balances. Except as reflected in Section 2.1(y) of the
Carrollton Disclosure Letter, to the knowledge of Carrollton, and based on
information given to Carrollton by third-party operators for all xxxxx not
operated by Carrollton or the Carrollton Subsidiary, the Payout Balance for
any well owned by Carrollton or the Carrollton Subsidiary is properly
reflected in the Carrollton Disclosure Letter as of the respective dates
shown thereon. "Payout Balance(s)" means the status, as of the dates of
Carrollton's calculations, of the recovery by Carrollton or a third party
of a cost amount specified in the contract relating to a well out of the
revenue from such well where the net revenue interest of Carrollton or the
Carrollton Subsidiary therein will be reduced when such amount has been
recovered.
(z) Plugging and Abandonment Liabilities. Except to the extent
expressly set forth in Section 2.1(z) of the Carrollton Disclosure Letter,
neither Carrollton nor the Carrollton Subsidiary has any obligation as of
the date hereof under Applicable Law to plug and abandon any well.
12
(aa) 1997 Exploration Activities. Section 2.1(aa) of the Carrollton
Disclosure Letter sets forth a listing of all exploration and development
activities in which Carrollton or the Carrollton Subsidiary has elected to
participate since January 1, 1997 and with respect to which Carrollton or
the Carrollton Subsidiary has expended or committed to expend $100,000 or
more. Carrollton has provided Titan with full access to information (to
the extent Carrollton or the Carrollton Subsidiary has such information in
its possession or has access to such information) regarding the status and
results of all such activities, including, without limitation, well logs,
results of drill stem tests, production information and other pertinent
information.
(bb) Disclosure. All factual information heretofore furnished by
Carrollton to Titan for purposes of or in connection with the transactions
contemplated by this Agreement, including, without limitation, all
historical production and cost information pertaining to the Oil and Gas
Interests, reserve reports, maps and well logs, has been true and accurate
in all material respects. All estimates furnished by Carrollton were
prepared on the basis of assumptions, data, information, tests or
conditions believed to be valid or accurate or to exist at the time such
estimates were prepared.
(cc) Brokerage Fees. Except as set forth in Section 2.1(cc) of the
Carrollton Disclosure Letter, neither Carrollton nor any of its affiliates
has retained any financial advisor, broker, agent, or finder or paid or
agreed to pay any financial advisor, broker, agent, or finder on account of
this Agreement or any transaction contemplated hereby.
(dd) Affiliated Transactions. Except as set forth in Section 2.1(dd)
of the Carrollton Disclosure Letter, other than the payment of wages and
salaries in accordance with the ordinary and usual payroll practices of
Carrollton, there are no agreements, arrangements or understandings
(written or oral, formal or informal) to which Carrollton or the Carrollton
Subsidiary is a party with any current or former director, officer,
employee, consultant or advisor or any affiliate of any such person by
which any such person shall receive any compensation, consideration or
benefit of any kind (whether cash or property) from Carrollton or the
Carrollton Subsidiary.
(ee) Accredited Investors. With the exception of not more than 35
Members of Carrollton, each Member of Carrollton (i) is an "accredited
investor" as defined in Rule 501 of the rules promulgated pursuant to the
Securities Act; and (ii) has such knowledge and experience in financial and
business matters in general that it has the capacity to evaluate the merits
and risks of an investment in the Titan Common Stock and to protect its own
interest in connection with its approval of the transaction contemplated in
this Agreement.
2.2 Representations and Warranties of Titan and Sub. Titan and Sub hereby
jointly and severally represent and warrant to Carrollton that:
(a) Organization and Compliance with Law. Each of Titan and its
consolidated subsidiaries (the "Titan Subsidiaries") is a corporation or
partnership duly organized, validly existing and, to the extent applicable,
in good standing under the laws of the jurisdiction in which it is
chartered or organized and has all requisite corporate or partnership power
and corporate or partnership authority and all necessary governmental
authorizations to own, lease and operate all of its properties and assets
and to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such
authority would not
13
reasonably be expected to have a Material Adverse Effect on Titan and the
Titan Subsidiaries. Except as set forth in Section 2.2(a) of the disclosure
letter delivered by Titan to Carrollton on the date hereof (the "1 Titan
Disclosure Letter"), each of Titan and the Titan Subsidiaries is duly
qualified as a foreign corporation or partnership to do business, and, to
the extent applicable, is in good standing, in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be duly qualified does not and would
not, either individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Titan and the Titan Subsidiaries. Each of
Titan and the Titan Subsidiaries is in compliance with all applicable laws,
judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not reasonably be expected to
have a Material Adverse Effect on Titan and the Titan Subsidiaries, taken
as a whole. Titan has heretofore delivered to Carrollton true and complete
copies of Titan's Certificate of Incorporation, as amended (the "Titan
Certificate"), and bylaws as in existence on the date hereof.
(b) Capitalization.
(i) The authorized capital stock of Titan consists of 60,000,000
shares of Titan Common Stock, par value $.01 per share. As of July
31, 1997, there were issued and outstanding 33,943,543 shares of Titan
Common Stock and no shares of Titan Common Stock were held as treasury
shares. As of July 31, 1997, an aggregate of 4,479,320 shares of
Titan Common Stock were reserved for issuance and issuable pursuant to
Titan's Stock Option Plan and 1996 Incentive Plan, or upon the
exercise of outstanding employee or non-employee director stock
options granted under Titan's stock option plans and agreements. All
issued shares of Titan Common Stock are validly issued, fully paid and
nonassessable and no holder thereof is entitled to preemptive rights.
All shares of Titan Common Stock to be issued pursuant to the Merger,
when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable and will not violate the preemptive
rights of any person. Except as set forth in Section 2.2(b) of the
Titan Disclosure Letter, Titan is not a party to, and is not aware of,
any voting agreement, voting trust or similar agreement or arrangement
relating to any class or series of its capital stock, or any agreement
or arrangement providing for registration rights with respect to any
capital stock or other securities of Titan.
(ii) As of July 31, 1997, there were outstanding options to purchase
3,918,820 shares of Titan Common Stock pursuant to the plans
referenced in Section 2.2(b)(i) above (the "Titan Options"). Other
than as set forth in Section 2.2(b) of the Titan Disclosure Letter, as
set forth in this Section 2.2(b) and except for issuances contemplated
by this Agreement in connection with the Merger, there are not now,
and at the Effective Time there will not be, any (A) shares of capital
stock or other equity securities of Titan outstanding (other than
Titan Common Stock issued pursuant to the exercise of Titan Options as
described herein) or (B) except for options granted pursuant to any of
the plans referenced above, outstanding options, warrants, scrip,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of Titan, or
contracts, understandings or arrangements to which Titan is a party,
or by which it is or may be bound, to issue additional shares of its
capital stock or options, warrants, scrip or rights to subscribe for,
or securities or rights convertible into or exchangeable for, any
additional shares of its capital stock.
14
(iii) Except as set forth in Section 2.2(b) of the Titan
Disclosure Letter, all outstanding shares of capital stock of the Titan
Subsidiaries are owned by Titan, a wholly-owned subsidiary of Titan or
individuals who hold nominal quantities of shares on behalf of Titan or
such a subsidiary as director's qualifying shares, free and clear of all
Encumbrances which would reasonably be expected to have a Material Adverse
Effect.
(iv) As of the date hereof, the authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of
which are validly issued, fully paid and nonassessable and are owned by
Titan.
(c) Authorization and Validity of Agreement. Titan and Sub have all
requisite corporate power and authority to enter into this Agreement and to
perform their obligations hereunder. The execution and delivery by Titan
and Sub of this Agreement and the consummation by each of them of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by
Titan and Sub and is the valid and binding obligation of Titan and Sub,
enforceable against Titan and Sub in accordance with its terms.
(d) No Approvals or Notices Required; No Conflict with Instruments to
which Titan or any of the Titan Subsidiaries is a Party. Neither the
execution and delivery of this Agreement nor the performance by Titan or
Sub of its obligations hereunder, nor the consummation of the transactions
contemplated hereby by Titan and Sub, will (i) conflict with the Titan
Certificate or the bylaws of Titan or the charter or bylaws of any of the
Titan Subsidiaries; (ii) assuming satisfaction of the requirements set
forth in clause (iii) below, violate any provision of law applicable to
Titan or any of the Titan Subsidiaries; (iii) except for (A) requirements
of Federal or state securities laws, (B) requirements arising out of the
HSR Act, (C) requirements of notice filings in such foreign jurisdictions
as may be applicable, and (D) the filing of a certificate of merger by
Carrollton and Sub in accordance with the LLLC and the DGCL, require any
consent or approval of, or filing with or notice to, any Governmental
Entity, domestic or foreign, under any provision of law applicable to Titan
or any of the Titan Subsidiaries; or (iv) require any consent, approval or
notice under, or violate, breach, be in conflict with or constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of any provision of,
or result in the creation or imposition of any lien upon any properties,
assets or business of Titan or any of the Titan Subsidiaries under, any
note, bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which Titan or any of the
Titan Subsidiaries is a party or by which Titan or any of the Titan
Subsidiaries or any of its or their assets or properties is bound or
encumbered, except (A) those that have already been given, obtained or
filed, (B) those that are required pursuant to bank loan agreements, as set
forth in Section 2.2(d) of the Titan Disclosure Letter, which will be
obtained prior to the Effective Time, and (C) those that, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
(e) Commission Filings; Financial Statements. Titan and each of the
Titan Subsidiaries have filed all reports, registration statements and
other filings, together with any amendments required to be made with
respect thereto, that they have been required to file with the Commission
15
under the Securities Act and the Exchange Act. All reports, registration
statements and other filings (including all notes, exhibits and schedules
thereto and documents incorporated by reference therein) filed by Titan
with the Commission since December 13, 1996, through the date of this
Agreement, together with any amendments thereto, are sometimes collectively
referred to as the "Titan Commission Filings". Titan has heretofore
delivered to Carrollton copies of the Titan Commission Filings. As of the
respective dates of their filing with the Commission, the Titan Commission
Filings complied in all material respects with the Securities Act, the
Exchange Act and the rules and regulations of the Commission thereunder,
and did 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 made therein, in light of the circumstances under which they
were made, not misleading.
All material contracts of Titan and the Titan Subsidiaries have been
included in the Titan Commission Filings, except for those contracts not
required to be filed pursuant to the rules and regulations of the
Commission.
Each of the consolidated financial statements (including any related
notes or schedules) included in the Titan Commission Filings was prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be noted therein or in the notes or
schedules thereto) and complied with all applicable rules and regulations
of the Commission. Such consolidated financial statements fairly present
the consolidated financial position of Titan and the Titan Subsidiaries as
of the dates thereof and the results of operations, cash flows and changes
in shareholders' equity for the periods then ended (subject, in the case of
the unaudited interim financial statements, to normal year-end audit
adjustments on a basis comparable with past periods). As of the date
hereof, Titan has no liabilities, absolute or contingent, that may
reasonably be expected to have a Material Adverse Effect on Titan and the
Titan Subsidiaries that are not reflected in the Titan Commission Filings,
except (i) those incurred in the ordinary course of business consistent
with past operations and not relating to the borrowing of money, and (ii)
those set forth in Section 2.2(e) of the Titan Disclosure Letter.
(f) Litigation. Except as disclosed in the Titan Commission Filings
or as set forth in Section 2.2(f) of the Titan Disclosure Letter, there are
no claims, actions, suits, investigations, inquiries or proceedings pending
or, to the knowledge of Titan, overtly threatened against or affecting
Titan or any of the Titan Subsidiaries or any of their respective
properties at law or in equity, or any of their respective employee benefit
plans or fiduciaries of such plans, or before or by any Governmental
Entity, or before any arbitration board or panel, wherever located, that
individually or in the aggregate if adversely determined would reasonably
be expected to have a Material Adverse Effect on Titan and the Titan
Subsidiaries, or that involve the risk of criminal liability.
(g) Interim Operations of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
(h) Disclosure. All factual information heretofore furnished by
Titan to Carrollton for purposes of or in connection with the transactions
contemplated by this Agreement has been true and accurate in all material
respects. All estimates furnished by Titan were prepared on the basis of
16
assumptions, data, information, tests or conditions believed to be valid or
accurate or to exist at the time such estimates were prepared.
(i) Brokerage Fees. Neither Titan nor any of its affiliates has
retained any financial advisor, broker, agent, or finder or paid or agreed
to pay any financial advisor, broker, agent, or finder on account of this
Agreement or any transaction contemplated hereby.
ARTICLE III
COVENANTS OF CARROLLTON PRIOR TO THE EFFECTIVE TIME
3.1 Conduct of Business by Carrollton Pending the Merger. Carrollton
covenants and agrees that, from the date of this Agreement until the Effective
Time, unless Titan shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement or set forth in Section 3.1 of the Carrollton
Disclosure Letter:
(a) the business of Carrollton and the Carrollton Subsidiary shall be
conducted only in, and Carrollton and the Carrollton Subsidiary shall not
take any action except in, the ordinary course of business and consistent
with past practice;
(b) Carrollton shall not directly or indirectly do any of the
following: (i) issue, sell, pledge, dispose of or encumber, or permit the
Carrollton Subsidiary to issue, sell, pledge, dispose of or encumber, (A)
any Membership Units or any equity interests of any kind of Carrollton or
the Carrollton Subsidiary or (B) other than in the ordinary course of
business and consistent with past practice and not relating to the
borrowing of money, any assets of Carrollton or the Carrollton Subsidiary;
(ii) amend or propose to amend the Carrollton Organizational Documents or
the charter or bylaws of the Carrollton Subsidiary; (iii) split, combine or
reclassify any outstanding equity interests or declare, set aside or pay
any distribution payable in cash, stock, property or otherwise with respect
to its Membership Units or equity equivalents, whether now or hereafter
outstanding; (iv) redeem, purchase or acquire or offer to acquire, or
permit the Carrollton Subsidiary to redeem, purchase or acquire or offer to
acquire, any of their Membership Units or other securities or equity
equivalents; (v) except in the ordinary course of business and consistent
with past practice, enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
3.1(b); (vi) enter into, adopt or (except as may be required by law) amend
or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any manager, officer or employee; (vii) except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense, increase in any manner the compensation or fringe
benefits of any manager, officer or employee; or (viii) pay to any manager,
officer or employee any benefit not required by any employee benefit
agreement, trust, plan, fund or other arrangement as in effect on the date
hereof;
(c) Carrollton shall use its reasonable efforts (i) to preserve intact
the business organization of Carrollton and the Carrollton Subsidiary; (ii)
to maintain in effect any authorizations
17
or similar rights of Carrollton and the Carrollton Subsidiary; (iii) to
keep available the services of its and their current officers and key
employees; (iv) to preserve the goodwill of those having business
relationships with it and the Carrollton Subsidiary; (v) to maintain and
keep its properties and the properties of the Carrollton Subsidiary in as
good a repair and condition as presently exists, except for deterioration
due to ordinary wear and tear and damage due to casualty; and (vi) to
maintain in full force and effect insurance comparable in amount and scope
of coverage to that currently maintained by it and the Carrollton
Subsidiary;
(d) Except as set forth in Section 2.1(aa) of the Carrollton
Disclosure Letter, Carrollton shall not without the prior written approval
of Titan make or agree to make, or permit the Carrollton Subsidiary to make
or agree to make, new capital expenditures that in the aggregate exceed
$50,000, unless in Carrollton's good faith judgment, emergency
circumstances require such an expenditure in order to preserve the value of
Carrollton's assets or to avoid substantial risk of loss to Carrollton and
Carrollton immediately advises Titan in writing of the expenditure;
(e) Carrollton shall, and shall cause the Carrollton Subsidiary to,
perform their respective obligations under any contracts and agreements to
which any of them is a party or to which any of their assets is subject,
except to the extent such failure to perform would not have a Material
Adverse Effect on Carrollton and the Carrollton Subsidiary, and except for
such obligations as Carrollton or the Carrollton Subsidiary in good faith
may dispute;
(f) neither Carrollton nor the Carrollton Subsidiary shall acquire,
sell, lease, transfer, or otherwise dispose of, directly or indirectly, any
assets outside the ordinary course of business consistent with past
practice or Membership Units, equity interests or any assets that in the
aggregate are material to Carrollton and the Carrollton Subsidiary, taken
as a whole;
(g) neither Carrollton nor the Carrollton Subsidiary shall acquire (by
merger, consolidation, or acquisition of stock or assets or otherwise) any
corporation, partnership, or other business organization or division
thereof;
(h) neither Carrollton nor the Carrollton Subsidiary shall amend any
Tax Return or make any Tax election or settle or compromise any federal,
state, local, or foreign Tax liability material to Carrollton and the
Carrollton Subsidiary taken as a whole;
(i) neither Carrollton nor the Carrollton Subsidiary shall pay,
discharge, or satisfy any claims, liabilities, or obligations (whether
accrued, absolute, contingent, unliquidated, or otherwise, and whether
asserted or unasserted), other than the payment, discharge, or satisfaction
in the ordinary course of business consistent with past practice, or in
accordance with their terms, of liabilities reflected or reserved against
in Carrollton's Financial Statements or incurred since June 30, 1997 in the
ordinary course of business consistent with past practice;
(j) neither Carrollton nor the Carrollton Subsidiary shall enter into
any lease, contract, agreement, commitment, arrangement, or transaction
(including any financial or commodity hedging transaction) outside the
ordinary course of business consistent with past practice;
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(k) neither Carrollton nor the Carrollton Subsidiary shall amend,
modify, or change in any material respect any existing lease, contract, or
agreement, other than in the ordinary course of business consistent with
past practice;
(l) neither Carrollton nor the Carrollton Subsidiary shall waive,
release, grant, or transfer any rights of value, other than in the ordinary
course of business consistent with past practice;
(m) Carrollton shall not, and shall not permit the Carrollton
Subsidiary to, take any action that would, or that reasonably could be
expected to, result in any of the representations and warranties set forth
in this Agreement becoming untrue or any of the conditions to the Merger
set forth in Article VI not being satisfied. Carrollton promptly shall
advise Titan orally and in writing of any change or event having, or which,
insofar as reasonably can be foreseen, would have, a Material Adverse
Effect on Carrollton and the Carrollton Subsidiary; and
(n) neither Carrollton nor the Carrollton Subsidiary shall authorize
or propose, or agree in writing or otherwise to take, any of the actions
described in this Section.
3.2 Vote of Members of Carrollton. Carrollton shall promptly take all
action reasonably necessary in accordance with the LLLC and the Carrollton
Organizational Documents, as well as state and federal securities laws, to cause
its Members to consider and vote upon the adoption and approval of this
Agreement. The Carrollton Managers (a) shall recommend at such meeting that the
Members of Carrollton vote to adopt and approve this Agreement; and (b) shall
take all action reasonably necessary to secure a vote of its Members in favor of
the adoption and approval of this Agreement. Carrollton's materials for
soliciting the vote of its Members shall be ready for mailing to the Members on
or before November 11, 1997.
3.3 No Solicitation. From and after the date of this Agreement, neither
Carrollton nor the Carrollton Subsidiary shall, directly or indirectly, through
any officer, manager, employee, affiliate, representative or agent (including
without limitation attorneys, accountants, consultants, bankers and financial
advisors) (collectively, "Representatives") of Carrollton or the Carrollton
Subsidiary, (i) solicit or knowingly encourage, including by way of furnishing
information, the initiation of any inquiries or proposals regarding (A) any
merger, tender offer, sale of Membership Units or other securities or equity
equivalents, or similar business transactions involving Carrollton or the
Carrollton Subsidiary, or (B) any sale of all or substantially all the assets of
Carrollton and the Carrollton Subsidiary (any of the foregoing transactions
being referred to herein as a "Carrollton Acquisition Proposal") or (ii)
participate in any discussion or negotiations, or provide third parties with any
information, relating to an inquiry or proposal regarding a Carrollton
Acquisition Proposal other than to notify any such party that it is engaged in
the transactions contemplated by this Agreement and will not engage in any
further communications with any such party. Without limitation of the foregoing,
Carrollton shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Carrollton or any Carrollton
Representatives with respect to any Carrollton Acquisition Proposal existing on
the date hereof.
3.4 Affiliates' Agreements. Prior to the Closing Date, Carrollton shall
deliver to Titan a letter identifying all persons whom it believes are, at the
time this Agreement is submitted for approval to the stockholders of Carrollton,
"affiliates" of Carrollton for purposes of Rule 145 under the Securities Act.
Carrollton shall use its reasonable efforts to cause each such person to deliver
to Titan on or prior to the
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Closing Date a written agreement substantially in the form of Exhibit A. Titan
shall not be required to maintain the effectiveness of the Registration
Statement (as defined below) for the purpose of resale by Members of Carrollton
who may be "affiliates" pursuant to Rule 145 under the Securities Act.
3.5 Access to Information; Confidentiality. Between the date hereof and
the Effective Time, Carrollton (i) shall give Titan and Sub and their respective
authorized representatives reasonable access, during regular business hours and
upon reasonable advance notice, to all employees, all plants, offices,
properties and other facilities, and all books and records, of Carrollton and
the Carrollton Subsidiary, (ii) shall permit Titan and Sub and their respective
authorized representatives to make such inspections as they may reasonably
require, and (iii) shall cause Carrollton's officers to furnish Titan and Sub
and their respective authorized representatives with such financial and
operating data and other information with respect to Carrollton and the
Carrollton Subsidiary as Titan or Sub may from time to time reasonably request;
provided, however, that no investigation pursuant to this Section shall affect
any representation or warranty of Carrollton contained in this Agreement or in
any agreement, instrument, or document delivered pursuant hereto or in
connection herewith; and provided further that Carrollton shall have the right
to have a representative present at all times of any such inspections,
interviews, and examinations conducted at or on the offices or other facilities
or properties of Carrollton or its affiliates or representatives.
ARTICLE IV
COVENANTS OF TITAN PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Titan Pending the Merger. Titan covenants and
agrees that, from the date of this Agreement until the Effective Time, unless
Carrollton shall otherwise agree in writing or as otherwise expressly
contemplated by this Agreement:
(a) Titan shall not directly or indirectly split, combine or
reclassify any outstanding capital stock, or declare, set aside or pay any
dividend payable in cash, stock, property or otherwise with respect to its
capital stock whether now or hereafter outstanding;
(b) Titan shall not, and shall not permit any of the Titan
Subsidiaries to, take any action that would, or that reasonably could be
expected to, result in any of the representations and warranties set forth
in this Agreement becoming untrue or any of the conditions to the Merger
set forth in Article VI not being satisfied. Titan promptly shall advise
Carrollton orally and in writing of any change or event having, or which,
insofar as reasonably can be foreseen, would have, a Material Adverse
Effect on Titan and the Titan Subsidiaries; and
(c) neither Titan nor any of the Titan Subsidiaries shall authorize or
propose, or agree in writing or otherwise to take, any of the actions
described in this Section.
4.2 Registration Statement. Titan has filed a registration statement (the
"Registration Statement") on Form S-4 with the Commission under the Securities
Act with respect to the offering, sale and delivery of shares of Titan Common
Stock that may be offered and issued in acquisitions of other businesses in
business combination transactions in accordance with Rule 415(a)(1)(viii) of
Regulation C under the Securities Act; and Titan will use its reasonable efforts
to issue pursuant to such Registration Statement the shares of Titan Common
Stock to be issued pursuant to the Merger; provided that Titan is relying on
20
paragraph 2(a) of the Commission's no-action letter to Service Corporation
International dated October 31, 1985. Subject to the immediately foregoing
proviso, Titan agrees that the Registration Statement will comply as to form in
all material respects with the requirements of the Securities Act and the
Exchange Act and the respective rules and regulations adopted thereunder, and
will not contain any untrue statement of any material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
made therein not misleading (except with respect to information concerning
Carrollton and the Carrollton Subsidiary furnished by or on behalf of Carrollton
specifically for use therein, for which information Carrollton shall be
responsible). Titan will advise Carrollton in writing if prior to the Effective
Time it shall obtain knowledge of any fact that would, in its opinion, make it
necessary to amend or supplement the Registration Statement in order to make the
statements therein not misleading or to comply with applicable law.
4.3 Reservation of Titan Stock. Titan shall reserve for issuance, out of
its authorized but unissued capital stock, such number of shares of Titan Common
Stock as may be issuable upon consummation of the Merger.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Filings; Consents; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Carrollton and Titan shall (i) make all necessary
filings with respect to the Merger and this Agreement under the HSR Act, the
Securities Act, the Exchange Act and applicable blue sky or similar securities
laws and shall use all reasonable efforts to obtain required approvals and
clearances with respect thereto; (ii) obtain all consents, waivers, approvals,
authorizations and orders required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Merger; and
(iii) take, or cause to be taken, all appropriate action, and do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement.
5.2 Notification of Certain Matters. Carrollton shall give prompt notice
to Titan, and Titan shall give prompt notice to Carrollton, orally and in
writing, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate at any time from the date
hereof to the Effective Time, and (ii) any material failure of Carrollton or
Titan, as the case may be, or any officer, director, employee or agent thereof,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder.
5.3 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any Governmental Entity or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
reasonable efforts to defend against and respond thereto.
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5.4 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense; provided,
however, that if this Agreement shall have been terminated pursuant to Section
7.1 as a result of the willful breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, such breaching
party shall pay the costs and expenses of the other parties in connection with
the transactions contemplated by this Agreement.
5.5 Indemnification. From and after the Effective Time, Titan and the
Surviving Entity shall, indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date hereof or who becomes prior to
the Effective Time, an officer, manager or employee of Carrollton or any of the
Carrollton Subsidiaries (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of Carrollton or the Carrollton Subsidiary, whether pertaining to
any matter existing or occurring at or prior to the Effective Time and whether
reasserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including without limitation all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
acts or omissions, or alleged acts or omissions, by him in his capacity as an
officer or director of Carrollton, which acts or omissions occurred prior to the
Effective Time; provided, however, that Titan shall be under no obligation to
indemnify any Indemnified Party pursuant to this Section 5.5 except to the
extent such Indemnified Party was entitled to indemnification from Carrollton
(pursuant to applicable law or contract) immediately prior to the Effective
Time. The procedures associated with such indemnification shall be the same as
those associated with the Indemnified Parties' indemnification from Carrollton,
as the case may be, immediately prior to the Effective Time (provided, however,
that Titan shall be under no obligation to deposit trust funds pursuant to any
"change-in-control" or similar provisions). Carrollton hereby agrees that, from
and after the date hereof until the Effective Time, it will not amend, modify or
otherwise alter any contractual provision under which any Indemnified Party is
entitled to indemnification from Carrollton at the time the execution of this
Agreement. The provisions of this Section 5.5 are intended to be for the
benefit of, and shall be enforceable by, the parties hereto and each Indemnified
Party, his heirs and his representatives.
5.6 Carrollton Employees. After the Effective Time, it is expected that
Titan may, in its sole discretion, offer employment to, or cause Carrollton to
continue the employment of, the employees of Carrollton (the "Retained
Employees"); provided, however, that Titan shall have no obligation to retain
any of the employees of Carrollton. Titan shall provide the Retained Employees
with the same benefits that accrue to employees of Titan.
5.7 Tax Treatment. Each of Titan and Carrollton undertakes and agrees to
use its reasonable efforts to cause the Merger to qualify, and to take no action
which would cause the Merger not to qualify, for treatment as a "reorganization"
within the meaning of Section 368(a) of the Code.
5.8 HSR Act Notification. To the extent required by the HSR Act, each of
the parties hereto shall (i) file or cause to be filed, as promptly as
practicable but in no event later than ten days after the execution and delivery
of this Agreement, with the Federal Trade Commission and the United States
Department of Justice, all reports and other documents required to be filed by
such party under the HSR Act concerning the transactions contemplated hereby and
(ii) promptly comply with or cause to be complied with
22
any requests by the Federal Trade Commission or the United States Department of
Justice for additional information concerning such transactions, in each case so
that the waiting period applicable to this Agreement and the transactions
contemplated hereby under the HSR Act shall expire as soon as practicable after
the execution and delivery of this Agreement. Each party hereto agrees to
request, and to cooperate with the other party or parties in requesting, early
termination of any applicable waiting period under the HSR Act.
5.9 Public Announcements. Except as may be required by applicable law,
neither Titan and Sub, on the one hand, nor Carrollton, on the other, shall
issue any press release or otherwise make any public statement with respect to
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party (which consent shall not be unreasonably withheld).
Any such press release or public statement required by applicable law shall only
be made after reasonable notice to the other party.
5.10 Indemnification of Brokerage. Carrollton, on the one hand, and
Titan, on the other, shall indemnify and hold each other harmless from any claim
or demand for commission or other compensation by any broker, finder, agent or
similar intermediary claiming to have been employed by or on behalf of
Carrollton or Titan, as the case may be, and shall bear the cost of legal fees
and expenses incurred in defending against any such claim.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement shall have been approved by the requisite vote of
the Members of Carrollton;
(b) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated;
(c) Other than suits to enforce this Agreement, there shall not be (i)
any effective injunction, writ or temporary restraining order or any other
order of any nature issued by a court or Governmental Entity of competent
jurisdiction directing that any aspect of the Merger not be consummated, or
(ii) any action, suit or proceeding pending or threatened in writing in
which it is or may be sought to prohibit, substantially delay or rescind
this Agreement or any aspect of the Merger or to obtain an award of damages
in connection with the Merger and which, in the good faith judgment of any
of the parties, is material;
(d) There shall have been obtained any and all material permits,
approvals and consents of securities or blue sky commissions of any
jurisdiction, and of any other Governmental Entity, that reasonably may be
deemed necessary so that the consummation of the Merger and the
transactions contemplated thereby will be in compliance with Applicable
Laws, the failure to comply with which
23
would reasonably be expected to have a Material Adverse Effect on Titan,
the Surviving Entity and their subsidiaries, taken as a whole after
consummation of the Merger; and
(e) All approvals of private persons or corporations, (i) the granting
of which is necessary for the consummation of the Merger or the
transactions contemplated in connection therewith and (ii) the non-receipt
of which would reasonably be expected to have a Material Adverse Effect on
Titan, the Surviving Entity and their subsidiaries, taken as a whole after
the consummation of the Merger, shall have been obtained.
6.2 Additional Conditions to Obligations of Titan. The obligation of
Titan to effect the Merger is, at the option of Titan, also subject to the
fulfillment at or prior to the Closing Date (unless an earlier date is provided
herein) of the following conditions:
(a) The representations and warranties of Carrollton contained in
Section 2.1 shall be accurate in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak specifically as of an earlier date) as of the Closing Date
as though such representations and warranties had been made at and as of
that time; all of the terms, covenants and conditions of this Agreement to
be complied with and performed by Carrollton and/or the Carrollton
Subsidiaries on or before the Closing Date shall have been duly complied
with and performed in all material respects; and a certificate to the
foregoing effect dated the Closing Date and signed by the chief executive
officer of Carrollton shall have been delivered to Titan;
(b) Since the date of this Agreement, no Material Adverse Effect
pertaining to Carrollton and the Carrollton Subsidiary (taken as a whole)
shall have occurred, and Carrollton and the Carrollton Subsidiary (taken as
a whole) shall not have suffered any damage, destruction or loss materially
and adversely affecting the properties or business of Carrollton and the
Carrollton Subsidiaries, taken as a whole, and Titan shall have received a
certificate signed by the chief executive officer of Carrollton dated the
Closing Date to such effect;
(c) Carrollton shall have received, and furnished written copies to
Titan of, the Carrollton affiliates' agreements pursuant to Section 3.4;
(d) Titan shall have received from Xxxxxx Xxxxxx, L.L.P., counsel to
Carrollton, an opinion dated the Closing Date covering the matters set
forth in Exhibit B; and
(e) Carrollton shall have substantially complied in all material
respects with all recommendations set forth on pages 19 and 20 of that
certain "Environmental Site Assessment of Oil and Gas Production Located in
Louisiana Operated by Carrollton Resources Corporation and Resources
Acquisition Corporation" prepared by Highlander Environmental Corp. dated
as of September, 1997.
(f) Carrollton shall have taken all action necessary to cancel all of
the Carrollton Options, and no holder of Carrollton Options shall have
acquired Membership Units or other equity securities of Carrollton as a
consequence of the exercise of any Carrollton Options.
24
6.3 Additional Conditions to Obligations of Carrollton. The obligation of
Carrollton to effect the Merger is, at the option of Carrollton, also subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of Titan and Sub contained in
Section 2.2 shall be accurate in all material respects as of the date of
this Agreement and (except to the extent such representations and
warranties speak specifically as of an earlier date) as of the Closing Date
as though such representations and warranties had been made at and as of
that time; all the terms, covenants and conditions of this Agreement to be
complied with and performed by Titan on or before the Closing Date shall
have been duly complied with and performed in all material respects; and a
certificate to the foregoing effect dated the Closing Date and signed by
the chief executive officer of Titan shall have been delivered to
Carrollton;
(b) Since the date of this Agreement, no Material Adverse Effect
pertaining to Titan and the Titan Subsidiaries shall have occurred, and
Titan and the Titan Subsidiaries shall not have suffered any damage,
destruction or loss materially adversely affecting the properties or
business of Titan and the Titan Subsidiaries, taken as a whole, and
Carrollton shall have received a certificate signed by the chief executive
officer of Titan dated the Closing Date to such effect;
(c) Carrollton shall have received from Xxxxxxxx & Knight, P.C.,
counsel to Titan, an opinion dated the Closing Date covering the matters
set forth in Exhibit C;
(d) The Registration Statement shall be effective on the Closing Date,
and all post-effective amendments filed shall have been declared effective
or shall have been withdrawn; and no stop-order suspending the
effectiveness thereof shall have been issued and no proceedings for that
purpose shall have been initiated or, to the knowledge of the parties,
threatened by the Commission; and
(e) The shares of Titan Common Stock issuable upon consummation of the
Merger shall have been approved for listing on the NMS or other national
securities exchange or automated quotation system, subject to official
notice of issuance.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to the
Effective Time, whether prior to or after approval by the stockholders of Titan
or the stockholders of Carrollton:
(a) by mutual consent of Titan and Carrollton;
(b) by either Titan or Carrollton if the Merger has not been effected
on or before January 31, 1998;
(c) by Titan if the condition set forth in Section 6.2(e) or Section
6.2(f) is not satisfied;
25
(d) by either Titan or Carrollton if a final, unappealable order of a
judicial or administrative authority of competent jurisdiction to restrain,
enjoin or otherwise prevent a consummation of this Agreement or the
transactions contemplated in connection herewith shall have been entered;
(e) by either Titan or Carrollton if the required approval of the
Members of Carrollton is not received;
(f) by Titan if (i) since the date of this Agreement there has been a
Material Adverse Effect pertaining to Carrollton and the Carrollton
Subsidiary, or (ii) there has been a material breach of any representation
or warranty or covenant set forth in this Agreement by Carrollton which
breach has not been cured within five business days following receipt by
Carrollton of notice of such breach; or
(f) by Carrollton if (i) since the date of this Agreement there has
been a Material Adverse Effect pertaining to Titan and the Titan
Subsidiaries, or (ii) there has been a material breach of any
representation or warranty or covenant set forth in this Agreement by Titan
which breach has not been cured within five business days following receipt
by Titan of notice of such breach.
7.2 Effect of Termination.
(a) In the event of any termination of this Agreement pursuant to
Section 7.1, (i) the provisions of Sections 5.4 and 5.10 shall survive any
such termination, and (ii) such termination shall not relieve any party
from liability for any breach of this Agreement.
(b) In the event that either Titan or Carrollton terminates this
Agreement pursuant to Section 7.1(b) (and the conditions to closing set
forth in Sections 6.1 and 6.3 (other than Sections 6.3(c), 6.3(d) and
6.3(e)) have otherwise been satisfied) or Sections 7.1(d), 7.1(e) or
7.1(f)(ii) and (i) after the date of this Agreement but at or before the
time this Agreement is terminated there shall have been a Carrollton
Acquisition Proposal proposed to Carrollton and (ii) any Carrollton
Acquisition Proposal (whether the same or different from the one referenced
in clause (i)) is consummated at any time within one year after the date of
this Agreement, then Carrollton shall promptly pay to Titan the sum of
$500,000 upon the consummation of any such Carrollton Acquisition Proposal.
(c) If this Agreement is terminated pursuant to Section 7.1(e) because
of the failure of Carrollton to secure the approval of its Members as
required under Section 3.2 and the conditions to closing set forth in
Sections 6.1 and 6.3 (other than Sections 6.3(c), 6.3(d) and 6.3(e)) have
otherwise been satisfied, then Carrollton shall promptly, but in no event
later than five business days after written request by Titan, pay to Titan
an amount equal to $100,000 in immediately available funds as reimbursement
for an agreed upon estimate of Titan's out-of-pocket fees and expenses
incurred in connection with the transactions contemplated hereby; provided,
however, that if Carrollton shall be obligated to make any payment to Titan
pursuant to Section 7.2(b), then Carrollton shall be entitled to offset
from any amount due under Section 7.2(b) any amount paid to Titan pursuant
to this Section 7.2(c).
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7.3 Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is, or whose stockholders or members are, entitled
to the benefits thereof. This Agreement may not be amended or supplemented at
any time, except by an instrument in writing signed on behalf of each party
hereto, provided that after this Agreement has been approved and adopted by the
Members of Carrollton, this Agreement may be amended only as may be permitted by
applicable provisions of the LLLC and the DGCL. The waiver by any party hereto
of any condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party hereto of any of the conditions precedent to its
obligations under this Agreement shall not preclude it from seeking redress for
breach of this Agreement other than with respect to the condition so waived.
7.4 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants or agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the terms of Article I, the second paragraph of Section 2.1(l),
Sections 5.5, 5.6, 5.7, 5.9 and 5.10, Article VII, and the agreements of the
"affiliates" of Carrollton delivered pursuant to Section 3.4.
7.5 Assignment. This Agreement shall inure to the benefit of and will be
binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Except as set forth in this Agreement, this
Agreement shall not be assignable by the parties hereto.
7.6 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i) delivered
in person or by expedited courier service, (ii) sent by telecopy or facsimile
transmission, answer back requested, or (iii) mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties hereto at the
following addresses:
if to Carrollton: Carrollton Resources, L.L.C.
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Xx.
with a copy to: Xxxxxx Xxxxxx, L.L.P.
Texaco Center
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxxx Xxxxxx
if to Titan: Titan Exploration, Inc.
000 Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
27
with a copy to: Xxxxxxxx & Xxxxxx, P.C.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.6. Such notices shall be
effective, (i) if delivered in person or by expedited courier service, upon
actual receipt by the intended recipient, (ii) if sent by telecopy or facsimile
transmission, when the answer back is received, or (iii) if mailed, upon the
earlier of five days after deposit in the mail and the date of delivery as shown
by the return receipt therefor.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of Texas without giving effect
to the principles of conflicts of law thereof.
7.8 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provision, covenants and restrictions
of this Agreement shall continue in full force and effect and shall in no way be
affected, impaired or invalidated.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
7.10 Headings. The Section headings herein are for convenience only and
shall not affect the construction hereof.
7.11 Entire Agreement; Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both oral and written, among the parties or any of them, with
respect to the subject matter hereof and neither this nor any document delivered
in connection with this Agreement confers upon any person not a party hereto any
rights or remedies hereunder except as provided in Section 5.5 and Section 5.6.
7.12 Disclosure Letters.
(a) The Carrollton Disclosure Letter, executed by Carrollton as of the
date hereof, and delivered to Titan on the date hereof, contains all
disclosure required to be made by Carrollton under the various terms and
provisions of this Agreement. Each item of disclosure set forth in the
Carrollton Disclosure Letter specifically refers to the Article and Section
of the Agreement to which such disclosure responds, and shall not be deemed
to be disclosed with respect to any other Article or Section of the
Agreement.
(b) The Titan Disclosure Letter, executed by Titan as of the date
hereof, and delivered to Carrollton on the date hereof, contains all
disclosure required to be made by Titan under the various terms and
provisions of this Agreement. Each item of disclosure set forth in the
Titan Disclosure Letter specifically refers to the Article and Section of
the Agreement to which such disclosure responds, and shall not be deemed to
be disclosed with respect to any other Article or Section of the Agreement.
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ARTICLE VIII
DEFINITIONS
8.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Article:
"Applicable Law" means any statute, law, rule, or regulation or any
judgment, order, writ, injunction, or decree of any Governmental Entity to
which a specified person or property is subject.
"Commission" shall mean the Securities and Exchange Commission.
"Defensible Title" means, as of the date set forth in the Carrollton
Disclosure Letter and as to each Oil and Gas Interest, such title that:
(i) Is defensible by Carrollton or the Carrollton Subsidiary, as
applicable, against the claims of all other persons; and
(ii) Entitles Carrollton or the Carrollton Subsidiary, as applicable,
to receive not less than the net revenue interest for such Oil and Gas
Interest as described in the Carrollton Disclosure Letter as the "Net
Revenue Interest" with respect to such Oil and Gas Interests; and
(iii) Obligates Carrollton or the Carrollton Subsidiary, as
applicable, to pay costs and expenses relating to such Oil and Gas Interest
in an amount not greater than the "Working Interest" as described in the
Carrollton Disclosure Letter with respect to such Oil and Gas Interest; and
(iv) Except for Permitted Encumbrances, is free and clear of any
Encumbrance.
"Encumbrances" means liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on
voting, sale, transfer, disposition, or otherwise), easements, and other
encumbrances of every type and description, whether imposed by law,
agreement, understanding, or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Entity" means any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body,
agency, department, commission, board, bureau, or other authority or
instrumentality (domestic or foreign).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Hydrocarbon Agreement" means any of the following:
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(i) "Hydrocarbon Purchase Agreement," which means any sales agreement,
purchase contract or marketing agreement that is currently in effect and
under which Carrollton or a Carrollton Subsidiary is a buyer of
hydrocarbons for resale (other than purchase agreements entered into in the
ordinary course of business with a term of three months or less, terminable
without penalty on 30 days' notice or less, which provide for a price not
greater than the market value price that would be paid pursuant to an
arm's-length contract for the same term with an unaffiliated third party
seller, and which do not obligate the purchaser to take any specified
quantity of hydrocarbons or to pay for any deficiencies in quantities of
hydrocarbons not taken).
(ii) "Hydrocarbon Sales Agreement," which means any sales agreement,
purchase contract or marketing agreement that is currently in effect and
under which any of Carrollton or a Carrollton Subsidiary is a seller of
hydrocarbons (other than "spot" sales agreements entered into in the
ordinary course of business with a term of three months or less, terminable
without penalty on 30 days' notice or less, and which provide for a price
not less than the market value price that would be received pursuant to an
arms'-length contract for the same term with an unaffiliated third party
purchaser).
(iii) "Hydrocarbon Support Agreement," which means any gathering,
transportation, treatment, compression, processing or similar agreement
that is currently in effect and to which Carrollton or a Carrollton
Subsidiary is a party (other than gathering, transportation, treatment,
compression, processing and similar agreements that have been entered into
in the ordinary course of business and which contain market value prices
and terms of the type found in gathering, transportation, treatment,
compression, processing and similar agreements entered into between
unaffiliated parties in arm's-length transactions).
"Material Adverse Effect" means any change, development, or effect
(individually or in the aggregate) which is, or is reasonably likely to be,
materially adverse (i) to the business, assets, results of operations,
condition (financial or otherwise), or prospects of (A) Carrollton and the
Carrollton Subsidiaries, or (B) Titan or the Titan Subsidiaries, as
applicable, considered as a whole, or (ii) to the ability of Carrollton or
Titan, as applicable, to perform on a timely basis any material obligation
of Carrollton or Titan, respectively, under this Agreement or any
agreement, instrument, or document entered into or delivered in connection
herewith; provided, however, that the drilling of a dry hole with respect
to any drilling project set forth in Section 2.1(aa) of the Carrollton
Disclosure Letter or otherwise approved by Titan between the date of this
Agreement and the Effective Time, and the depletion or cessation of
production of an existing well in the ordinary course of business shall not
be deemed to give rise to a Material Adverse Effect.
"NMS" means the NASDAQ National Market System.
"Oil and Gas Interest(s)" means (a) direct and indirect interests in
and rights with respect to oil, gas, mineral and related properties and
assets of any kind and nature, direct or indirect, including working,
royalty and overriding royalty interests, production payments, operating
rights, net profits interests, other non-working interests and non-
operating interests; (b) interests in and rights with respect to
hydrocarbons and other minerals or revenues therefrom and contracts in
connection therewith and claims and rights thereto (including oil and gas
leases, operating agreements, unitization and pooling agreements and
orders, division orders, transfer orders, mineral deeds, royalty deeds, oil
and gas sales, exchange and processing contracts and agreements and, in
30
each case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; (c) easements, rights
of way, licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing; and
(d) interests in equipment and machinery (including well equipment and
machinery), oil and gas production, gathering, transmission, compression,
treating, processing and storage facilities (including tanks, tank
batteries, pipelines and gathering systems), pumps, water plants, electric
plants, gasoline and gas processing plants, refineries and other tangible
personal property and fixtures associated with, appurtenant to, or
necessary for the operation of any of the foregoing.
"Permitted Encumbrances" means (i) Encumbrances for inchoate
mechanics' and materialmen's liens for construction in progress and
workmen's, repairmen's, warehousemen's and carriers' liens arising in the
ordinary course of business, (ii) requirements for consent to assignment
and other encumbrances of a similar nature which are part of contracts
customarily used in the oil and gas industry, (iii) Encumbrances for Taxes
not yet payable, (iv) Encumbrances and imperfections of title, including
servitudes, permits, surface leases and other rights in respect to surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like; conditions, covenants or other restrictions; easements for streets,
alleys, highways, pipelines, power lines, telephone lines and railways, and
other assessments and rights-of-way, and all other liens, in each case
listed in this subsection (iv) that (A) do not arise in connection with or
secure indebtedness for money borrowed or owed or the extension of credit,
(B) do not materially detract from the value of the Oil and Gas Interests
subject thereto or affected thereby or otherwise materially impair the
Property or operations being conducted thereon or therewith, so a
reasonably prudent operator engaged in the oil and gas industry with
knowledge of the facts and circumstances and the legal effect thereon would
accept title to such Oil and Gas Interests subject to such detractions,
interferences or impairments or (C) do not reduce the net revenue interest
or increase the working interest shown for the affected Oil and Gas
Interests on the Carrollton Disclosure Letter, and (v) any other
Encumbrances to the extent expressly set forth in Section 8.1 of the
Carrollton Disclosure Letter.
"person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, enterprise, unincorporated organization, or Governmental Entity.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise, or other tax imposed by any
United States federal, state, or local taxing authority, including any
interest, penalties, or additions attributable thereto.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
8.2 Certain Additional Defined Terms. In addition to such terms as are
defined in the opening paragraph of and the recitals to this Agreement and in
Section 8.1, the following terms are used in this Agreement as defined in the
pages set forth opposite such terms:
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TERM PAGE
---- ----
Agreement....................................................... 1
Audited Financial Statements.................................... 6
Carrollton...................................................... 1
Carrollton Acquisition Proposal................................. 19
Carrollton Disclosure Letter.................................... 4
Carrollton Options.............................................. 5
Carrollton Organizational Documents............................. 4
Carrollton Subsidiary........................................... 4
Closing......................................................... 2
Closing Date.................................................... 2
Code............................................................ 1
DGCL............................................................ 1
Effective Time.................................................. 2
Exchange Ratio.................................................. 3
Financial Statements............................................ 6
Indemnified Parties............................................. 22
Latest Balance Sheet............................................ 6
LLLC............................................................ 1
Managers........................................................ 5
Members......................................................... 5
Membership Units................................................ 1
Merger.......................................................... 1
Registration Statement.......................................... 20
Representatives................................................. 19
Retained Employees.............................................. 22
Sub............................................................. 1
Surviving Entity................................................ 1
Titan........................................................... 1
Titan Certificate............................................... 14
Titan Commission Filings........................................ 00
Xxxxx Xxxxxx Stock.............................................. 1
Titan Disclosure Letter......................................... 14
Titan Options................................................... 14
Titan Subsidiaries.............................................. 13
Unaudited Financial Statements.................................. 6
32
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
TITAN EXPLORATION, INC.
By:/s/ Xxxx X. Xxxxxxxxx
---------------------
Xxxx X. Xxxxxxxxx
President
TITAN BAYOU BENGAL HOLDINGS, INC.
By:/s/ Xxxx X. Xxxxxxxxx
---------------------
Xxxx X. Xxxxxxxxx
President
CARROLLTON RESOURCES, L.L.C.
By:/s/ Xxxx X. Xxxxxx, Xx.
-----------------------
Xxxx X. Xxxxxx, Xx.
President
33
