UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 31, 1998
-----------------------
TRITON ENERGY LIMITED
---------------------
(Exact name of registrant as specified in its charter)
Cayman Islands 1-11675 None
--------------- ------- ----
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
Caledonian House, Mary Street
P.O.Box 1043
George Town
Grand Cayman, Cayman Islands N/A
- ---------------------------- ---
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (345) 490-0050
--------------
N/A
---
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On August 31, 1998, Triton Energy Limited (the "Company") entered into a
Stock Purchase Agreement (the "Purchase Agreement") with an affiliate of
Hicks, Muse, Tate and Furst Incorporated (the "Purchaser"). The Purchase
Agreement provides that, subject to certain conditions, the Company will issue
to the Purchaser 1,822,500 (the "Initial Issuance") shares of 8% Convertible
Preference Shares ("8% Preference Shares"). Each 8% Preference Share will be
convertible at any time at the option of the holder into four Ordinary Shares
of the Company (subject to customary antidilution protections).
Promptly following the Initial Issuance, the Company is required by the
Purchase Agreement to conduct a rights offering (the "Rights Offering") in
which the Company will distribute to each holder of record of the Company's
Ordinary Shares, 5% Convertible Preference Shares and 8% Preference Shares
(including the Purchaser), as of a date to be specified by the Board of
Directors, transferable rights (the "Rights") to purchase, at $70.00 per
share, a pro rata portion (proportional to each such holder's ownership of
Ordinary Shares on an "as-converted" basis) of approximately 3,177,500 8%
Preference Shares. Pursuant to the Purchase Agreement, each Right is expected
to carry the right to subscribe at the $70.00 subscription price for
additional 8% Preference Shares for which the other holders of Rights did not
subscribe through the exercise of the basic subscription privileges.
The Purchaser has agreed, subject to certain conditions, (i) to exercise
in the Rights Offering the basic subscription privileges pursuant to all
Rights that it will hold, (ii) not to exercise any oversubscription privileges
in the Rights Offering and (iii) to acquire upon consummation of the Rights
Offering all 8% Preference Shares not subscribed for by other holders pursuant
to either their basic or oversubscription privileges. The 8% Preference Shares
to be issued to the Purchaser in the Initial Issuance will be convertible into
an aggregate of approximately 7.3 million Ordinary Shares, representing
approximately 17% of Triton's pro forma Ordinary Shares outstanding, and the
total amount of 8% Preference Shares to be issued, assuming consummation of
both the Initial Issuance and the Rights Offering, will be convertible into an
aggregate of 20 million Ordinary Shares, representing approximately 35% of
Triton's pro forma Ordinary Shares outstanding.
The Purchase Agreement also provides that the Company is to pay the
Purchaser a termination fee of $30 million (the "Termination Fee") if (i) the
Purchase Agreement is terminated in connection with the Company pursuing a
competing business combination transaction of the type described in the
Purchase Agreement or (ii) subject to certain exceptions, the Purchase
Agreement is terminated for any reason and within one year after such
termination the Company enters into a definitive agreement with respect to
(and thereafter consummates), or consummates, such a business combination
transaction.
Pursuant to the Purchase Agreement, the Company and the Purchaser have
agreed to enter into a Shareholders Agreement (the "Shareholders Agreement")
at the time of the Initial Issuance pursuant to which, among other things, (i)
the Company will grant to the Purchaser and its designated transferees certain
registration rights with respect to 8% Preference Shares and Ordinary Shares
held by them and (ii) the size of the Company's Board of Directors will be set
at ten and the Purchaser will have the right to designate four out of such ten
directors (subject to reduction in the event the Purchaser's and such
designated transferees' holdings of 8% Preference Shares and Ordinary Shares
fall below certain thresholds to be set forth in the Shareholders Agreement).
The descriptions contained herein are qualified in their entirety by
reference to the Purchase Agreement (including the exhibits filed therewith),
a copy of which is filed herewith and is incorporated by reference herein.
This report is neither an offer to sell nor a solicitation of an offer to
purchase any Rights, Ordinary Shares or 8% Preference Shares, and any offering
of securities of the Company described herein will be made only by means of a
prospectus.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
- ----------- -----------
10.1 Stock Purchase Agreement dated as of August 31, 1998
between Triton Energy Limited and HM 4 Triton, L.P.,
including forms of the Unanimous Written Consent of
the Board of Directors authorizing a Series of
Preference Shares and the Shareholders Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRITON ENERGY LIMITED
Date: September 9, 1998 By: /s/ Robert B. Holland, III
------------------------------
Robert B. Holland, III
Interim Chief Executive Officer
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
TRITON ENERGY LIMITED
AND
HM4 TRITON, L.P.
8% CONVERTIBLE PREFERENCE SHARES
(PAR VALUE $.01 PER SHARE)
AUGUST 31, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
-----------
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1.1 Definitions 1
---------------------------------------------------------------------
Section 1.2 References and Titles 10
---------------------------------------------------------------------
ARTICLE II
PURCHASE OF 8% PREFERENCE SHARES
--------------------------------
Section 2.1 Purchase of Shares 11
---------------------------------------------------------------------
ARTICLE III
REPRESENTATIONS AND WARRANTIES
--------------------------------
Section 3.1 Representations and Warranties of the Company 11
---------------------------------------------------------------------
Section 3.2 Representations and Warranties of Purchaser 29
---------------------------------------------------------------------
ARTICLE IV
COVENANTS
--------------------------------
Section 4.1 Furnishing of Information 33
---------------------------------------------------------------------
Section 4.2 Rights Offering 33
---------------------------------------------------------------------
Section 4.3 Stock Exchange Listing 34
---------------------------------------------------------------------
Section 4.4 Registration Statement 34
---------------------------------------------------------------------
Section 4.5 Affirmative Covenants of the Company 35
---------------------------------------------------------------------
Section 4.6 Negative Covenants of the Company 35
---------------------------------------------------------------------
Section 4.7 Approvals 37
---------------------------------------------------------------------
Section 4.8 Shareholders Agreement. 37
---------------------------------------------------------------------
Section 4.9 Preferred Stock Authorization. 37
---------------------------------------------------------------------
Section 4.10 HSR Act Notification 38
---------------------------------------------------------------------
Section 4.11 Indemnification of Directors and Officers; Insurance 38
---------------------------------------------------------------------
Section 4.13 Notification of Certain Matters 40
---------------------------------------------------------------------
Section 4.14 Board of Directors 41
---------------------------------------------------------------------
Section 4.15 Financial Advisory Agreement; Commitment Fee 41
---------------------------------------------------------------------
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
--------------------------------
Section 5.1 Conditions Precedent to Each Party's Obligation 41
---------------------------------------------------------------------
Section 5.2 Conditions Precedent to Obligation of Purchaser at the First Closing 42
---------------------------------------------------------------------
Section 5.3 Conditions Precedent to Obligations of Company at the First Closing 43
---------------------------------------------------------------------
Section 5.4 Conditions Precedent to Obligation of Purchaser at the Second Closing 44
---------------------------------------------------------------------
Section 5.5 Conditions Precedent to Obligations of Company at the Second Closing 46
---------------------------------------------------------------------
ARTICLE VI
CLOSINGS
--------------------------------
Section 6.1 Closings 46
---------------------------------------------------------------------
Section 6.2 Actions to Occur at the First Closing 46
---------------------------------------------------------------------
Section 6.3 Actions to Occur at the Second Closing 47
---------------------------------------------------------------------
ARTICLE VII
TERMINATION
--------------------------------
Section 7.1 Termination 48
---------------------------------------------------------------------
Section 7.2 Effect of Termination 50
---------------------------------------------------------------------
ARTICLE VIII
INDEMNIFICATION
--------------------------------
Section 8.1 Indemnification of Purchaser 50
---------------------------------------------------------------------
Section 8.2 Indemnification of Company 51
---------------------------------------------------------------------
Section 8.3 Defense of Third-Party Claims 51
---------------------------------------------------------------------
Section 8.4 Direct Claims 52
---------------------------------------------------------------------
Section 8.5 Special Provisions Regarding Indemnity 52
---------------------------------------------------------------------
Section 8.6 Tax Related Adjustments 53
---------------------------------------------------------------------
ARTICLE IX
MISCELLANEOUS
--------------------------------
Section 9.1 Survival of Provisions 53
---------------------------------------------------------------------
Section 9.2 No Waiver; Modification in Writing 54
---------------------------------------------------------------------
Section 9.3 Specific Performance 54
---------------------------------------------------------------------
Section 9.4 Severability 54
---------------------------------------------------------------------
Section 9.5 Fees and Expenses 54
---------------------------------------------------------------------
Section 9.6 Parties in Interest 56
---------------------------------------------------------------------
Section 9.7 Notices 56
---------------------------------------------------------------------
Section 9.8 Counterparts 57
---------------------------------------------------------------------
Section 9.9 Entire Agreement 57
---------------------------------------------------------------------
Section 9.10 Governing Law 58
---------------------------------------------------------------------
Section 9.11 Public Announcements 58
---------------------------------------------------------------------
Section 9.12 Assignment 58
---------------------------------------------------------------------
Section 9.13 Director and Officer Liability 58
---------------------------------------------------------------------
Section 9.14 Headings 59
---------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A Form of Financial Advisory Agreement
Exhibit B Form of Monitoring and Oversight Agreement
Exhibit C Form of Preferred Stock Authorization
Exhibit D Form of Shareholders Agreement
Exhibit E Form of Indemnification Agreement
Exhibit F-1 Form of Legal Opinion of Robert Holland, General Counsel
to the Company
Exhibit F-2 Form of Legal Opinion of W. S. Walker & Co.
Exhibit F-3 Form of Legal Opinion of Hunter & Hunter
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of August 31, 1998, by and between
Triton Energy Limited, a Cayman Islands company (the "Company"), and HM4
-------
Triton, L.P., a Cayman Islands exempted limited partnership (together with its
permitted assigns, "Purchaser").
---------
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section I.1 Definitions. As used in this
-----------
Agreement, and unless the context requires a different meaning, the following
terms have the meanings indicated:
"5% Preference Shares" has the meaning set forth in Section 3.1(c)(i).
"5% Preference Shares Authorization" has the meaning set forth in Section
3.1(c)(iii).
"8% Preference Shares" means the Company's 8% Convertible Preference
Shares, par value $.01 per share.
"Additional D&O Policies" has the meaning set forth in Section 4.11(b).
"Affiliate" means, with respect to any Person, any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person. For purposes of this definition and
this Agreement, the term "control" (and correlative terms) means the power,
whether by contract, equity ownership or otherwise, to direct the policies or
management of a Person.
"Agreement" means this Stock Purchase Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with the
terms hereof.
"Approval" means any approval, authorization, grant of authority,
consent, order, qualification, permit, license, variance, exemption,
franchise, concession, certificate, filing or registration or any waiver of
the foregoing, or any notice, statement or other communication required to be
filed with, delivered to or obtained from any Governmental Entity or any other
Person.
"Articles of Association" means the Company's Articles of Association, as
amended from time to time.
<PAGE>
"Asset Value" shall mean the consideration to be paid for such asset by
the acquiring Person in a bona fide arms-length transaction with a
non-Affiliate third party, including all debt assumed as part of such
transaction or to which the assets subject to such transaction are subject and
which remains outstanding immediately following such transaction; provided,
--------
however, that if the consideration is payable in whole or in part in property
- -------
(which term shall include the securities of any issuer other than the Company)
other than cash, the fair market value of such property shall be determined as
follows: (i) if such property consists of securities, such value shall be the
Current Market Price of such securities and (ii) such value of property other
than securities shall be determined by the Company and HMCo in good faith or,
if the Company and HMCo do not agree on the fair market value of such property
within five (5) Business Days after HMCo's receipt of a copy of the written
offer to purchase such assets describing and quantifying the non-cash
consideration to be paid for such assets, then the Company and HMCo shall
select one nationally recognized independent appraiser (with each of the
Company and HMCo bearing one-half of the expense of such appraiser) to
determine the fair market value of that property and the appraised fair market
value of that property as determined by such appraiser shall be deemed the
fair market value of that property.
"Authorized Preferred Stock" has the meaning set forth in Section
3.1(c)(i).
"Benefit Plan" has the meaning set forth in Section 3.1(o).
"Board" means the Board of Directors of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New York,
New York or Dallas, Texas generally are authorized or required by law or other
government actions to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations or other
equivalents (however designated) of capital or capital stock of such Person
and (ii) with respect to any Person that is not a corporation or company, any
and all partnership or other equity interests of such Person.
"Closings" has the meaning provided therefor in Section 6.1.
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Common Stock" means the Company's ordinary shares, par value $.01 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or pursuant
to an agreement to which the Company is a party.
"Company" has the meaning set forth in the introductory paragraph hereof.
"Company Disclosure Schedule" has the meaning set forth in Section 3.1.
<PAGE>
"Company Indemnified Costs" means (i) any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs and expenses
(including court costs and reasonable legal fees and expenses incurred in
investigating and preparing for any litigation or proceeding) that any of the
Company Indemnified Parties incurs and that arise out of or result from any
breach or default by Purchaser of any of the representations or warranties
under this Agreement or any other Transaction Documents and (ii) any and all
damages, losses, claims, liabilities, demands, charges, suits, penalties,
costs and expenses (including court costs and reasonable legal fees and
expenses incurred in investigating and preparing for any litigation or
proceeding) that any of the Company Indemnified Parties incurs and that arise
out of or result from any breach by Purchaser of any of the covenants or
agreements under this Agreement or any other Transaction Documents.
"Company Interests" means:
(a) all rights, titles, interests, tenements, hereditaments,
appurtenances, benefits and privileges of the Company or any of its
Subsidiaries in, to and under the Concession Area, the Material Oil and Gas
Contracts, the other Contract Interests and all material personal property,
improvements, lease and well equipment, easements, permits, servitudes, rights
of way and surface rights associated therewith, if any; and
(b) all material files, records and data owned by, or in the actual
or constructive possession of, the Company or any of its Subsidiaries relating
to the Company, any of its Subsidiaries, the Concession Area, the Material Oil
and Gas Contracts, the Contract Interests or any other Company Interest,
including all material title records, geological, geophysical and seismic
records, data and information, production records, electric logs, core data,
pressure data and other related matters of a non-interpretive nature
associated therewith.
"Company Options" has the meaning set forth in Section 3.1(c)(iv).
"Company SEC Documents" has the meaning set forth in Section 3.1(e)(i).
"Concession Area" means the geographic areas or regions covered by or
subject to the Material Oil and Gas Contracts.
"Contract Interests" means the Material Oil and Gas Contracts and any and
all existing oil and gas processing contracts, casinghead gas contracts, joint
venture agreements, seismic exploration agreements, area of mutual interest
agreements, saltwater disposal agreements, commingling agreements, sales
agreements, transportation agreements, pipeline agreements, and other
contracts, agreements and instruments (including the penalty provisions
thereof and future interests, reversionary rights and deferred interests) and
orders relating thereto, to which the Company or any Subsidiary is a party or
otherwise bound which relate to the Concession Area or to the exploration for
or development, production or transportation of oil, gas or petroleum from or
attributable to the Concession Area.
<PAGE>
"Contracts" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any amendments
and other modifications thereto), to which the Company or any of its
Subsidiaries is a party or is otherwise bound.
Credit Agreements means, collectively, (i) that certain Credit
Agreement between the Company and Soci t G n rale, Southwest Agency, dated
October 8, 1997, as amended, (ii) that certain Credit Agreement between the
Company and Barclays Bank PLC, dated November 26, 1997, as amended, (iii) that
certain Credit Agreement between the Company and Toronto Dominion (Texas),
Inc., dated November 26, 1997, as amended, (iv) that certain Credit Agreement
between the Company and Union Bank of California, N.A., dated December 31,
1997, as amended, (v) that certain Credit Agreement between the Company and
Credit Suisse First Boston, dated February 9, 1998, as amended, and (vi) that
certain Demand Promissory Note with Banque Paribas dated September 15, 1997.
"Cure Period" has the meaning set forth in Section 7.1(b)(i).
"Current Market Price" of Common Stock or any other class of stock or
other security of the Company or any other issuer for any day shall mean the
last reported sales price, regular way on such day, or, if no sale takes place
on such day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York Stock Exchange (
NYSE ) or, if such security is not listed or admitted for trading on the NYSE,
- ----
on the principal national securities exchange on which such security is listed
or admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on The Nasdaq Stock Market or, if such security
is not quoted on The Nasdaq Stock Market, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System
(NASDAQ) or, if bid and asked prices for such security on such day shall not
------
have been reported through NASDAQ, the average of the bid and asked prices on
such day as furnished by any NYSE member firm regularly making a market in
such security selected for such purpose by the Board of Directors or, if no
such market is regularly made, as determined by a majority of the Board of
Directors based on advice of an independent appraiser selected by a majority
of the Board of Directors.
<PAGE>
"Debt", without duplication, means (a) all indebtedness (including the
principal amount thereof or, if applicable, the accreted amount thereof and
the amount of accrued and unpaid interest thereon) of the Company or its
Subsidiaries, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (b) all deferred indebtedness
of the Company or its Subsidiaries for the payment of the purchase price of
property or assets purchased, (c) all obligations of the Company or its
Subsidiaries to pay rent or other payment amounts under a lease of real or
personal property which is required to be classified as a capital lease or a
liability on the face of a balance sheet prepared in accordance with GAAP, (d)
any outstanding reimbursement obligation of the Company or its Subsidiaries
with respect to letters of credit, bankers' acceptances or similar facilities
issued for the account of the Company or its Subsidiaries, (e) any payment
obligation of the Company or its Subsidiaries under any interest rate swap
agreement, forward rate agreement, interest rate cap or collar agreement or
other financial agreement or arrangement entered into for the purpose of
limiting or managing interest rate risks, (f) all indebtedness for borrowed
money secured by any Lien existing on property owned by the Company or its
Subsidiaries, whether or not indebtedness secured thereby shall have been
assumed, (g) all guaranties, endorsements, assumptions and other contingent
obligations of the Company or its Subsidiaries in respect of, or to purchase
or to otherwise acquire, indebtedness for borrowed money of others, (h) all
other short-term and long-term liabilities of the Company or its Subsidiaries
of any nature and (i) all premiums, penalties and change of control payments
required to be paid or offered in respect of any of the foregoing as a result
of the consummation of the transactions contemplated by the Transaction
Documents regardless if any of such are actually paid.
"Environmental Laws" has the meaning set forth in Section 3.1(r)(A).
"ERISA" has the meaning set forth in Section 3.1(o).
"Excess Shares" has the meaning set forth in Section 4.2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"Financial Advisory Agreement" means that certain Financial Advisory
Agreement between the Company and HMCo in the form of Exhibit A hereto.
"First Closing" has the meaning set forth in Section 6.1.
"First Closing Date" has the meaning set forth in Section 6.1.
"GAAP" has the meaning set forth in Section 3.1(e)(ii).
"Governmental Entity" means any agency, bureau, commission, court,
authority, department, official, political subdivision, tribunal or other
instrumentality of any government, whether (i) regulatory, administrative or
otherwise, (ii) federal, state or local, or (iii) domestic or foreign.
"Hazardous Materials" has the meaning set forth in Section 3.1(r)(B).
"HMCo" has the meaning set forth in Section 4.16.
"HSR Act" has the meaning set forth in Section 3.1(d)(iii) of this
Agreement.
"Indemnification Agreement" has the meaning set forth in Section 4.11(a).
"Indemnified Parties" means the Purchaser Indemnified Parties or the
Company Indemnified Parties, as the case may be.
<PAGE>
"Indemnifying Party" means any person who is obligated to provide
indemnification hereunder.
Indenture means that certain Amended and Restated Senior Indenture
between the Company and The Chase Manhattan Bank, as Trustee, dated as of July
25, 1997, together with the Amended and Restated First Supplemental Indenture,
dated as of July 25, 1997, with respect to $200,000,000 aggregate principal
amount of 8 % Senior Notes due 2002, and the Amended and Restated Second
Supplemental Indenture, dated as of July 25, 1997, with respect to
$200,000,000 aggregate principal amount of 9 % Senior Notes due 2005.
"Initial Shares" means the 1,822,500 Shares to be purchased and sold at
the First Closing.
"Intangible Property" has the meaning set forth in Section 3.1(q).
"knowledge" has the meaning set forth in Section 3.1(j)(v).
"Law" means any constitutional provision, statute or other law,
ordinance, rule, regulation or interpretation of any thereof and any Order of
any Governmental Entity (including environmental laws).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or
the revenues or income thereon or therefrom.
"Litigation" has the meaning set forth in Section 3.1(k).
"Material Adverse Effect" or "Material Adverse Change" means any effect,
change, event or occurrence that is materially adverse to the business,
operations, properties, condition (financial or otherwise), results of
operations, assets, liabilities or prospects of the Company and its
Subsidiaries taken as a whole , but excluding any such effect, change, event
or occurrence resulting from or relating to (i) changes in general economic
conditions or (ii) effects, changes, events or occurrences in the Company's
industry generally (including without limitation any regulatory changes or
changes in prices for oil or gas), in each case which do not have a materially
disproportionate effect on the business, operations or properties of the
Company or its Subsidiaries as compared to general economic conditions or the
Company's industry as a whole, respectively.
"Material Contracts" has the meaning given it in Section 3.1(l)(ii).
<PAGE>
"Material Oil and Gas Contracts" means the following agreements as in
effect on the date hereof and as the same may hereafter be modified, amended,
supplemented or restated: (A) Contract for Exploration and Exploitation for
Santiago de Atalayas I with an effective date of July 1, 1982, between Triton
Columbia, Inc. ("TCI") and Empressa Colombiana De Petroleos; (B) Contract for
---
Exploration and Exploitation for Tauramena with an effective date of July 4,
1988, between TCI and Empressa Colombiana De Petroleos; (C) Rio Chitamena
Association Contract between Empressa Colombiana De Petroleos and Total
Exploration En Produktie Maatschappij B.V., dated December 3, 1990; (D)
Contract between Malaysia-Thailand Joint Authority and Petronas Carigali (JDA)
SDN. BHD. and Triton Oil Company of Thailand dated as of April 21, 1994,
relating to Exploration and Exploitation of Petroleum for Malaysia-Thailand
Joint Development Area Block A-18; and (E) the joint operating agreements
relating to the foregoing (A) through (D).
"Memorandum of Association" means the Company's Memorandum of
Association, as amended from time to time.
"Monitoring Agreement" means that certain Monitoring and Oversight
Agreement to be entered into between the Company and HMCo in the form of
Exhibit B hereto.
-----
"NYSE" means the New York Stock Exchange.
"NYSE Approval" has the meaning set forth in Section 4.3.
"Oil and Gas Properties" means leasehold and other interests in oil, gas
and other mineral properties owned or otherwise held in the name of the
Company or any of its Subsidiaries.
"Order" means any decree, injunction, judgment, order, ruling, assessment
or writ.
"Permitted Liens" has the meaning set forth in Section 3.1(n).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Stock Authorization" means the unanimous written consent of
the Board creating, authorizing and providing for the issuance of the 8%
Preference Shares, in the form of Exhibit C.
----------
"Purchase Price" has the meaning set forth in Section 2.1(b).
"Purchaser" has the meaning set forth in the introductory paragraph
hereto.
"Purchaser Designees" has the meaning set forth in Section 4.11(a).
<PAGE>
"Purchaser Indemnified Costs" means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable legal fees and expenses incurred in investigating
and preparing for any litigation or proceeding) that any of the Purchaser
Indemnified Parties incurs and that arise out of or result from (i) any breach
or default by the Company of any of the representations or warranties under
this Agreement or any other Transaction Documents, (ii) any breach by the
Company of any of the covenants or agreements (other than breaches of
covenants to be performed by the Company after the Closing) of the Company
under this Agreement or any other Transaction Documents or (iii) any
litigation or proceedings brought by any shareholder of the Company (whether
such action is brought in such shareholder's name or derivatively on behalf of
the Company) in respect of the transactions contemplated by this Agreement or
any other Transaction Documents.
"Purchaser Indemnified Parties" means Purchaser and each officer,
director, employee, stockholder, partner, member and Affiliate of Purchaser.
"Purchaser's Expenses" means all reasonable out-of-pocket fees, costs and
expenses incurred by Purchaser in connection with its due diligence efforts or
the transactions contemplated by this Agreement and the other Transaction
Documents, including (i) fees, costs and expenses of its accountants, counsel,
financial advisors and other similar advisors and (ii) fees paid to any
Governmental Entity but excluding any commitment, underwriting fee or similar
fees paid by Purchaser to any third party lender or underwriter in connection
with any debt financing obtained by Purchaser with respect to the transactions
contemplated by this Agreement.
"Registration Statement" has the meaning set forth in Section 4.4.
"Release" has the meaning set forth in Section 3.1(r)(C).
"Remaining Shares" means the Shares purchased and sold at the Second
Closing, including 8% Preference Shares purchased by Purchaser pursuant to
Rights held by Purchaser.
"Remedial Action" has the meaning set forth in Section 3.1(r)(D).
"Reserve Report" means the Appraisal Report as of December 31, 1997 on
Certain Properties owned by Triton Colombia Incorporated in Colombia prepared
by DeGolyer and MacNaughton with respect to the Cusiana and Cupiagua Fields in
Colombia and the End-1997 Reserves Report of Carigali-Triton Operating Company
with respect to Block A-18 in the Malaysia-Thailand Joint Development Area
estimating the proved reserves attributable to the Cakirawala, Suriya, Bulan,
Bumi East, Senja, Samudra and Wira fields as of December 31, 1997 and
described in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997.
"Rights" has the meaning set forth in Section 4.2(a).
"Rights Agreement" has the meaning set forth in Section 3.1(u).
"Rights Offering" has the meaning set forth in Section 4.2(a).
"Rights Offering Documents" has the meaning set forth in Section 4.2(b).
"Rule 144" means Rule 144 under the Securities Act of 1933, as amended,
and any successor rule thereto.
<PAGE>
"Sale Transaction" means (a) the acquisition (by direct issuance from the
Company, from existing securityholders or otherwise) by any Person or group of
Persons deemed a "person" under Section 13(a)(3) of the Exchange Act of
beneficial ownership of securities representing a majority of the combined
voting power of the outstanding securities of the Company entitled to vote ,
generally or as a separate class or series or together with one or more class
or series of shares or stock, in the election of directors of the Company, the
result of which would result in such Person or Persons (or group) having the
ability to elect a majority of the Board of Directors, (b) a reorganization,
recapitalization, merger, consolidation or similar business combination or
transaction involving the Company (unless the holders of the outstanding
securities of the Company entitled to vote in the election of directors prior
to such transaction continue to own securities of the entity resulting from or
surviving such transaction (a "Surviving Entity") entitled to vote in the
-----------------
election of directors sufficient to allow holders to elect a majority of the
board of directors of the Surviving Entity upon the completion of such
transaction) or (c) a sale or other disposition (in a single transaction or a
series of related transactions) of assets with an Asset Value in excess of 50%
of the market value of the assets of the Company and its Subsidiaries as a
whole; provided, however, such term shall not include the transactions
-------- -------
contemplated by this Agreement or any other Transaction Documents.
"SEC" means the Securities and Exchange Commission.
"Second Closing" has the meaning set forth in Section 6.1.
"Second Closing Date" has the meaning set forth in Section 6.1.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Senior Notes means, collectively, (i) $200,000,000 in aggregate
principal amount of 8 % Senior Notes due 2002, and (ii) $200,000,000 in
aggregate principal amount of 9 % Senior Notes due 2005.
"Shareholder Litigation" means each of the pending class action
proceedings styled as Birdie Capital Corporation and Jonathan Schwartz v.
Triton Energy, Limited., et al., Ken Bortner v. Triton Energy, Limited., et
al., D. H. Lee, Jr. v. Triton Energy, Limited, et al., North River Trading Co.
L.L.C. v. Triton Energy, Limited, et al., Richard Strauss and Michael Brown v.
Triton Energy, Limited., et al., Richard L. Zorn v. Triton Energy, Limited.,
et al., and any and all additional claims, actions, suits or proceedings
relating to the same set of facts or circumstances, or otherwise containing
substantially the same allegations, as such proceedings.
"Shareholders Agreement" means the Shareholders Agreement between the
Company and Purchaser, substantially in the form attached hereto as Exhibit D.
---------
"Shares" means the shares of 8% Preference Shares purchased by Purchaser
pursuant to this Agreement.
<PAGE>
"Stock Plans" means the Company's (i) 1981 Employee Non-Qualified Stock
Option Plan, as amended, (ii) 1985 Stock Option Plan, as amended, (iii) 1988
Stock Appreciation Rights Plan, (iv) 1989 Stock Option Plan, as amended, (v)
Second Amended and Restated 1992 Stock Option Plan, (vi) Amended and Restated
1985 Restricted Stock Plan, as amended, (vii) 1997 Share Compensation Plan and
(viii) Triton Resources (UK) Limited Share Option Scheme.
"Subsidiary" means, (i) a corporation, a majority of whose stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company
or by the Company and another Subsidiary, or (ii) any other Person (other than
a corporation) in which the Company, a Subsidiary or the Company and a
Subsidiary, directly or indirectly, at the date of determination thereof has
at least a majority ownership interest. For purposes of this Agreement,
Triton International Oil Corporation shall be deemed a Subsidiary of the
Company.
"Tax" or "Taxes" has the meaning set forth in Section 3.1(n).
"Tax Return" has the meaning set forth in Section 3.1(n) hereof.
"Termination Fee" has the meaning set forth in Section 9.5(c).
"Transaction Documents" means this Agreement, the Preferred Stock
Authorization, the Shareholders Agreement and any other documents executed in
connection herewith or therewith.
"Transfer" has the meaning set forth in Section 3.2(e).
"Underlying Shares" means the shares of Common Stock issuable upon
conversion or exchange of the Shares.
"Unsubscribed Shares" shall mean the number of shares of 8% Preference
Shares for which the holders of Rights shall not have subscribed, either
pursuant to their basic or oversubscription privileges, during the period of
time in which holders of Rights may exercise Rights to purchase 8% Preference
Shares in the Rights Offering.
<PAGE>
Section I.2 References and Titles. All
---------------------
references in this Agreement to Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions refer to the corresponding Exhibits,
Schedules, Articles, Sections, subsections, and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any Articles, Sections, subsections, or other subdivisions of
this Agreement are for convenience only, do not constitute any part of such
Articles, Sections, subsections or other subdivisions, and shall be
disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise expressly requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural and the conjunctive and disjunctive forms of such defined terms.
ARTICLE II
PURCHASE OF 8% PREFERENCE SHARES
--------------------------------
Section II.1 Purchase of Shares.
--------------------
(a) Subject to the terms and conditions herein set forth, the Company
will sell to Purchaser, and Purchaser will purchase from the Company, at the
times indicated below, a number of shares of 8% Preference Shares equal to the
sum of the following:
(i) at the First Closing, 1,822,500 Shares; and
(ii) at the Second Closing, a number of 8% Preference Shares equal to
the sum of (A) Purchaser's pro rata portion of 8% Preference Shares offered in
the Rights Offering and (B) all Unsubscribed Shares; provided that Purchaser
--------
shall not be required to purchase more than 3,177,500 8% Preference Shares at
the Second Closing.
(b) The aggregate purchase price payable for the 8% Preference Shares
at each Closing shall be equal to $70.00 multiplied by the total number of 8%
Preference Shares purchased by the Purchaser at such Closing (the "Purchase
--------
Price").
---
(c) Delivery of the Shares shall be made at each Closing by delivery
to Purchaser, against payment of the Purchase Price therefor as provided
herein, of a share certificate representing the total number of Shares to be
purchased at such Closing by Purchaser hereunder.
(d) Payment of the Purchase Price for the Shares to be purchased
hereunder shall be made by or on behalf of Purchaser by wire transfer of
immediately available funds to an account of the Company (the number for which
account shall have been furnished to Purchaser at least two Business Days
prior to the applicable Closing Date).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
Section III.1 Representations and Warranties of the Company.
-------------------------------------------------
The Company represents and warrants to Purchaser as follows (in each
case as qualified by matters reflected on the disclosure schedule dated
as of the date of this Agreement and delivered by the Company to Purchaser
on or prior to the date of this Agreement (the "Company Disclosure
Schedule") and made a part hereof by reference):
(a) Organization, Standing and Power
--------------------------------
Each of the Company and each of its Subsidiaries is a corporation or
other entity duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated or organized and has the
requisite corporate or other such entity power and authority to carry on its
business as now being conducted. Each of the Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect. The Company has delivered (or, in the case of the Company's
Subsidiaries, made available) to Purchaser prior to the execution of this
Agreement complete and correct copies of its Memorandum of Association and
Articles of Association, as in effect on the date of this Agreement.
(b) Subsidiaries. Schedule 3.1(b)(i) of the Company Disclosure
------------ ------------------
Schedule sets forth a true and complete list, as of the date hereof, of each
Subsidiary of the Company, together with the jurisdiction of incorporation or
organization and the percentage of each Subsidiary's outstanding share capital
(or other voting or equity securities or interests, as applicable) owned by
the Company or another Subsidiary of the Company. Except as set forth in
Schedule 3.1(b)(ii) of the Company Disclosure Schedule, all the outstanding
- -------------------
shares of share capital (or other voting or equity securities or interests, as
applicable) of each Subsidiary of the Company have been validly issued and
(with respect to corporate Subsidiaries) are fully paid and nonassessable and
are owned directly or indirectly by the Company, free and clear of all Liens
except for Permitted liens. Except for the shares or capital stock of its
Subsidiaries and the partnership interests listed in Schedule 3.1(b)(iii) of
--------------------
the Company Disclosure Schedule, as of the date hereof, the Company does not
own, directly or indirectly, any share or capital stock (or other voting or
equity securities or interests, as applicable) of any corporation, limited
liability company, partnership, joint venture or other entity which is
material to the business of the Company and its Subsidiaries taken as a whole.
(c) Capital Structure.
------------------
(i) The authorized shares of Company consists of 200,000,000 shares
of Common Stock and 20,000,000 shares of other classes to be determined upon
the creation thereof by the Board (the "Authorized Preferred Stock"), of
--------------------------
which, as of the date of this Agreement, (A) 36,636,452 shares of Common Stock
are issued and outstanding, (B0 420,000 shares of Authorized Preferred Stock
are designated as 5% Convertible Preference Shares, par value $.01 per share
(the "5% Preference Shares"), each of which is convertible into one share of
---------------------
Common Stock, 209,639 shares of which are issued and outstanding, (C) 200,000
shares of the Authorized Preferred Stock are designated as Series A Junior
Participating Preference Shares, no shares of which are issued and
outstanding, (D) 91 shares of Common Stock are held by the Company in its
treasury and (E) no shares of Common Stock are held by any of the Company's
Subsidiaries. Except as described above in this Section 3.1(c)(i), the
Company has no authorized, issued or outstanding shares or Capital Stock.
(ii) As of the date hereof, there are no bonds, debentures, notes or
other indebtedness issued or outstanding having the right to vote on any
matters on which holders of Common Stock or Authorized Preferred Stock may
vote, including without limitation the transactions contemplated by this
Agreement and the other Transaction Documents.
(iii) Giving effect to the applicable provisions of the Articles of
Association, the Preferred Stock Authorization, the unanimous written consent
of the Board authorizing the 5% Preference Shares (the "5% Preference Shares
--------------------
Authorization") and all other instruments affecting the rights of holders of
------------
shares or capital stock of the Company to which the Company is a party or is
bound (which, if any, other than the Articles of Association, the Preferred
Stock Authorization. the 5% Preference Shares Authorization and the other
Transaction Documents, are set forth in Schedule 3.1(c)(iii) or Schedule
-------------------- --------
3.1(c)(vi) of the Company Disclosure Schedule), upon issuance each outstanding
-----
Share will be convertible into four shares of Common Stock; there are no
restrictions or limitations, contractual or otherwise, binding upon the
Company or to which the Company is subject that prohibit or limit the
enforceability of the terms and provisions of the Preferred Stock
Authorization or, except as set forth in the Preferred Stock Authorization,
will prohibit or limit the right of a holder of Shares to convert Shares into
shares of Common Stock; and the conversion of any Shares into shares of Common
Stock will not violate or result in or constitute a default under any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other contract, agreement, arrangement or
understanding to which the Company is a party or by which it or any of its
properties or assets are bound;
(iv) There are no outstanding warrants, share or stock options,
share or stock appreciation rights or other rights to receive any shares or
capital stock of the Company or any of its Subsidiaries granted under the
Stock Plans or otherwise, except as set forth in Schedule 3.1(c)(iv) of the
-------------------
Company Disclosure Schedule (such warrants, share or stock options, shares or
stock appreciation rights or other rights disclosed thereon, collectively, the
"Company Options"). Except for the Company Options and 5% Preference Shares
----------------
(as to which no more than 209,639 shares of Common Stock and no shares or
stock of any other class or series of the Company are issuable upon exercise
or conversion thereof) and, except as set forth above or in Schedule
--------
3.1(c)(iv) of the Company Disclosure Schedule, there are no outstanding
-
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares or stock (or other voting or
equity securities or interests, as applicable) of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except as set forth in the
5% Preference Shares Authorization and in Schedule 3.1(c)(iv) of the Company
-------------------
Disclosure Schedule, there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares or stock (or other voting or equity securities or interests, as
applicable) of the Company or any of its Subsidiaries.
(v) All outstanding shares (or other voting or equity securities or
interests, as applicable) of the Company and its Subsidiaries are, and all
shares which may be issued upon conversion of the 8% Preference Shares will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive or similar rights.
(vi) Except as contemplated hereby or in the other Transaction
Documents or as set forth in Schedule 3.1(c)(vi) of the Company Disclosure
-------------------
Schedule, there are not as of the date hereof and there will not be at the
time of either Closing any shareholder agreements, voting agreements or
trusts, proxies or other agreements or contractual obligations to which the
Company or any Subsidiary is a party or bound with respect to the voting or
disposition of any shares or stock (or other voting or equity securities or
interests, as applicable) of the Company or any of its Subsidiaries and, to
the Company's knowledge, as of the date hereof, there are no other shareholder
agreements, voting agreements or trusts, proxies or other agreements or
contractual obligations among the shareholders of the Company with respect to
the voting or disposition of any shares or stock (or other voting or equity
securities or interests, as applicable) of the Company or any of its
Subsidiaries.
(d) Authority; No Violations; Approvals
-----------------------------------
(i) The Board of Directors has approved this Agreement, the other
Transaction Documents and the transactions contemplated hereby and thereby,
and declared this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby to be in the best interests of
the Company. The Company has all requisite corporate power and authority to
enter into this Agreement and each of the other Transaction Documents and to
consummate each of the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each of the other Transaction
Documents and the consummation of each of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement and each of the other Transaction
Documents has been duly executed and delivered by the Company and the
Preferred Stock Authorization has been duly adopted by the Board of Directors
in accordance with applicable law. Each of the Preferred Stock Authorization
and, assuming this Agreement and each of the other Transaction Documents to
which Purchaser is a party constitute the valid and binding obligations of
Purchaser, this Agreement and each of the other Transaction Documents
constitutes a valid and binding obligation of Company enforceable in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(ii) Except as set forth in Schedule 3.1(d)(ii) of the Company
-------------------
Disclosure Schedule, the execution and delivery of this Agreement and each of
the other Transaction Documents does not, and the consummation of the
transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, require the consent of
any other party to or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to the
loss of a material benefit under, or give rise to a right of purchase under,
result in the creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries under, or otherwise result in a material
detriment to the Company or any of its Subsidiaries under, any provision of
(F) the Memorandum of Association and Articles of Association or any provision
of the comparable charter or organizational documents of any of its
Subsidiaries, (G) any loan or credit agreement, note, bond, mortgage,
indenture, lease, or other agreement (including the Material Oil and Gas
Contracts) to which the Company or any of its Subsidiaries is a party or
otherwise is bound or by which any of them or their respective properties are
bound or any Approval applicable to the Company or any of its Subsidiaries,
(H) any joint venture or other ownership arrangement to which the Company or
any of its Subsidiaries is a party or otherwise is bound or by which any of
them or their respective properties are bound or (I0 assuming the Approvals
referred to in Section 3.1(d)(iii) are duly and timely obtained or made, any
Law or Order applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of clause (B)
(other than with respect to any material loan or credit agreement, note, bond,
mortgage or indenture or any Material Oil and Gas Contract), (C) or (D), any
such conflicts, violations, defaults, rights, Liens, detriments, Laws or
Orders that, individually or in the aggregate, (x) have not had and could not
reasonably be expected to have a Material Adverse Effect, (y) have not
impaired and could not reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in
any material respect, or (z) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
(iii) No Approval from any Governmental Entity is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or any other Transaction Document by
the Company or the consummation by the Company of the transactions
contemplated hereby or thereby, except for: (A) if applicable, the filing of
a notification report by Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration or
-------
termination of the applicable waiting period with respect thereto; (B) the
filing with the SEC of (x) the Registration Statement and the declaration of
the effectiveness of the Registration Statement by the SEC, (y) such reports
under Section 13(a) of the Exchange Act and such other compliance with the
Exchange Act and the rules and regulations thereunder, as may be required in
connection with this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby; (C) such Approvals as may be
required by any applicable state securities or "blue sky" laws; (D) such
Approvals as may be required by any foreign securities, corporate or other
Laws; and (E) any such Approval the failure of which to be made or obtained
(1) has not had and could not reasonably be expected to have a Material
Adverse Effect, (2) has not impaired and could not reasonably be expected to
impair the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect and (3) could not reasonably be
expected to delay in any material respect or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents.
(e) SEC Documents.
--------------
(i) The Company has made available to Purchaser a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since December 31, 1996 and prior
to or on the date of this Agreement (the "Company SEC Documents"), which are
---------------------
all the documents (other than preliminary materials) that the Company was
required to file with the SEC between December 31, 1996 and the date of this
Agreement. As of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents, and none of the Company
SEC Documents contained when filed any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(ii) The financial statements of the Company included in the Company
SEC Documents, including the notes and schedules thereto, complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, were prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during
----
the periods involved (except as may be indicated in the notes thereto or, in
the case of the unaudited statements, as permitted by Rule 10-01 of Regulation
S-X of the SEC) and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal,
recurring adjustments, none of which are material) the consolidated financial
position of the Company and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries for
the periods presented therein.
(iii) Except as disclosed in the Company SEC Documents, there are no
agreements, arrangements or understandings between the Company and any party
who is or was at any time prior to the date hereof but after December 31, 1996
an Affiliate of the Company that are required to be disclosed in the Company
SEC Documents.
(f ) Information Supplied. None of the
--------------------
information included or incorporated by reference in the Registration
Statement will, at the date such Registration Statement is declared effective
by the SEC or any time from and after such date through and including the date
of the Second Closing, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. Notwithstanding the foregoing, no representation is
made by the Company in this Section 3.1(f) with respect to statements made or
incorporated by reference in the Registration Statement in conformity with
information supplied by or on behalf of Purchaser specifically for use in the
Registration Statement.
(g) Absence of Certain Changes or Events
-------------------------------------
(i) Except as disclosed in, or reflected in Schedule 3.1(g) or the
---------------
Company SEC Documents filed with the SEC after December 31, 1997, and prior to
the date of this Agreement, or except as contemplated by this Agreement, since
December 31, 1997, to the date of this Agreement each of the Company and its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice, and there has not been: (i any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any shares or stock (or other voting
or equity securities or interests, as applicable) of the Company or any of its
Subsidiaries (other than the declaration and payment of (A) regular cash
dividends with respect to the Company's first and third fiscal quarters at the
required annual 5% rate per share on the 5% Preferences Shares, with usual
record and payment dates and (B) any dividends or distributions by wholly
owned Subsidiaries); (ii) any split, combinations, reclassification or
amendment of any material term of any outstanding equity security of the
Company or any Subsidiary of the Company or (other than issuance of Common
Stock upon the exercise of any Company Options and/or issuances of Common
Stock upon conversion after the date hereof of 5% Preference Shares
outstanding on December 31, 1997) any issuance or the authorization of the
issuance of any other securities in respect of, or in lieu of or in
substitution for shares or stock (or other voting or equity securities or
interests, as applicable) of the Company or any of its Subsidiaries, other
than in connection with the transactions contemplated hereby; (iii) any
repurchase, redemption or other acquisition by the Company or any Subsidiary
of the Company of any outstanding shares or stock (or other voting or equity
securities or interests, as applicable) of the Company or any Subsidiary of
the Company, except as contemplated by the Stock Plans; (iv) (A) any granting
by the Company or any of its Subsidiaries to any executive officer of the
Company or any of its Subsidiaries of any increase in compensation, except for
increases in the ordinary course of business consistent with past practice or
as required under employment or other agreements or benefit arrangements in
effect as of December 31, 1997, or (B) any granting by the Company or any of
its Subsidiaries to any such executive officer of any increase in severance or
termination pay, except as was required under any employment, severance,
termination or other agreements or benefit arrangements in effect as of
December 31, 1997; (v) except as required by a change in GAAP, any change in
accounting methods, principles or practices by the Company or any of its
Subsidiaries materially affecting its assets, liabilities or business; or (vi)
any material casualties affecting the Company and its Subsidiaries, taken as a
whole, or any material loss, damage or destruction to any of their properties
or assets, including the Company Interests (other than to the extent covered
by insurance, subject to applicable deductible thresholds).
(ii) Except as disclosed in, or reflected in Schedule 3.1(g) of the
---------------
Company Disclosure Schedule or the Company's consolidated financial statements
included in the Company's Quarterly Report on Form 10-Q for the six months
ended June 30, 1998, and the notes thereto, or except as contemplated by this
Agreement, since December 31, 1997, there has not been any event, circumstance
or fact that (x) has had or could reasonably be expected to have a Material
Adverse Effect, (y) has impaired or could reasonably be expected to impair the
ability of the Company to perform its obligations under any of the Transaction
Documents in any material respect, or (z) could reasonably be expected to
delay in any material respect or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents.
(h) No Undisclosed Material Liabilities
-----------------------------------
Except as disclosed in Schedule 3.1(h) of the Company Disclosure
---------------
Schedule or the Company's financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, and the notes
thereto, there are no material liabilities or obligations of the Company or
any of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than: (i) liabilities
adequately provided for on the balance sheet of the Company dated as of June
30, 1998 (including the notes thereto) contained in the Company's Quarterly
Report on Form 10-Q for the six months ended June 30, 1998; (ii) liabilities
incurred in the ordinary course of business consistent with past practice
since December 31, 1997, which liabilities, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect; (iii)
liabilities arising under or in connection with the Transaction Documents;
(iv) liabilities reflected in the pro forma financial statements included in
the Company's Current Report on Form 8-K dated August 17, 1998, and (v)
liabilities not required by GAAP to be recognized or disclosed on a
consolidated balance sheet of the Company and its consolidated Subsidiaries or
in the notes thereto, which liabilities, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(i) No Default. Neither the Company nor any of its
----------
Subsidiaries is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation)
of any term, condition or provision of (i) the Memorandum of Association or
Articles of Association of the Company or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, instrument, permit,
concession, franchise, license or any other contract, agreement, arrangement
or understanding to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
properties or assets is bound, or (iii) any Order or Law applicable to the
Company or any of its Subsidiaries, except in the case of clause (ii) and
(iii), for violations or defaults that, individually or in the aggregate, (x)
have not had and could not reasonably be expected to have a Material Adverse
Effect, (y) have not impaired and could not reasonably be expected to impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, or (z) could not reasonably be
expected to delay in any material respect or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents. The
Company (i) is not in breach of or default under any financial covenant under
the Credit Agreements, the Indentures or the Senior Notes and (ii) except as
disclosed in Schedule 3.1(i) of the Company Disclosure Schedule, does not
----------------
believe that it is reasonably likely that it will be in breach of or default
under any financial covenant under the Credit Agreement or the Indentures as
of the next date on which the Company is required to be in compliance with any
such financial covenants.
(j) Compliance with Applicable Laws
-------------------------------
(i) The Company and each of its Subsidiaries has in effect all
Approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses, and there has occurred no default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation) under any such Approval, except for
failures to obtain, or for defaults or violations under, Approvals which
failures, defaults or violations, individually or in the aggregate, (i) have
not had and could not reasonably be expected to have a Material Adverse
Effect, (ii) have not impaired and could not reasonably be expected to impair
the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, or (iii) could not reasonably
be expected to delay in any material respect or prevent the consummation of
any of the transactions contemplated by any of the Transaction Documents.
(ii) Except as disclosed in the Company SEC Documents, the businesses
of the Company and its Subsidiaries are in compliance with all applicable Laws
and Orders, except for possible noncompliance, which, individually or in the
aggregate, (i) have not had and could not reasonably be expected to have a
Material Adverse Effect, (ii) have not impaired and could not reasonably be
expected to impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect, or (iii) could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents.
(iii) No investigation or review by any Governmental Entity with
respect to the Company, any of its Subsidiaries, the transactions contemplated
by this Agreement and the other Transaction Documents, or the Contract
Interest, to the knowledge of the Company, is pending or threatened, nor has
any Governmental Entity notified the Company or any of its Subsidiaries in
writing or, to the Company's knowledge, otherwise of any intention to conduct
the same, other than those the outcome of which, individually or in the
aggregate, (i) have not had and could not reasonably be expected to have a
Material Adverse Effect, (ii) have not impaired and could not reasonably be
expected to impair the ability of the Company to perform its obligations under
any of the Transaction Documents in any material respect, or (iii) could not
reasonably be expected to delay in any material respect or prevent the
consummation of any of the transactions contemplated by any of the Transaction
Documents.
(iv) Each operator under the Material Oil and Gas Contracts which is
the Company or a Subsidiary of the Company, and, to the Company's knowledge,
each other operator under the Material Oil and Gas Contracts, has complied in
all material respects with any applicable Laws and Orders of Governmental
Entities in respect to its operation in the Concession Area and its
performance under the Material Oil and Gas Contracts.
(v) For purposes of this Agreement, the terms "knowledge of the
----------------
Company," "to the Company's knowledge" and other references qualified by
-- -----------------------------
knowledge of the Company and/or its executive officers means the actual
knowledge of the executive officers and directors of the Company and each of
the individuals listed on Schedule 3.1(j)(v) of the Company Disclosure
-------------------
Schedule after reasonable inquiry.
(k) Litigation.
----------
(i) Except as disclosed in the Company SEC Documents or Schedule
--------
3.1(k) of the Company Disclosure Schedule, there is no suit, action,
--
proceeding or indemnification claim, at law or in equity, pending before any
--
Governmental Entity, or, to the knowledge of the Company, threatened, against
or affecting the Company, any Subsidiary of the Company, or the Contract
Interests ("Litigation"), and the Company is not a party to any Litigation,
----------
and the Company and its Subsidiaries have no knowledge of any facts that could
reasonably be expected to give rise to any Litigation, that (in any case) (i)
has had or could reasonably be expected to have a Material Adverse Effect,
(ii) has impaired or reasonably could be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in
any material respect, or (iii) reasonably could be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents, nor is there any Order of
any Governmental Entity or arbitrator outstanding against or, to the Company's
knowledge, binding upon the Company, any Subsidiary of the Company or the
Contract Interests which (i) has had or could reasonably be expected to have a
Material Adverse Effect, (ii) has impaired or reasonably could be expected to
impair the ability of the Company to perform its obligations under any of the
Transaction Documents in any material respect, or (iii) reasonably could be
expected to delay in any material respect or prevent the consummation of any
of the transactions contemplated by any of the Transaction Documents.
(ii) Schedule 3.1(k) of the Company Disclosure Schedule contains an
---------------
accurate and complete list of all Orders restricting or limiting in any
material respect, the business or operations of the Company or any of its
Subsidiaries, in each case that is not disclosed in the Company SEC Documents,
to which the Company or any of its Subsidiaries is a party or, to the
Company's knowledge, by which the Company or any of its Subsidiaries or any of
their respective assets or properties are bound.
(l) Certain Agreements; Contract Interests.
---------------------------------------
(i) Material Oil and Gas Contracts.
---------------------------------------
(a) With respect to the Material Oil and Gas Contracts, (i) all such
Material Oil and Gas Contracts are in full force and effect and are the valid
and legally binding obligations of the Company and each of its Subsidiaries to
the extent a party thereto and, to the Company's knowledge, each other party
thereto and are enforceable in accordance with their respective terms; (ii)
neither the Company nor, to the knowledge of the Company, any other party to
any such Material Oil and Gas Contract is in material breach or default with
respect to its obligations thereunder; and (iii) no party to any such Material
Oil and Gas Contract has given notice of any action to terminate, cancel,
rescind or procure a judicial or arbitral reformation thereof.
(b) There are no material outstanding calls for payments by the
Company or any of its Subsidiaries under the Material Oil and Gas Contracts
that are due that have not been made, and all royalties, rentals and other
payments due under any of the Contract Interests or otherwise due and relating
to any Material Oil and Gas Contract have been paid to the proper person in
the proper amount.
(c) Except for the Material Oil and Gas Contracts, there are no
Contract Interests to which the Company or any Subsidiary is a party pursuant
to which the Company and its Subsidiaries received or were entitled to receive
revenues of $1,000,000 or more in any one of the three years ending December
31, 1996, 1997 or 1998, or that otherwise is material to the business,
operations or financial condition of the Company and its Subsidiaries as a
whole.
(ii) Except for the Material Oil and Gas Contracts and except as
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, the Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1998 and Schedule 3.1(l)(ii) of the Company Disclosure
-------------------
Schedule, there are no (A) employment or consulting Contracts (unless such
employment or consulting Contracts are terminable without liability or penalty
on 30 days or less notice) under or pursuant to which the Company is obligated
to make payments in excess of $200,000 per annum, (B) other Contracts that are
material to the Company and its Subsidiaries, taken as a whole, or their
respective business, (C) Contracts relating to material leasehold interests or
(D) Contracts with Affiliates under or pursuant to which the Company is
obligated to make payments in excess of $60,000 per annum (excluding
agreements solely by and among the Company and one or more of its
Subsidiaries), in any such case, to which the Company or any Subsidiary is a
party or to which the Company or any Subsidiary or their respective assets is
bound (such Contracts disclosed or required to be disclosed, the "Material
--------
Contracts"). Each Material Contract is a valid and binding obligation of the
------
Company or one of its Subsidiaries and, to the knowledge of the Company, of
each party thereto other than the Company or its respective Subsidiary and is
in full force and effect.
(iii) The Company or the relevant Subsidiary and, to the knowledge of
the Company, each other party to the Material Contracts, has performed in all
material respects the obligations required to be performed by it under the
Material Contracts and is not (with or without lapse of time or the giving of
notice, or both) in breach or default thereunder.
(iv) A complete copy of each Material Oil and Gas Contract and each
written Material Contract and a written description of each oral Material
Contract has been made available to Purchaser prior to the date of this
Agreement.
(v) Except as disclosed in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997, or in any other Company SEC Document
filed with the SEC after December 31, 1997, and prior to the date of this
Agreement or in Schedule 3.1(l)(v) of the Company Disclosure Schedule, none of
------------------
the Company or of its Subsidiaries is a party to any oral or written
agreement, plan or arrangement with any employee (whether an employee,
consultant or an independent contractor) of the Company or its Subsidiary (A)
the benefits of which are contingent, or the terms of which are materially
altered, upon, or result from, the occurrence of a transaction involving the
Company or its Subsidiary of the nature of any of the transactions
contemplated by this Agreement or (B) any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or any
other Transaction Documents or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement. Schedule 3.1(l)(v) of the Company Disclosure Schedule lists each
oral and written agreement, plan or arrangement with any employee (whether an
employee, consultant or an independent contractor) of the Company or any of
its Subsidiaries which provides for aggregate benefits or other amounts
payable by the Company or any of its Subsidiaries in excess of $200,000 which
are contingent upon, or will be accelerated by, or which otherwise will become
payable upon the termination of any such employee's employment by or any other
service with the Company or any of its Subsidiaries after, the occurrence of
the transactions contemplated by this Agreement or any of the other
Transaction Documents.
(vi) The Company has made available to Purchaser (C) true and correct
copies of all material loan or credit agreements (including the Credit
Agreements), notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any Debt of the Company or any of its
Subsidiaries is outstanding or may be incurred and (D) accurate information
regarding the respective principal amounts currently outstanding thereunder to
the extent materially different than as set forth in the financial statements
included in the Company's quarterly report on Form 10-Q for the six months
ended June 30, 1998.
(m) Status of Shares. The issuance and sale of the Shares and the
----------------
reservation and issuance of the Underlying Shares have been duly authorized by
all necessary corporate action on the part of the Company and such Shares,
when delivered to Purchaser at the Closing against payment therefor as
provided herein, will be validly issued, fully paid and non-assessable and the
issuance and sale of the Shares and the issuance of the Underlying Shares is
not and will not be subject to preemptive rights of any other shareholder of
the Company.
(n) Tax Returns and Tax Payments. The Company, each of its
--------------------------------
Subsidiaries and any affiliated, consolidated, combined, unitary or similar
group of which the Company or any of its Subsidiaries is or was a member has
timely filed all material returns, reports or statements required to be filed
with any Governmental Entity with respect to Taxes ("Tax Returns") required to
-----------
be filed by it, and all such Tax Returns are true, correct and complete in all
material respects, and all Taxes shown thereon to be due have been paid,
except where the failure to so have timely filed, to be true, correct or
complete or to have paid such Taxes has not had and could not reasonably be
expected to have a Material Adverse Effect. The Company has established
reserves, to the extent required by GAAP, with respect to the payment of all
material Taxes not yet due and payable with respect to the result of
operations of the Company and its Subsidiaries through the date hereof. No
claim for unpaid Taxes has been asserted in writing by a tax authority or has
become a Lien (except for Permitted Liens) against the property of the Company
or any of its Subsidiaries, which claim or Lien has had or reasonably could be
expected to have a Material Adverse Effect. No audit of any Tax Return of the
Company or any of its Subsidiaries or any affiliated, consolidated, combined,
unitary or similar group in which the Company or any of its Subsidiaries is or
has been a member is being conducted by a tax authority, which audit
reasonably could be expected to have a Material Adverse Effect, and no
extension of the statute of limitations on the assessment of any material
Taxes has been granted by the Company or any of its Subsidiaries and currently
is in effect. Neither the Company nor any of its Subsidiaries is a party to,
is bound by, or has any obligation under any tax sharing or allocation
agreement or similar agreement or arrangement (other than among the Company
and its Subsidiaries). For purposes of this Agreement "Tax" means any
---
federal, state, local or foreign income, gross receipts, property, sales, use,
license, excise, franchise, employment, payroll, premium, withholding,
alternative or added minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or penalty, imposed by any
Governmental Entity. For purposes of this Agreement "Permitted Lien" means
--------------
(a) liens, pledges, security interests, claims or other encumbrances
("Encumbrances") securing Taxes, assessments, governmental charges or levies,
-----
all of which are not yet due and payable or as to which adequate reserves have
been established in the Company's financial statements and that may thereafter
be paid without penalty, (b) mechanics', carriers', workmen's, repairmen's,
and other similar Encumbrances incurred in the ordinary course of business
consistent with past practice, or (c) such other liens which, individually and
in the aggregate, do not and will not materially detract from the value of any
of the property or assets of the Company or its Subsidiaries or materially
interfere with the use thereof.
Tax Returns and Tax Payments. The Company, each of its Subsidiaries and
-----------------------------
any affiliated, consolidated, combined, unitary or similar group of which the
Company or any of its Subsidiaries is or was a member has timely filed all
material returns, reports or statements required to be filed with any
Governmental Entity with respect to Taxes (TaxReturns) required to be filed by
----------
it, and all such Tax Returns are true, correct and complete in all material
respects, and all Taxes shown thereon to be due have been paid, except where
the failure to so have timely filed, to be true, correct or complete or to
have paid such Taxes has not had and could not reasonably be expected to have
a Material Adverse Effect. The Company has established reserves, to the
extent required by GAAP, with respect to the payment of all material Taxes not
yet due and payable with respect to the result of operations of the Company
and its Subsidiaries through the date hereof. No claim for unpaid Taxes has
been asserted in writing by a tax authority or has become a Lien (except for
Permitted Liens) against the property of the Company or any of its
Subsidiaries, which claim or Lien has had or reasonably could be expected to
have a Material Adverse Effect. No audit of any Tax Return of the Company or
any of its Subsidiaries or any affiliated, consolidated, combined, unitary or
similar group in which the Company or any of its Subsidiaries is or has been a
member is being conducted by a tax authority, which audit reasonably could be
expected to have a Material Adverse Effect, and no extension of the statute of
limitations on the assessment of any material Taxes has been granted by the
Company or any of its Subsidiaries and currently is in effect. Neither the
Company nor any of its Subsidiaries is a party to, is bound by, or has any
obligation under any tax sharing or allocation agreement or similar agreement
or arrangement (other than among the Company and its Subsidiaries). For
purposes of this Agreement Tax means any federal, state, local or foreign
---
income, gross receipts, property, sales, use, license, excise, franchise,
employment, payroll, premium, withholding, alternative or added minimum, ad
valorem, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or penalty, imposed by any Governmental Entity. For purposes of
this Agreement PermittedLien means (a) liens, pledges, security interests,
-------------
claims or other encumbrances (Encumbrances) securing Taxes, assessments,
------------
governmental charges or levies, all of which are not yet due and payable or as
to which adequate reserves have been established in the Company's financial
statements and that may thereafter be paid without penalty, (b) mechanics',
carriers', workmen's, repairmen's, and other similar Encumbrances incurred in
the ordinary course of business consistent with past practice, or (c) such
other liens which, individually and in the aggregate, do not and will not
materially detract from the value of any of the property or assets of the
Company or its Subsidiaries or materially interfere with the use thereof.
(o) Employee Benefit Plans. All employee
----------------------
benefit plans covering employees of the Company and its Subsidiaries
(collectively, the "Benefit Plans") are listed in the Company SEC Documents or
-------------
the Company Disclosure Schedule and complete copies of all material Benefit
Plans, including all amendments, have been made available to Purchaser. To
the extent applicable, the Benefit Plans comply, in all material respects,
with the requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and the Code, and any Benefit Plan intended to be
-----
qualified under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and has not, since such determination, been
amended or, to the knowledge of the Company, operated in a way which would
adversely affect such qualified status. Other than the Triton Exploration
Services, Inc. Retirement Income Plan, neither the Company nor any
corporation, trade, business or entity under common control with the Company
within the meaning of Section 414(b), (c) or (m) of the Code maintains,
sponsors or contributes to or has, within the six years prior to the First
Closing Date, maintained, sponsored or contributed to any employee benefit
plan that is covered by Title IV of ERISA or is subject to the funding
requirements of Section 412 of the Code or Section 302 of ERISA, or a
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA. Neither a
Benefit Plan nor the Company has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA. Each Benefit Plan has
been maintained and administered in all material respects in compliance with
its terms and with ERISA and the Code to the extent applicable thereto. There
are no pending nor, to the knowledge of the executive officers of the Company,
any threatened material claims against or otherwise involving any Benefit Plan
and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Benefit Plan activities) has been brought
against or with respect to any Benefit Plan. All contributions required to be
made as of the date hereof to the Benefit Plans have been made. No employees
of the Company or any of its Subsidiaries are covered by any severance plan or
similar arrangement, other than payments pursuant to foreign law. Except as
disclosed in Schedule 3.1(o) of the Company Disclosure Schedule, the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not (1) require the Company to make a larger
contribution to, or pay greater benefits under, any Benefit Plan than it
otherwise would, (2) create or give rise to additional vested rights or
service credits under any Benefit Plan, or (3) result in all or any part of
any payments made, or that may become payable as a result of the transactions
contemplated by the Agreement, by the Company not to be deductible by the
payor under sections 280G or 162(m) of the Code. Except as disclosed in
Schedule 3.1(o) of the Company Disclosure Schedule, no Benefit Plan provides
retiree medical or retiree life insurance benefits to any person and the
Company is not contractually obligated to provide any person with medical
benefits or life insurance upon retirement or termination of employment,
except as required by sections 601 through 608 of ERISA and section 4980B of
the Code.
(p) Labor Matters. Except as set forth in Schedule
------------- --------
3.1(p) of the Company Disclosure Schedule or in the Company SEC Documents:
- ------
(i) there is no unfair labor practice charge or grievance arising out
of a collective bargaining agreement or other grievance procedure against the
Company or any of its Subsidiaries pending, or, to the knowledge of the
Company or any of its Subsidiaries, threatened, that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect;
(ii) there is no strike, dispute, slowdown, work stoppage or lockout
pending, or, to the knowledge of the Company or any of its Subsidiaries,
threatened, against or involving the Company or any of its Subsidiaries that,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect; or
(iii) To the knowledge of the Company, there is no proceeding, claim,
suit, action or governmental investigation pending or threatened, in respect
to which any current or former director, officer, employee or agent of the
Company or any of its Subsidiaries is or may be entitled to claim
indemnification from the Company or any of its Subsidiaries pursuant to (a)
the Memorandum of Association and Articles of Association of the Company, (b)
any provision of the comparable charter or organizational documents of any of
its Subsidiaries, (c) any indemnification agreement to which the Company or
any Subsidiary of the Company is a party or (d) applicable Law.
(q) Intangible Property Intangible Property. The Company and its
------------------- -------------------
Subsidiaries possess or have adequate rights to use all material trademarks,
trade names, patents, service marks, brand marks, brand names, computer
programs, databases, industrial designs and copyrights necessary for the
operation of the businesses of each of the Company and its Subsidiaries
(collectively, the "Intangible Property"), except where the failure to possess
-------------------
or have adequate rights to use such properties, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect. All of the Intangible Property is owned or licensed by the
Company or its Subsidiaries free and clear of any and all Liens, except those
that, individually or in the aggregate, have not had and could not reasonably
be expected to have a Material Adverse Effect, and neither the Company nor any
such Subsidiary has forfeited or otherwise relinquished any Intangible
Property which forfeiture, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect. To the knowledge of
the Company, the use of the Intangible Property by the Company or its
Subsidiaries does not, in any material respect, conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title,
interest or goodwill, including any intellectual property right, trademark,
trade name, patent, service mark, brand mark, brand name, computer program,
database, industrial design, copyright or any pending application therefor of
any other person and there have been no claims made and neither the Company
nor any of its Subsidiaries has received any notice of any claim or otherwise
knows that any of the Intangible Property is invalid or conflicts with the
asserted rights of any other person or has not been used or enforced or has
failed to have been used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Intangible
Property, except for any such conflict, infringement, violation, interference,
claim, invalidity, abandonment, cancellation or unenforceability that,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.
(r) Environmental Matters.
----------------------
For purposes of this Agreement:
(A) "Environmental Laws" means all federal, state and local laws,
------------------
rules, regulations, ordinances, orders and decrees of any Governmental Entity,
whether now in existence or hereafter enacted and in effect at the time of
either Closing, relating to pollution or the protection of human health,
safety or the environment of any jurisdiction in which the applicable party
hereto owns or operates assets or conducts business or owned or operated
assets or conducted business (whether or not through a predecessor entity)
(including ambient air, surface water, groundwater, land surface, subsurface
strata, natural resources or wildlife), including laws and regulations
relating to Releases or threatened Releases of Hazardous Materials or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of solid waste or
Hazardous Materials, and any similar laws, rules, regulations, ordinances,
orders and decrees of any foreign jurisdiction in which the applicable party
hereto owns or operates assets or conducts business;
(B) "Hazardous Materials" means (x) any petroleum or petroleum
--------------------
products, radioactive materials (including naturally occurring radioactive
materials), asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, polychlorinated biphenyls or transformers or
other equipment that contain dielectric fluid containing polychlorinated
biphenyls, (y) any chemicals, materials or substances which are now defined as
or included in the definition of "solid wastes," "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous substances,"
"restricted hazardous wastes," "toxic substances" or "toxic pollutants," or
words of similar import, under any Environmental Law and (z) any other
chemical, material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in which
the Company or any of its Subsidiaries operates (for purposes of this Section
3.1(t)).
(C) "Release" means any spill, effluent, emission, leaking, pumping,
-------
pouring, emptying, escaping, dumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor environment, or
into or out of any property owned, operated or leased by the Company or its
Subsidiaries; and
(D) "Remedial Action" means all actions, including any capital
----------------
expenditures, required by a Governmental Entity or required under any
Environmental Law, or voluntarily undertaken to (w) clean up, remove, treat,
or in any other way ameliorate or address any Hazardous Materials or other
substance in the indoor or outdoor environment; (x) prevent the Release or
threat of Release, or minimize the further Release of any Hazardous Material
so it does not endanger or threaten to endanger the public or employee health
or welfare of the indoor or outdoor environment; (y) perform pre-remedial
studies and investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (z) bring the Company or its Subsidiaries into
compliance with any Environmental Law.
Except as disclosed in the Company SEC Documents or on Schedule 3.1(r) of
---------------
the Company Disclosure Schedule:
(i) The operations of the Company and its Subsidiaries have been
conducted are, and as of each Closing Date will be, in compliance with all
Environmental Laws, except where the failure to so comply, individually or in
the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect;
(ii) Neither the Company nor any of its Subsidiaries has caused the
generation, treatment, manufacture, processing, distribution, use, storage,
discharge, Release, transport or handling of any Hazardous Materials at any of
its properties or facilities, except as has not had and could not reasonably
be expected to have a Material Adverse Effect;
(iii) Neither the Company nor any of its Subsidiaries has received
any written notice from any Governmental Entity or other third party alleging
any violation by the Company or any of its Subsidiaries of, or responsibility
or liability of the Company or any of its Subsidiaries under, any
Environmental Law or for personal injuries, Remedial Action or property
damages, which has had or could reasonably be expected to have a Material
Adverse Effect;
(iv) The Company and its Subsidiaries are not subject to any
outstanding written orders issued by, or contracts with, any Governmental
Entity or other person respecting (A) Environmental Laws, (B) Remedial Action,
(C) any Release or threatened Release of a Hazardous Material or (D) an
assumption of responsibility for environmental liabilities of another person,
except such orders or contracts the compliance with which, individually or in
the aggregate, has not had and could not reasonably be expected to have a
Material Adverse Effect;
(v) Neither the Company nor any of its Subsidiaries has any
contingent liability in connection with the Release of any Hazardous Material
into the indoor or outdoor environment (whether on-site or off-site) or
employee or third party exposure to Hazardous Materials that, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect.
(s) Insurance. Schedule 3.1(s) of the Company
--------- ---------------
Disclosure Schedule sets forth an insurance schedule of the Company's and each
of its Subsidiaries' directors' and officers' liability insurance. The
Company maintains insurance in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its Subsidiaries (taking into
account the cost and availability of such insurance).
(t) Vote. There are no approvals required of the holders of any
----
class or series of shares or stock of the Company necessary to approve this
Agreement or any other Transaction Documents and the transactions contemplated
hereby or thereby.
<PAGE>
(u) Amendment to Rights Agreement. The Board has taken all necessary
-----------------------------
action to amend the Rights Agreement, dated as of March 25, 1996, as amended
(the "Rights Agreement"), between the Company and Chemical Bank, as Rights
-----------------
Agent, so that none of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will cause (i) the rights
issued pursuant to the Rights Agreement to become exercisable under the Rights
Agreement or (ii) the distribution of Rights Certificates (as defined in the
Rights Agreement).
(v) Prepayments. Neither the Company nor any Subsidiary is
-----------
obligated, by virtue of a prepayment arrangement, make-up right under a
production sales Contract containing a "take or pay" or similar provision,
production payment or any other arrangement, to deliver hydrocarbons, or
proceeds from the sale thereof, attributable to any of its properties at some
future time without then or thereafter being entitled to received payment of
the contract price therefor, except where any such arrangement could not
reasonably be expected to have a Material Adverse Effect.
(w) Gas Imbalances. Except as disclosed in the Company SEC
---------------
Documents, neither the Company nor any Subsidiary has (i) any obligation to
deliver gas from the Oil and Gas Properties (or cash in lieu thereof) to other
owners of interests in those properties as a result of past production by the
Company, any Subsidiary or any of their predecessors in excess of the share to
which they were entitled nor (ii) any right to receive deliveries of gas from
the Oil and Gas Properties (or cash in lieu thereof) from other owners of
interests in those properties as a result of past production by the company,
any Subsidiary or any of their predecessors of less than the share to which
they were entitled in either case where any such gas imbalance could
reasonably be expected to have a Material Adverse Effect.
(x) Reserve Report. A true, correct and complete copy of the Reserve
--------------
Report has been provided to Purchaser. The Company's and each Subsidiary's
ownership of the Oil and Gas Properties described in the Reserve Report
entitle the respective owner to receive a percentage of the oil, gas and other
hydrocarbons produced from each well or unit equal to not less than the
percentage set forth in the Reserve Report as the "Net Revenue Interest" for
such well or unit and cause the respective owner to be obligated to bear a
percentage of the cost of operation of such well or unit not greater than the
percentage set forth in the Reserve Report as the "Working Interest" for such
well or unit, and to the extent such percentages of production which the
respective owner is entitled to receive, and shares of expenses which the
respective owner is obligate to bear, may change after the date of such
report, such changes were properly reflected (based on reasonable assumptions)
in preparing such report. The underlying historical information used for
preparation of the Reserve Report was, at the time of delivery, true and
correct in all material respects.
(y) Nonconsent Operations. Except as set forth in Schedule 3.1(y) of
--------------------- ---------------
the Company Disclosure Schedule, there are no operations on the Oil and Gas
Properties in which the Company's or any Subsidiary's commitment would have
exceeded $5,000,000, being conducted as of January 1, 1998, or any time
thereafter, in which the Company or any Subsidiary was entitled to participate
and did not participate.
<PAGE>
(z) Information Provided. Neither this Agreement, the Schedules and
--------------------
Exhibits hereto, the other Transaction Documents, nor any other document
provided by the Company to Purchaser contain any untrue statement of a
material fact or omit any material fact necessary to make the statements
herein or therein, as the case may be, not misleading.
(aa) No Brokers or Finders. No agent, broker, finder or investment
---------------------
or commercial banker, or other Person or firm engaged by or acting on behalf
of the Company or its Subsidiaries in connection with the negotiation,
execution or performance of this Agreement is or will be entitled to any
brokerage or finder's or similar fee or other commission as a result of this
Agreement, the other Transaction Documents or the transactions contemplated
hereby or thereby, other than any such fees or commissions that have been
disclosed to Purchaser and as to which the Company shall have full
responsibility.
Section III.2 Representations and Warranties of Purchaser
--------------------------------------------
(a) Organization, Standing and Power. Purchaser is a Cayman Islands
--------------------------------
exempted limited partnership duly organized, validly existing, and in good
standing under the laws of the Cayman Islands and has all requisite
partnership power and authority to own, lease, and operate its properties and
to carry on its business as now being conducted and to execute and deliver
this Agreement and the other Transaction Documents to which Purchaser is a
party and consummate the transactions contemplated hereby and thereby.
(b) Authority; Approvals.
---------------------
(i) Purchaser represents and warrants to the Company that (a) the
execution and delivery of this Agreement and the other Transaction Documents
to which it is a party and the purchase of the Shares to be purchased by it
have been duly and properly authorized, (b) this Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered by it or on its behalf and, assuming the accuracy of the
representations and warranties of the Company in Section 3.1(d) hereof,
constitute the valid and legally binding obligations of Purchaser, enforceable
against it in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights generally
and to general principles of equity; (c) the purchase of the Shares to be
purchased by it does not conflict with or violate (1) its partnership
agreement or (2) any law applicable to it in a manner that could materially
hinder or impair the completion of any of the transactions contemplated
hereby; and (d) the purchase of Shares to be purchased by it does not impose
any penalty or other onerous condition on Purchaser that could materially
hinder or impact the completion of any of the transactions contemplated
hereby.
(ii) No Approval from any Governmental Entity is required by or with
respect to Purchaser in connection with the execution and delivery by
Purchaser of this Agreement or any other Transaction Document to which it is a
party or the consummation by Purchaser of the transactions contemplated hereby
or thereby, except for: (A) if applicable, the filing of a notification
report by Purchaser under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the expiration or termination of the
-------
applicable waiting period with respect thereto; (B) such Approvals as may be
required by any foreign securities, corporate or other Laws; and (C) any such
Approval the failure of which to be made or obtained (1) has not impaired and
could not reasonably be expected to impair the ability of Purchaser to perform
its obligations under any of the Transaction Documents in any material respect
or (2) could not reasonably be expected to delay in any material respect or
prevent the consummation of any of the transactions contemplated by any of the
Transaction Documents.
(c) Litigation. As of the time of execution of this Agreement, there
----------
is no claim, action, suit, inquiry, judicial or administrative proceeding
pending or, to the knowledge of Purchaser, threatened against it relating to
any of the transactions contemplated by this Agreement or any other
Transaction Document.
(d) Investment Intent. Purchaser represents and warrants to the
-----------------
Company that the Shares to be acquired by it hereunder and any Underlying
Shares to be acquired upon the conversion or exchange of such Shares are being
acquired for its own account for investment and with no intention of
distributing or reselling such Shares or Underlying Shares or any part thereof
or interest therein in any transaction which would be in violation of the
securities Laws of the United States of America or any state or any foreign
country or jurisdiction.
(e) Transfer Restrictions. If Purchaser should decide to dispose of
---------------------
any of the Shares to be purchased by it or any Underlying Shares to be issued
to it upon the conversion or exchange of such Shares, Purchaser understands
and agrees that it may do so only subject to the transfer restrictions set
forth in the Shareholders Agreement and pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from
registration under the Securities Act. In connection with any offer, resale,
pledge or other transfer (individually and collectively, a "Transfer") of any
--------
Shares or Underlying Shares other than pursuant to an effective registration
statement, the Company may require that the transferor of such Shares or
Underlying Shares provide to the Company an opinion of counsel which opinion
shall be reasonably satisfactory in form and substance to the Company, to the
effect that such Transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and any State or foreign securities Laws. Purchaser agrees to the
imprinting, so long as appropriate, of substantially the following legend on
certificates representing the Shares and any Underlying Shares:
THE [8% CONVERTIBLE PREFERENCE SHARES/ORDINARY SHARES] (THE "SHARES")
------
EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
--------------
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER
(INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SHARES EVIDENCED HEREBY,
--------
EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT SUCH AS THE EXEMPTION SET FORTH IN RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE). IF THE PROPOSED TRANSFER IS TO BE MADE OTHER
THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY
STATE OR FOREIGN SECURITIES LAW.
THE SHARES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
SHAREHOLDERS AGREEMENT DATED _______________, 1998, WHICH CONTAINS CERTAIN
RESTRICTIONS ON THE TRANSFER OF THE SHARES. A COPY OF THE SHAREHOLDERS
AGREEMENT IS AVAILABLE AT THE REGISTERED OFFICE OF THE COMPANY.
The legends set forth above may be removed if and when the Shares or
Underlying Shares, as the case may be, represented by such certificate are no
longer subject to the transfer restrictions set forth in the Shareholders
Agreement and are disposed of pursuant to an effective registration statement
under the Securities Act or the opinion of counsel referred to above has been
provided to the Company. The share certificates shall also bear any
additional legends required by applicable federal, state or foreign securities
Laws, which legends may be removed when, in the opinion of counsel to the
Company, the same are no longer required under the Memorandum of Association,
the Articles of Association or the applicable requirements of such securities
Laws. Purchaser agrees that, in connection with any Transfer of Shares by it
pursuant to an effective registration statement under the Securities Act,
Purchaser will comply with all prospectus delivery requirements of the
Securities Act. The Company makes no representation, warranty or agreement as
to the availability of any exemption from registration under the Securities
Act with respect to any resale of Shares or Underlying Shares.
(f) Purchaser Status. Purchaser represents and warrants to, and
----------------
covenants and agrees with the Company that (i) at the time it was offered the
Shares, it was, (ii) at the date hereof, it is, and (iii) at each Closing
Date, it will be, an accredited investor as defined in Rule 501(a) under the
Securities Act, and has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the Company
and an investment in the Shares, and is able to bear the economic risk of such
investment.
(g) Information Supplied. None of the information, if any, supplied
--------------------
by or on behalf of Purchaser specifically for inclusion in the Registration
Statement and which is included or incorporated by reference in the
Registration Statement will, at the date such Registration Statement is
declared effective by the SEC or any time from and after such date through and
including the date of the Second Closing, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. No representation is
made by Purchaser in connection with any of the foregoing except with respect
to statements made or incorporated by reference in the Registration Statement
in conformity with information supplied by or on behalf of Purchaser
specifically for use in the Registration Statement.
(h) No Brokers or Finders. No agent, broker, finder or investment or
---------------------
commercial banker, or other Person or firm engaged by or acting on behalf of
Purchaser in connection with the negotiation, execution or performance of this
Agreement is or will be entitled to any brokerage or finder's or similar fee
or other commission as a result of this Agreement, other than any such fees or
commissions that have been disclosed to the Company and as to which Purchaser
shall have full responsibility.
(i) Ownership of Shares. Neither the Purchaser nor any of its
---------------------
Affiliates is the beneficial owner of any shares of or stock of the Company.
(j) Financing. Upon the terms and subject to the conditions of this
---------
Agreement, the Purchaser has available to it and at the Closings will have all
funds necessary to satisfy its obligations to purchase Shares hereunder.
ARTICLE IV
COVENANTS
---------
Section IV.1 Furnishing of InformationIV.1
---------------------------
As long as Purchaser owns Shares or Underlying Shares
representing at least 5% of the aggregate number of shares of Common Stock
then outstanding (determined after giving effect to the full conversion of all
outstanding Shares owned by Purchaser at the conversion price then in effect),
from and after the First Closing Date the Company will promptly furnish to
Purchaser all reports filed by it pursuant to Section 13(a) or 15(d) of the
Exchange Act (or if the Company is not at the time required to file reports
pursuant to said Section 13(a) or 15(d), annual and quarterly reports
comparable to those required by Sections 13(a) or 15(d) of the Exchange Act).
Section IV.2 Rights Offering.
----------------
(a) Promptly following the First Closing, the Company shall conduct a
distribution to each record holder of Common Stock, 5% Preference Shares and
8% Preference Shares, as of a record date after the First Closing to be set by
the Company, of the transferable right (the "Rights") to purchase, at $70.00
------
per share, a pro-rata portion (with the pro rata portion relating to
outstanding 5% Preference Shares and 8% Preference Shares determined based on
the number of shares of Common Stock into which such shares are convertible as
of such record date) of 3,177,500 shares (subject to rounding as set forth
below) of 8% Preference Shares (the "Rights Offering"). Based on the current
---------------
outstanding shares of the Company, in the Rights Offering (i) the Company will
distribute .072 transferrable Rights with respect to each share of Common
Stock and 5% Preference Shares and .288 transferable Rights with respect to
each 8% Preference Share outstanding as of the record date for the Rights
Offering, at no cost to the record holders; (ii) one Right plus $70.00 in cash
will entitle the holder to purchase one share of 8% Preference Shares; (iii)
the Rights will be evidenced by transferable subscription certificates; (iv)
no fractional Rights or cash in lieu thereof will be issued or paid, and the
number of Rights distributed to each holder of Common Stock, 5% Preference
Shares and 8% Preference Shares will be rounded up to the nearest whole number
of Rights; (v) brokers, dealers and other nominees holding shares of Common
Stock, 5% Preference Shares or 8% Preference Shares on the record date for
more than one beneficial owner will be entitled to obtain separate
subscription certificates for their beneficial owners so that they may each
receive the benefit of rounding; and (vi) each Right will also carry the right
to subscribe at the $70.00 subscription price for additional shares of 8%
Preference Shares for which the other holders of Rights did not subscribe
through the exercise of the basic subscription privileges (the "Excess
------
Shares"), provided that (A) only Rights holders who exercise their basic
subscription privilege in full will be entitled to exercise the
oversubscription privilege, (B) if the Excess Shares are not sufficient to
satisfy all oversubscriptions, the Excess Shares will be allocated pro rata
(subject to the elimination of fractional shares) among those Rights holders
exercising the oversubscription privilege and (C) Purchaser shall not purchase
any 8% Preference Shares pursuant to its oversubscription privilege under
Rights held by Purchaser.
(b) The Company shall promptly prepare and submit to Purchaser for
review, a form of subscription agreement, subscription certificate and all
other documents and instruments required in connection with the Rights
Offering, all of which shall be in form and substance reasonably satisfactory
to Purchaser (the "Rights Offering Documents"). The Rights Offering Documents
-------------------------
shall provide, among other things, that the Rights Offering shall be generally
conducted in the manner described in Section 4.2(a).
Section IV.3 Stock Exchange Listing.
----------------------
The Company shall submit a listing application to the NYSE with respect to the
8% Preference Shares, the Underlying Shares and the Rights within ten business
days after the date hereof and Purchaser shall be entitled to review and
reasonably comment on such listing application and the submission of any other
materials to the NYSE in connection with the listing of the 8% Preference
Shares, the Underlying Shares and the Rights. The Company shall use all
commercially reasonable efforts to cause, prior to the First Closing Date, the
8% Preference Shares, the Underlying Shares and the Rights to be approved for
listing on the NYSE, subject to official notice of issuance, upon issuance in
accordance with the terms of this Agreement (including as provided in Section
2.1(a)) and the Rights Offering Documents (and, in the case of the 8%
Preference Shares, generally, satisfactory distribution and, in the case of
the Rights, the 8% Preference Shares to be issued in the Rights Offering and
the Underlying Shares to be issued pursuant to such 8% Preference Shares, the
effectiveness of the Registration Statement) (collectively, the "NYSE
----
Approval").
<PAGE>
Section IV.4 Registration Statement.
----------------------
As promptly as practicable after the date hereof, the Company shall prepare
and file with the SEC a registration statement on Form S-3, or shall file a
post-effective amendment to an existing shelf registration statement of the
Company currently effective under the Securities Act and in proper form to
effect the Rights Offering (including the issuance of the 8% Preference Shares
to be issued pursuant thereto and the Underlying Shares to be issued upon
conversion of such 8% Preference Shares), for the purpose of registering
under the Securities Act the offering, sale and delivery of the securities
issuable in the Rights Offering, including the Underlying Shares with respect
to the shares of 8% Preference Shares offered thereby. The term "Registration
------------
Statement," as used herein, means such registration statement and all
- ---------
amendments and supplements thereto, if any. The Company shall use all
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after the First
Closing. The Company shall notify Purchaser promptly of the receipt of any
comments on, or any requests for amendments or supplements to, the
Registration Statement by the SEC, and the Company shall supply Purchaser with
copies of all correspondence between it and its representatives, on the one
hand, and the SEC or members of its staff, on the other, with respect to the
Registration Statement. The Company, after consultation with Purchaser, shall
use commercially reasonable efforts to respond promptly to any comments made
by the SEC with respect to the Registration Statement. The Company and
Purchaser each agrees promptly to correct any information provided by it for
use in the Registration Statement if and to the extent that such information
shall have become false or misleading in any material respect, and the Company
further agrees to take all steps necessary to cause the Registration Statement
(or the prospectus contained therein) as so corrected to be filed with the SEC
and to be disseminated to the extent required by applicable Law. The Company
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) reasonably required to be
taken under any applicable state securities Laws in connection with the
issuance of securities pursuant to the Registration Statement.
Section IV.5 Affirmative Covenants of the Company
------------------------------------
The Company hereby covenants and agrees that, until
the earlier of the Second Closing or the termination of this Agreement, unless
otherwise expressly contemplated by this Agreement or consented to in writing
by Purchaser (such consent not to be unreasonably withheld), the Company will
and will cause each of its Subsidiaries to:
(a) operate its business in the usual and ordinary course consistent
with past practices except as contemplated by this Agreement or as provided in
or contemplated by the Company Disclosure Schedule, consistent with the
Company's restructuring as announced or disclosed in the Company SEC Documents
filed prior to the date of this Agreement or disclosed in press releases
released prior to the date of this Agreement (the "Announced Restructuring");
-----------------------
(b) use commercially reasonable efforts to maintain and keep its
properties and assets in as good a repair and condition as at present,
ordinary wear and tear excepted; and
(c) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that
currently maintained, consistent with the Announced Restructuring.
Section IV.6 Negative Covenants of the Company
---------------------------------
(a) Except as expressly contemplated by this Agreement or otherwise
consented to in writing by Purchaser, from the date of this Agreement until
earlier of the First Closing or the termination of this Agreement, the Company
shall not do, and shall not permit any of its Subsidiaries to do, any of the
following:
(i) except as set forth in Schedule 4.6(a)(i) of the Company
------------------
Disclosure Schedule, acquire or agree to acquire (whether pursuant to a
definitive agreement, a non-binding letter of intent or otherwise), by merging
or consolidating with, by purchasing an equity interest in or a portion of the
assets of (including by a "farm-in" of any properties or interests), or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets of any other Person (other than from a Subsidiary of the
Company or the purchase of assets from suppliers or vendors in the ordinary
course of business and other than assets which, individually or in the
aggregate, are not material to the business or operations of the Company or
any of its Subsidiaries);
(ii) except as set forth in Schedule 4.6(a)(ii) of the Company
-------------------
Disclosure Schedule or as permitted under Section 4.12, sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, or agree to sell, lease,
exchange, mortgage, pledge, transfer or otherwise dispose of (including by a
"farm-out" of any properties or interests), any of its assets or any assets of
any of its Subsidiaries, except for pledges or dispositions of assets in the
ordinary course of business or consistent with the Announced Restructuring and
except for assets which, individually or in the aggregate, are not material to
the business or operations of the Company or any of its Subsidiaries;
(iii) except as set forth in Schedule 4.6(a)(iii) of the Company
--------------------
Disclosure Schedule, adopt or propose to adopt any amendments to the Company's
Memorandum of Association or Articles of Association or similar charter
documents; other than transactions between the Company and one or more of its
Subsidiaries or among one or more of its Subsidiaries, adopt resolutions
authorizing a liquidation, dissolution, merger, consolidation, restructuring,
recapitalization, or other reorganization of the Company or any Subsidiary; or
make any other material changes in the Company's capital structure;
(iv) (i) except as set forth in Schedule 4.7(a)(iv) of the Company
-------------------
Disclosure Schedule change any of its significant accounting methods,
principles, practices or policies or (ii) make or rescind any express or
deemed election relating to Taxes, settle or compromise any claim, action,
suit, Litigation, audit or controversy relating to Taxes, or change any of its
methods of reporting income or deductions for federal or other income Tax
purposes from those employed in the preparation of the federal or other income
Tax Returns or other Tax Returns for the taxable year ending December 31,
1997, except, in the case of either clause (i) or clause (ii), as may be
required by Law or GAAP;
(v) other than borrowings in the ordinary course under the Credit
Facilities, incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument or under any financing lease, whether pursuant to a
sale-and-leaseback transaction or otherwise;
(vi) except as set forth in Schedule 4.6(a)(vi) of the Company
-------------------
Disclosure Schedule, make any loans or advances to any Person, other than (i)
advances to employees in the ordinary and usual course of business and (ii)
transactions among or between the Company and its Subsidiaries in the ordinary
and usual course of the Company's business;
(vii) declare or pay any dividend or make any other distribution with
respect to its shares or capital stock, other than dividends paid by any
Subsidiary to the Company or another Subsidiary in the ordinary and usual
course of the Company's business and regular dividends on the 5% Preference
Shares in accordance with the terms as in effect on the date hereof;
(viii) except as set forth in Schedule 4.6(a)(viii) of the Company
---------------------
Disclosure Schedule, enter into, adopt, or (except as may be required by law)
amend or terminate any Benefit Plan; approve or implement any employment
severance arrangements (other than payments made under the Company's severance
policy in accordance with past practice) or discharge or, except to replace
any officer or executive management personnel who have departed on
substantially the same or lesser terms as the departed Person, hire any
officers or executive management personnel; authorize or enter into any
employment, severance, consulting services or other agreement with any
officers or executive management personnel; or except as set forth in Section
4.6(a)(viii) of the Company Disclosure Schedule, change the compensation or
benefits provided to any director, officer, or employee as of June 30, 1998;
or
(ix) agree in writing or otherwise to do any of the foregoing.
(b) Except as expressly contemplated by this Agreement or otherwise
consented to in writing by Purchaser, from the date of this Agreement until
earlier of the Second Closing or the termination of this Agreement, the
Company shall not do, and shall not permit any of its Subsidiaries to do, any
of the following:
(i) materially amend, terminate or fail to use all commercially
reasonable efforts to maintain in full force and effect and, if applicable,
renew any Material Oil and Gas Contract or any Material Contract (provided
that the Company and its Subsidiaries shall not be required to renew any
Material Contract on terms that are less favorable to the Company or its
Subsidiaries), or fail to use all commercially reasonable efforts to prevent a
default in any material respect (or take or omit to take any action that, with
or without the giving of notice or passage of time, would constitute a
material default) under any Material Oil and Gas Contract or any Material
Contract;
(ii) split, combine, reclassify or amend any term of any of its
shares or capital stock; or
(iii) Except as set forth in Schedule 4.6(b)(iii) of the Company
--------------------
Disclosure Schedule, (A) issue, sell or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase, or otherwise) any of its shares or capital stock or other securities
other than (1) as contemplated herein or (2) pursuant to awards issued and
outstanding as of the date hereof under the Stock Plans or as required under
the terms of any other security of the Company outstanding as in effect as of
the date of this Agreement, or (B) purchase or otherwise acquire any of its
shares or capital stock, employee or director stock options, warrants or other
equity securities or debt securities other than pursuant to the terms thereof
as in effect as of the date of this Agreement.
Section IV.7 Approvals. The Company and Purchaser
---------
each agree to cooperate and use all commercially reasonable efforts to obtain
(and will promptly prepare all registrations, filings and applications,
requests and notices preliminary to all) Approvals that may be necessary or
which may be reasonably requested by the Company or Purchaser to consummate
the transactions contemplated by this Agreement and the other Transaction
Documents.
Section IV.8 Shareholders Agreement.
----------------------
On or before the First Closing Date, the Company and Purchaser shall enter
into the Shareholders Agreement.
Section IV.9 Preferred Stock Authorization.IV.9
-----------------------------
On or before the First Closing Date, the Company shall take,
or cause to be taken, all action necessary to authorize and approve the
Preferred Stock Authorization in accordance with the relevant provisions of
the Companies Law of the Cayman Islands.
Section IV.10 HSR Act Notification. To
--------------------
the extent the HSR Act will be applicable to the acquisition of the Shares by
Purchaser, each of the parties hereto shall (a) file or cause to be filed, as
promptly as practicable after the execution and delivery of this Agreement and
in no event later than ten Business Days after the date 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 (b) promptly
comply with or cause to be complied with any requests by the Federal Trade
Commission or the United States Department of Justice for additional
information concerning the Transaction, in each case so that the waiting
period applicable to this Agreement and the Transaction 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.
Section IV.11 Indemnification of Directors and Officers;
----------------------------------------------
(a) At the later of (i) the First Closing or (ii) such date on which
such individuals are elected to the Board of Directors, the Company shall
enter into indemnification agreements with each of the directors designated by
the Purchaser pursuant to the Shareholders Agreement ("Purchaser Designees")
-------------------
substantially in the form of Exhibit E hereto with such changes thereto as may
---------
be agreed upon by Purchaser and the Company (each an "Indemnification
---------------
Agreement").
- ---------
(b) At or prior to the First Closing Date, the Company shall obtain
directors' and officers' liability insurance policies providing an aggregate
of $25,000,000 in additional coverage to the coverage provided by the
Company's current directors' and officers' insurance policy (the "Additional
----------
D&O Policies"). The Company shall use all commercially reasonable efforts to
------------
ensure that the Additional D&O Policies shall, in addition to customary
coverage, provide coverage for Purchaser and any of its Affiliates with
respect to any claims brought against Purchaser or any of its Affiliates
arising out of or relating to any act or omission of any director of the
Company in his or her capacity as a director of the Company; provided,
--------
however, that in the event the Additional D&O Policies are not available to
provide coverage as described in this sentence, the Company shall use
commercially reasonable efforts to obtain a separate insurance policy (the
"Alternative Policy") providing such coverage in such amounts as can be
-----------------
obtained by the Company upon the payment of annual premiums that, when
aggregated with the annual premiums paid for the Additional D&O Policies, do
not exceed 200% of the annual premiums related to the Company's existing
director and officer liability policies aggregating $30,000,000 in coverage.
The Company shall maintain in effect the Additional D&O Policies and the
Alternative Policy for so long as Purchaser is entitled to nominate members to
the Board of Directors pursuant to the Shareholders Agreement.
(c) The Company shall, from and after the date of this Agreement and
until the later of (i) four years from the First Closing Date or (ii) the
final resolution of all Shareholder Litigation, maintain in effect the current
directors' and officers' liability insurance policies maintained by the
Company (provided that the Company may substitute therefor policies no less
favorable in terms and amounts of coverage so long as substitution does not
result in gaps of lapses in coverage) with respect to matters occurring prior
to the Second Closing Date; provided, however, that in no event shall the
Company be required to expend pursuant to this Section more than an amount per
year equal to 150% of current annual premiums paid by the Company for such
insurance.
(d) The Company shall amend its existing insurance coverage under the
Company's current policies of directors' and officers' liability insurance, or
obtain comparable replacement policies on terms no less favorable in terms of
coverage and amounts than those in effect on the date hereof, so that
Purchaser's purchase of the Shares pursuant to this Agreement shall not
constitute a "change of control" of the Company or otherwise cause any of the
Purchaser Designees or any of persons who become officers, directors or
employees of the Company on or after the First Closing Date to be excluded
from the coverage provided by such insurance policies.
(e) In the event the Company or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each such case, proper provision shall be made so that
the successors and assigns of the Company shall assume the obligations set
forth in this Section 4.11. The provisions of this Section are intended to be
for the benefit of, and shall be enforceable by, the parties hereto and each
person entitled to indemnification or insurance coverage pursuant to this
Section, his heirs, and his representatives. The rights provided such persons
under this Section shall be in addition to, and not in lieu of, any rights to
indemnity that such persons may have under the Articles of Association of the
Company or any other provisions herein or in other agreements.
Section IV.12 No Solicitation.
----------------
(a) From and after the date hereof until the earlier of the Second
Closing Date or the termination of this Agreement, neither the Company nor
any of its Subsidiaries, nor any of their respective officers, directors,
representatives, agents or Affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or any of
its Subsidiaries) (collectively, "Representatives") will, and the Company will
---------------
cause the employees and Representatives of the Company and its Subsidiaries
not to, directly or indirectly, (i) solicit, initiate or encourage the
submission of any proposal for a Sale Transaction, (ii) enter into any
agreement with respect to any Sale Transaction or give any approval with
respect to any Sale Transaction, (iii) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any Sale
Transaction or any proposal for a Sale Transaction or (iv) release any third
party from its obligations under any existing standstill agreement or
arrangement relating to a proposed Sale Transaction or otherwise under any
confidentiality or other similar agreement relating to information material to
the Company or any of its Subsidiaries; provided, however, that if at any time
-------- -------
prior to the First Closing, the Board of Directors of the Company determines
in good faith, based on the advice of outside counsel, that it is necessary to
do so in order to comply with its fiduciary duties to the Company's
shareholders under applicable law, the Company (and its Representatives) may,
in response to a proposal for a Sale Transaction not solicited on or after the
date hereof, subject to compliance with Section 4.12(c), (x) furnish
information with respect to the Company pursuant to a customary
confidentiality agreement to any Person making such proposal and (y)
participate in negotiations regarding such proposal. The Company shall
immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any
parties conducted heretofore by the Company or any Representatives with
respect to any Sale Transaction existing on the date hereof. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentence by any Representative of the Company or any of
its Subsidiaries, whether or not such Person is purporting to act on behalf of
the Company or any of its Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 4.12(a) by the Company.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (x) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Purchaser, the approval (including, without limitation, the
Board of Directors' resolution providing for such approval) of this Agreement,
the Preference Share Authorization or the transactions contemplated hereby or
thereby or (y) approve or recommend, or propose to approve or recommend, any
Sale Transaction, except in the case of clause (x) or (y), if the Board of
Directors of the Company determines in good faith, based on the advice of
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company under applicable law and then only at or after
the termination of this Agreement pursuant to Section 7.1(c).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.12, the Company promptly shall advise
Purchaser orally and in writing of any request for information or of any
proposed Sale Transaction or any inquiry with respect to or which could
reasonably be expected to lead to any proposed Sale Transaction, the identity
of the Person making any such request, proposed Sale Transaction or inquiry
and all the terms and conditions thereof. The Company will keep Purchaser
fully informed of the status and details (including amendments or proposed
amendments) of any such request, proposed Sale Transaction or inquiry, and
Purchaser shall keep confidential such information provided to it by the
Company pursuant to this Section 4.12(c), subject to any judicial or other
legal order, directions or obligation to disclose such information.
(d) Nothing contained in this Section 4.12 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14d-9 or Rule 14e-2 promulgated under the Exchange Act; provided, however,
neither the Company nor its Board of Directors nor any committee thereof
shall, except as permitted by Section 4.12(b), withdraw or modify, or propose
to withdraw or modify, its approval or recommendation with respect to this
Agreement, the Preference Share Authorization or the transactions contemplated
hereby or thereby (including, without limitation, the Board of Directors'
resolution providing for such approval) or approve or recommend, or propose to
approve or recommend, a Sale Transaction.
Section IV.13 Notification of Certain MattersSection IV.13
------------------------------------------------
The Company shall give prompt notice to
Purchaser, and Purchaser shall give prompt notice to the Company, of (a) the
occurrence, or failure to occur, of any event that causes any representation
or warranty contained in any Transaction Document to be untrue or inaccurate
in any material respect at any time from the date of this Agreement to either
Closing Date and (b) any failure of the Company or Purchaser to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under any Transaction Document.
Section IV.14 Board of Directors. The
------------------
Company shall take, or cause to be taken, such action as may be necessary or
advisable to ensure that simultaneously with the First Closing the Board shall
consist of ten directorships, six of which shall be held by the individuals
listed in Schedule 4.14 of the Company's Disclosure Schedule and four of which
-------------
shall be vacant pending designation by Purchaser of four individuals to serve
as members of the Board of Directors pursuant to the Shareholders Agreement
and, as of the First Closing Date, the Company will comply with its
obligations under Section 4.1 of the Shareholders Agreement. The Company
shall take, or cause to be taken, such action as may be necessary or advisable
to ensure that simultaneously with the First Closing each of the audit and
compensation committees and the executive committee, if any, of the Board of
Directors shall include one of the directors designated by Purchaser. The
right of Purchaser to continue to designate nominees for election to the Board
of Directors shall be subject to the conditions set forth in the Shareholders
Agreement.
Section IV.15 Financial Advisory Agreement; Commitment Fee
--------------------------------------------
execution and delivery of this Agreement by the parties hereto, the Company
shall execute and deliver to Hicks, Muse & Co. Partners, L.P. ("HMCo")
----
counterparts of the Financial Advisory Agreement and Purchaser shall cause
HMCo to execute and deliver to the Company counterparts of the Financial
Advisory Agreement.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
Section V.1 Conditions Precedent to Each Party's ObligationV.1
------------------------------------------------
The respective obligations of Purchaser and the Company to effect the
transactions contemplated hereby are subject to the satisfaction on or
prior to each Closing Date of the following conditions:
(a) Approvals. All Approvals of, or expirations of waiting periods
---------
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed, occurred,
or been obtained, including the expiration or termination of any applicable
waiting period under the HSR Act.
(b) No Injunctions or Restraints. No temporary restraining order,
----------------------------
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
(c) No Action. No action shall have been taken nor any statute,
---------
rule, or regulation shall have been enacted by any Governmental Entity that
makes the consummation of the transactions contemplated hereby illegal.
(d) NYSE Listing. The Company shall have obtained the NYSE Approval.
------------
Section V.2 Conditions Precedent to Obligation of Purchaser at the
------------------------------------------------------
First Closing
------------
The obligation of Purchaser to effect the transactions
contemplated by this Agreement to be consummated at the First Closing is
subject to the satisfaction of the following conditions unless waived, in
whole or in part, by Purchaser:
(a) Representations and Warranties. The representations and
--------------------------------
warranties of the Company set forth in this Agreement shall be true and
correct in all respects (provided that, for purposes of this Section 5.2(a),
any representation or warranty of the Company contained herein that is
qualified by a materiality standard or a Material Adverse Effect qualification
shall be read without regard to any such qualifications as if such
qualifications were not contained therein) as of the date of this Agreement
and as of the First Closing Date as though made on and as of the First Closing
Date except for such failures which, individually or in the aggregate, have
not had and could not reasonably be expected to have a Material Adverse
Effect, and Purchaser shall have received a certificate to the foregoing
effect signed on behalf of the Company and its Subsidiaries by the chief
executive officer or by the chief financial officer of the Company.
(b) Performance of Obligations. The
--------------------------
Company shall have performed in all respects (provided that, for purposes of
this Section 5.2(b), any covenant or agreement that is qualified by a
materiality standard or Material Adverse Effect qualification shall be read
without regard to any such qualification as if such qualification was not
contained therein) all obligations required to be performed by it or them
under this Agreement prior to the First Closing Date (it being understood that
the Registration Statement need not have become effective as of such date)
except for such failures which, individually or in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect, and
Purchaser shall have received a certificate to such effect signed on behalf of
the Company and its Subsidiaries by the chief executive officer or by the
chief financial officer of the Company.
(c) Consents Under Agreements. Purchaser shall have been furnished
-------------------------
with evidence of (i) the consent or approval of each person that is a party to
a Material Oil and Gas Contract (including evidence of the payment or any
required payment) and whose consent or approval shall be required in order to
permit the consummation of each of the transactions contemplated by this
Agreement or to prevent a breach of such Contract or the creation of a right
to terminate such Contract, (ii) all consents or approvals required under the
Credit Agreements, the Indenture and the Senior Notes with respect to the
consummation of each of the transactions contemplated by this Agreement or
necessary to prevent a breach of any such Contracts or instruments and (iii)
all other consents or approvals required to be obtained by the Company or any
of its Subsidiaries with respect to the consummation of each of the
transactions contemplated by this Agreement the failure of which to obtain
reasonably could be expected to result in a Material Adverse Effect, and each
such consent or approval shall be unconditioned.
(d) Legal Opinions. Purchaser shall have received (i) from Robert
--------------
Holland, general counsel of the Company and its Subsidiaries, an opinion dated
the First Closing Date, in substantially the form attached as Exhibit F-1
-----------
hereto, (ii) from W. S. Walker & Co., Cayman counsel to the Company and its
Subsidiaries, or other counsel to the Company and its Subsidiaries reasonably
acceptable to Purchaser an opinion dated the First Closing Date, in
substantially the form attached as Exhibit F-2 hereto, (iii) from Vinson &
-----------
Elkins L.L.P., corporate counsel to the Purchaser, or other counsel to
Purchaser reasonably acceptable to Purchaser an opinion dated the First
Closing Date, as to the enforceability of this Agreement and the Shareholders
Agreement, in form and substance reasonably satisfactory to Purchaser and (iv)
from Hunter & Hunter, Cayman counsel to Purchaser, an opinion dated the First
Closing Date, in substantially the form attached as Exhibit F-3 hereto, each
-----------
of which opinions, if requested by Purchaser, shall expressly provide that
they may be relied upon by Purchaser's lenders, underwriters, or other sources
of financing with respect to the transactions contemplated hereby.
(e) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by the Company pursuant to Section 6.2(b)
shall have been delivered.
(f) No Issuance of Securities. The Company shall have complied in
-------------------------
all respects with the covenants set forth in Section 4.6(b)(iii).
(g) Preferred Stock Authorization. The Board shall have adopted and
-----------------------------
approved the Preferred Stock Authorization in accordance with the Companies
Laws of the Cayman Islands.
Section V.3 Conditions Precedent to Obligations of Company at the
-----------------------------------------------------
First Closing
-----------
The obligation of the Company to effect the transactions
contemplated by this Agreement to be consummated at the First Closing is
subject to the satisfaction of the following conditions unless waived, in
whole or in part, by the Company:
(a) Representations and Warranties. The representations and
--------------------------------
warranties of Purchaser set forth in this Agreement shall be true and correct
in all respects (provided that, for purposes of this Section 5.3(a), any
representation or warranty of Purchaser contained herein that is qualified by
a materiality standard or a Material Adverse Effect qualification shall be
read without regard to any such qualifications as if such qualifications were
not contained therein) as of the date of this Agreement and as of the First
Closing Date as though made on and as of the First Closing Date except for
such failures which, individually or in the aggregate, have not had and could
not reasonably be expected to have a Material Adverse Effect, and the Company
shall have received a certificate to the foregoing effect signed on behalf of
Purchaser by the chief executive officer or by the chief financial officer of
Purchaser.
(b) Performance of Obligations of Purchaser
-----------------------------------------
Purchaser shall have performed in all respects
(provided that, for purposes of this Section 5.3(b), any covenant or agreement
that is qualified by a materiality standard shall be read without regard to
any such qualification as if such qualification was not contained therein) the
obligations required to be performed by it under this Agreement prior to the
First Closing Date except for such failures which, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect, and the Company shall have received a certificate to
such effect signed on behalf of Purchaser by the chief executive officer or by
the chief financial officer of Purchaser.
(c) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by Purchaser pursuant to Section 6.2(a)
shall have been delivered.
Section V.4 Conditions Precedent to Obligation of Purchaser at the
------------------------------------------------------
Second Closing
-------------
The obligation of Purchaser to effect the transaction
contemplated by this Agreement to be consummated at the Second Closing is
subject to the following conditions unless waived, in whole or in part, by
Purchaser:
(a) Consummation of First Closing. The First Closing shall have
-----------------------------
occurred prior to the Second Closing Date.
(b) Completion of Rights Offering. The Rights Offering shall have
-----------------------------
commenced and the time periods for basic and oversubscription rights shall
have expired and the number of Unsubscribed Shares shall have been determined.
(c) Representations and Warranties. The representations and
--------------------------------
warranties of the Company set forth in this Agreement shall be true and
correct in all respects (provided that, for purposes of this Section 5.4(c),
any representation or warranty of the Company contained herein that is
qualified by a materiality standard or a Material Adverse Effect qualification
shall be read without regard to any such qualifications as if such
qualifications were not contained therein) as of the date of this Agreement
and as of the Second Closing Date as though made on and as of the Second
Closing Date except for such failures which, individually or in the aggregate,
have not had and could not reasonably be expected to have a Material Adverse
Effect, and Purchaser shall have received a certificate to the foregoing
effect signed on behalf of the Company and its Subsidiaries by the chief
executive officer or by the chief financial officer of the Company.
(d) Performance of Obligations. The
--------------------------
Company shall have performed in all respects (provided that, for purposes of
this Section 5.4(d), any covenant or agreement that is qualified by a
materiality standard or Material Adverse Effect qualification shall be read
without regard to any such qualification as if such qualification was not
contained therein) all obligations required to be performed by it or them
under this Agreement prior to the Second Closing Date except for such failures
which, individually or in the aggregate, have not had and could not reasonably
be expected to have a Material Adverse Effect, and Purchaser shall have
received a certificate to such effect signed on behalf of the Company and its
Subsidiaries by the chief executive officer or by the chief financial officer
of the Company.
(e) Legal Opinions. Purchaser shall have received (i) from Robert
--------------
Holland, general counsel of the Company and its Subsidiaries, an opinion dated
the Second Closing Date, in substantially the form attached as Exhibit F-1
-----------
hereto and (ii) from W. S. Walker & Co., Cayman counsel to the Company and its
Subsidiaries, or other counsel to the Company reasonably acceptable to
Purchaser, an opinion dated the Second Closing Date, in substantially the form
attached as Exhibit F-2 hereto, (iii) from Vinson & Elkins L.L.P., corporate
-----------
counsel to the Company, or other counsel to Purchaser reasonably acceptable to
Purchaser, an opinion dated the Second Closing Date, as to the enforceability
of this Agreement and the Shareholders Agreement, in form and substance
reasonably satisfactory to Purchaser and (iv) from Hunter & Hunter, Cayman
counsel to Purchaser, an opinion dated the Second Closing Date, in
substantially the form attached as Exhibit F-3 hereto, each of which opinions,
-----------
if requested by Purchaser, shall expressly provide that they may be relied
upon by Purchaser's lenders, underwriters, or other sources of financing with
respect to the transactions contemplated hereby.
(f) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by the Company pursuant to Section 6.3(b)
shall have been delivered.
(g) Board Designees. Four individuals designated by Purchaser
----------------
pursuant to Section 4.1 of the Shareholders Agreement to serve as members of
the Board of Directors shall have been duly elected or appointed to the Board
of Directors and shall not have been removed other than at the direction of
Purchaser.
Section V.5 Conditions Precedent to Obligations of Company at the
-----------------------------------------------------
Second Closing
------------
The obligation of the Company to effect the transactions
contemplated by this Agreement to be consummated at the Second Closing is
subject to the satisfaction of the following conditions unless waived, in
whole or in part, by the Company.
(a) Consummation of First Closing. The First Closing shall have
-----------------------------
occurred prior to the Second Closing Date.
(b) Completion of Rights Offering. The Rights Offering shall have
-----------------------------
commenced and expired and the number of Unsubscribed Shares shall have been
determined.
(c) Representations and Warranties. The representations and
--------------------------------
warranties of Purchaser set forth in this Agreement shall be true and correct
in all material respects (provided that, for purposes of this Section 5.5(c),
any representation or warranty of Purchaser contained herein that is qualified
by a materiality standard or a Material Adverse Effect qualification shall be
read without regard to any such qualification as if such qualifications were
not contained therein) as of the date of this Agreement and as of the Second
Closing Date as though made on and as of the Second Closing Date except for
such failures which, individually or in the aggregate, have not had and could
not reasonably be expected to have a Material Adverse Effect, and the Company
shall have received a certificate to the foregoing effect signed on behalf of
Purchaser by the chief executive officer or by the chief financial officer of
Purchaser.
(d) Performance of Obligations of Purchaser
-----------------------------------------
Purchaser shall have performed in all material
respects (provided that, for purposes of this Section 5.5(d), any covenant or
agreement that is qualified by a materiality standard shall be read without
regard to any such qualifications as if such qualification was not contained
therein) the obligations required to be performed by it under this Agreement
prior to the Second Closing Date except for such failures which, individually
or in the aggregate, have not had and could not reasonably be expected to have
a Material Adverse Effect, and the Company shall have received a certificate
to such effect signed on behalf of Purchaser by the chief executive officer or
by the chief financial officer of Purchaser.
(e) Closing Deliveries. All documents, instruments, certificates or
------------------
other items required to be delivered by Purchaser pursuant to Section 6.3(a)
shall have been delivered.
ARTICLE VI
CLOSINGS
----------
Section VI.1 Closings. Subject to the satisfaction
--------
or waiver of the conditions set forth in Article V, the purchase and sale of
the Shares to be purchased by Purchaser hereunder will take place at two
closings (the "Closings"). The closing of the purchase and sale of the
--------
Initial Shares pursuant to Section 2.1(a)(i) (the "First Closing") and the
-------------
closing of the purchase and sale of the Remaining Shares pursuant to Section
2.1(a)(ii) and the Rights Offering (the "Second Closing") shall occur (a) at
--------------
the offices of Vinson & Elkins L.L.P., 2001 Ross Avenue, Suite 3700, Dallas,
Texas 75201, at 10:00 a.m., local time, on the third Business Day following
the satisfaction or waiver (subject to applicable Law) of each of the
conditions to the obligations of the parties to effect the transactions to
occur at each such Closing as set forth in Sections 5.1, 5.2, 5.3, 5.4 and
5.5, respectively; provided that Purchaser may, at Purchaser's option, extend
--------
either of the Closing Dates up to thirteen (13) Business Days after such date
or (b) at such other location and time as may be mutually agreed upon by the
parties hereto. The date on which the First Closing is required to take place
is herein referred to as the "First Closing Date" and the date on which the
------------------
Second Closing is required to take place is herein referred to as the "Second
------
Closing Date." All closing transactions at the First Closing shall be deemed
- -------------
to have occurred simultaneously, and all closing transactions at the Second
Closing shall be deemed to have occurred simultaneously.
Section VI.2 Actions to Occur at the First Closing
-------------------------------------
(a) At the First Closing, Purchaser shall deliver to the Company
the following:
(i) Purchase Price. An amount equal to the Purchase Price for the
---------------
Initial Shares in accordance with Article II hereof;
(ii) Shareholders Agreement. Counterparts of the Shareholders
-----------------------
Agreement executed by Purchaser;
(iii) Monitoring Agreement. Counterparts of the Monitoring Agreement
--------------------
executed by HMCo; and
(iv) Certificates. The certificates described in Sections 5.3(a)
------------
and 5.3(b).
(b) At the First Closing, the Company shall pay to HMCo the amount of
$7,000,000 payable pursuant to the Financial Advisory Agreement as referred to
in Section 9.5(d) and shall deliver to Purchaser (or to its designee as
indicated otherwise) the following:
(i) Share Certificates. Certificates representing the Initial
-------------------
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed in
blank, and otherwise in proper form for transfer;
(ii) Shareholders Agreement. Counterparts of the Shareholders Agreement
----------------------
executed by the Company;
(iii) Monitoring Agreement.Counterparts of the Monitoring Agreement executed
--------------------
by the Company;
(iv) Funding Fee. The amount of $2,551,500 payable pursuant to
------------
Section 9.5(d), paid to HMCo by wire transfer of immediately available funds
to an account of HMCo (the number for which account shall have been furnished
to the Company at least two Business Days prior to the Closing Date);
(v) Purchaser's Expenses. An amount equal to Purchaser's Expenses
--------------------
incurred through the First Closing Date in connection with the transactions
contemplated hereby as provided in Section 9.5(a), by wire transfer of
immediately available funds to an account of Purchaser (the amount of such
costs and expenses and the number for which account shall have been furnished
to the Company at least two Business Days prior to the Closing Date);
(vi) Certificates. The certificates described in Sections 5.2(a)
-------------
and 5.2(b);
(vii) Consents Under Agreements. The original of each consent or
-------------------------
approval, if any, pursuant to Section 5.2(c); and
(viii) Legal Opinions. The opinions of counsel referred to in Section
--------------
5.2(d).
Section VI.3 Actions to Occur at the Second Closing
---------------------------------------
(a) At the Second Closing, Purchaser shall deliver to the Company the
following:
(i) Purchase Price. An amount equal to the Purchase Price for the Remaining
---------------
Shares in accordance with Article II
hereof; and
(ii) Certificates. The certificates described in Sections 5.5(a) and 5.5(b).
--------------
(b) At the Second Closing, the Company shall deliver to Purchaser (or to its
designee as indicated otherwise) the following:
(i) Share Certificates. Certificates representing the Remaining
------------------
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed in
blank, and otherwise in proper form for transfer;
(ii) Funding Fee. The amount of 2% multiplied by the product of (A)
-----------
$70.00 and (B) the number of Remaining Shares, as provided in Section 9.5(d),
paid to HMCo by wire transfer of immediately available funds to an account of
HMCo (the number for which account shall have been furnished to the Company at
least two Business Days prior to the Closing Date);
(iii) Purchaser's Expenses. An amount equal to Purchaser's Expenses
--------------------
incurred between the First Closing Date and the Second Closing Date as
provided in Section 9.5(a), by wire transfer of immediately available funds to
an account of Purchaser (the amount of such costs and expenses and the number
for which account shall have been furnished to the Company at least two
Business Days prior to the Closing Date);
(iv) Certificates. The certificates described in Sections 5.4(c) and 5.4(d);
-------------
and
(v) Legal Opinions. The opinions of counsel referred to in Section 5.4(e).
---------------
ARTICLE VII
TERMINATION
----------------------
(a) by mutual consent of Purchaser and the Company;
(b) by either Purchaser or the Company:
(i) in the event of a breach by the other party of any
representation, warranty, covenant or agreement contained in this Agreement
which (A) would give rise to the failure of a condition set forth in Section
5.2(a) or 5.2(b), with respect to the First Closing, or Section 5.3(a) or
5.3(b), with respect to the Second Closing, as applicable, and (B) cannot be
cured or, if curable, has not been cured within 20 days (the "Cure Period")
-----------
following receipt by the breaching party of written notice of such breach (it
being acknowledged and agreed that there shall not be a Cure Period for
breaches of the covenants set forth in Section 4.12);
(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree, or ruling or taken any other action
(which order, decree, or ruling Purchaser and the Company shall use all
commercially reasonable efforts to lift), in each case permanently
restraining, enjoining, or otherwise prohibiting the transactions contemplated
by this Agreement, and such order, decree, ruling, or other action shall have
become final and nonappealable;
(iii) if the First Closing shall not have occurred by the later of
(A) October 31, 1998, as such date may be extended by Purchaser pursuant to
Section 6.1(a), and (B) the date to which the First Closing Date is extended
pursuant to Section 6.1(b); provided, however, that the right to terminate
this Agreement under this clause (iii) shall not be available to any party
whose breach of this Agreement has been the cause of, or resulted in, the
failure of the First Closing to occur on or before such date; or
(iv) if the Second Closing shall not have occurred by the later of
(A) 50 Business Days after the date on which the Registration Statement is
declared effective under the Securities Act, but in no event later than
February 1, 1999, as such date may be extended by Purchaser pursuant to
Section 6.1(a), and (B) the date to which the Second Closing Date is extended
pursuant to Section 6.1; provided, however, that the right to terminate this
Agreement under this clause (iv) shall not be available to any party whose
breach of this Agreement has been the cause of, or resulted in, the failure of
the Second Closing to occur on or before such date;
(c) by the Company if (i) the Board of Directors of the Company shall
have determined in good faith, based on the advice of outside counsel, that it
is necessary, in order to comply with its fiduciary duties under applicable
law, to terminate this Agreement and to enter into an agreement with respect
to or to consummate a transaction constituting a Sale Transaction, and (ii)
the Company shall have given at least five Business Days prior written notice
to Purchaser advising Purchaser that the Company has received a bona fide
proposal for a Sale Transaction from a third party, specifying the material
terms and conditions of such proposal (including the identity of the third
party) and the material terms and conditions of any agreements or arrangements
to be entered into in connection with a Sale Transaction and that the Company
intends to terminate this Agreement in accordance with this Section 7.1(c);
provided that the Company may not effect such termination pursuant to this
------
Section 7.1(c) unless the Company has contemporaneously with such termination
tendered payment to Purchaser, or its designee, of the Termination Fee and the
reimbursement of Purchaser's Expenses (if and to the extent that Purchaser has
provided to the Company documentation reasonably acceptable to the Company in
support of the amounts claimed) that is due Purchaser or its designee pursuant
to Section 9.5; or
(d) by Purchaser if:
(i) the Board shall have recommended to the shareholders of the
Company any Sale Transaction, other than a proposal or offer by Purchaser or
any of its Affiliates, or shall have resolved to do so; or
(ii) a tender offer or exchange offer for 50% or more of the
outstanding shares of Common Stock or voting securities representing 50% or
more of the voting power of the outstanding capital stock of the Company
(giving effect to the conversion of outstanding 8% Preference Shares to Common
Stock at the rate which the 8% Preference Shares are then convertible into
shares of Common Stock) is commenced (other than by the Company or its
Affiliates) and the Board of Directors of the Company fails to timely
recommend against the stockholders of the Company tendering their shares into
such tender offer or exchange offer.
provided that Purchaser in exercising its termination rights hereunder may
condition the effectiveness of such termination upon receipt of the
Termination Fee and reimbursement of Purchaser's Expenses (if and to the
extent that Purchaser has provided to the Company documentation reasonably
acceptable to the Company in support of the amounts claimed) that are due
Purchaser or its designee pursuant to Section 9.5.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
person controlling any such party or any of their respective officers,
directors, employees, accountants, consultants, legal counsel, agents, or
other representatives whether prior to or after the execution of this
Agreement. Notiwthstanding anything in the foregoing to the contrary, a party
that is in material breach of this Agreement shall not be entitled to
terminate this Agreement except, in the case of a default by the Company, with
the consent of Purchaser, or in the case of a default by Purchaser, with the
consent of the Company.
Section VII.2 Effect of Termination.
---------------------
In the event of the termination of this Agreement, written notice thereof
shall forthwith be given to the other party specifying the provision hereof
pursuant to which such termination is made, and this Agreement (except for the
provisions of this Section 7.2, Article VIII and Sections 9.4, 9.5, 9.6, 9.9,
9.10, 9.12 and 9.13, which shall survive such termination) shall forthwith
become null and void. Subject to the provisions of Section 9.5, in the event
of a termination of this Agreement by either the Company or Purchaser as
provided above, there shall be no liability on the part of the Company or
Purchaser, except for liability arising out of a wilful breach of, or
misrepresentation under, this Agreement (but in no event shall any party
hereto be entitled to recover punitive damages).
ARTICLE VIII
INDEMNIFICATION
---------------
VIII.1 Indemnification of Purchaser.
----------------------------
Subject to the provisions of this Article VIII, from and after the First
Closing Date the Company agrees to indemnify and hold harmless the Purchaser
Indemnified Parties from and against any and all Purchaser Indemnified Costs.
VIII.2 Indemnification of Company.
--------------------------
Subject to the provisions of this Article VIII, from and after the First
Closing Date Purchaser agrees to indemnify and hold harmless the Company from
and against any and all Company Indemnified Costs.
VIII.3 Defense of Third-Party Claims
-----------------------------
An Indemnified Party shall give prompt written notice to any person
who is obligated to provide indemnification hereunder (an "Indemnifying
Party") of the commencement or assertion of any action, proceeding, demand, or
claim by a third party (collectively, a "third-party action") in respect of
which such Indemnified Party shall seek indemnification hereunder. Any
failure so to notify an Indemnifying Party shall not relieve such Indemnifying
Party from any liability that it, he, or she may have to such Indemnified
Party under this Section 8.3 unless the failure to give such notice materially
and adversely prejudices such Indemnifying Party. The Indemnifying Party
shall have the right to assume control of the defense of, settle, or otherwise
dispose of such third-party action on such terms as it deems appropriate;
provided, however, that:
(a) The Indemnified Party shall be entitled, at its own expense, to
participate in the defense of such third-party action (provided, however, that
the Indemnifying Party shall pay the attorneys' fees of one counsel (provided
that if any such third-party action is brought in a jurisdiction other than
Texas, the Indemnifying Party shall also pay the attorney's fees of one local
counsel) to the Indemnified Party if (i) the employment of separate counsel
shall have been authorized in writing by any such Indemnifying Party in
connection with the defense of such third-party action, (ii) the Indemnifying
Parties shall not have employed counsel reasonably satisfactory to the
Indemnified Party to have charge of such third-party action, (iii) counsel to
the Indemnified Party shall have advised the Indemnified Party that there are
defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party, (iv) counsel to the
Indemnified Party and the Indemnifying Party shall have advised their
respective clients in writing, with a copy delivered to the other party, that
there is a conflict of interest that could make it inappropriate under
applicable standards of professional conduct to have common counsel), or (v)
the third-party action is a proceeding brought by a shareholder of the Company
(in such shareholder's name or derivatively on behalf of the Company) in
respect of the transactions contemplated by this Agreement;
(b) The Indemnifying Party shall obtain the prior written approval of
the Indemnified Party (not to be unreasonably withheld) before entering into
or making any settlement, compromise, admission, or acknowledgment of the
validity of such third-party action or any liability in respect thereof if,
pursuant to or as a result of such settlement, compromise, admission, or
acknowledgment, injunctive or other equitable relief would be imposed against
the Indemnified Party or if, in the reasonable opinion of the Indemnified
Party, such settlement, compromise, admission, or acknowledgment could
reasonably be expected to have a material adverse effect on its business;
(c) No Indemnifying Party shall, without the consent of each
Indemnified Party (which consent shall not be unreasonably withheld), consent
to the entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by each claimant or
plaintiff to each Indemnified Party of a release from all liability in respect
of such third-party action; and
(d) The Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and
the Indemnified Party shall be entitled to have sole control over, the defense
or settlement, compromise, admission, or acknowledgment of any third-party
action (i) as to which the Indemnifying Party fails to assume the defense
within a reasonable length of time; or (ii) to the extent the third-party
action seeks an order, injunction, or other equitable relief against the
Indemnified Party which could reasonably be expected to materially adversely
affect the business, operations, assets, or financial condition of the
Indemnified Party; provided, however, that the Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment that would give rise to
liability on the part of any Indemnifying Party without the prior written
consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article VIII and, in
connection therewith, shall furnish such records, information, and testimony
and attend such conferences, discovery proceedings, hearings, trials, and
appeals as may be reasonably requested.
VIII.4 Direct Claims. In any case in which
-------------
an Indemnified Party seeks indemnification hereunder which is not subject to
Section 8.3 because no third-party action is involved, the Indemnified Party
shall notify the Indemnifying Party in writing of any Indemnified Costs which
such Indemnified Party claims are subject to indemnification under the terms
hereof. The failure of the Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of such claim unless the resulting
delay materially prejudices the position of the Indemnifying Party with
respect to such claim.
VIII.5 Special provisions Regarding Indemnity. Notwithstanding
--------------------------------------
the other terms of this Agreement:
(a) Purchaser shall not be entitled to recover any Purchaser
Indemnified Costs and the Company shall not be entitled to recover any Company
Indemnified Costs as a result of any breach of any representation or warranty
by the other party unless, in either such case, the aggregate amount thereof
exceeds $2,500,000, in which event the party entitled to indemnification with
respect thereto shall be entitled to recover only the amount in excess of
$2,500,000; and provided, however, that the limitations of this Section 8.5(a)
-------- -------
shall not apply to any Purchaser Indemnified Cost resulting from or relating
to (i) any misrepresentation or breach of the representations and warranties
contained in Section 3.1(c) or (ii) the Company's knowing or willful
misrepresentations or breaches of representations or warranties made as a part
of or contained in this Agreement.
(b) For purposes of determining if there has been any inaccuracy or
breach of a representation or warranty for purposes of calculating Purchaser
Indemnified Costs or Company Indemnified Costs, the representations and
warranties contained herein that are qualified by a materiality standard or a
Material Adverse Effect or Material Adverse Change qualification shall be read
without regard to any such qualifications as if such qualifications were not
contained therein.
(c) The Company's maximum liability for Purchaser Indemnified Costs
shall be the Purchase Price
<PAGE>
VIII.6 Tax Related Adjustments.
-----------------------------
The Company and Purchaser agree that any payment of Indemnified Costs made
hereunder will be treated by the parties on their Tax Returns as an adjustment
to the Purchase Price. If, notwithstanding such treatment by the parties, any
payment of Indemnified Costs is determined to be taxable income rather than
adjustment to Purchase Price, then the Indemnifying Party shall indemnify the
Indemnified Party for any Taxes payable by the Indemnified Party or any
subsidiary by reason of the receipt of such payment (including any payments
under this Section 8.5), determined at an assumed marginal tax rate equal to
the highest marginal tax rate then in effect for corporate taxpayers in the
relevant jurisdiction.
ARTICLE IX
MISCELLANEOUS
--------------------------
Section IX.1 Survival of Provisions.
-----------------------
(a) The representations and warranties of the Company and Purchaser
made herein or in any other Transaction Document and the covenants of the
Company and Purchaser to be complied with on or prior to either Closing Date
shall remain operative and in full force and effect pursuant to their terms,
regardless of (x) any investigation made by or on behalf of Purchaser or the
Company, as the case may be, or (y) acceptance of any of the Shares and
payment by Purchaser therefor, until the first anniversary of the Second
Closing Date.
(b) The covenants and agreements of the Company and Purchaser
contained in this Agreement to the extent that, by their terms, they are to be
performed or complied with after either of the Closing Dates, including
without limitation the Indemnification Agreement set forth in Article VIII
hereof, will survive until the later of (i) the first anniversary of the
Second Closing Date or (ii) the expiration of all applicable statute of
limitations (including all periods of extension, whether automatic or
permissive) affecting or applicable to any such covenant or agreement.
(c) Any claim for indemnification for a breach of a representation,
warranty or covenant hereunder shall be brought within the applicable survival
period specified in Section 9.1(a) or Section 9.1(b) hereof. If a claim for
indemnification is made in accordance with Article VIII hereof before the
expiration of the applicable survival period set forth in Section 9.1(a) or
Section 9.1(b), as applicable, then (not withstanding such survival period)
the representation, warranty, covenant or agreement applicable to such claim
will survive for purposes of such claim until the resolution of such claim by
final, nonappealable judgment or settlement, but only with respect to such
claim.
Section IX.2 No Waiver; Modification in Writing
----------------------------------
No failure or delay on the part of the Company or a
Purchaser in exercising any right, power or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. Without limiting the rights that any
party may have for fraud under common law, the remedies provided for herein
are cumulative and are the exclusive remedies available to the Company or
Purchaser at law or in equity. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given without the written consent of the Company, on the one hand, and
Purchaser or its permitted assigns, on the other hand, provided that notice of
any such waiver shall be given to each party hereto as set forth below. Any
amendment, supplement or modification of or to any provision of this
Agreement, or any waiver of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for which
made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on any party hereto in any case shall
entitle the other party to any other or further notice or demand in similar or
other circumstances.
Section IX.3 Specific Performance. The
--------------------
parties recognize that in the event the Company should refuse to perform under
the provisions of this Agreement or any other Transaction Document, monetary
damages alone will not be adequate. Purchaser shall therefore be entitled, in
addition to any other remedies which may be available, including money
damages, to obtain specific performance of the terms of this Agreement. In
the event of any action to enforce this Agreement or any other Transaction
Document specifically, the Company hereby waive the defense that there is an
adequate remedy at law.
Section IX.4 Severability. If any term or other
------------
provision of this Agreement is invalid, illegal, or incapable of being
enforced by any rule of applicable law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated herein are not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal, or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated herein are consummated as originally
contemplated to the fullest extent possible.
Section IX.5 Fees and Expenses.
-------------------
(a) At each Closing pursuant to Sections 6.2(b)(v) and 6.3(b)(iii),
the Company shall pay to Purchaser an amount equal to the Purchaser's Expenses
through the applicable Closing Date in connection with the transactions
contemplated by this Agreement.
(b) Concurrently with a termination of this Agreement by the Company
or Purchaser pursuant to Sections 7.1(b)(ii), 7.1(b)(iii) or 7.1(b)(iv) (and
as a condition to any such termination by the Company), by the Company
pursuant to Section 7.1(c) (and as a condition to any such termination by the
Company) or by Purchaser pursuant to Section 7.1(b)(i) or 7.1(d), the Company
shall pay to Purchaser by wire transfer of immediately available funds an
amount equal to the Purchaser's Expenses. If the Company terminates this
Agreement pursuant to Section 7.1(b)(i), then Purchaser shall not be entitled
to reimbursement of the Purchaser's Expenses. The payment of Purchasers
Expenses pursuant to this Section 9.5(b) shall not in any way limit Purchasers
rights against the Company as permitted under Section 7.2 of this Agreement.
(c) Concurrently with a termination of this Agreement by the Company
pursuant to Section 7.1(c), the Company shall pay to Purchaser by wire
transfer of immediately available funds an amount equal to $30,000,000 (the
"Termination Fee").
---------------
(d) If this Agreement is terminated by the Company or Purchaser
pursuant to Sections 7.1(b)(ii), 7.1(b)(iii) or 7.1(b)(iv) or by Purchaser
pursuant to Section 7.1(b)(i) as a result of non-willful breach of this
Agreement by the Company or pursuant to Section 7.1(d), and within one year
after such termination date (i) definitive documentation with respect to a
Sale Transaction has been entered into or (ii) 50% or more of the outstanding
Common Stock or voting securities representing 50% or more of the voting power
of the outstanding capital stock of the Company (giving effect to the
conversion of outstanding 8% Preference Shares to Common Stock at the rate at
which the 8% Preference Shares are then convertible into shares of Common
Stock) has been acquired pursuant to a tender or exchange offer in connection
with a proposed Sale Transaction or, if a tender or exchange offer in
connection with a proposed Sale Transaction has been commenced prior to but
has not expired as of such date that is one year after such termination of
this Agreement, 50% or more of the outstanding Common Stock or voting
securities representing 50% or more of the voting power of the outstanding
capital stock of the Company (giving effect to the conversion of outstanding
8% Preference Shares to Common Stock at the rate at which the 8% Preference
Shares are then convertible into shares of Common Stock) is acquired pursuant
to such tender or exchange offer, then the Company shall pay or shall cause to
be paid, contemporaneously with the consummation of such Sale Transaction, to
Purchaser, or its designee, an amount equal to the Termination Fee by wire
transfer of immediately available funds. Notwithstanding the forgoing,
Purchaser shall not be entitled to the Termination Fee pursuant to this
Section 9.5(d) if this Agreement is terminated pursuant to Section 7.1(b)(iii)
and the sole unsatisfied condition to Purchaser's obligation to close shall
have been the failure of the condition in Section 5.1(a) to have been
satisfied as a result of the failure to obtain approval under the HSR Act or
the failure of the expiration or termination of any applicable waiting period
under the HSR Act to have expired.
(e) Pursuant to the terms of the Financial Advisory Agreement, the
Company will pay to HMCo a transaction fee equal to $7,000,000 by wire
transfer of immediately available funds contemporaneously with the earlier to
occur of (i) the First Closing Date or (ii) the termination of this Agreement
for any reason. At the First Closing, the Company also shall pay to HMCo a
transaction fee in the amount of $2,551,500 by wire transfer of immediately
available funds. In addition, at the Second Closing, the Company shall pay
HMCo a transaction fee equal to two percent of the Purchase Price paid by
Purchaser at such Second Closing, including the Purchase Price paid by
Purchaser for any Shares purchased in the Rights Offering.
(f) The payment of Purchaser's Expenses and the Termination Fee shall
be paid by the Company without reservation of rights or protests and the
Company upon making such payment shall be deemed to have released and waived
any and all rights that it may have to recover such amounts. Nothing
contained in this Section 9.5 shall limit Purchasers rights against the
Company in the event of the termination of this Agreement by Purchaser
pursuant to Section 7.1(b)(i) as a result of a willful breach by the Company
of this Agreement.
Section IX.6 Parties in Interest.
-------------------
This Agreement shall be binding upon and, except as provided below, inure
solely to the benefit of each party hereto and their successors and assigns,
and nothing in this Agreement, except as set forth in Section 4.11 (which is
expressly intended for the benefit of the parties specified therein and shall
be enforceable by any of such parties or any of their respective heirs and
representatives) and Article VIII (which is intended for the benefit of all
Indemnified Parties), express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section IX.7 Notices. All notices and other
-------
communications hereunder shall be in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to Purchaser, to:
HM 4 Triton, L.P.
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr.
Facsimile: (214) 740-7313
with a copy to:
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Michael D. Wortley
Facsimile: (214) 999-7732
(b) If to the Company, to:
Triton Energy Limited
c/o Triton Exploration Services, Inc.
6688 North Central Expressway
Suite 1400
Dallas, Texas 75206
Attention: Robert Holland
Facsimile: (214) 691-0198
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert Friedman
Facsimile: (212) 455-2502
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
Section IX.8 Counterparts. This Agreement may
------------
be executed and delivered (including by facsimile transmission) in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section IX.9 Entire Agreement. This
-----------------
Agreement (which term shall be deemed to include the Exhibits and Schedules
hereto and the other certificates, documents and instruments delivered
hereunder) and the other Transaction Documents constitute the entire agreement
of the parties hereto and supersede all prior agreements, letters of intent
and understandings, both written and oral, among the parties with respect to
the subject matter hereof. There are no representations or warranties,
agreements, or covenants other than those expressly set forth in this
Agreement and the other Transaction Documents.
Section IX.10 Governing Law. THIS AGREEMENT
-------------
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PROVISIONS. Each of the
parties hereby (a) irrevocably submits to the exclusive jurisdiction of the
United States Federal District Court for the Northern District of Texas,
sitting in Dallas County, Texas, the United States of America, in the event
such court has jurisdiction or, if such court does not have jurisdiction, to
any district court sitting in Dallas County, Texas, the United States of
America, for the purposes of any suit, action or proceeding arising out of or
relating to this Agreement, including any claims for indemnity pursuant to
Article VIII hereof, (b) waives, and agrees not to assert in any such suit,
acting or proceeding, any claim that (i) it is not personally subject to the
jurisdiction of such court or of any other court to which proceedings in such
court may be appealed, (ii) such suit, action or proceeding is brought in an
inconvenient forum or (iii) the venue of such suit, action or proceeding is
improper and (c) expressly waives any requirement for the posting of a bond by
the party bringing such suit, action or proceeding. Each of the parties
consents to process being served in any such suit, action or proceeding by
mailing, certified mail, return receipt requested, a copy thereof to such
party at the address in effect for notices hereunder, and agrees that such
services shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 9.10 shall affect or limit any right to
serve process in any other manner permitted by law.
Section IX.11 Public Announcements.
--------------------
The Company, on the one hand, and Purchaser, on the other, shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby, except for statements required by Law or by any listing agreements
with or rules of any national securities exchange or the National Association
of Securities Dealers, Inc., or made in disclosures reasonably determined as
required to be filed pursuant to the Securities Act of 1933 or the Securities
Exchange Act of 1934.
Section IX.12 Assignment. Neither this Agreement
----------
nor any of the rights, interests, or obligations hereunder shall be assigned
by any of the parties hereto, whether by operation of Law or otherwise;
provided, however, that upon notice to the Company, (a) Purchaser may assign
or delegate any or all of its rights or obligations under this Agreement to
any Affiliate thereof and (b) nothing in this Agreement shall limit
Purchaser's ability to make a collateral assignment of its rights under this
Agreement to any institutional lender that provides funds to Purchaser without
the consent of the Company. The Company shall execute an acknowledgment of
such collateral assignments in such forms as Purchaser's lenders may from time
to time reasonably request; provided, however, that unless written notice is
given to the Company that any such collateral assignment has been foreclosed
upon, the Company shall be entitled to deal exclusively with Purchaser as to
any matters arising under this Agreement or any of the other agreements
delivered pursuant hereto. In the event of such an assignment, the provisions
of this Agreement shall inure to the benefit of and be binding on Purchaser's
assigns. Any attempted assignment in violation of this Section shall be null
and void.
Section IX.13 Director and Officer Liability
------------------------------
The directors, officers, partners, members and
stockholders of Purchaser, the Company and their respective Affiliates shall
not have any personal liability or obligation arising under this Agreement
(including any claims that the Company or Purchaser may assert) other than as
an assignee of this Agreement.
Section IX.14 Headings. The headings of
--------
this Agreement are for convenience of reference only and are not part of the
substance of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officer as of the date first written
above.
TRITON ENERGY LIMITED
By:
Robert B. Holland, III
Interim Chief Executive Officer
and General Counsel
HM4 TRITON, L.P.
By: HM Triton G.P., LLC
its General Partner
By:
Daniel S. Dross
Senior Vice President
EXHIBIT C
---------
UNANIMOUS WRITTEN CONSENT
OF
BOARD OF DIRECTORS
OF
TRITON ENERGY LIMITED
AUTHORIZING A SERIES OF PREFERENCE SHARES
The undersigned, constituting all of the directors of Triton Energy
Limited, a Cayman Islands company (the Company ), hereby consent in writing
-------
to the taking of the following actions and the adoption of the following
resolutions without the holding of, and waive any notices required for, a
meeting of directors for the purposes of considering the same:
WHEREAS, the Board of Directors of the Company has determined that it is
beneficial to and in the best interests of the Company to create a series of
preference shares as set forth herein for the purpose of issuing such
preference shares pursuant to and in accordance with the terms of the Stock
Purchase Agreement (as herein defined); now therefore be it
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Company in accordance with the provisions of its Memorandum of
Association and Articles of Association, as amended, the Board of Directors
does hereby create, authorize and provide for the issuance of a series of
preference shares consisting of 11,000,000 shares, par value $.01 per share,
out of the existing authorized but unissued share capital of the Company with
the following rights, terms, preferences and voting powers:
Section 1. Number of Shares and Designation
--------------------------------
This series of preference shares shall be designated
as 8% Convertible Preference Shares and the number of shares which shall
----------------------------------
constitute such series shall not be more than 11,000,000 shares, par value
$.01 per share, which number may be decreased (but not below the number
thereof then outstanding plus the number required to fulfill the Company s
obligations under options, warrants or similar rights issued by the Company)
from time to time by the Board of Directors.
Section 2. Definitions. For purposes of
-----------
this Unanimous Written Consent (the Consent ), the following terms shall have
-------
the meanings indicated:
5% Convertible Preference Shares shall mean the 5% Convertible
-----------------------------------
Preference Shares, par value $.01 per share, of the Company.
8% Convertible Preference Shares shall have the meaning set forth in
-----------------------------------
Section 1.
Additional Shares shall have the meaning set forth in subsection 3(b).
------------------
Affiliate shall have the meaning as such term has under Rule 12b-2 of
---------
the United States Securities Exchange Act of 1934, as amended.
Average Market Value shall mean, with respect to any referenced
----------------------
security for a particular date, the average of the daily Current Market Price
per share of such security for the twenty Trading Days immediately preceding
the referenced date.
Board of Directors shall mean the Board of Directors of the Company.
--------------------
Business Day shall mean any day other than a Saturday, Sunday or a day
-------------
on which state or federally chartered banking institutions in New York City,
New York or Dallas, Texas are not required to be opened.
Capital Stock shall mean (i) with respect to any Person that is a
--------------
corporation or company, any and all shares, interests, participations or other
equivalents (however designated) of capital or capital stock of such Person
and (ii) with respect to any Person that is not a corporation or company, any
and all partnership or other equity interests of such Person.
Charter shall mean, collectively, the Company s Memorandum of
-------
Association and Articles of Association, as amended.
Commission shall mean the United States Securities and Exchange
----------
Commission.
Common Shares shall mean any Ordinary Shares, par value $.01 per share,
-------------
of the Company and any Capital Stock for or into which such Common Shares
hereafter are exchanged, converted, reclassified or recapitalized by the
Company or pursuant to an agreement to which the Company is a party.
Company shall mean Triton Energy Limited, a Cayman Islands company.
-------
Constituent Person shall have the meaning set forth in subsection 5(d).
------------------
Conversion Price shall mean the conversion price per Common Share for
-----------------
which the 8% Convertible Preference Shares are convertible, as such Conversion
Price may be adjusted pursuant to Section 5. The initial conversion price
shall be $17.50 (equivalent to a conversion rate of four Common Shares for
each 8% Convertible Preference Share).
Current Market Price of Common Shares or any other class of stock or
----------------------
other security of the Company or any other issuer for any day shall mean the
last reported sales price, regular way on such day, or, if no sale takes place
on such day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York Stock Exchange (
NYSE ) or, if such security is not listed or admitted for trading on the NYSE,
- ----
on the principal national securities exchange on which such security is listed
or admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on The Nasdaq Stock Market or, if such security
is not quoted on The Nasdaq Stock Market, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System (
NASDAQ ) or, if bid and asked prices for such security on such day shall not
- ------
have been reported through NASDAQ, the average of the bid and asked prices on
such day as furnished by any NYSE member firm regularly making a market in
such security selected for such purpose by the Board of Directors or, if no
such market is regularly made, as determined by a majority of the Board of
Directors upon the advice of an independent appraiser selected by a majority
of the Board of Directors.
Dividend Payment Date shall mean a date fixed by the Board of Directors
---------------------
which date shall not be more than 5 days following the end of the applicable
Dividend Period; provided, however, that if any Dividend Payment Date falls on
-------- -------
any day other than a Business Day, the dividend payment due on such Dividend
Payment Date shall be paid on the Business Day immediately following such
Dividend Payment Date.
Dividend Periods shall mean semi-annual dividend periods commencing on
-----------------
January 1 and July 1 of each year and ending on and including June 30 and
December 31 of such year, respectively (other than the initial Dividend
Period, which shall commence on the first Issue Date and end on and include
June 30, 1999).
Dollar or $ shall mean lawful currency of the United States of
------ -
America.
First Issue Date shall mean the first date on which a share of 8%
------------------
Convertible Preference Shares is issued.
Investor shall mean the Person named as the Purchaser in the Stock
--------
Purchase Agreement or any assignee of such Person s rights under the Stock
Purchase Agreement who purchases the 8% Convertible Preference Shares pursuant
to the Stock Purchase Agreement and any assignee of such Person in accordance
with the terms of the Shareholders Agreement.
Issue Date shall mean, with respect to a share of 8% Convertible
-----------
Preference Shares, the date on which such share of the 8% Convertible
Preference Shares is issued and sold.
Junior Dividend Shares shall have the meaning set forth in Section
------------------------
3(i).
Junior Liquidation Shares shall have the meaning set forth in Section
---------------------------
3(j).
Junior Shares shall mean the Common Shares and any other class or
--------------
series of Capital Stock of the Company now or hereafter issued and outstanding
over which the 8% Convertible Preference Shares have preference or priority in
both (i) the payment of dividends and (ii) the distribution of assets on any
liquidation, dissolution or winding up of the Company; the 5% Convertible
Preference Shares shall be deemed Junior Shares for purposes of this Consent.
Liquidation Preference shall have the meaning set forth in subsection
-----------------------
4(a).
Majority in Interest of the 8% Convertible Preference Shares shall mean
------------------------------------------------------------
Persons holding of record, in the aggregate, in excess of fifty percent of the
then outstanding 8% Convertible Preference Shares.
Non-Electing Share shall have the meaning set forth in subsection 5(d).
------------------
Parity Dividend Shares shall have the meaning set forth in subsection
------------------------
3(g).
Parity Liquidation Shares shall have the meaning set forth in
---------------------------
subsection 3(h).
Parity Shares shall have the meaning set forth in subsection 8(b).
--------------
Person shall mean any individual, firm, partnership, company or other
------
entity, and shall include any successor (by merger or otherwise) of such
entity.
Preferred Stock of any Person shall mean any Capital Stock of such
----------------
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
Purchased Shares shall have the meaning set forth in subsection
-----------------
5(c)(v).
Second Closing shall have the meaning set forth in the Stock Purchase
---------------
Agreement.
Securities and Security shall have the meanings set forth in
---------- --------
subsection 5(c)(iv).
Securities Act shall mean the Securities Act of 1933, as amended, and
---------------
the rules and regulations promulgated thereunder.
Senior Shares shall have the meaning set forth in subsection 8(a).
--------------
set apart for payment shall be deemed to include, without any action by
---------------------
the Company other than the following, the recording by the Company in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to an authorization of dividends or other distribution by the Board
of Directors, the allocation of funds to be so paid on any series or class of
stock of the Company; provided, however, that if any funds for any class or
-------- -------
series of Junior Shares or any class or series of stock ranking on a parity
with the 8% Convertible Preference Shares as to the payment of dividends are
placed in a separate account of the Company or delivered to a disbursing,
paying or other similar agent, then set apart for payment with respect to
the 8% Convertible Preference Shares shall mean placing such funds in a
separate account or delivering such funds to a disbursing, paying or other
similar agent.
Shareholders Agreement means the Shareholders Agreement to be entered
-----------------------
into between the Company and Investor as provided by the Stock Purchase
Agreement.
Stock Purchase Agreement shall mean that certain Stock Purchase
--------------------------
Agreement by and between the Company and HM4 Triton, L.P., a Cayman Islands
exempted limited partnership, dated as of August __, 1998.
Subsidiary shall mean (i) a corporation or company, a majority of whose
----------
Capital Stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by the Company, by a
Subsidiary of the Company or by the Company and another Subsidiary or (ii) any
other Person (other than a corporation or company) in which the Company, one
or more Subsidiaries of the Company or the Company and one or more
Subsidiaries of the Company, directly or indirectly, at the date of
determination thereof has or have at least a majority ownership interest. For
purposes hereof, Triton International Oil Corporation and its Subsidiaries
shall be deemed Subsidiaries of the Company.
Trading Day shall mean any day on which the securities in question are
------------
traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on The Nasdaq Stock Market, or if
such securities are not quoted on The Nasdaq Stock Market, in the applicable
securities market in which the securities are traded.
Transaction shall have the meaning set forth in subsection 5(d).
-----------
Transfer Agent shall have the meaning set forth in Section 11, or such
---------------
other agent or agents of the Company as may be designated by the Board of
Directors or their designee as the transfer agent for the 8% Convertible
Preference Shares.
Section 3. Dividends.
---------
(a) The registered holders of 8% Convertible Preference Shares shall
be entitled to receive, when, as and if authorized or declared by the Board of
Directors out of funds legally available for that purpose, distributions in
the form of cash dividends on each share of 8% Convertible Preference Shares,
at a rate per annum equal to 8.0% of the Liquidation Preference per share of
the 8% Convertible Preference Shares, payable for each Dividend Period after
the Issue Date of such share of 8% Convertible Preference Shares. Such
dividends with respect to each share of 8% Convertible Preference Shares shall
begin to accumulate and shall be fully cumulative on a daily basis from the
Issue Date of such share of 8% Convertible Preference Shares, whether or not
authorized or declared by the Board of Directors and whether or not in any
Dividend Period or Dividend Periods there shall be funds of the Company
legally available for the payment of such dividends, and shall be payable
semi-annually in cash Dollars, when, as and if authorized or declared by the
Board of Directors, in arrears on Dividend Payment Dates or such other dates
as provided herein, commencing on the first Dividend Payment Date after the
Issue Date of such share of 8% Convertible Preference Shares.
(b) At the option of the Company, dividends may be paid, instead of
in cash, on declaration by the Board of Directors, by the issuance of
additional fully paid whole shares of 8% Convertible Preference Shares (the
Additional Shares ), to the extent authorized but unissued shares of 8%
-----------------
Convertible Preference Shares are legally available therefor, in respect of
any and all Dividend Payment Dates; provided that, if any dividend payable on
--------
any Dividend Payment Date is not declared or authorized and paid in full in
cash on such Dividend Payment Date, the amount payable as dividends on such
Dividend Payment Date that is not paid in cash on such Dividend Payment Date
shall be paid in Additional Shares to the extent authorized but unissued
shares of 8% Convertible Preference Shares are legally available therefor. If
a dividend is to be paid in Additional Shares, the number of Additional Shares
to be issued in payment of the dividend with respect to each outstanding share
of 8% Convertible Preference Shares shall be determined by dividing (a) the
amount of the accumulated dividend payable to each registered holder of 8%
Convertible Preference Shares on the basis of all shares held of record by
such holder as of the record date for such dividend, whether evidenced by one
or more certificates, by (b) $70.00, with amounts in respect of any partial
shares to be paid in cash by the Company, and upon payment in Additional
Shares as herein provided the dividend shall be deemed paid in full and shall
not accumulate.
(c) Each dividend shall be payable in arrears to the holders of
record of 8% Convertible Preference Shares, as they appear on the register of
members of the Company at the close of business on such record dates, not more
than 15 days preceding such Dividend Payment Dates thereof, as shall be fixed
by the Board of Directors. All dividends paid with respect to shares of 8%
Convertible Preference Shares pursuant to Sections 3(a) and 3(b) shall be paid
pro rata to the holders entitled thereto.
(d) Dividends on the 8% Convertible Preference Shares that are in
arrears and unpaid (in cash or Additional Shares) as of any Dividend Payment
Date for any Dividend Period (a Dividend Arrearage ) will cumulate as if such
------------------
dividends had been paid in Additional Shares as provided in Section 3(b) and
such Additional Shares were outstanding on each succeeding Dividend Payment
Date until such accumulated semi-annual dividends shall have been declared and
paid in cash or in Additional Shares by the Board of Directors. Any such
declaration may be for a portion, or all, of the then accumulated dividends.
In the event dividends on the 8% Convertible Preference Shares are in arrears
and unpaid for three or more Dividend Periods (whether or not consecutive),
holders of 8% Convertible Preference Shares shall be entitled to certain
voting rights as provided in subsection 9(c).
(e) Accumulated and unpaid dividends for any past Dividend Periods
may be authorized or declared and paid at any time and for such interim
periods, without reference to any regular Dividend Payment Date, to holders of
record on such date, not more than 15 days preceding the payment date thereof,
as may be fixed by the Board of Directors. Dividend payments shall be
aggregated per holder and shall be made to the nearest cent (with $.005 being
rounded upward).
(f) The amount of dividends payable per share of 8% Convertible
Preference Shares for each Dividend Period shall be computed by dividing the
annual dividend amount by two. The amount of dividends payable for the
initial Dividend Period, or any other period shorter or longer than a full
Dividend Period, on the 8% Convertible Preference Shares shall be computed on
the basis of twelve 30-day months and a 360-day year. Except as expressly
provided herein, holders of 8% Convertible Preference Shares shall not be
entitled to any dividends, whether payable in cash, property, shares or stock,
in excess of cumulative dividends (including dividends that cumulate as a
result of a Dividend Arrearage as provided in subsection 3(d)) as herein
provided on the 8% Convertible Preference Shares.
(g) So long as any 8% Convertible Preference Shares are outstanding,
no full dividends shall be authorized, declared, paid or set apart for payment
on any class or series of Parity Shares or any other class or series of the
Company s Capital Stock currently outstanding or hereafter issued ranking, as
to dividends, on a parity with the 8% Convertible Preference Shares (the
Parity Shares and any such other class or series of the Company s Capital
Stock being herein referred to as Parity Dividend Shares ) unless full
----------------------
cumulative dividends on all outstanding 8% Convertible Preference Shares for
all Dividend Periods terminating on or prior to the dividend payment date on
such class or series of Parity Dividend Shares have been or contemporaneously
are paid or declared and a sum of cash Dollars or Additional Shares sufficient
for the payment thereof set apart for such payment. If full dividends are not
so paid, all dividends declared upon shares of the 8% Convertible Preference
Shares and any other Parity Dividend Shares shall be declared pro rata so that
the amount of dividends declared per share on the 8% Convertible Preference
Shares and such Parity Dividend Shares shall in all cases bear to each other
the same ratio that accumulated and unpaid dividends per share on the 8%
Convertible Preference Shares and such Parity Dividend Shares bear to each
other. No dividends may be paid on Parity Dividend Shares except on dates on
which dividends are paid on the 8% Convertible Preference Shares for any
period.
(h) So long as any 8% Convertible Preference Shares are outstanding,
the Company shall not, directly or indirectly through any Affiliate of the
Company controlled by the Company, make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
redemption, purchase, retirement or other acquisition of any Parity Dividend
Shares or any other class or series of the Company s Capital Stock ranking on
a parity with the 8% Convertible Preference Shares as to distributions of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary (the Parity Shares and any such other class or series
of the Company s Capital Stock being herein referred to as Parity Liquidation
------------------
Shares ), and, other than dividends to the extent permitted by subsection
- ------
3(g), no distributions shall be declared, paid or set apart for payment on
shares of Parity Dividend Shares or Parity Liquidation Shares, unless full
cumulative dividends on all outstanding 8% Convertible Preference Shares for
all Dividend Periods ending on or before such payment for or setting apart for
payment on account of, or the payment date of such distributions on, such
Parity Dividend Shares or Parity Liquidation Shares have been or
contemporaneously are paid or declared and a sum of cash Dollars or Additional
Shares sufficient for the payment therefor set apart for payment.
(i) So long as any 8% Convertible Preference Shares are outstanding,
no dividends shall be authorized, declared, paid or set apart for payment or
other distribution authorized or made upon Junior Shares or any other Capital
Stock of the Company ranking junior as to dividends to the 8% Convertible
Preference Shares (the Junior Shares and any such other class or series of the
Company s Capital Stock being herein referred to as Junior Dividend Shares ),
----------------------
unless full cumulative dividends on the 8% Convertible Preference Shares for
all Dividend Periods ending on or before the dividend payment date of such
dividends on Junior Dividend Shares have been or contemporaneously are paid or
declared and a sum of cash Dollars or Additional Shares sufficient for the
payment therefor set apart for payment.
(j) So long as any 8% Convertible Preference Shares are outstanding,
the Company shall not, directly or indirectly through any Affiliate of the
Company controlled by the Company, make any payment on account of, or set
apart for payment money for a sinking or other similar fund for, the
redemption, purchase, retirement or other acquisition of any Junior Dividend
Shares or any other class or series of the Company s Capital Stock ranking
junior to the 8% Convertible Preference Shares as to distributions of assets
upon liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary (the Junior Dividend Shares and any such other class or series
of the Company s Capital Stock ranking junior to the 8% Convertible Preference
Shares as to such distributions being herein referred to as Junior
------
Liquidation Shares ) unless (i) full cumulative dividends on all outstanding
- -------------------
8% Convertible Preference Shares and any other Parity Dividend Shares shall
have been or contemporaneously are paid or declared and a sum of cash Dollars
or Additional Shares sufficient for the payment thereof set apart for payment
for all Dividend Periods with respect to the 8% Convertible Preference Shares
terminating on or before such payment for, or the setting apart for payment on
account of, such class or series of Junior Liquidation Shares and all dividend
periods with respect to such Parity Dividend Shares terminating on or before
such payment for, or the setting apart for payment on account of, such class
or series of Junior Liquidation Shares and (ii) cash Dollars or Additional
Shares sufficient for the payment of the dividend for the current Dividend
Period with respect to the 8% Convertible Preference Shares and the current
dividend period with respect to such Parity Dividend Shares shall have been
paid or set apart for the payment thereof; provided, however, that the
-------- -------
restrictions set forth in this subsection 3(j) shall not apply to the purchase
or other acquisition of Junior Liquidation Shares either (A) pursuant to any
employee or director incentive or benefit plan or arrangement of the Company
or any Subsidiary of the Company heretofore or hereafter adopted or (B) in
exchange solely for Junior Shares.
(k) Any reference to distribution contained in this Section 3 shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
Section 4. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, before any payment or distribution
of the assets of the Company shall be made to or set apart for the holders of
Junior Shares, the holders of the 8% Convertible Preference Shares shall be
entitled to be paid, out of the assets of the Company available for
distribution to its stockholders, in immediately available funds, $70.00 for
each outstanding 8% Convertible Preference Share (including outstanding
Additional Shares) (the Liquidation Preference ), plus an amount equal to all
----------------------
dividends (whether or not authorized) accumulated and unpaid thereon to the
date of final distribution to such holders; but such holders shall not be
entitled to any further payment. If, upon any liquidation, dissolution or
winding up of the Company, the assets of the Company, or proceeds thereof,
distributable among the holders of the 8% Convertible Preference Shares shall
be insufficient to pay in full the Liquidation Preference, plus an amount
equal to all dividends (whether or not authorized) accumulated and unpaid
thereon to the date of final distribution to such holders, and liquidating
payments on any other shares of any class or series of Parity Shares, then
such assets, or the proceeds thereof, shall be distributed among the holders
of 8% Convertible Preference Shares and any such other Parity Liquidation
Shares ratably in accordance with the respective amounts that would be payable
on such 8% Convertible Preference Shares and any such other Parity Liquidation
Shares if all amounts payable thereon were paid in full. The holders of 8%
Convertible Preference Shares shall be entitled to notice in advance of any
liquidation, dissolution or winding up of the Company as provided in
subsection 5(e). For the purposes of this Section 4, (i) a consolidation,
merger or scheme of arrangement of the Company with one or more entities, (ii)
a sale or transfer of all or substantially all of the Company s assets, or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Company.
(b) Subject to the rights of the holders of any Parity Liquidation
Shares or any shares of any series or class or classes of stock ranking prior
to the 8% Convertible Preference Shares upon liquidation, dissolution or
winding up of the Company, after payment shall have been made in full to the
holders of the 8% Convertible Preference Shares, as provided in this Section
4, any other series or class or classes of Junior Shares shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the
holders of the 8% Convertible Preference Shares shall not be entitled to share
therein.
Section 5. Conversion. 8% Convertible
-----------
Preference Shares shall be subject to conversion, at the option of the holder,
into Common Shares, as follows:
(a) Conversion Right. Subject to and upon compliance with the
-----------------
provisions of this Section 5, a holder of 8% Convertible Preference Shares
shall have the right, at his, her or its option, at any time prior to the
close of business on the fifth Business Day prior to the date fixed for
redemption of such shares as herein provided, to convert all or any part of
such shares into the number of fully paid and non-assessable Common Shares
obtained by dividing the aggregate Liquidation Preference of such shares by
the Conversion Price (as in effect at the time and on the date provided for in
the last paragraph of this subsection 5(a)). In the event the shares of 8%
Convertible Preference Shares are called for redemption pursuant to Section 6,
the right of conversion provided herein shall terminate at the close of
business on the fifth Business Day prior to the date fixed for redemption
unless the Company shall default in making the payment due upon redemption
thereof.
In order to exercise such conversion right, the holder of each 8%
Convertible Preference Share to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Company or in blank,
at the office of the Transfer Agent, accompanied by written notice to the
Company that the holder thereof elects to convert such 8% Convertible
Preference Shares. Unless the Common Shares issuable on conversion are to be
issued in the same name as the name in which such 8% Convertible Preference
Share is registered, each share surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Company,
duly executed by the holder or such holder s duly authorized attorney and an
amount sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Company demonstrating that such taxes have been paid).
Holders of 8% Convertible Preference Shares at the close of business on a
dividend payment record date shall be entitled to receive the dividend payable
on such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date on or prior to
such Dividend Payment Date.
As promptly as practicable after the surrender of certificates for 8%
Convertible Preference Shares as aforesaid, the Company shall issue and shall
deliver at such office to such holder, or on his or her written order, a
certificate or certificates for the number of full Common Shares issuable upon
the conversion of such shares in accordance with provisions of this Section 5,
and any fractional interest in respect of a Common Share arising upon such
conversion shall be settled as provided in subsection 5(b).
Upon the conversion of any 8% Convertible Preference Shares as provided
in this subsection 5(a), the holder of each 8% Convertible Preference Share
converted also shall be entitled to receive an amount, in cash Dollars, equal
to all dividends (whether or not authorized or declared) accumulated and
unpaid on each share of 8% Convertible Preference Share converted by such
holder, including dividends accrued pursuant to subsection 3(d) as a result of
a Dividend Arrearage, up to and including the effective date of conversion as
provided in the last paragraph of this subsection 5(a). Such cash amount
shall be paid to the holder of the 8% Convertible Preference Shares to which
such dividends relate on or before the fifth Business Day after the effective
date of such conversion.
Each conversion shall be deemed to have been effected immediately
following the close of business on the date on which the certificates for 8%
Convertible Preference Shares shall have been surrendered and such notice
received by the Company as aforesaid, and the person or persons in whose name
or names any certificate or certificates for Common Shares shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time on such
date unless the register of members of the Company shall be closed for
transfer on that date, in which event such person or persons shall be deemed
to have become such holder or holders of record at the close of business on
the next succeeding day on which such register of members is open, but such
conversion shall be at the Conversion Price in effect on the date on which
such shares shall have been surrendered and such notice received by the
Company.
(b) No Fractional Shares. No fractional shares or scrip representing
--------------------
fractions of Common Shares shall be issued upon conversion of the 8%
Convertible Preference Shares. Instead of any fractional interest in a Common
Share that would otherwise be deliverable upon the conversion of a 8%
Convertible Preference Share, the Company shall pay to the holder of such
share an amount in cash based upon the Current Market Price of Common Shares
on the Trading Day immediately preceding the date of conversion. If more than
one share shall be surrendered for conversion at one time by the same holder,
the number of full Common Shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of 8% Convertible Preference
Shares so surrendered.
(c) Conversion Price Adjustments. The Conversion Price shall be
----------------------------
adjusted from time to time as follows:
(i) If at any time after the first Issue Date, the Company shall
issue for cash or other consideration Common Shares or any security
convertible into or exchangeable or exercisable for Common Shares at a price
per Common Share, calculated by including the aggregate proceeds to the
Company upon issuance and any additional consideration payable to the Company
upon any such conversion, exchange or exercise (in each case before deduction
of any discounts, commissions, fees and other expenses of issuance and
marketing), that is less than the Current Market Price of Common Shares as of
the opening of business on the date of issuance, then the Conversion Price in
effect at the close of business on the day immediately preceding such issuance
shall be adjusted, effective as of the time of such issuance, to equal the
price determined by multiplying (A) the Conversion Price in effect at the
close of business on the day immediately preceding such issuance by (B) a
fraction, the numerator of which shall be the sum of (1) the number of Common
Shares outstanding immediately prior to such issuance and (2) the number of
shares that the aggregate proceeds to the Company from such issuance
(including any additional consideration per Common Share payable to the
Company upon any such conversion, exchange or exercise (before deduction of
any discounts, commissions, fees and other expenses of issuance and
marketing)) would purchase at such Current Market Price, and the denominator
of which shall be the sum of (1) the number of Common Shares outstanding
immediately prior to such issuance and (2) the number of additional Common
Shares issued or subject to issuance upon the conversion, exchange or exercise
of such securities issued.
For the purposes of this subsection 5(c)(i), the issuance by the Company
of securities convertible into or exchangeable or exercisable for Common
Shares shall be deemed to involve the immediate issuance of the maximum number
of Common Shares issuable upon the conversion, exchange or exercise of such
securities for a consideration equal to the minimum aggregate consideration
receivable by the Company upon such conversion, exchange or exercise. In the
event that securities are issued by the Company that result in an adjustment
to the Conversion Price pursuant to this subsection 5(c)(i) and such
securities are not converted, exchanged or exercised prior to the expiration
of the right of the holders of such securities to effect any such action, then
immediately upon such expiration the Conversion Price shall be recomputed (but
such redetermination shall not affect the Conversion Price of any 8%
Convertible Preference Shares that have been converted prior to such
expiration) and effective immediately upon such expiration shall be increased
to the price which it would have been (but reflecting any other adjustments in
the Conversion Price made pursuant to the other provisions of this subsection
5(c) after the issuance of such securities) had such adjustment to the
Conversion Price not been made. For purposes of this subsection 5(c)(i), if
shares are issued for consideration all or part of which is other than cash,
the amount of such non-cash consideration shall be deemed to be the value
thereof as determined by a majority of the Board of Directors based on the
advice of an independent appraiser selected by a majority of the Board of
Directors. The provisions of this subsection 5(c)(i) shall not be applicable
to: (i) any issuance for which an adjustment to the Conversion Price is
provided under any other subclause of this subsection 5(c), (ii) any issuance
of Common Shares upon actual exercise, exchange or conversion of any
securities if the Conversion Price was fully and properly adjusted at the time
such securities were issued or if no such adjustment was required hereunder at
the time such securities were issued , (iii) the issuance of Additional
Shares, the issuance of additional 8% Convertible Preference Shares at a per
share price equal to or greater than the Liquidation Preference or the
issuance of Common Shares upon conversion of outstanding 8% Convertible
Preference Shares, (iv) the issuance of options, warrants or restricted shares
of Common Shares to members of the management of the Company or its
Subsidiaries pursuant to management incentive plans or employee stock
compensation plans as in effect prior to the First Closing Date or approved by
the affirmative vote of a majority of the Board of Directors after the first
Issue Date or the issuance of any Common Shares upon the exercise of such
stock options or warrants or upon the exercise of any other options or
warrants of the Company outstanding as of the date of the Stock Purchase
Agreement in accordance with the terms thereof as in effect as of the date of
the Stock Purchase Agreement or (v) the issuance of any 8% Convertible
Preference Share purchase rights as contemplated by Section 4.2 of the Stock
Purchase Agreement. All Common Shares issued and all Common Shares reserved
for issuance pursuant to any outstanding convertible securities (including the
8% Convertible Preference Shares), warrants, rights or options deemed not to
constitute an issuance pursuant to the previous sentence shall nevertheless be
deemed to be outstanding for all computations pursuant to this Section 5(c)
until such shares are no longer outstanding or such convertible securities,
warrants, rights or options shall expire, as applicable.
(ii) If the Company shall after the first Issue Date pay a dividend
or make a distribution on any class or series of its shares or Capital Stock
in the form of an issue of Common Shares or any security convertible into or
exercisable or exchangeable for Common Shares, then the Conversion Price in
effect at the opening of business on the Business Day next following the date
fixed for the determination of stockholders entitled to receive such dividend
or distribution shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect immediately prior to the opening of
business on the Business Day next following the date fixed for such
determination by (B) a fraction, the numerator of which shall be the number of
Common Shares outstanding on the close of business on the date fixed for such
determination and the denominator of which shall be the sum of (1) the number
of Common Shares outstanding on the close of business on the date fixed for
such determination and (2) the number of Common Shares constituting such
dividend or distribution, including the number of additional Common Shares
issuable pursuant to such convertible, exercisable or exchangeable
securities. Such adjustment shall become effective immediately after the
opening of business on the day next following such record date (except as
provided in subsection 5(f) below).
(iii) If the Company shall after the first Issue Date (A) subdivide
its outstanding Common Shares into a greater number of shares, (B) combine its
outstanding Common Shares into a smaller number of shares or (C) issue any
Capital Stock by reclassification of its Common Shares, the Conversion Price
in effect at the opening of business on the day following the date fixed for
the determination of shareholders entitled to receive such dividend or
distribution or at the opening of business on the Business Day next following
the day on which such subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the holder of any 8%
Convertible Preference Share thereafter surrendered for conversion shall be
entitled to receive the number of such securities that such holder would have
owned or have been entitled to receive after the happening of any of the
events described above as if such 8% Convertible Preference Shares had been
converted immediately prior to the effective date of such subdivision,
combination or reclassification. An adjustment made pursuant to this
subparagraph (iii) shall become effective immediately prior to the opening of
business on the Business Day next following the record date (except as
provided in subsection 5(f) below) in the case of a dividend or distribution
and shall become effective immediately prior to the opening of business on the
Business Day next following the effective date in the case of a subdivision,
combination or reclassification.
(iv) If the Company shall after the first Issue Date issue rights,
options, warrants or other instruments to all holders of Common Shares or any
other class or series of Capital Stock of the Company entitling them to
subscribe for or purchase Common Shares at a price per share less than the
Current Market Price per Common Share on the record date for the determination
of shareholders entitled to receive such rights, options, warrants or
instruments, then the Conversion Price in effect at the opening of business on
the Business Day next following such record date shall be adjusted to equal
the price determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the Business Day next
following the date fixed for such determination by (B) a fraction, the
numerator of which shall be the sum of (1) the number of Common Shares
outstanding on the close of business on the date fixed for such determination
and (2) the number of shares that the aggregate proceeds to the Company from
the exercise of such rights, options, warrants or instruments for Common
Shares would purchase at such Current Market Price, and the denominator of
which shall be the sum of (1) the number of Common Shares outstanding on the
close of business on the date fixed for such determination and (2) the number
of additional Common Shares offered for subscription or purchase pursuant to
such rights, options, warrants or other instruments. Such adjustment shall
become effective immediately after the opening of business on the day next
following such record date (except as provided in subsection 5(f) below). In
determining whether any rights, options, warrants or instruments entitle the
holders of Common Shares to subscribe for or purchase Common Shares at such
Current Market Price, there shall be taken into account any consideration
received by the Company upon issuance and upon exercise of such rights,
options, warrants or instruments, the value of such consideration, if other
than cash, to be determined by a majority of the Board of Directors based on
the advice of an independent appraiser selected by a majority of the Board of
Directors. In case any rights or warrants referred to in this subsection
5(c)(iv) in respect of which an adjustment shall have been made shall expire
unexercised after the same shall have been distributed or issued by the
Company, the Conversion Price shall be readjusted at the time of such
expiration to the Conversion Price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants (but such redetermination shall not affect the
Conversion Price of any 8% Convertible Preference Shares that have been
converted prior to such expiration).
(v) If the Company shall distribute to all holders of its Common
Shares evidence of its indebtedness, any shares of any class or series of
Capital Stock of the Company, cash or assets (including all rights, options,
warrants or any other instrument entitling such holders to subscribe for or
purchase any securities of the Company, but excluding Common Shares or any
securities the distribution of which would require an adjustment under
subsection(s) 5(c)(ii), (iii) or (iv)) (collectively, Securities and,
----------
individually, a Security ), then in each case the Conversion Price shall be
--------
adjusted so that it shall equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to receive such
distribution by (B) a fraction, the numerator of which shall be the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by a majority of the Board of Directors based
on the advice of an independent appraiser selected by a majority of the Board
of Directors) of the portion of the shares or assets or evidences of
indebtedness so distributed or of such rights or warrants applicable to one
Common Share, and the denominator of which shall be the Current Market Price
per Common Share on the record date mentioned below. Such adjustment shall
become effective immediately prior to the opening of business on the Business
Day next following (except as provided in subsection 5(f) below) the record
date for the determination of shareholders entitled to receive such
distribution. For the purposes of this subsection 5(c)(v), the distribution
of a Security which is distributed not only to the holders of the Common
Shares on the date fixed for the determination of shareholders entitled to
such distribution of such Security, but also is distributed with each Common
Share delivered to a Person converting a 8% Convertible Preference Share after
such determination date, shall not require an adjustment of the Conversion
Price pursuant to this subsection 5(c)(v); provided that on the date, if any,
--------
on which a Person converting a 8% Convertible Preference Share would no longer
be entitled to receive such Security with a Common Share (other than as a
result of the termination of all such Securities), a distribution of such
Securities shall be deemed to have occurred and the Conversion Price shall be
adjusted as provided in this subsection 5(c)(v) (and such day shall be deemed
to be the date fixed for the determination of the shareholders entitled to
receive such distribution and the record date within the meaning of the two
preceding sentences).
(vi) No adjustment in the Conversion Price pursuant to any provision
of this Section 5 shall be required unless such adjustment would require a
cumulative increase or decrease of at least 1% in such price; provided,
--------
however, that any adjustments that by reason of this subsection 5(c)(vi) are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment until made; and provided, further, that any adjustment
-------- -------
shall be required and made in accordance with the provisions of this Section 5
(other than this subsection 5(c)(vi)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to the
holders of Common Shares. Notwithstanding any other provisions of this
Section 5, the Company shall not be required to make any adjustment of the
Conversion Price for the issuance of any Common Shares pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities
of the Company and the investment of additional optional amounts in Common
Shares under such plan. All calculations under this Section 5 shall be made
to the nearest cent (with $.005 being rounded upward) or to the nearest
one-tenth of a share (with .05 of a share being rounded upward), as the case
may be. Anything in this subsection 5(c) to the contrary notwithstanding, the
Company will, to the extent permitted by law, make such reductions in the
Conversion Price, in addition to those required by this subsection 5(c), as
the Board of Directors in its good faith discretion shall determine to be
necessary in order that any subdivision of shares, reclassification or
combination of shares, distribution of rights or warrants to purchase shares
or securities, or a distribution of other assets (other than cash dividends)
hereafter made by the Company to its shareholders shall not be taxable.
(vii) Any direct or indirect reduction in the exercise or conversion
price of any outstanding option, warrant, right or other instrument entitling
the holder thereof to subscribe for or purchase, by exercise, exchange,
conversion or otherwise, any Common Shares shall be deemed a new issuance of
such derivative security to the extent of such reduction; provided, however,
-------- -------
that any adjustment to the exercise or conversion price of (A) convertible or
exchangeable securities (including the 5% Convertible Preference Shares of the
Company), warrants, rights or options outstanding as of the date of the Stock
Purchase Agreement as a result of the exercise or conversion adjustment
provisions contained in the instruments governing the terms of such securities
as in effect as of the date of the Stock Purchase Agreement or (B) convertible
or exchangeable securities, warrants, rights or options issued after the date
of the Stock Purchase Agreement (x) as a result of the exercise or conversion
adjustment provisions contained in the instruments governing the terms of such
Securities or (y) in the case of any options or warrants described in clause
(iv) of subsection 5.1(c)(i), upon approval of a majority of the Board of
Directors, in any case shall not be deemed a new issuance of such securities
and shall not require an adjustment to the Conversion Price pursuant to this
Section 5.
(viii) In the event that, at any time after the first Issue Date, any
adjustment is made to the Conversion Price of the 8% Convertible Preference
Shares pursuant to this Section 5, such adjustment to the Conversion Price
shall be applicable with respect to all then outstanding 8% Convertible
Preference Shares and all 8% Convertible Preference Shares issued after the
date of the event causing such adjustment to the Conversion Price (including
all Additional Shares).
(d) If the Company shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, self
tender offer for or scheme of arrangement involving or relating to all or
substantially all Common Shares, a sale of all or substantially all of the
Company s assets or a recapitalization or reclassification of the Common
Shares and excluding any transaction as to which subparagraph (c)(ii) of this
Section 5 applies) (each of the foregoing being referred to herein as a
Transaction), in each case as a result of which all or substantially all
- -----------
Common Shares are converted into the right to receive shares, securities or
other property (including cash or any combination thereof), each 8%
Convertible Preference Share, which is not converted into the right to receive
shares, securities or other property prior to such Transaction, shall
thereafter be convertible into the kind and amount of shares, securities and
other property (including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of Common Shares
into which one 8% Convertible Preference Share was convertible immediately
prior to such Transaction, assuming such holder of Common Shares (i) is not a
Person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made, as
the case may be ( Constituent Person ), or an affiliate of a Constituent
-------------------
Person or (ii) failed to exercise his rights of election, if any, as to the
kind or amount of shares, securities and other property (including cash)
receivable upon such Transaction (provided if the kind or amount of shares,
securities and other property (including cash) receivable upon such
Transaction is not the same for each Common Share held immediately prior to
such Transaction by other than a Constituent Person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
( Non-Electing Share ), then for the purpose of this subsection 5(d) the kind
------------------
and amount of shares, securities and other property (including cash)
receivable upon such Transaction by each holder of a Non-Electing Share shall
be deemed to be the kind and amount so receivable per share by holders of a
plurality of the Non-Electing Shares). The Company shall not be a party to
any Transaction unless the terms of such Transaction are consistent with the
provisions of this subsection 5(d), and it shall not consent or agree to the
occurrence of any Transaction until the Company has entered into an agreement
with the successor or purchasing entity, as the case may be, for the benefit
of the holders of the 8% Convertible Preference Shares that will contain
provisions enabling the holders of the 8% Convertible Preference Shares that
remain outstanding after such Transaction to convert into the consideration
(determined as provided in this subsection 5(d)) received by holders of Common
Shares at the Conversion Price in effect immediately prior to such
Transaction. The provisions of this subsection 5(d) shall similarly apply to
successive Transactions.
(e) If, subject to the limitations set forth in Section 3 above:
(i) the Company shall (1) declare any dividend (or any other
distribution) on Common Shares, other than (A) a dividend payable in Common
Shares or (B) a dividend payable in cash out of its retained earnings other
than any special or nonrecurring or other extraordinary dividend or (2)
declare or authorize a redemption or repurchase of in excess of 10% of the
then-outstanding Common Shares; or
(ii) the Company shall authorize the granting to the holders of
Common Shares of rights, options or warrants to subscribe for or purchase any
shares of any class or series or of any other rights, options or warrants; or
(iii) there shall be any recapitalization or reclassification of the
Common Shares (other than an event to which subsection (c)(ii) of this Section
5 applies) or any consolidation or merger to which the Company is a party and
for which approval of any shareholders of the Company is required, or a
statutory share exchange by the Company for all or substantially all of its
outstanding Common Shares or the sale or transfer of all or substantially all
of the assets of the Company as an entirety; or
(iv) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Company,
then the Company shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of the 8% Convertible Preference Shares at
the addresses of such holders as shown on the register of members of the
Company, as promptly as possible, but at least 10 Business Days prior to the
applicable date hereinafter specified, a notice stating (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or
granting of rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Shares of record to be entitled to
such dividend, distribution or rights, options or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, liquidation, dissolution or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Shares of record shall be entitled to exchange
their Common Shares for securities or other property, if any, deliverable upon
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up. Failure to give or receive
such notice or any defect therein shall not affect the legality of validity of
the proceedings described in this Section 5.
(f) In any case in which subsection 5(c) provides that an adjustment
shall become effective on the day next following the record date for an event,
the Company may defer until the occurrence of such event (A) issuing to the
holder of any 8% Convertible Preference Share converted after such record date
and before the occurrence of such event the additional Common Shares issuable
upon such conversion by reason of the adjustment required by such event over
and above the Common Shares issuable upon such conversion before giving effect
to such adjustment and (B) paying to such holder any amount of cash in lieu of
any fraction pursuant to subsection 5(b).
(g) There shall be no adjustment of the Conversion Price in case of
the issuance of any shares of the Company in a reorganization, acquisition or
other similar transaction except as specifically set forth in this Section 5.
If any action or transaction would require adjustment of the Conversion Price
pursuant to more than one paragraph of this Section 5, only one adjustment
shall be made and such adjustment shall be the amount of adjustment that has
the highest absolute value.
(h) The Company covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Shares, for the purpose of effecting conversion of the 8%
Convertible Preference Shares, the full number of Common Shares deliverable
upon the conversion of all outstanding 8% Convertible Preference Shares not
theretofore converted. For purposes of this subsection 5(h), the number of
Common Shares that shall be deliverable upon the conversion of all outstanding
8% Convertible Preference Shares shall be computed as if at the time of
computation all such outstanding shares were held by a single holder.
The Company covenants that any Common Shares issued upon conversion of
the 8% Convertible Preference Shares shall be validly issued, fully paid and
non-assessable. Before taking any action that would cause an adjustment
reducing the Conversion Price below the then-par value of the Common Shares
deliverable upon conversion of the 8% Convertible Preference Shares, the
Company will take any corporate or other action that, in the opinion of its
counsel, may be necessary in order that the Company may validly and legally
issue fully paid and (subject to any customary qualification based upon the
nature of a business trust) non-assessable Common Shares at such adjusted
Conversion Price.
The Company shall use all commercially reasonable efforts to list the
Common Shares required to be delivered upon conversion of the 8% Convertible
Preference Shares, prior to such delivery, upon each national securities
exchange, if any, upon which the outstanding Common Shares are listed at the
time of such delivery.
Prior to the delivery of any securities that the Company shall be
obligated to deliver upon conversion of the 8% Convertible Preference Shares,
the Company shall use its best efforts to comply with all federal and state
laws and regulations thereunder requiring the registration of such securities
with, or any approval of or consent to the delivery thereof by, any
governmental authority.
(i) The Company will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of Common
Shares or other securities or property on conversion of the 8% Convertible
Preference Shares pursuant hereto; provided, however, that the Company shall
-------- -------
not be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of Common Shares or other securities or
property in a name other than that of the holder of the 8% Convertible
Preference Shares to be converted, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has paid to the
Company the amount of any such tax or established, to the reasonable
satisfaction of the Company, that such tax has been paid.
Section 6. Redemption at the Option of the CompanySection 6.
----------------------------------------------------
(a) Right of Redemption. The 8% Convertible Preference Shares may
-------------------
not be redeemed by the Company prior to the third anniversary of the initial
Issue Date (the First Redemption Date ). From and after the First Redemption
---------------------
Date, the Company shall have the right and option (provided it has sufficient
funds legally available therefor), but not the obligation, to elect to redeem
all, but not less than all, of the then outstanding shares of 8% Convertible
Preference Shares at any time that the Average Market Value per Common Share
is equal to or greater than the Average Market Value per Common Share which
corresponds to the date on which notice of such redemption is given as set
forth on Schedule A attached hereto. Any redemption of the 8% Convertible
-----------
Preference Shares pursuant to this Section 6 shall be for an amount payable in
immediately available funds equal to $70.00 per share plus an amount in
immediately available funds equal to all per share accumulated and unpaid
dividends on the 8% Convertible Preference Shares, whether or not authorized
or declared, to and including the date fixed for redemption, such sum being
hereinafter referred to as the Redemption Price ). Such election shall be
----------------
made by the Company giving written notice thereof (the Redemption Notice ) to
-----------------
each holder of record of 8% Convertible Preference Shares. The date of the
Redemption Notice is referred to herein as the Call Date.
----------
(b) Redemption Procedures.
----------------------
(i) The Redemption Notice shall be given by first class mail, postage
prepaid, to each holder of record of the 8% Convertible Preference Shares at
its last address as shown up on the register of members of the Company, and
shall specify the date fixed for redemption (which shall be no less than 30
nor more than 60 days after the date of the Redemption Notice), the Redemption
Price, the place or places of payment, that payment will be made upon
presentation and surrender of the certificates representing the 8% Convertible
Preference Shares, that after the date fixed for redemption dividends will
cease to accumulate on such shares, the Conversion Price in effect on the Call
Date, and that the right of holders to convert 8% Convertible Preference
Shares shall terminate at the close of business on the fifth Business Day
prior to the date fixed for redemption (unless the Company defaults in the
payment of the Redemption Price). Any notice that is mailed as herein
provided shall be conclusively presumed to have been duly given, whether or
not the holder of 8% Convertible Preference Shares receives such notice.
(ii) On or after the date fixed for redemption as stated in the
Redemption Notice, each holder of the shares called for redemption shall
surrender the certificate representing such shares to the Company at the place
designated in such notice and shall thereupon be entitled to receive payment
of the Redemption Price.
(iii) Redemption Notice having been given as aforesaid, if, on the
date fixed for redemption, funds necessary for the redemption shall be
available therefor and shall have been deposited with a bank or trust company
with irrevocable instructions and authority to pay the Redemption Price to the
holders of the 8% Convertible Preference Shares, then, notwithstanding that
the certificates representing any such shares called for redemption shall not
have been surrendered, dividends with respect to the shares so called shall
cease to accumulate after the date fixed for redemption, such shares shall no
longer be deemed outstanding, the holders thereof shall cease to be
shareholders of the Company, and all rights whatsoever with respect to the
shares so called for redemption (except the right of the holders to receive
the Redemption Price without interest upon surrender of their certificates
therefor) shall terminate.
(iv) Any defect in the Redemption Notice, or any failure to give such
notice by mail to any holder of 8% Convertible Preference Shares, shall not
affect the validity of the proceedings for the redemption of any other 8%
Convertible Preference Shares, and the Company shall be obligated to redeem
the shares of 8% Convertible Preference Shares of those holders to whom
defective or no Redemption Notice was given upon presentment and surrender of
the certificates representing their 8% Convertible Preference Shares on or
after the date fixed for redemption.
(v) In the event that any shares of 8% Convertible Preference Shares
shall be converted into Common Shares pursuant to Section 5, then (A) the
Company shall not have the right to redeem such shares and (B) any funds which
shall have been deposited for the payment of the Redemption Price for such
shares shall be returned to the Company immediately after such conversion.
Section 7. Shares to Be Retired.
--------------------
All 8% Convertible Preference Shares which shall have been issued and
reacquired in any manner by the Company shall be restored to the status of
authorized but unissued shares of the capital of the Company, without
designation as to class or series.
Section 8. Ranking. Any class or series of
-------
Capital Stock of the Company shall be deemed to rank:
(a) prior to the 8% Convertible Preference Shares, as to the payment
of dividends or as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class or series shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in preference or priority to the holders of
8% Convertible Preference Shares ( Senior Shares );
--------------
(b) on a parity with the 8% Convertible Preference Shares, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof be different from
those of the 8% Convertible Preference Shares, if the holders of such class or
series of Capital Stock and the 8% Convertible Preference Shares shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in proportion to their respective
amounts of accumulated and unpaid dividends per share or Liquidation
Preferences, without preference or priority one over the other
(Parity Shares);
-------------
(c) junior to the 8% Convertible Preference Shares, as to the payment
of dividends, if such class or series of Capital Stock shall be Junior
Dividend Shares; and
(d) junior to the 8% Convertible Preference Shares, as to the
distribution of assets upon liquidation, dissolution or winding up, if such
class or series of Capital Stock shall be Junior Liquidation Shares.
Section 9. Voting.
------
(a) General. For purposes of the provisions of this Section 9, each
-------
8% Convertible Preference Share shall have one (1) vote per share, except that
when the 8% Convertible Preference Shares and the Common Shares shall vote
together as a single class, then each holder of the 8% Convertible Preference
Shares shall be entitled to the number of votes with respect to such holder s
8% Convertible Preference Shares equal to the number of whole shares of Common
Stock into which such shares would have been converted at the Conversion Price
in effect on the record date for determining shareholders entitled to vote on
such matters.
(b) Voting Rights. The holders of 8% Convertible Preference Shares
-------------
shall vote together as a single class with the holders of the Common Shares on
an as converted basis as provided in subsection 9(a) on all matters submitted
to a vote of the holders of the Common Shares. Except as provided in the
immediately preceding sentence and in subsection 9(c), holders of 8%
Convertible Preference Shares shall have no voting rights except as required
by the Charter and applicable law.
(c) Class Directors. If and whenever three or more semi-annual
----------------
dividends (whether or not consecutive) payable on the 8% Convertible
Preference Shares shall be in arrears (which shall, with respect to any such
semi-annual dividend, mean that any such dividend has not been paid in full),
whether or not authorized, the number of directors then constituting the Board
of Directors shall be increased by two and the holders of the 8% Convertible
Preference Shares, voting separately as a class, shall be entitled to elect
two additional directors to serve on the Board of Directors at any annual
meeting of shareholders or extraordinary meeting held for the purpose of
electing directors, or at an extraordinary meeting of the holders of the
8%Convertible Preference Shares called as hereinafter provided for the purpose
of electing directors. At the next annual meeting of shareholders of the
Company following any such election and each succeeding annual meeting, for so
long as all arrears in dividends on the 8% Convertible Preference Shares then
outstanding have not been paid and the holders of 8% Convertible Preference
Shares elect to exercise such right, the holders of 8% Convertible Preference
Shares, voting separately as a class, shall have the right to elect two
directors to the Board of Directors. Whenever all arrears in dividends on the
8% Convertible Preference Shares then outstanding shall have been paid, then
the right of the holders of the 8% Convertible Preference Shares to elect such
additional directors shall cease (but subject always to the same provision for
the vesting of such voting rights in the case of any similar future arrearages
in three or more semi-annual dividends), and the terms of office of all
persons elected as directors to the two directorships created as provided in
this subsection 9(c) shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. The directors elected pursuant to
this subsection 9(c) shall hold office until the earlier of (i) the next
annual meeting of the shareholders or extraordinary meeting held for the
purpose of electing directors, (ii) the next extraordinary meeting of the
holders of the 8% Convertible Preference shares called as hereinafter provided
for the purpose of electing directors, (iii) the resignation, death or removal
of such 8% Preferred Director or (iv) the date on which such office shall
terminate as above provided. If any vacancy shall occur among the directors
elected by the holders of the 8% Convertible Preference Shares pursuant to
this Section 9(c), a successor may be elected by the Board of Directors in
accordance with the Articles of Association to serve for the term of such
Person s predecessor.
(d) Procedure; Action Without Meeting. At any time the power to
---------------------------------
elect directors as representatives of the holders of the 8% Convertible
Preference Shares shall have been vested in the holders of 8% Convertible
Preference Shares as provided in subsection 9(c), the Secretary of the Company
may, and upon the written request of a holder or holders of 8% Convertible
Preference Shares representing at least 10% of the then outstanding 8%
Convertible Preference Shares (addressed to the Secretary at the principal
office of the Company) shall, call an extraordinary meeting of the holders of
the 8% Convertible Preference Shares for the election of the director or
directors to be elected pursuant to subsections 9(c), such call to be made by
notice similar to that provided in the Articles of Association for an
extraordinary meeting of the shareholders or as required by law. If any such
extraordinary meeting required to be called as above provided shall not be
called by the Secretary within 10 days after receipt of any such request, then
any holder or holders of 8% Convertible Preference Shares representing at
least 10% of the then outstanding 8% Convertible Preference Shares may call
such meeting, upon the notice above provided, and for that purpose shall have
access to the register of members of the Company.
Section 10. Record Holders. The
--------------
Company and the Transfer Agent shall deem and treat the record holder of any
8% Convertible Preference Shares as the true and lawful owner thereof for all
purposes, and neither the Company nor the Transfer Agent shall be affected by
any notice to the contrary.
Section 11. Transfer Agent. ________________ is hereby
--------------
appointed Transfer Agent for the 8% Convertible Preference Shares.
AND BE IT FURTHER RESOLVED, that any documents heretofore executed or
lawful actions heretofore taken by any of the officers of the Company in
connection with the transactions herein described are hereby ratified,
confirmed and approved in all respects; and further
RESOLVED, that these resolutions may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
EXECUTED as of the ________ day of _________________, 1998.
__________________________________________
___________________________________________
___________________________________________
___________________________________________
SCHEDULE A
-----------
Redemption Date Average Market Value
- ----------------------------- --------------------
First Redemption Date ( FRD )
---
through [FRD + 6 months] $ 28.54
[FRD + 6 months] through
[FRD + 12 months] $ 31.14
[FRD + 12 months] through
[FRD + 18 months] $ 34.20
[FRD + 18 months] through
[FRD + 24 months] $ 37.58
[FRD + 24 months] through
[FRD + 30 months] $ 32.57
[FRD + 30 months] through
[FRD + 36 months] $ 34.97
[FRD + 36 months] through
[FRD + 42 months] $ 37.60
From and after [FRD + 42 months] for so long as any 8% Convertible Preference
Shares are outstanding, the Average Market Value shall be increased as of each
six month anniversary of such date occurring thereafter, which Average Market
Value shall be in effect from and after such date until the Average Market
Value is recalculated as of the next six month anniversary of such date, and
shall be calculated using the same methodologies as the Average Market Value
was calculated as set forth on this Schedule A so that each Average Market
----------
Value, as of the date of determination, would result in a holder purchasing a
share of 8% Convertible Preference Shares as of the First Issue Date
recognizing an internal rate of return of 20% if such share were redeemed by
the Company as of such date of determination.
Average Market Value will be subject to equitable proportionate adjustments in
the event of any event described in subsection 5.1(c)(iii) or similar event.
EXHIBIT D
---------
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this Agreement ), dated as of ___________,
1998, is entered into by and between Triton Energy Limited, a Cayman Islands
company (the Company ), and HM4 Triton, L.P., a Cayman Islands exempted
limited partnership (the Purchaser ).
In consideration of the obligations of the Company and Purchaser under
the Stock Purchase Agreement (as hereinafter defined), the premises, mutual
covenants and agreements hereinafter contained and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1.1 Definitions.
------------
8% Preference Shares means the 8% Convertible Preference Shares of the
Company, par value $.01 per share.
8% Preference Shares Authorization means the unanimous written consent
of the Board authorizing the 8% Preference Shares dated _____________, 1998.
"Advice" shall have the meaning provided in Section 2.5 hereof.
"Affiliate" means, with respect to any Person, any Person who, directly or
indirectly, controls, is controlled by or is under common control with that
Person.
"Agreement" means this Shareholders Agreement, as such from time to time
may be amended.
"Asset Acquisition" shall mean (i) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or shall be consolidated or merged
with the Company or any Subsidiary of the Company or (ii) the acquisition by
the Company or any Subsidiary of the Company of assets of any Person
comprising a division, line of business or substantial portion of the assets
of such Person.
"Asset Sale" shall mean any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by the
Company or any of its Subsidiaries (excluding any Sale and Leaseback
Transaction or any pledge of assets or stock by the Company or any of its
Subsidiaries) to any Person other than the Company or a wholly owned
Subsidiary of the Company of (i) any Capital Stock of any Subsidiary of the
Company or (ii) any other property or assets of the Company or any Subsidiary
of the Company other than in the ordinary course of business.
"Board" means the board of directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which state or federally chartered banking institutions in New York City,
New York or Dallas, Texas are not required to be opened.
"Commodity Agreement" shall mean any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by the
Company or any of its Subsidiaries designed to protect the Company or any of
its Subsidiaries against fluctuations in the price of commodities actually
used or bought or sold in the ordinary course of business of the Company and
its Subsidiaries.
"Common Stock" means the ordinary shares, $0.01 par value per share, of
the Company, and any shares or capital stock for or into which such Common
Stock hereafter is exchanged, converted, reclassified or recapitalized by the
Company or pursuant to an agreement to which the Company is a party.
"Common Stock Equivalents" means, without duplication with any other
Common Stock or Common Stock Equivalents, any rights, warrants, options,
convertible securities or indebtedness, exchangeable securities or
indebtedness, or other rights, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock of the Company and securities
convertible or exchangeable into Common Stock of the Company, whether at the
time of issuance or upon the passage of time or the occurrence of some future
event.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Consolidated EBITDA" shall mean, with respect to any Person, for any
period, the sum (without duplication) of (i) Consolidated Net Income and (ii)
to the extent Consolidated Net Income has been reduced thereby, (A) all income
taxes of such Person and its Subsidiaries paid or accrued in accordance with
GAAP for such period (other than income taxes attributable to extraordinary or
nonrecurring gains or losses), (B) Consolidated Interest Expense and (C)
Consolidated Non-Cash Charges, all as determined on a consolidated basis for
such Person and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" shall mean, with respect to any Person
for any period, without duplication, the sum of (i) the interest expense of
such Person and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount, (b) the net cost under Interest Swap
Obligations (including any amortization of discounts), (c) the interest
portion of any deferred payment obligation, (d) all commissions, discounts and
other fees and charges owed with respect to letters of credit, bankers
acceptance financing or similar facilities, and (e) all accrued interest and
(ii) the interest component of Capitalized Lease Obligations paid or accrued
by such Person and its Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income"of any Person shall mean, for any period, the
aggregate net income (or loss) of such Person and its Subsidiaries for such
period on a consolidated basis, determined in accordance with GAAP; provided
--------
that there shall be excluded therefrom, without duplication, (a) gains and
losses from Asset Sales or abandonments or reserves relating thereto and the
related tax effects, (b) items classified as extraordinary or nonrecurring
gains and losses, and the related tax effects according to GAAP, (c) the net
income (or loss) of any Person acquired in a pooling of interests transaction
accrued prior to the date it becomes a Subsidiary of such first referred to
Person or is merged or consolidated with it or any of its Subsidiaries, (d)
the net income of any Subsidiary to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
restricted by contract, operation of law or otherwise, (e) the net income of
any Person, other than a Subsidiary, except to the extent of the lesser of (x)
dividends or distributions paid to such first referred to Person or its
Subsidiary by such Person and (y) the net income of such Person (but in no
event less than zero), and the net loss of such Person shall be included only
to the extent of the aggregate Investment of the first referred to Person or a
consolidated Subsidiary of such Person and (f) any non-cash expenses
attributable to grants or exercises of employee stock options.
"Consolidated Non-Cash Charges" shall mean, with respect to any Person
for any period, the aggregate depreciation, amortization and other non-cash
expenses of such Person and its Subsidiaries (excluding any such charges
constituting an extraordinary or nonrecurring item) reducing Consolidated Net
Income of such Person and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Credit Agreements" means, collectively, (i) that certain Credit
Agreement between the Company and Soci t G n rale, Southwest Agency, dated
October 8, 1997, as amended, (ii) that certain Credit Agreement between the
Company and Barclays Bank PLC, dated November 26, 1997, as amended, (iii) that
certain Credit Agreement between the Company and Toronto Dominion (Texas),
Inc., dated November 26, 1997, as amended, (iv) that certain Credit Agreement
between the Company and Union Bank of California, N.A., dated December 31,
1997, as amended, (v) that certain Credit Agreement between the Company and
Credit Suisse First Boston, dated February 9, 1998, as amended, and (vi) that
certain Demand Promissory Note with Banque Paribas dated September 15, 1997.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
the Company or any of its Subsidiaries against fluctuations in currency
values.
"Current Market Price" of Common Stock or any other class of stock or
other security of the Company or any other issuer for any day shall mean the
last reported sales price, regular way on such day, or, if no sale takes place
on such day, the average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York Stock Exchange (
NYSE ) or, if such security is not listed or admitted for trading on the NYSE,
- ----
on the principal national securities exchange on which such security is listed
or admitted for trading or, if not listed or admitted for trading on any
national securities exchange, on The Nasdaq Stock Market or, if such security
is not quoted on The Nasdaq Stock Market, the average of the closing bid and
asked prices on such day in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System (
NASDAQ ) or, if bid and asked prices for such security on such day shall not
- ------
have been reported through NASDAQ, the average of the bid and asked prices on
such day as furnished by any NYSE member firm regularly making a market in
such security selected for such purpose by the Board or, if no such market is
regularly made, as determined by a majority of the Board based on advice of an
independent appraiser selected by a majority of the Board.
"Demand Registration" shall have the meaning set forth in Section 2.1.1
hereof.
"Demand Request" shall have the meaning set forth in Section 2.1.1.
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Excluded Registration" means a registration under the Securities Act of
(i) securities registered on Form S-8 or any similar successor form and (ii)
securities registered to effect the acquisition of all or a substantial
portion of the securities of a Person or a substantial portion of its assets
or a merger or other combination with another Person.
"GAAP" shall mean United States generally accepted accounting principles,
applied on a consistent basis for the periods involved.
"Holder" shall mean Purchaser and shall include all direct or indirect
transferees of Purchaser who shall become a party to this Agreement, and each
subsequent transferee of any such Holder who shall become a party to or
otherwise agree to be bound by this Agreement. Holders shall mean each
Holder collectively. If at any time there is more than one Holder, except as
otherwise specifically set forth in this Agreement, any notices, designations,
consents, or similar actions to be taken by the Holder or Holders hereunder
shall be taken as provided in Section 4.4.
"Immediate Family" means the spouse of an individual and the
grandparents, parents, siblings and children (and children and spouses of any
of the foregoing) of the individual or his or her spouse. An adopted child
will be treated as the child of his or her adoptive parent or parents if (but
only if) he or she was adopted before he or she reached 21 years of age.
"Inspectors" shall have the meaning provided in Section 2.5(x) hereof.
"Indebtedness" shall mean with respect to any Person, without
duplication, any liability of such Person (i) for borrowed money, (ii)
evidenced by bonds, debentures, notes or other similar instruments, (iii)
constituting Capitalized Lease Obligations, (iv) incurred or assumed as the
deferred purchase price of property, or pursuant to conditional sale
obligations and title retention agreements (but excluding trade accounts
payable arising in the ordinary course of business), (v) for the reimbursement
of any obligor on any letter of credit, banker s acceptance or similar credit
transaction, (vi) for Indebtedness of others guaranteed by such Person, (vii)
for Interest Swap Obligations, Commodity Agreements and Currency Agreements
and (viii) for Indebtedness of any other Person of the type referred to in
clauses (i) through (vii) which is secured by any Lien on any property or
asset of such first referred to Person, the amount of such Indebtedness being
deemed to be the lesser of the value of such property or asset or the amount
of the Indebtedness so secured. The amount of Indebtedness of any Person at
any date shall be (A) the outstanding principal amount of all unconditional
obligations described above, as such amount would be reflected on a balance
sheet prepared in accordance with GAAP, and (B) with respect to all contingent
obligations described above, the maximum liability as of such date of such
Person for any guarantees of Indebtedness for borrowed money of any other
Person and the amount required under GAAP to be accrued with respect to any
other contingent obligation.
"Interest Swap Obligations" shall mean the obligations of any Person
under any interest rate protection agreement, interest rate future, interest
rate option, interest rate swap, interest rate cap or other interest rate
hedge or arrangement.
"Investment" shall mean (i) any transfer or delivery of cash, stock or
other property of value in exchange for Indebtedness, stock or other security
or ownership interest in any Person by way of loan, advance, capital
contribution, guarantee or otherwise and (ii) an investment deemed to have
been made by the Company at the time any entity which was a Subsidiary of the
Company ceases to be such a Subsidiary in an amount equal to the value of the
loans and advances made, and any remaining ownership interest in, such entity
immediately following such entity ceasing to be a Subsidiary of the Company.
The amount of any non-cash Investment shall be the fair market value of such
Investment, as determined conclusively in good faith by management of the
Company unless the fair market value of such Investment exceeds $1,000,000, in
which case the fair market value shall be determined conclusively in good
faith by the Board of Directors at the time such Investment is made.
"Issue Date" shall have the meaning ascribed to such term under the 8%
Convertible Preference Shares Authorization.
"Junior Shares" has the meaning provided in the 8% Preference Shares
Authorization.
"Leverage Ratio" shall mean the ratio of (i) the aggregate outstanding
amount of Indebtedness of the Company and its Subsidiaries (including
Permitted Indebtedness) as of the date of calculation on a consolidated basis
in accordance with GAAP (subject to the terms described in the next paragraph)
plus (A) the aggregate liquidation preference on such date of (1) all
outstanding Preferred Stock of the Company s Subsidiaries (except Preferred
Stock issued to the Company or a wholly owned Subsidiary of the Company and
except Preferred Stock issued by Triton International Oil Corporation in
respect of costs to conduct petroleum operations pursuant to Section 8.3 of
the Shareholders Agreement with ARCO JDA Limited), (2) all Senior Shares, (3)
all Parity Liquidation Shares and (4) all other outstanding shares of
Preferred Stock of the Company the terms of which require, or permit the
holder thereof to require, the Company to redeem all or any portion thereof at
a future date, but in the case of clause (4), only with respect to the present
value of such amount as required to be redeemed or with respect to which the
holders thereof could require redemption, calculated at a discount rate equal
to the weighted average of the interest rates under the Credit Agreements (or
any Refinancing Indebtedness related thereto as from time to time in effect)
(excluding in each of cases (2), (3) and (4) such securities issued to a
wholly-owned Subsidiary of the Company) less (B) cash and the current market
value of marketable securities held by the Company and its Subsidiaries to
(ii) the Consolidated EBITDA of the Company for the four full fiscal quarters
(the Four Quarter Period ) ending on or as of the most recent quarter end
---------------------
prior to the date of determination.
For purposes of this definition, the amount of Indebtedness which is
issued at a discount shall be deemed to be the accreted value of such
Indebtedness at the end of the Four Quarter Period, whether or not such amount
is the amount then reflected on a balance sheet prepared in accordance with
GAAP. In addition to the foregoing, for purposes of this definition,
Consolidated EBITDA shall be calculated on a pro forma basis after giving
effect to (i) the incurrence of the Indebtedness of such Person and its
Subsidiaries and the issuance of the Preferred Stock of such Person and its
Subsidiaries (and the application of the proceeds therefrom) giving rise to
the need to make such calculation and any incurrence (and the application of
the proceeds therefrom) or repayment of other Indebtedness, other than the
incurrence or repayment of Indebtedness pursuant to working capital
facilities, at any time subsequent to the beginning of the Four Quarter Period
and on or prior to the date of determination, as if such incurrence or
issuance (and the application of the proceeds thereof), or the repayment, as
the case may be, occurred on the first day of the Four Quarter Period, (ii)
any Asset Sales or Asset Acquisitions (including without limitation any Asset
Acquisition giving rise to the need to make such calculation as a result of
such Person or one of its Subsidiaries (including any Person that becomes a
Subsidiary as a result of such Asset Acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness or issuing Preferred Stock) at any
time on or subsequent to the first day of the Four Quarter Period and on or
prior to the date of determination, as if such Asset Sale or Asset Acquisition
(including the incurrence, assumption or liability for any such Indebtedness
and the issuance of such Preferred Stock and also including any Consolidated
EBITDA associated with such Asset Acquisition) occurred on the first day of
the Four Quarter Period and (iii) cost savings resulting from employee
terminations, facilities consolidations and closings, standardization of
employee benefits and compensation practices, consolidation of property,
casualty and other insurance coverage and policies, standardization of sales
representation commissions and other contract rates, and reductions in taxes
other than income taxes (collectively Cost Savings Measures ), which cost
---------------------
savings the Company reasonably believes in good faith would have been achieved
during the Four Quarter Period as a result of such Asset Acquisitions
(regardless of whether such cost savings could then be reflected in pro forma
financial statements under GAAP, Regulation S-X promulgated by the Commission
or any other regulation or policy of the Commission), provided that both (A)
such cost savings and Cost Savings Measures were identified and such cost
savings were quantified in an officer s certificate delivered to the Board of
Directors (with a copy delivered to Purchaser) at the time of the consummation
of the Asset Acquisition and such officer s certificate states that such
officer believes in good faith that actions will be commenced or initiated
within 90 days of such Asset Acquisition to effect such Cost Savings Measures
and (B) with respect to each Asset Acquisition completed prior to the 90th day
preceding such date of determination, actions were commenced or initiated by
the Company within 90 days of such Asset Acquisition to effect the Cost
Savings Measures identified in such officer s certificate (regardless,
however, of whether the corresponding cost savings have been achieved).
"Material Adverse Effect" shall have the meaning provided in Section
2.1.5 hereof.
"NASD" shall have the meaning provided in Section 2.5(xiv) hereof.
"Parity Shares" has the meaning provided in the 8% Preference Shares
Authorization.
"Parity Dividend Shares" has the meaning provided in the 8% Preference
Shares Authorization.
"Parity Liquidation Shares" has the meaning provided in the 8% Preference
Shares Authorization.
"Permitted Indebtedness" shall mean, without duplication, (i)
Indebtedness outstanding on the First Closing Date, other than Indebtedness
under the Credit Facilities; (ii) Indebtedness of the Company or a Subsidiary
incurred pursuant to the Credit Agreements in an aggregate principal amount at
any time outstanding not to exceed $135 million; (iii) Interest Swap
Obligations; provided that such Interest Swap Obligations are entered into to
--------
protect the Company from fluctuations in interest rates of its Indebtedness;
(iv) obligations under Commodity Agreements and Currency Agreements, provided
--------
that such Commodity Agreements and Currency Agreements are entered into to
protect the Company from fluctuations in commodity prices and currency values,
respectively; (v) Refinancing Indebtedness; (vi) Indebtedness owed by the
Company to any wholly owned Subsidiary of the Company or by any Subsidiary of
the Company to the Company or any wholly owned Subsidiary of the Company;
(vii) Indebtedness in respect of performance bonds, letters of credit, bankers
acceptances and surety or appeal bonds provided by the Company or any of its
Subsidiaries to their customers in the ordinary course of their business;
(viii) Indebtedness required to be incurred pursuant to the Shareholders'
Agreement between Triton International Oil Corporation and ARCO JDA Limited;
and (ix) Indebtedness represented by Capitalized Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in a related business or incurred
to refinance any such purchase price or cost of construction or improvement,
in each case incurred no later than 365 days after the date of such
acquisition or the date of completion of such construction or improvement;
provided, however, that the principal amount of any Indebtedness incurred
----- -------
pursuant to this clause (viii) shall not exceed $10,000,000 at any time
outstanding.
"Permitted Transfer" means any Transfer (a) with respect to a Holder who
is an individual, to a member of the Immediate Family of the Holder or a trust
whose sole beneficiaries are the Holder and/or members of the Immediate Family
of the Holder, (b) with respect to a Holder that is a corporation, partnership
or other entity (other than a trust), to an owner of at least 10% of the
equity interest in the corporation, partnership or other legal entity or to a
general partner of any partnership, (c) with respect to a Holder that is a
trust, to any beneficiary of the trust or any member of the Immediate Family
of a beneficiary of the trust, (d) to any Affiliate of a Holder, (e) pursuant
to a pledge to secure indebtedness provided that the pledgee agrees in writing
that the Registrable Shares subject to such Transfer shall be subject to the
terms hereof, (f) to any charitable trust, foundation or other charitable or
non-profit organization or entity, (g) to a Holder pursuant to the provisions
of Section 3.3, (h) pursuant to a merger, consolidation, share exchange,
scheme of arrangement or other similar transaction by the Company or pursuant
to an agreement to which the Company is a party, (i) by a Holder in response
to a tender or exchange offer for all of the outstanding Common Stock of the
Company and (j) by a Holder pursuant to a public offering registered under the
Securities Act or pursuant to Rule 144 promulgated under the Securities Act;
provided that, in each of case (a) through (f), the transferee agrees to be
-------
bound by the terms and provisions of this Agreement.
"Person or person" shall mean any individual, firm, partnership,
company or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" of any Person shall mean any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
"Records" shall have the meaning provided in Section 2.4(x) hereof.
"Refinancing Indebtedness" shall mean any refinancing by the Company of
Indebtedness of the Company or any of its Subsidiaries that does not (i)
result in an increase in the aggregate principal amount of Indebtedness (such
principal amount to include, for purposes of this definition, any premiums,
penalties or accrued interest paid with the proceeds of the Refinancing
Indebtedness) of such Person or (ii) create Indebtedness with (a) a Weighted
Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being refinanced or (b) a final maturity earlier
than the final maturity of the Indebtedness being refinanced.
"Registrable Shares" means at any time the 8% Preference Shares of the
Company and Common Stock owned by the Holder or Holders, whether owned on the
date hereof or acquired hereafter, including upon the conversion of 8%
Preference Shares by the Holder thereof or otherwise; provided, however, that
-------- -------
Registrable Shares shall not include any shares (x) the sale of which has been
registered pursuant to the Securities Act and which shares have been sold
pursuant to such registration, or (y) which have been sold to the public
pursuant to Rule 144 promulgated under the Securities Act.
"Registration Expenses" shall have the meaning provided in Section 2.7
hereof.
"Replacement Shelf Registration Statement" shall have the meaning
provided in Section 2.2.3 hereof.
"Requesting Holder" shall have the meaning provided in Section 2.1.1(a)
hereof.
"Required Filing Date" shall have the meaning provided in Section
2.1.1(b) hereof.
"Sale and Leaseback Transaction" shall mean any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of any property, whether owned
by the Company or any Subsidiary at the Issue Date or later acquired, which
has been or is to be sold or transferred by the Company or such Subsidiary to
such Person or to any other Person from whom funds have been or are to be
advanced by such Person on the security of such property.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Seller Affiliates" shall have the meaning provided in Section 2.8.1
hereof.
"Senior Shares" shall have the meaning provided in the 8% Convertible
Preference Shares Authorization.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated
August 31, 1998, between the Company and Purchaser.
"Subsidiary" of any Person means (i) a corporation a majority of whose
outstanding shares of capital stock or other equity interests with voting
power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, and
(ii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (x)
at least a majority ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person. For
purposes hereof, Triton International Oil Corporation shall be deemed a
Subsidiary of the Company.
"Suspension Notice" shall have the meaning provided in Section 2.6
hereof.
"Third-Party Sale" means any Transfer other than a Permitted Transfer.
"Trading Day" shall mean any day on which the securities in question are
traded on the NYSE, or if such securities are not listed or admitted for
trading on the NYSE, on the principal national securities exchange on which
such securities are listed or admitted, or if not listed or admitted for
trading on any national securities exchange, on The Nasdaq Stock Market, or if
such securities are not quoted on The Nasdaq Stock Market, in the applicable
securities market in which the securities are traded.
"Transfer" means any direct or indirect sale, transfer, pledge or other
disposition of Registrable Shares.
Weighted Average Life to Maturity shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding aggregate principal amount of such Indebtedness into (b) the
total of the product obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
Section 1.2 Rules of Construction. Unless the context otherwise requires:
---------------------
(1) a term has the meaning assigned to it;
(2) or is not exclusive;
(3) words in the singular include the plural, and words in the
plural include the singular;
(4) provisions apply to successive events and transactions; and
(5) herein, thereof and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 Demand Registration.
-------------------------
2.1.1 Request for Registration.
-------------------------
(a) At any time after _____________, ____ [ONE YEAR AFTER FIRST
CLOSING], one or more Holders may request the Company, in writing (a Demand
------
Request ), to effect the registration under the Securities Act of all or part
------
of its or their Registrable Shares (a Demand Registration ); provided that
------------------- --------
the Registrable Shares proposed to be sold by the Holders requesting a Demand
Registration (the Requesting Holders, which term shall include parties
deemed Requesting Holders pursuant to Section 2.1.5 hereof) represent, in
the aggregate, more than 20% of the total number of Registrable Shares held by
all Holders (a Registrable Amount ).
-------------------
(b) Each Demand Request shall specify the number of Registrable
Shares proposed to be sold (which shall represent, in the aggregate, more than
20% of the total number of Registrable Shares held by all Holders) and the
intended method of disposition thereof. Subject to Section 2.1.6, the Company
shall file the Demand Registration within 45 days after receiving a Demand
Request (the Required Filing Date ) and shall use all commercially reasonable
--------------------
efforts to cause the same to be declared effective by the SEC as promptly as
practicable after such filing; provided, that the Company need effect only
-------- ----
five Demand Registrations; provided, further, that if any Registrable Shares
-------- -------
requested to be registered pursuant to a Demand Request under this Section 2.1
are excluded from a registration pursuant to Section 2.1.4 below, the Holders
shall have the right, with respect to each such exclusion, to one additional
Demand Registration under this Section 2.1 with respect to such excluded
Registrable Shares; and provided, further, that the Company shall not be
-------- -------
obligated to file a registration statement relating to a registration request
under this Section 2.1 more frequently than once in any nine month period or
within a period of six months after the effective date of any other
registration statement of the Company other than an Excluded Registration or
any registration statement filed at the request or on behalf of, or for the
benefit of, another securityholder of the Company (other than pursuant to this
Section 2.1) in which Holders were not entitled to include all Registrable
Shares requested to be included therein.
2.1.2 Effective Registration and Expenses. A registration will not
-----------------------------------
count as a Demand Registration until it has become effective (unless (i) (A)
the Requesting Holders shall have made a written request for a registration
which is subsequently withdrawn by the Requesting Holders with respect to a
number of Registrable Securities such that the number of Registrable
Securities requested to be included in such registration statement is less
than a Registrable Amount after the Company has filed a registration statement
with the SEC in connection therewith, (B) the Company has performed its
obligations hereunder in all material respects and (C) there has not been any
event, change or effect which, individually or in the aggregate, has had or
would be reasonably likely to have a material adverse effect on the business,
operations, prospects, assets, condition (financial or otherwise) or results
of operations of the Company, or (ii) such registration statement is not
declared effective solely as a result of the failure of the Requesting Holders
to take all actions reasonably required in order to have the registration and
the related registration statement declared effective by the SEC, in which
case such demand will count as a Demand Registration unless the Requesting
Holders pay all Registration Expenses, as hereinafter defined, in connection
with such withdrawn registration); provided, that if, after it has become
effective, an offering of Registrable Shares pursuant to a registration is
interfered with by any stop order, injunction, or other order or requirement
of the SEC or other governmental agency or court, such registration will be
deemed not to have been effected and will not count as a Demand Registration,
unless such order, injunction or requirement shall have been imposed solely as
a result of the actions of the Requesting Holders or the failure of the
Requesting Holders to take all actions reasonably required in order to prevent
such imposition, in which case such registration shall be counted as a Demand
Registration without regard to whether it is so interfered with . Subject to
the following sentence, in the event that a Demand Request is made by a Holder
that is subsequently withdrawn by that Holder, all Registration Expenses
incurred in connection therewith shall be borne by that Holder and such
withdrawn Demand Request shall not be counted as a Demand Registration in
determining the number of Demand Registrations to which the Holders are
entitled pursuant to Section 2.1.1(b). In the event that a Demand Request is
made by a Holder that is subsequently withdrawn by that Holder, all
Registration Expenses shall be borne by the Company if (i) the Company has not
performed its obligations hereunder in all material respects or (ii) there has
been any event, change or effect which, individually or in the aggregate, has
had or would be reasonably likely to have a material adverse effect on the
business, operations, prospects, assets, condition (financial or otherwise) or
results of operations of the Company; and in such case a withdrawn Demand
Request shall not be counted as a Demand Registration in determining the
number of Demand Registrations to which the Holders are entitled pursuant to
Section 2.1.1(b).
2.1.3 Selection of Underwriters. If requested by the Requesting
-------------------------
Holders, the offering of Registrable Shares pursuant to a Demand Registration
shall be in the form of a firm commitment underwritten offering. The
Requesting Holders of a majority of the Registrable Shares to be registered in
a Demand Registration shall determine whether the offering shall be in the
form of a firm commitment underwriting and, if so, shall select the investment
banking firm or firms to manage the underwritten offering; provided that such
selection shall be subject to the consent of the Company, which consent shall
not be unreasonably withheld.
2.1.4 Priority on Demand Registrations. No securities to be sold for
--------------------------------
the account of any Person (including the Company) other than a Requesting
Holder shall be included in a Demand Registration if the managing underwriter
or underwriters shall advise the Requesting Holders in writing that the
inclusion of such securities will materially and adversely affect the price or
success of the offering (a Material Adverse Effect ). Furthermore, in the
-----------------------
event the managing underwriter or underwriters shall advise the Requesting
Holders that even after exclusion of all securities of other Persons pursuant
to the immediately preceding sentence, the amount of Registrable Shares
proposed to be included in such Demand Registration by Requesting Holders is
sufficiently large to cause a Material Adverse Effect, the Registrable Shares
of the Requesting Holders to be included in such Demand Registration shall
equal the number of shares which the Requesting Holders are so advised can be
sold in such offering without a Material Adverse Effect and such shares shall
be allocated pro rata among the Requesting Holders on the basis of the number
of Registrable Shares held by the Requesting Holders.
2.1.5 Rights of Nonrequesting Holders. Upon receipt of any Demand
-------------------------------
Request, the Company shall promptly (but in any event within 10 days) give
written notice of such proposed Demand Registration to all other Holders, who
shall have the right, exercisable by written notice to the Company within 15
days of their receipt of the Company s notice, to elect to include in such
Demand Registration such portion of their Registrable Securities as they may
request. All Holders requesting to have their Registrable Shares included in
a Demand Registration in accordance with the preceding sentence shall be
deemed to be Requesting Holders for purposes of this Section 2.1.
2.1.6 Deferral of Filing. The Company may defer the filing (but not
------------------
the preparation) of a registration statement required by Section 2.1 until a
date not later than 180 days after the Required Filing Date (or, if longer,
180 days after the effective date of the registration statement contemplated
by clause (ii) below) if (i) at the time the Company receives the Demand
Request, the Company or any of its Subsidiaries are engaged in confidential
negotiations or other confidential business activities, disclosure of which
would be required in such registration statement (but would not be required if
such registration statement were not filed), and the Board of the Company
determines in good faith that such disclosure would be materially detrimental
to the Company and its shareholders or would have a material adverse effect on
any such confidential negotiations or other confidential business activities,
or (ii) prior to receiving the Demand Request, the Board had determined to
effect a registered underwritten public offering of the Company s securities
for the Company s account and the Company had taken substantial steps
(including, but not limited to, selecting a managing underwriter for such
offering) and is proceeding with reasonable diligence to effect such offering.
A deferral of the filing of a registration statement pursuant to this Section
2.1.6 shall be lifted, and the requested registration statement shall be filed
forthwith, if, in the case of a deferral pursuant to clause (i) of the
preceding sentence, the negotiations or other activities are disclosed by the
Company or terminated, or, in the case of a deferral pursuant to clause (ii)
of the preceding sentence, the proposed registration for the Company s account
is abandoned. In order to defer the filing of a registration statement
pursuant to this Section 2.1.6, the Company shall promptly (but in any event
within 10 days), upon determining to seek such deferral, deliver to each
Requesting Holder a certificate signed by an executive officer of the Company
stating that the Company is deferring such filing pursuant to this Section
2.1.6 and, subject to applicable confidentiality agreements, a general
statement of the reason for such deferral and an approximation of the
anticipated delay. Within 20 days after receiving such certificate, the
holders of a majority of the Registrable Shares held by the Requesting Holders
and for which registration was previously requested may withdraw such Demand
Request by giving notice to the Company; if withdrawn, the Demand Request
shall be deemed not to have been made for all purposes of this Agreement. The
Company may defer the filing of a particular registration statement pursuant
to this Section 2.1.6 only once.
Section 2.2 Piggyback Registrations.
------------------------
2.2.1 Right to Piggyback. Each time the Company proposes to register
------------------
any of its equity securities (other than pursuant to an Excluded Registration)
under the Securities Act for sale to the public (whether for the account of
the Company or the account of any securityholder of the Company and including
any registration statement pursuant to Rule 415 under the Securities Act (such
as a universal shelf registration statement), including the Replacement
Shelf Registration Statement) or proposes to make such an offering of equity
securities pursuant to a previously filed registration statement pursuant to
Rule 415 under the Securities Act and the form of registration statement to be
used permits the registration of Registrable Shares, the Company shall give
prompt written notice to each Holder of Registrable Shares (which notice shall
be given not less than 30 days prior to the effective date of the Company s
registration statement), which notice shall offer each such Holder the
opportunity to include any or all of its or his Registrable Shares in such
registration statement, subject to the limitations contained in Section 2.2.2
hereof. Each Holder who desires to have its or his Registrable Shares
included in such registration statement shall so advise the Company in writing
(stating the number of shares desired to be registered and the intended method
of disposition) within 20 days after the date of such notice from the Company.
Any Holder shall have the right to withdraw such Holder s request for
inclusion of such Holder s Registrable Shares in any registration statement
pursuant to this Section 2.2.1 by giving written notice to the Company of such
withdrawal. Subject to Section 2.2.2 below, the Company shall use all
commercially reasonable efforts to include in such registration statement all
such Registrable Shares so requested to be included therein; provided,
however, that the Company may at any time withdraw or cease proceeding with
any such registration if it shall at the same time withdraw or cease
proceeding with the registration of all other equity securities originally
proposed to be registered.
2.2.2 Priority on Registrations. If the Registrable Shares requested
-------------------------
to be included in the registration statement by any Holder differ from the
type of securities proposed to be registered by the Company and the managing
underwriter advises the Company that due to such differences the inclusion of
such Registrable Shares would cause a Material Adverse Effect, then (i) the
number of such Holder s or Holders Registrable Shares to be included in the
registration statement shall be reduced to an amount which, in the opinion of
the managing underwriter, would eliminate such Material Adverse Effect or (ii)
if no such reduction would, in the opinion of the managing underwriter,
eliminate such Material Adverse Effect, then the Company shall have the right
to exclude all such Registrable Shares from such registration statement
provided no other securities of such type are included and offered for the
account of any other Person in such registration statement. Any partial
reduction in number of Registrable Shares to be included in the registration
statement pursuant to clause (i) of the immediately preceding sentence shall
be effected pro rata based on the ratio which such Holder s requested shares
bears to the total number of shares requested to be included in such
registration statement by all Persons other than the Company who have
requested that their shares be included in such registration statement. If
the Registrable Shares requested to be included in the registration statement
are of the same type as the securities being registered by the Company and the
managing underwriter advises the Company in writing that the inclusion of such
Registrable Shares would cause a Material Adverse Effect, the Company will be
obligated to include in such registration statement, as to each Holder, only a
portion of the shares such Holder has requested be registered equal to the
ratio which such Holder s requested shares bears to the total number of shares
requested to be included in such registration statement by all Persons who
have requested that their shares be included in such registration statement.
If the Company initiated the registration, then the Company may include all of
its securities in such registration statement before any of such Holder s
requested shares are included. If another securityholder initiated the
registration, then the Company may not include any of its securities in such
registration statement unless all Registrable Shares requested to be included
in the registration statement by all Holders are included in such registration
statement. If as a result of the provisions of this Section 2.2.2 any Holder
shall not be entitled to include all Registrable Securities in a registration
that such Holder has requested to be so included, such Holder may withdraw
such Holder s request to include Registrable Shares in such registration
statement prior to its effectiveness. No Holder may participate in any
registration statement hereunder unless such Person (x) agrees to sell such
Person s Registrable Shares on the basis provided in any underwriting
arrangements approved by the Company and (y) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements, and
other documents reasonably required under the terms of such underwriting
arrangements; provided, however, that no such Person shall be required to make
any representations or warranties in connection with any such registration
other than representations and warranties as to (i) such Person s ownership of
his or its Registrable Shares to be sold or transferred free and clear of all
liens, claims, and encumbrances, (ii) such Person s power and authority to
effect such transfer, and (iii) such matters pertaining to compliance with
securities laws and other applicable laws and governmental rules and
regulations, if any, as may be reasonably requested; provided further,
however, that the obligation of such Person to indemnify pursuant to any such
underwriting arrangements shall be several, not joint and several, among such
Persons selling securities, and the liability of each such Person will be in
proportion to, and provided further that such liability will be limited to,
the net amount received by such Person from the sale of his or its Registrable
Shares pursuant to such registration.
Section 2.3 Shelf Registration.
-------------------
2.3.1 Replacement Shelf Registration. Upon the written request of
------------------------------
Purchaser at any time after the Second Closing Date, the Company promptly
shall prepare and file with the SEC a universal shelf registration statement
pursuant to Rule 415 under the Securities Act to supersede and replace the
Company s existing universal shelf registration statement (registration no.
333-11703) currently effective under the Securities Act and shall include
therein such Registrable Shares as Holder shall request (but in no event less
than a Registrable Amount) (the Replacement Shelf Registration Statement ).
----------------------------------------
The Company shall use all commercially reasonable efforts to cause such
Replacement Shelf Registration Statement to become effective under the
Securities Act, and at any time after the effectiveness thereof when the
Company elects to effect an offering of securities pursuant to the Replacement
Shelf Registration Statement, Holder shall be entitled to exercise its rights
under Section 2.1 (subject to the first sentence of Section 2.1.1 with respect
to any demand for any offering to be made pursuant thereto) and Section 2.2.1
with respect to such offering.
2.3.2 Use of Shelf Registration. At any time that Holder requests a
-------------------------
Demand Registration pursuant to Section 2.1 or to include Registrable Shares
in a registration statement pursuant to Section 2.2, in each case with respect
to the Replacement Shelf Registration Statement or any other shelf
registration statement, the provisions of Sections 2.1 and 2.2, including
references in such Sections to file, register or included in, as
relating to the rights of the Holders to request to include Registrable Shares
in a registration statement to be filed with the SEC shall be construed as
referring to a request to have Registrable Shares included in such
registration statement pursuant to Section 2.2 in the case of the initial
filing of such registration statement or to a request to include Registrable
Shares in an offering to be effected pursuant to such registration statement
pursuant to Section 2.1 or 2.2, as applicable, in the case of an offering to
be effected pursuant to a registration statement that previously has been
declared effective under the Securities Act.
Section 2.4 Holdback Agreement. Unless the managing underwriter
------------------
otherwise agrees, each of the Company and the Holders agrees, and the Company
agrees, in connection with any underwritten registration, to use its
reasonable efforts to cause its Affiliates to agree, not to effect any public
sale or private offer or distribution of any Common Stock or Common Stock
Equivalents during the ten business days prior to the effectiveness under the
Securities Act or pricing of any underwritten offering pursuant to a
registration statement in which Registrable Securities are included and during
such time period after the effectiveness under the Securities Act of any
underwritten registration or pricing of underwritten securities (not to exceed
90 days) (except, if applicable, as part of such underwritten registration) as
the Company and the managing underwriter may agree.
Section 2.5 Registration Procedures. Whenever any Holder has
------------------------
requested that any Registrable Shares be registered pursuant to this
Agreement, the Company will use its commercially reasonable efforts to effect
the registration and the sale of such Registrable Shares in accordance with
the intended method of disposition thereof, and pursuant thereto the Company
will as expeditiously as reasonably possible:
(i) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act with respect to such Registrable
Shares and use all commercially reasonable efforts to cause such registration
statement to become effective;
(ii) prepare and file with the SEC such amendments, post-effective
amendments, and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 120 days (or such lesser
period as is necessary for the underwriters in an underwritten offering to
sell unsold allotments) and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(iii) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), any documents incorporated by reference therein and such other
documents as such seller or underwriters may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by such seller or
the sale of such securities by such underwriters (it being understood that,
subject to Section 2.6 and the requirements of the Securities Act and
applicable state securities laws, the Company consents to the use of the
prospectus and any amendment or supplement thereto by each seller and the
underwriters in connection with the offering and sale of the Registrable
Shares covered by the registration statement of which such prospectus,
amendment or supplement is a part);
(iv) use all commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the managing underwriter reasonably requests; use all
commercially reasonable efforts to keep each such registration or
qualification (or exemption therefrom) effective during the period in which
such registration statement is required to be kept effective; and do any and
all other acts and things which may be reasonably necessary or advisable to
enable each seller to consummate the disposition of the Registrable Shares
owned by such seller in such jurisdictions (provided, however, that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph or (B) consent to general service of process in any such
jurisdiction);
(v) promptly notify each seller and each underwriter and (if
requested by any such Person) confirm such notice in writing (A) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (B) of the issuance by any
state securities or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable Shares
under state securities or blue sky laws or the initiation of any proceedings
for that purpose, and (C) of the happening of any event which makes any
statement made in a registration statement or related prospectus untrue in any
material respect or which requires the making of any changes in such
registration statement, prospectus or documents so that they will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and, as promptly as practicable thereafter, prepare and file with
the SEC and furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Shares, such
prospectus will not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(vi) make generally available to the Company s securityholders an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 30 days after the end of the 12-month period
beginning with the first day of the Company s first fiscal quarter commencing
after the effective date of a registration statement, which earnings statement
shall cover said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate information on
Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with
Rule 158 under the Securities Act;
(vii) if requested by the managing underwriter or reasonably
requested by any seller promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or any
seller reasonably requests to be included therein, including, without
limitation, with respect to the Registrable Shares being sold by such seller,
the purchase price being paid therefor by the underwriters and with respect to
any other terms of the underwritten offering of the Registrable Shares to be
sold in such offering, and promptly make all required filings of such
prospectus supplement or post-effective amendment;
(viii) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into a registration statement (in
the form in which it was incorporated), deliver a copy of each such document
to each seller;
(ix) cooperate with the sellers and the managing underwriter to
facilitate the timely preparation and delivery of certificates (which shall
not bear any restrictive legends unless required under applicable law)
representing securities sold under any registration statement, and enable such
securities to be in such denominations and registered in such names as the
managing underwriter or such sellers may request and keep available and make
available to the Company s transfer agent prior to the effectiveness of such
registration statement a supply of such certificates;
(x) promptly make available for inspection by any seller, any
underwriter participating in any disposition pursuant to any registration
statement, and any attorney, accountant or other agent or representative
retained by any such seller or underwriter (collectively, the Inspectors ),
----------
all financial and other records, pertinent corporate documents and properties
of the Company (collectively, the Records ), as shall be reasonably necessary
-------
to enable them to exercise their due diligence responsibility, and cause the
Company s officers, directors and employees to supply all information
requested by any such Inspector in connection with such registration
statement; provided, that, unless the disclosure of such Records is necessary
to avoid or correct a misstatement or omission in the registration statement
or the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, the Company shall not be
required to provide any information under this subparagraph (x) if (A) the
Company believes, after consultation with counsel for the Company, that to do
so would cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has requested
and been granted from the SEC confidential treatment of such information
contained in any filing with the SEC or documents provided supplementally or
otherwise or (2) the Company reasonably determines in good faith that such
Records are confidential and so notifies the Inspectors in writing unless
prior to furnishing any such information with respect to (A) or (B) such
Holder of Registrable Securities requesting such information agrees to enter
into a confidentiality agreement in customary form and subject to customary
exceptions; and provided, further that each Holder of Registrable Securities
agrees that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and allow the
Company at its expense, to undertake appropriate action and to prevent
disclosure of the Records deemed confidential;
(xi) furnish to each seller and underwriter a signed counterpart of
(A) an opinion or opinions of counsel to the Company, and (B) a comfort letter
or comfort letters from the Company s independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as the sellers or managing
underwriter reasonably requests;
(xii) use all commercially reasonable efforts to cause the
Registrable Shares included in any registration statement to be (A) listed on
each securities exchange, if any, on which securities of the same type issued
by the Company are then listed, or (B) authorized to be quoted and/or listed
(to the extent applicable) on the National Association of Securities Dealers,
Inc. Automated Quotation ( NASDAQ ) or The New York Stock Exchange if the
------
Registrable Shares so qualify and securities of the same type issued by the
Company are so listed or quoted;
(xiii) provide a CUSIP number for the Registrable Shares included in
any registration statement not later than the effective date of such
registration statement;
(xiv) cooperate with each seller and each underwriter participating
in the disposition of such Registrable Shares and their respective counsel in
all reasonable respects in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. ( NASD );
----
(xv) during the period when the prospectus is required to be
delivered under the Securities Act, file within the required time periods all
documents required to be filed with the SEC pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act;
(xvi) notify each seller of Registrable Shares promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information;
(xvii) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the opinion
of counsel for the Company or the managing underwriter, is required in
connection with the distribution of the Registrable Shares;
(xviii) enter into such agreements (including underwriting agreements
in the managing underwriter s customary form) as are customary in connection
with an underwritten registration; and
(xix) advise each seller of such Registrable Shares, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such purpose
and promptly use all commercially reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal at the earliest possible moment
if such stop order should be issued.
Section 2.6 Suspension of Dispositions. Each Holder agrees by
---------------------------
acquisition of any Registrable Shares that, upon receipt of any notice (a
Suspension Notice ) from the Company of the happening of any event of the kind
--------------
described in Section 2.5(v)(C), such Holder will forthwith discontinue
disposition of Registrable Shares until such Holder s receipt of the copies of
the supplemented or amended prospectus, or until it is advised in writing (the
Advice ) by the Company that the use of the prospectus may be resumed, and has
- ------
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed by the
Company, such Holder will deliver to the Company all copies, other than
permanent file copies then in such Holder s possession, of the prospectus
covering such Registrable Shares current at the time of receipt of such
notice. In the event the Company shall give any such notice, the time period
regarding the effectiveness of registration statements set forth in Section
2.4(ii) hereof shall be extended by the number of days during the period from
and including the date of the giving of the Suspension Notice to and including
the date when each seller of Registrable Shares covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus or the Advice. The Company shall use its commercially reasonable
efforts and take such actions as are reasonably necessary to render the Advice
as promptly as practicable.
Section 2.7 Registration Expenses. All expenses incident to the
---------------------
Company s performance of or compliance with this Article 2 including without
limitation, (i) all registration and filing fees, (ii) all fees and expenses
associated with filings required to be made with the NASD (including, if
applicable, the fees and expenses of any qualified independent underwriter
as such term is defined in Schedule E of the By-Laws of the NASD, and of its
counsel), as may be required by the rules and regulations of the NASD, (iii)
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Shares), (iv) rating agency fees, (v)
printing expenses (including expenses of printing certificates for the
Registrable Shares in a form eligible for deposit with Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by a holder of Registrable Shares), (vi) messenger and delivery
expenses, (vii) the Company s internal expenses (including without limitation
all salaries and expenses of its officers and employees performing legal or
accounting duties), (viii) the fees and expenses incurred in connection with
any listing of the Registrable Shares, (ix) fees and expenses of counsel for
the Company and its independent certified public accountants (including the
expenses of any special audit or cold comfort letters required by or
incident to such performance), (x) securities acts liability insurance (if the
Company elects to obtain such insurance), (xi) the fees and expenses of any
special experts retained by the Company in connection with such registration,
and (xii) the fees and expenses of other persons retained by the Company,
subject to Section 2.1.2., will be borne by the Company, whether or not any
registration statement becomes effective; provided that in no event shall
Registration Expenses include any underwriting discounts or commissions or
transfer taxes or the fees and expenses of counsel for the Holders.
Section 2.8 Indemnification.
---------------
2.8.1 The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, members, officers, and
directors and each Person who controls such seller (within the meaning of the
Securities Act or the Exchange Act) and any agent or investment advisor
thereof (collectively, the Seller Affiliates ) (A) against any and all
------------------
losses, claims, damages, liabilities, and expenses, joint or several
(including, without limitation, attorneys fees and disbursements except as
limited by Section 2.8.3) based upon, arising out of or resulting from any
untrue or alleged untrue statement of a material fact contained in any
registration statement, prospectus, or preliminary prospectus relating to the
offer and sale of Registrable Shares or any amendment thereof or supplement
thereto, or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, (B)
against any and all loss, liability, claim, damage, and expense whatsoever, as
incurred, to the extent of the aggregate amount paid in settlement (effected
with the Company s consent) of any litigation or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon, arising out of or resulting from any such untrue
statement or omission or alleged untrue statement or omission, and (C) against
any and all costs and expenses (including reasonable fees and disbursements of
counsel) as may be reasonably incurred in investigating, preparing, or
defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon, arising out of or resulting from any such untrue statement or
omission or alleged untrue statement or omission, to the extent that any such
expense or cost is not paid under subparagraph (A) or (B) above; except
insofar as the same are made in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of such seller
or any Seller Affiliate specifically for inclusion in the registration
statement or arise from such seller s or any Seller Affiliate s failure to
deliver a copy of the registration statement or prospectus or any amendments
or supplements thereto after the Company has furnished such seller or Seller
Affiliate with a sufficient number of copies of the same. The reimbursements
required by this Section 2.8.1 will be made by periodic payments during the
course of the investigation or defense, as and when bills are received or
expenses incurred.
2.8.2 In connection with any registration statement in which a seller
of Registrable Shares is participating, each such seller will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the fullest extent permitted by law, each such seller will
indemnify and reimburse the Company and its directors and officers and each
Person who controls the Company (within the meaning of the Securities Act or
the Exchange Act) against any and all losses, claims, damages, liabilities,
and expenses (including, without limitation, reasonable attorneys fees and
disbursements except as limited by Section 2.8.3) based upon, arising out of
or resulting from any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, prospectus, or any
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with any
information or affidavit so furnished in writing by such seller or any of its
Seller Affiliates specifically for inclusion in the registration statement;
provided that the obligation to indemnify will be several, not joint and
several, among such sellers of Registrable Shares, and the liability of each
such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by
such seller from the sale of Registrable Shares pursuant to such registration
statement; provided, however, that such seller of Registrable Shares shall not
be liable in any such case to the extent that prior to the filing of any such
registration statement or prospectus or amendment thereof or supplement
thereto, such seller has furnished in writing to the Company information
expressly for use in such registration statement or prospectus or any
amendment thereof or supplement thereto which corrected or made not misleading
information previously furnished to the Company.
2.8.3 Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person except to the extent that the
indemnifying party is materially prejudiced thereby) and (B) unless such
indemnified party has been advised by counsel that a conflict of interest
between such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of such claim
with counsel reasonably satisfactory to the indemnified party; provided,
however, that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of
such person unless (i) the indemnifying party has agreed to pay such fees or
expenses, (ii) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such person, (iii)
the named parties to any such action or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel in writing that
there is a conflict of interest on the part of counsel employed by the
indemnifying party to represent such indemnified party, or (iv) the
indemnified party s counsel shall have advised the indemnified party that
there are defenses available to the indemnified party that are different from
or in addition to those available to the indemnifying party and that the
indemnifying party is not able to assert on behalf of or in the name of the
indemnified party (in which case of either (iii) or (iv), if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of such indemnified party but shall have the right to
participate through its own counsel). If such defense is not assumed by the
indemnifying party as permitted hereunder, the indemnifying party will not be
subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). If
such defense is assumed by the indemnifying party pursuant to the provisions
hereof, such indemnifying party shall not settle or otherwise compromise the
applicable claim unless (1) such settlement or compromise contains a full and
unconditional release of the indemnified party or (2) the indemnified party
otherwise consents in writing (such consent not to be unreasonably withheld).
An indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless any indemnified party shall have been advised by
counsel in writing that a conflict of interest exists between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the reasonable
fees and disbursements of such additional counsel or counsels.
2.8.4 Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 2.8.1 or Section 2.8.2 are
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities, or expenses (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, liabilities, or expenses (or actions in respect
thereof) (i) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and the indemnified party in connection with
the actions which resulted in the losses, claims, damages, liabilities or
expenses or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
the relative benefits of the indemnified party and indemnifying party from the
offering of the securities covered by such registration statement as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or indemnified party, and
the parties, relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 2.8.4 were determined by pro rata allocation (even if the Holders or
any underwriters or all of them were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 2.8.4. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or, except
as provided in Section 2.8.3, defending any such action or claim.
Notwithstanding the provisions of this Section 2.8.4, no Holder shall be
required to contribute an amount greater than the dollar amount by which the
proceeds received by such Holder with respect to the sale of any Registrable
Shares exceeds the amount of damages which such Holder has otherwise been
required to pay by reason of such statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders obligations in this
Section 2.8.4 to contribute shall be several in proportion to the amount of
Registrable Shares registered by them and not joint.
If sufficient indemnification is available under this Section 2.8, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 2.8.1 and Section 2.8.2 without regard to the relative
fault of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 2.8.4.
2.8.5 The indemnification and contribution provided for under this
Stockholders Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director, or controlling Person of such indemnified party and will survive the
transfer of securities.
ARTICLE 3
RESTRICTIONS ON TRANSFER
Section 3.1 General. Any Third-Party Sale shall be subject to compliance
with provisions of this Article 3.
Section 3.2 Transfer Restrictions. During the one year period
---------------------
following the date hereof, the Holder shall not engage in any Third-Party
Sales without the Company s prior written consent.
Section 3.3 Right of First Offer. (a) Until the earlier of the fifth
--------------------
annual anniversary of the date hereof or the date on which Purchaser and its
Affiliates own less than 10% of the then outstanding Common Stock (assuming
conversion of all Common Stock Equivalents, including all 8% Preference
Shares, then held by Purchaser and its Affiliates) prior to consummating any
Third-Party Sale in respect of Common Stock, 8% Preference Shares or a
combination of Common Stock and 8% Preference Shares that constitute, in the
aggregate, more than 9.9% of the then outstanding Common Stock (assuming
conversion of all Common Stock Equivalents, including all 8% Preference
Shares, then held by Purchaser and its Affiliates proposed to be sold) to any
one buyer or related group of buyers in a single transaction or a series of
related transactions, Purchaser or any Affiliate of Purchaser (the Offeror )
-------
will deliver to the Company a written notice (an Offer Notice ) specifying
------------
the aggregate number of Registrable Securities intended to be Transferred and
the minimum consideration (the Offer Price ) for which the Offeror proposes
-----------
in good faith to sell the Registrable Securities to be offered in such
Third-Party Sale (the Offered Shares ). Upon receipt of such notice, the
--------------
Company shall have 30 days to notify the Offeror in writing (the ROFO Notice)
-----------
of the identity of one or more designated buyers (collectively, the
Designated Buyer ) of the Offered Shares (which may include the Company). The
---------
Designated Buyer shall then have an additional 30 days from the date the
Company notifies the Offeror to close the acquisition of the Offered Shares.
(b) Rights to Purchase Offered Shares. If the Designated Buyer
----------------------------------
delivers to the Offeror a written notice (an Acceptance Notice ) within 30
-----------------
days following delivery of the ROFO Notice (the ROFO Acceptance Period ),
----------------------
stating that such Designated Buyer is willing to purchase all of the Offered
Shares for the Offer Price and on the other terms, if any, as are set forth in
the Offer Notice, the Offeror will sell all (but not less than all) of the
Offered Shares to such Designated Buyer, and such Designated Buyer will
purchase such Offered Shares from the Offeror, on the proposed terms and
subject to the conditions set forth in the Offer Notice and below ; provided,
--------
however, that if the Offer Price is payable in whole or in part in property
- -------
(which term shall include the securities of any issuer other than the Company)
other than cash, the Designated Buyer may pay, in lieu of such property, a sum
of cash equal to the fair market value of such property as determined by the
selling Holder and the Designated Buyer in good faith or, if the selling
Holder and the Designated Buyer do not agree on the fair market value of such
property within five (5) days after the delivery of the Acceptance Notice,
then each of the selling Holder and the Designated Buyer shall select one
nationally recognized independent appraiser (with each of the selling Holder
and the Designated Buyer bearing the expense of the appraiser selected by it)
to determine the fair market value of that property and the average of the
appraised fair market values of that property as determined by those
appraisers shall be deemed the fair market value of that property for purposes
of this Article 3.
(c) The ROFO Closing. The consummation of any purchase of the
------------------
Offered Shares by the Designated Buyer pursuant to this Section 3.3 (the ROFO
----
Closing ) will occur no later than the last day of the ROFO Acceptance Period,
- -------
at such time and place as may be agreed upon by the Offeror and the Designated
Buyer or, if such parties fail to agree to such time and place, at the offices
of the Offeror at 200 Crescent Court, Suite 1600, Dallas, Texas 75201 at 10:00
a.m. (Central Time) on the last business day of the ROFO Acceptance Period.
At the ROFO Closing, (1) the Designated Buyer will deliver to the Offeror by
certified or official bank check or wire transfer to an account designated by
the Offeror an amount in immediately available funds equal to the aggregate
Offer Price for the offered Shares, (2) the Offeror will deliver one or more
certificates evidencing the Offered Shares, together with such other duly
executed instruments or documents (executed by the Offeror) as may be
reasonably requested by the Designated Buyer to acquire the Offered Shares.
(d) Right to Consummate Third-Party Sale If no ROFO Notice or no
------------------------------------
Acceptance Notice relating to the proposed Third-Party Sale is delivered to
the Offeror prior to the expiration of the applicable period set forth above,
or an Acceptance Notice is so delivered to the Offeror but the ROFO Closing
fails to occur prior to the expiration of the ROFO Closing Period (unless the
Designated Buyer was ready, willing and able prior to the expiration of the
ROFO Closing Period to consummate the transactions to be consummated by the
Designated Buyer at the ROFO Closing), the Offeror may (without affecting its
rights, if any, arising out of such failure) consummate the Third-Party Sale,
but only (1) during the 6-month period immediately following the expiration of
the applicable 30 day period (in the event that no ROFO Notice or Acceptance
Notice, as the case may be, was timely delivered to the Offering Holder) or
the 6-month period immediately following the expiration of the ROFO Closing
Period (in the event that an Acceptance Notice was timely delivered to the
Offeror but the ROFO Closing failed timely to occur) and, (2) at a price at
least equal to 95% of the Offer Price.
ARTICLE 4
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 4.1 Board.
-----
4.1.1 Board Representation. Subject to the provisions of Section
--------------------
4.1.6 below, Holder shall be entitled to designate individuals for nomination
for election to the Board as follows:
(i) for so long as the Board consists of ten members, Holder shall be
entitled to designate four nominees;
(ii) if the number of members constituting the entire Board shall be
increased or decreased from ten, Holder shall be entitled to designate a
number of nominees so that such nominees, if elected, would constitute that
percentage of the total number of members of the Board that the number of
directors Holder was entitled to nominate immediately prior to such increase
or decrease bears to the total number of directorships on the entire Board
immediately prior to such increase or decrease, with any fractional
directorship resulting from such calculation being rounded up to the next
whole number.
Members of the Board designated by Holder pursuant to this Section 4.1.1
or elected to fill a vacancy by members designated by Holder as provided in
subsection 4.1.4 herein shall be referred to as the Holder Designees.
----------------
Subject to Section 4.1.6, the Company and the Board shall take such actions as
necessary to cause Holder Designees to be nominated and submitted to the
shareholders for election to the Board as provided in Sections 4.1.2 and
4.1.3.
4.1.2 Initial Board Designees. Simultaneously with the execution and
-----------------------
delivery of this Agreement, the Company and the Board shall take such actions
as necessary to cause the Board to consist of ten members, four vacancies to
exist on the Board, and to cause four Holder Designees to fill such vacancies
on the Board created pursuant to the terms of the Stock Purchase Agreement.
4.1.3 Annual Meeting.
---------------
(a) At each annual meeting of the Company s shareholders or any
extraordinary meeting in lieu thereof at which the term of any Holder Designee
is to expire or prior to which there shall be less than the maximum number of
Holder Designees serving on the Board, Holder shall be entitled to designate
for nomination as a director the number of individuals as necessary so that,
if such designees are elected to the Board at such annual meeting or any
extraordinary meeting in lieu thereof, the maximum number of Holder Designees
shall be serving on the Board. The Company agrees to cause each Holder
Designee so designated by Holder to be nominated for election to the Board at
each annual meeting of the Company s shareholders or any extraordinary meeting
in lieu thereof. To the extent the Company s proxy statement for any annual
meeting of shareholders, or any extraordinary meeting in lieu thereof,
includes a recommendation regarding the election of any other nominees to the
Company s Board, the Company agrees to include a recommendation of its Board
that the shareholders also vote in favor of each Holder Designee standing for
election at such meeting. The Company shall take all actions necessary to
ensure that the Articles of Association of the Company as in effect
immediately following the date hereof do not, at any time thereafter, conflict
in any respect with the provisions of this Section 4.1.
(b) If, at any time Holder fails to advise (at least 90 days prior to
the next annual meeting) the Board in writing of its intention to designate
the number of directors which Holder is then entitled to designate for
nomination at the next annual meeting of the Company s shareholders or
extraordinary meeting in lieu thereof (other than any such meeting that occurs
within 90 days after the resignation of a director designated by Holder, in
which case such writing shall be delivered within a reasonable amount of time
prior to the mailing of proxy materials for such meeting), then the rights
granted under this Section 4.1 with respect to the designation of Holder
Designees shall be applicable for such meeting only with respect to the number
of nominees as indicated in such writing, if any, that Holder intends to
designate, but shall continue to be fully effective with respect to subsequent
meetings and interim vacancies. At each annual meeting or extraordinary
meeting in lieu thereof for which Holder does not advise the Board of its
intention to nominate the maximum number of directors which it is entitled to
nominate for such meeting, the nominees for election to the Board, other than
those nominated by Holder, shall be determined by the Board and the Company.
4.1.4 Board Committees. For so long as Holder is entitled to
-----------------
nominate at least one Holder Designee, the Company and the Board shall take
such actions as necessary to cause at least one Holder Designee to be elected
to, and to at all times be a member of, each committee established by the
Board.
4.1.5 Vacancies. If, prior to his election to the Board pursuant to
---------
Section 4.1.1 hereof, any Holder Designee shall be unable or unwilling to
serve as a director of the Company, then the Holder shall be entitled to
nominate a replacement who shall then be a Holder Designee for purposes of
this Section 4. If, following an election or appointment to the Board pursuant
to Section 4.1.1 hereof, any Holder Designee shall resign or be removed or be
unable to serve for any reason prior to the expiration of his term as a
director of the Company, then the Holder shall, within 30 days of such event,
notify the Board in writing of a replacement Holder Designee, and the Company
and the Board shall take such action as necessary to cause such replacement
Holder Designee to be appointed to the Board and each applicable committee
thereof to fill the unexpired term of the Holder Designee who such new Holder
Designee is replacing.
4.1.6 Reduction/Termination of Rights. The right of the Holder to
-------------------------------
designate directors under this Section 4.1 shall be reduced and terminate as
follows:
If at any time after the Second Closing the number of shares of Common
Stock and 8% Preference Shares (assuming conversion of such shares into Common
Stock) held of record by Purchaser and its Affiliates, collectively, represent
less than the below specified percentage of the number of shares of Common
Stock into which a number of 8% Preference Shares equal to the Original Number
would be convertible as of such time of determination, the number of directors
that Holder shall be entitled to designate shall be reduced to the number
indicated:
PERCENTAGE HELD HOLDER
BY PURCHASE AND ITS AFFILIATES DIRECTORS
- -------------------------------- ---------
Less than 75% but equal to
or more than 50% 3
Less than 50% but equal to
or more than 25% 2
Less than 25% but equal to
or more than 1% 1
Less than 1% 0
For purposes of this Agreement, "Original Number" shall mean the
----------------
aggregate number of 8% Preference Shares purchased by Purchaser pursuant to
the terms of the Stock Purchase Agreement (including 8% Preference Shares
purchased pursuant to the Rights (as defined in the Stock Purchase
Agreement)).
Upon written request to Holder at any time that the number of Holder
Designees exceeds the number of directors Holder shall be entitled to
designate pursuant to this Section 4.1.5, Holder shall cause one or more
Holder Designees to resign from the Board as necessary to reduce the number of
Holder Designees to the number Holder is then entitled to designate.
4.1.7 Fees; Costs and Expenses. Except as provided in the following
------------------------
sentence, Holder Designees shall not receive an annual retainer, meeting fees
or other consideration for serving on the Board (or committees thereof) on any
Board of Directors of any Subsidiary of the Company. The Company will pay or
reimburse each Holder Designee for all reasonable out-of-pocket expenses
incurred by such Holder Designee in connection with its participation in
meetings of the Board (and committees thereof) and the Boards of Directors
(and committees thereof) of the Subsidiaries of the Company.
4.1.8 Class Director Limitation. Notwithstanding the term of this
-------------------------
Section 4.1, if, at any time that Holder holds a majority of the outstanding
8% Preference Shares and the holders of 8% Preference Shares are entitled,
voting separately as a class, to elect directors pursuant to Section 9.1(c) of
the 8% Preference Share Authorization, the number of Holder Designees that
Holder is entitled to designate pursuant to this Section 4.1, when added to
the two directors the holders of 8% Preference Shares are entitled to elect
pursuant to Section 9(c) of the 8% Preference Share Authorization (the Class
-----
Directors ), constitutes 50% or more of the members of the Board, the number
- ---------
of directors Holder is entitled to designate pursuant to this Section 4.1
shall be reduced to a number so that such Holder Designees and the Class
Directors, collectively, constitute less than 50% of the total Board until the
earlier of the date on which (i) Holder no longer owns a majority of the
outstanding 8% Preference Shares or (ii) the Class Directors and the number of
Holder Designees Holder is entitled to designate pursuant to this Section 4.1,
collectively, constitute less than 50% of the Board.
Section 4.2 Other Activities of the Holder; Fiduciary Duties. It is
------------------------------------------------
understood and accepted that the Holder and its Affiliates have interests in
other business ventures which may be in conflict with the activities of the
Company and its Subsidiaries and that, subject to applicable law, nothing in
this Agreement shall limit the current or future business activities of the
Holder or its Affiliates whether or not such activities are competitive with
those of the Company and its Subsidiaries. Nothing in this Agreement, express
or implied, shall relieve any officer or director of the Company (including
any designee of a Holder pursuant to Section 4.1.1) or any of its Subsidiaries
of any fiduciary or other duties or obligations they may have to the Company s
shareholders.
Section 4.3 From and after the First Closing and for so long after
the Second Closing as Purchaser and its Affiliates, collectively, hold of
record shares of Common Stock and 8% Preference Shares (assuming conversion
into Common Stock of all 8% Preference Shares held by Purchaser and its
Affiliates) representing in the aggregate at least (x) 50% of the number of
shares of Common Stock into which a number of 8% Preference Shares equal to
the Original Shares would be convertible as of such time of determination or
(y) 10% of the number of outstanding shares of Common Stock, determined giving
effect to the full conversion of all outstanding securities of the Company
convertible or exchangeable for Common Stock, in addition to any other vote or
consent of shareholders required by law or by the Company s Articles of
Association, without the prior written consent of Holder, the Company shall
not, and shall not permit any Subsidiary to:
(i) Amend, alter or repeal any of the provisions of the Articles of
Association of the Company or the 8% Preference Shares Authorization that
affects the voting powers, rights or preferences of the holders of the 8%
Preference Shares; provided, however, that action to authorize or create or to
-------- -------
increase the authorized amount of any Junior Shares, (1) shall not be deemed
to affect the voting powers, rights or preferences of the holders of 8%
Preference Shares;
(ii) Merge, consolidate or enter into a similar business combination,
scheme of arrangement or transaction, effect any reorganization,
reclassification, recapitalization or other transaction or event in connection
with a plan pursuant to which a majority of the outstanding Common Stock or
any of the 8% Preference Shares (or, with respect to any Subsidiary of the
Company, any shares or stock of such Subsidiary) shall be exchanged for,
converted into, acquired for or constitute solely the right to receive
securities, cash or other property (whether by means of an exchange offer,
liquidation, tender, offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise) or otherwise reorganize with
or into one or more entities (other than a merger of a wholly-owned Subsidiary
of the Company into another wholly-owned Subsidiary of the Company); provided
--------
that this clause (ii) shall not prohibit the restructure of Triton
International Oil Corporation ("TIOC") and its Subsidiaries pursuant to
----
Section 14.1 of the Shareholders Agreement between TIOC and ARCO JDA Limited
(the "ARCO Shareholders Agreement");
-----------------------------
(iii) Authorize or create, modify the terms of or increase the
authorized amount of, (1) any shares of any class or series or of any security
convertible into shares of any class or series ranking prior to the 8%
Preference Shares in the distribution of assets on any liquidation,
dissolution or winding up of the Company or any Subsidiary or in the payment
of dividends, (2) any class of Parity Shares, Parity Liquidation Shares or
Parity Dividend Shares, (3) any class or series of Junior Shares or any
security convertible into or exchangeable for any class or series of Junior
Shares that, pursuant to their terms, require, or permit the holders thereof
to require, the Company or any Subsidiary to redeem all or any portion of such
Junior Shares, or (4) any class or series of any other equity security other
than Junior Shares or any security convertible into or exchangeable for any
class or series of any other equity security other than Junior Shares;
(iv) Sell, lease to a third party or otherwise dispose of (in a
single transaction or a series of related transactions) assets comprising in
excess of 50% of the market value of the assets of the Company and its
Subsidiaries as a whole or dissolve, liquidate or terminate the Company;
(v) Other than regular dividends on the Company s 5% Convertible
Preference Shares in accordance with the terms thereof as in effect on the
date hereof and subject to subsection 3(i) of the 8% Preference Shares
Authorization, declare, pay or set aside for payment any dividends or other
distributions (whether in cash, shares or property) with respect to, or redeem
or otherwise purchase, any Junior Shares or, in the case of any Subsidiary of
the Company, any shares or stock held other than by the Company or any
wholly-owned Subsidiary of the Company; provided that this clause (v) shall
--------
not prohibit the payment of dividends on and/or redemption of shares of TIOC
pursuant to the ARCO Shareholders Agreement;
(vi) Directly, or indirectly through any Subsidiary of the Company,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
incur ) any Indebtedness (other than Permitted Indebtedness) or issue, or
permit any Subsidiary of the Company to issue, any Preferred Stock (except
Preferred Stock issued to the Company or a wholly owned Subsidiary of the
Company); provided, however, that the Company and its Subsidiaries may incur
-------- -------
Indebtedness and, subject to the other limitations of this Section 4.3, issue
shares of Preferred Stock if, in either case, the Company s Leverage Ratio at
the time of incurrence of such Indebtedness or the issuance of such Preferred
Stock, as the case may be, after giving pro forma effect to such incurrence or
issuance as of such date and to the use of proceeds therefrom is less than 2.5
to 1; provided, further, that this clause (vi) shall not prohibit the issuance
-------- -------
of Preferred Stock by Triton International Oil Corporation pursuant to Section
8.3 of the ARCO Shareholders Agreement;
(vii) Issue any shares of 8% Preference Shares other than (a)
pursuant to the terms of the Stock Purchase Agreement and the Rights Offering
(as defined in the Stock Purchase Agreement) and (b) as Additional Shares
pursuant to subsection 3(b) of the 8% Preference Shares Authorization;
(viii) Issue any shares of a class of shares ranking pari passu or
prior to the 8% Convertible Preference Shares with respect to dividends or to
the distribution of assets in liquidation or, in the case of any Subsidiary of
the Company, issue any shares or stock to any Person other than the Company or
any Subsidiary of the Company (provided that this clause (viii) shall not
prohibit the issuance of Preferred Stock by Triton International Oil
Corporation pursuant to Section 8.3 of the ARCO Shareholders Agreement);
(ix) Commence or effect any tender or exchange offer made by the
Company or any Subsidiary for all or any portion of the Common Stock; or
(x) Decrease the number of shares designated as 8% Convertible
Preference Shares as provided in Section 1 of the Preference Shares
Authorization.
Section 4.4 Action by Holder. At any time there shall be more than
----------------
one Holder, the designation of Holder Designees and the consent of Holder
required for actions referred to in this Agreement shall be effected by
delivery to the Company of a written instrument designating such Holder
Designees or granting (or denying) such consent executed by Holders holding a
majority of outstanding Common Stock (calculated giving effect to the full
conversion of all 8% Preference Shares held by all Holders) (a Majority
--------
Interest). Each such written instrument shall indicate the number of 8%
- --------
Preference Shares held by the Holder or Holders executing same and shall
contain a certification that such Holders 8% Preference Shares represent a
Majority Interest.
ARTICLE 5
TERMINATION
The provisions of this Agreement, unless earlier terminated pursuant to
their terms, shall terminate on the tenth anniversary of the date of this
Agreement.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if
made by hand delivery, by telex, by telecopier or registered or certified
mail, postage prepaid, return receipt requested, addressed as follows (or at
such other address as may be substituted by notice given as herein provided):
If to the Company:
c/o Triton Exploration Services Inc.
Attention: President
If to any Holder, at its address listed on the signature pages hereof.
Any notice or communication hereunder shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered
back, if telexed; when receipt is acknowledged, if telecopied; and five
calendar days after mailing if sent by registered or certified mail (except
that a notice of change of address shall not be deemed to have been given
until actually received by the addressee).
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 6.2 Third Party Registration Rights. The Company is not a
-------------------------------
party, or otherwise subject, to any agreement granting registration rights to
any other Person with respect to the securities of the Company. The Company
will not on or after the date of this Agreement enter into any agreement
granting (a) demand registration rights to any other Person with respect to
the securities of the Company, or (b) piggy-back registration rights to any
other Person that are not junior or subordinate to the rights granted to the
holders of Registrable Securities under Sections 2.1 and 2.2 hereof, without
the written consent of the holders of a majority of the then outstanding
Registrable Shares. Any agreement entered into pursuant to such consent shall
not be amended without a further written consent of the holders of a majority
of the then outstanding Registrable Shares.
Section 6.3 Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE
---------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. This Agreement shall be
construed, interpreted, and enforced in accordance with the laws of the State
of Texas, excluding any choice-of-law provisions thereof. Each of the parties
hereby (a) irrevocably submits to the exclusive jurisdiction of the United
States Federal District Court for the Northern District of Texas, sitting in
Dallas County, Texas, the United States of America, in the event such court
has jurisdiction or, if such court does not have jurisdiction, to any district
court sitting in Dallas County, Texas, the United States of America, for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement, including any claims by any Indemnified Persons for indemnity
pursuant to Section 5 hereof, (b) waives, and agrees not to assert in any such
suit, acting or proceeding, any claim that (i) it is not personally subject to
the jurisdiction of such court or of any other court to which proceedings in
such court may be appealed, (ii) such suit, action or proceeding is brought in
an inconvenient forum or (iii) the venue of such suit, action or proceeding is
improper and (c) expressly waives any requirement for the posting of a bond by
the party bringing such suit, action or proceeding. Each of the parties
consents to process being served in any such suit, action or proceeding by
mailing, certified mail, return receipt requested, a copy thereof to such
party at the address in effect for notices hereunder, and agrees that such
services shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7 shall affect or limit any right to serve
process in any other manner permitted by law.
Section 6.4 Successors and Assigns. Whether or not an express
-----------------------
assignment has been made pursuant to the provisions of this Agreement,
provisions of this Agreement that are for the Holders benefit as the holders
of any Registrable Shares are also for the benefit of, and enforceable by, all
subsequent holders of Registrable Shares and such subsequent holders shall be
deemed to be Holders and to have become parties to this Agreement (including
without limitation for purposes of Article IV hereof), except as otherwise
expressly provided herein; provided that the provisions of this Agreement
shall not be for the benefit of, applicable to or enforceable by any
transferee, and such transferee shall not be deemed a Holder for purposes of
this Agreement of Registrable Shares if the Holder effecting such transfer
expressly shall have designated such transferee as not constituting a Holder
subject to or entitled to the benefit of this Agreement at or prior to the
effectiveness of the transfer of Registrable Shares to such transferee.
Subject to the preceding sentence, this Agreement shall be binding upon the
Company, each Holder, and their respective successors and permitted assigns.
Section 6.5 Duplicate Originals. All parties may sign any number of
-------------------
copies of this Agreement. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
Section 6.6 Severability. In case any provision in this Agreement
------------
shall be held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in every other
respect and the remaining provisions shall not in any way be affected or
impaired thereby.
Section 6.7 Specific Performance. The Company and the Holder or
--------------------
Holders recognize that if the Company refuses to perform under the provisions
of this Agreement, monetary damages alone will not be adequate to compensate
the Holder or Holders for its or their injury. The Holder or Holders shall
therefore be entitled, in addition to any other remedies that may be
available, to obtain specific performance of the terms of this Agreement.
Section 6.8 No Waivers; Amendments.
------------------------
6.8.1 No failure or delay on the part of the Company or any Holder in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
6.8.2 Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Company and the Holders holding a majority of the Registrable Shares.
Section 6.9 No Affiliate Liability. The partners, members, officers,
----------------------
directors, shareholders and Affiliates of a Holder, the Company or their
respective Affiliates shall not have any personal liability or obligation to
any Person arising under this Agreement in such capacities.
SIGNATURES TO SHAREHOLDER AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first written above.
TRITON ENERGY LIMITED
By:
Name:
Title:
HM4 TRITON, L.P.
By: HM Triton G.P., LLC,
its general partner
By:
Name:
Title:
Address:
200 Crescent Court
Suite 1600
Dallas, Texas 75201
