<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-3880
TOM BROWN, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-1949781
------------------------------- ------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
P. O. BOX 2608
500 EMPIRE PLAZA BLDG.
MIDLAND, TEXAS 79701
--------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
915-682-9715
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
----------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 13, 1996.
CLASS OF COMMON STOCK OUTSTANDING AT AUGUST 13, 1996
--------------------- ------------------------------
$.10 PAR VALUE 21,126,194
<PAGE> 2
TOM BROWN, INC. AND SUBSIDIARIES
QUARTERLY REPORT FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
Part I. Financial Information (Unaudited):
Consolidated Balance Sheets,
June 30, 1996 and December 31, 1995 4
Consolidated Statements of Operations,
Three Months and Six Months ended
June 30, 1996 and 1995 6
Consolidated Statements of Cash Flows,
Six Months ended June 30, 1996 and 1995 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II. Other Information:
Item 4. Submission of Matters to a Vote of
Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
Signature 18
</TABLE>
2
<PAGE> 3
TOM BROWN, INC.
P. O. Box 2608
500 Empire Plaza Bldg.
Midland, Texas 79701
______________________
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FORM 10-Q
_______________________
PART I OF TWO PARTS
FINANCIAL INFORMATION
3
<PAGE> 4
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1996 1995
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,837,000 $ 4,982,000
Accounts receivable, net of allowance
for doubtful accounts of $58,000 at
June 30, 1996 and December 31, 1995 11,989,000 7,408,000
Accounts receivable -
Wind River-Pavillion, Inc. 16,000 62,000
Inventories 440,000 246,000
Other 236,000 190,000
----------- -----------
Total current assets 19,518,000 12,888,000
----------- -----------
Property and equipment, at cost:
Oil and gas properties, based on the
successful efforts accounting method 222,881,000 186,624,000
Other equipment 23,368,000 12,056,000
----------- -----------
246,249,000 198,680,000
Less: Accumulated depreciation
and depletion 120,235,000 112,695,000
----------- -----------
Net property and equipment 126,014,000 85,985,000
----------- -----------
Senior gas indexed notes 51,093,000 51,093,000
Deferred income taxes, net 9,048,000 13,170,000
Other assets, net 1,589,000 1,038,000
----------- -----------
$ 207,262,000 $164,174,000
=========== ===========
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
Liabilities and Stockholders' Equity 1996 1995
------------------------------------ ---- ----
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 11,364,000 $ 5,979,000
Accrued expenses 952,000 1,536,000
----------- -----------
Total current liabilities 12,316,000 7,515,000
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, at $.10 par value.
Authorized 40,000,000 shares;
Outstanding 21,124,694 and
20,180,902 shares, respectively. 2,112,000 2,018,000
Convertible preferred stock,
at $.10 par value.
Authorized 2,500,000 shares;
1,000,000 shares outstanding. 100,000 -
Additional paid-in capital 261,100,000 224,889,000
Accumulated deficit (68,366,000) (70,248,000)
----------- -----------
Total stockholders' equity 194,946,000 156,659,000
----------- -----------
$ 207,262,000 $164,174,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three and Six Months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Gas and oil sales $ 8,324,000 $ 5,187,000 $16,757,000 $10,121,000
Marketing, gathering
and processing 5,635,000 3,708,000 10,289,000 7,980,000
Interest income and
other 112,000 267,000 230,000 489,000
---------- ---------- ---------- ----------
Total revenues 14,071,000 9,162,000 27,276,000 18,590,000
---------- ---------- ---------- ----------
Costs and expenses:
Gas and oil production 1,648,000 1,189,000 3,087,000 2,280,000
Taxes on gas and oil
production 477,000 476,000 1,174,000 1,048,000
Cost of gas sold 3,835,000 3,129,000 7,486,000 6,858,000
Exploration costs 515,000 380,000 926,000 1,948,000
Impairments of
leasehold costs 2,000 198,000 67,000 344,000
General and
administrative 1,403,000 1,018,000 2,757,000 2,026,000
Depreciation, depletion
and amortization 3,980,000 2,386,000 7,697,000 4,706,000
Writedown of properties - - - 8,368,000
Other 10,000 27,000 17,000 27,000
---------- ---------- ---------- ---------
Total costs
and expenses 11,870,000 8,803,000 23,211,000 27,605,000
---------- ---------- ---------- ----------
Income (loss) before
income taxes 2,201,000 359,000 4,065,000 (9,015,000)
Income tax provision:
Recognition of
deferred tax asset - - - 13,967,000
Income tax expense 752,000 86,000 1,386,000 149,000
---------- --------- ---------- ----------
Net income $ 1,449,000 $ 273,000 $ 2,679,000 $ 4,803,000
---------- ---------- ---------- ----------
Preferred stock dividend $ 437,000 $ - $ 797,000 $ -
---------- ---------- ---------- ----------
Net income available to
common shareholders $ 1,012,000 $ 273,000 $ 1,882,000 $ 4,803,000
========== ========== ========== ==========
Weighted average number of
common shares outstanding 21,121,775 15,536,860 21,117,484 16,195,448
========== ========== ========== ==========
Net income per common share $ .05 $ .02 $ .09 $ .30
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months ended
June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,882,000 $ 4,803,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 7,697,000 4,706,000
Gain on sales of assets (11,000) (102,000)
Option plan compensation 20,000 58,000
Exploration costs 926,000 1,948,000
Impairments of leasehold costs 67,000 344,000
Writedown of properties - 8,368,000
Deferred income taxes 1,208,000 (13,967,000)
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable (4,535,000) 463,000
Decrease (increase) in inventories (194,000) 596,000
Increase in other current assets (46,000) (35,000)
Increase (decrease) in accounts
payable 5,385,000 (727,000)
Decrease in accrued expenses (584,000) (366,000)
Increase in other non-current assets (551,000) -
---------- ----------
Net cash provided by operating activities $ 11,264,000 $ 6,089,000
---------- ----------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
TOM BROWN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Six Months ended
June 30,
------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from investing activities:
Proceeds from sales of assets $ 109,000 $ 460,000
Capital and exploration expenditures (9,658,000) (19,275,000)
Investment in senior gas indexed notes - (51,093,000)
---------- ----------
Net cash used in investing activities (9,549,000) (69,908,000)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt - 51,000,000
Proceeds from exercise of stock options 140,000 87,000
---------- ----------
Net cash provided by financing activities 140,000 51,087,000
---------- ----------
Net increase (decrease) in cash and cash
equivalents 1,855,000 (12,732,000)
---------- ----------
Cash and cash equivalents at beginning
of period 4,982,000 19,147,000
---------- ----------
Cash and cash equivalents at end of period $ 6,837,000 $ 6,415,000
========== ==========
Cash paid during the period for:
Interest $ - $ -
Taxes 85,000 38,000
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE> 9
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three and Six Months ended June 30, 1996 and 1995
(Unaudited)
(1) During interim periods, Tom Brown, Inc. follows the accounting policies set
forth in its Annual Report to Stockholders and its Report on Form 10-K filed
with the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Stockholders when reviewing interim financial results.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments necessary for a fair presentation. Certain reclassifications have
been made to amounts reported in previous periods to conform to the 1996
presentation.
(2) Potential Purchase of Presidio Oil Company
On May 31, 1995, the Company announced that it had written to Presidio Oil
Company ("Presidio") in order to propose a business combination between the two
companies. On June 28, 1995, the Company purchased approximately $56 million
principal amount of the outstanding $100 million principal amount of GINs of
Presidio for approximately $51 million, including accrued interest. Presidio
has been unable to meet the interest payments on the GINs and is therefore in
default under terms of the GINs. The purchase of the GINs was funded by a $51
million demand note that was repaid in November, 1995 using proceeds from a
common stock offering.
On August 6, 1996, the Company announced that it had executed a definitive
agreement with Presidio for the acquisition of Presidio for $183 million
(consisting of approximately $101 million of cash and 5 million shares
(approximately 2.677 million shares after deducting the portion representing the
Company's previous investment in the Presidio Gas Indexed Notes) of the
Company's Common Stock valued at $16.50 per share), plus the assumption of
certain liabilities. The transaction would be consummated through a Chapter 11
bankruptcy proceeding which was filed by Presidio on August 5, 1996. The
Company's obligation to consummate the transaction is conditioned upon, among
other things, the receipt of the bankruptcy court confirmation order approving
the transaction by November 15, 1996.
Although management believes its investment in the GINs is a strategic part
of its efforts to acquire Presidio, there can be no assurances as to when, if
ever, such acquisition will be consummated. A failure to consummate the
acquisition of Presidio could result in the Company not recovering its initial
investment in the GINs. In addition, the value of the Company's investment in
the GINs may be adversely affected by the results of operations and financial
condition of Presidio, which is dependent in large part on the prices Presidio
realizes for its gas and oil production, as well as the ultimate outcome of
Presidio's efforts to restructure its outstanding indebtedness or to be acquired
by another party and the timing thereof. There is not currently an active
trading market for the GINs, and the Company may experience difficulty in
selling the GINs if it desires to do so in the future.
9
<PAGE> 10
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisition of KN Production Company ("KNPC")
On January 31, 1996, the Company and KN Energy, Inc. ("KNE") closed joint
transactions which resulted in (i) the Company's acquisition of all of the
issued and outstanding stock of KNPC, formerly a wholly owned subsidiary of
KNE, and (ii) KNE's acquisition of 1,000,000 shares of the Company's $1.75
Convertible Preferred Stock, Series A (the "Series A Preferred Stock"), and
918,367 shares of the Company's Common Stock. The Series A Preferred Stock
carries a 7% dividend payable quarterly. In addition, Wildhorse Energy
Partners, LLC ("Wildhorse") was formed by the Company and KNE for the purpose
of providing gas gathering, processing, marketing, field and storage services.
The transaction, accounted for as a purchase, was valued at $36.25 million,
of which $25 million was paid in the form of 1,000,000 shares of the Company's
Series A Preferred Stock and the remaining $11.25 million was paid in the form
of 918,367 shares of the Company's Common Stock, based on a price per share of
$12.25. The addition of KNPC added approximately 34.5 Bcfe of proved gas
equivalent reserves, 243,000 net undeveloped acres and a natural gas storage
facility.
Wildhorse was created to provide gathering, processing, marketing, storage
and field services to Rocky Mountain gas and oil producers and others.
Wildhorse is jointly owned by the Company (45 percent) and KNE (55 percent)
and is operated by KNE under the direction of an operating team with equal
representation from KNE and the Company. The Company accounts for its share of
Wildhorse using the proportionate consolidation method of accounting.
The Company has dedicated significant amounts of its Rocky Mountain gas
production to Wildhorse for gathering, processing and marketing. KNE contributed
substantial gas marketing contracts and a natural gas pipeline in western
Colorado.
The following table presents the unaudited pro forma revenues, net income
and net income per share for the six months ended June 30, 1996 and 1995,
assuming that the KNPC transaction occurred January 1, 1995.
<TABLE>
<CAPTION>
Six Months ended
June 30,
----------------
1996 1995
---- ----
<S> <C> <C>
Revenues $ 27,276 $ 24,472
====== ======
Net income $ 2,679 $ 5,000
Preferred stock dividend 875 875
------ ------
Net income available to common
shareholders $ 1,804 $ 4,125
====== ======
Net income per common share $ .09 $ .25
====== ======
</TABLE>
10
<PAGE> 11
TOM BROWN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Income Taxes
Financial Accounting Standard No. 109, "Accounting for Income Taxes" (the
"Statement") was adopted by the Company effective as of January 1, 1993. The
Statement requires a balance sheet approach to the calculation of deferred
income taxes. The Company has significant net operating loss carryforwards
and, therefore, calculated a net deferred tax asset upon adoption of the
Statement. However, due to the Company's history of net operating losses until
1995, a valuation allowance was recorded equal to the amount of the net
deferred asset.
Based on 1993 and 1994 additions to the Company's gas and oil reserves and
the resulting increases in anticipated future income, the Company expects to
realize a major portion of the future benefit of its net operating loss
carryforwards prior to their expiration. Accordingly, that portion of the
valuation allowance was reversed in the first quarter of 1995. A valuation
allowance of approximately $9.9 million has been retained against the
Company's net deferred tax assets at June 30, 1996 based on management's
estimate of the recoverability of future tax benefits.
Temporary differences and carryforwards which gave rise to significant
portions of deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Net operating loss carryforwards.................... $ 21,080,000 $ 23,070,000
Gas and oil acquisition, exploration and development
costs deducted for tax purposes in excess of book.. (10,871,000) (8,074,000)
Investment tax credit carryforwards................. 4,813,000 4,813,000
Option plan compensation............................ 1,514,000 1,507,000
Other............................................... 2,435,000 2,435,000
---------- ----------
Net deferred tax asset............................ 18,971,000 23,751,000
Valuation allowance................................. (9,923,000) (10,581,000)
---------- ----------
Recognized net deferred tax asset................. $ 9,048,000 $ 13,170,000
========== ==========
</TABLE>
The valuation allowance listed above relates primarily to net operating
loss and investment tax credit carryforwards. The Company evaluated all
appropriate factors to determine the proper valuation allowance for these
carryforwards, including any limitations concerning their use, the year the
carryforwards expire and the levels of taxable income necessary for
utilization. In this regard, full valuations were provided for investment tax
credit carryforwards. Based on its recent operating results and its expected
levels of future earnings, the Company believes it will, more likely than not,
generate sufficient taxable income to realize the benefit attributable to the
net operating loss carryforwards for which valuation allowances were not
provided.
11
<PAGE> 12
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The factors which most significantly affect the Company's results of
operations are (1) the sales prices of natural gas and crude oil, (2) the level
of total sales volumes and (3) the level and success of exploration and
development activity.
On January 31, 1996, the Company and KN Energy, Inc. ("KNE") closed joint
transactions which resulted in (i) the Company's acquisition of all of the
issued and outstanding stock of KNPC, formerly a wholly owned subsidiary of
KNE, and (ii) KNE's acquisition of 1,000,000 shares of the Company's $1.75
Convertible Preferred Stock, Series A (the "Series A Preferred Stock"), and
918,367 shares of the Company's Common Stock. In addition, Wildhorse Energy
Partners, LLC ("Wildhorse") was formed by the Company and KNE for the purpose
of providing gas gathering, processing, marketing, field and storage services.
The transaction, accounted for as a purchase, was valued at $36.25 million,
of which $25 million was paid in the form of 1,000,000 shares of the Company's
Series A Preferred Stock and the remaining $11.25 million was paid in the form
of 918,367 shares of the Company's Common Stock, based on a price per share of
$12.25.
Selected Operating Data
<TABLE>
<CAPTION>
Three Months Six Months
ended ended
June 30, June 30,
-------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues (in thousands):
Natural gas sales................. $ 5,753 $ 3,273 $11,906 $ 6,686
Crude oil sales................... 2,571 1,914 4,851 3,435
Marketing, gathering and
processing...................... 5,635 3,708 10,289 7,980
Other............................. 112 267 230 489
------ ----- ------ ------
Total revenues.............. $14,071 $ 9,162 $ 27,276 $18,590
====== ===== ====== ======
Net income (in thousands)............ $ 1,012 $ 273 $ 1,882 $ 4,803
====== ===== ====== ======
Natural gas production (MMcf)........ 4,347 2,781 8,221 5,330
Crude oil production (MBbls)......... 123 106 258 200
Average natural gas sales
price ($/Mcf)..................... $ 1.32 $ 1.18 $ 1.45 $ 1.25
Average crude oil sales
price ($/Bbl)..................... $ 20.90 $ 18.06 $ 18.80 $ 17.18
</TABLE>
Revenues
During the three month period ended June 30, 1996, revenues from natural gas
and oil production increased $3.1 million to $8.3 million compared to the same
period in 1995. An increase in natural gas sales volumes of 56% increased
revenues by approximately $2.1 million. An increase in average natural gas
prices received by the Company from $1.18 per Mcf to $1.32 per Mcf increased
revenues by approximately $0.4
12
<PAGE> 13
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
million. An increase in oil sales volumes of 16% increased revenues by
approximately $0.3 million for the three months ended June 30, 1996. An
increase in the average crude oil sales prices from $18.06 to $20.90 per barrel
increased revenues $0.3 million.
During the six month period ended June 30, 1996, revenues from natural gas
and oil production increased $6.6 million to $16.8 million compared to the same
period in 1995. An increase in natural gas sales volumes of 54% increased
revenues by approximately $4.2 million. An increase in average natural gas
prices received by the Company from $1.25 per Mcf to $1.45 per Mcf increased
revenues by approximately $1.1 million. An increase in oil sales volumes of
29% increased revenues by approximately $1.0 million for the six month period
ended June 30, 1996. An increase in the average crude oil sales price from
$17.18 per Bbl to $18.80 per Bbl increased revenues by approximately $0.3
million for the six months ended June 30, 1996.
Revenues from natural gas and oil production from the KNPC acquisition for
the first six months of 1996 accounted for $2.9 million of the $6.6 million
increase.
Marketing, gathering and processing revenues increased $1.9 million and $2.3
million, respectively, for the three and six month periods ended June 30, 1996
as a result of the increased activity in the Company's natural gas marketing
operations through Wildhorse, its newly formed joint venture with KN Energy,
Inc.
Costs and Expenses
Costs and expenses for the three months ended June 30, 1996 increased
approximately 35% to $11.9 million as compared to the same period in 1995 due
primarily to the properties acquired in the KNPC acquisition in January, 1996.
Natural gas and oil production expense increased $0.5 million as a result of
the addition of the KNPC properties. An increase of $0.3 million in taxes on
gas and oil production due to the KNPC properties was offset by refunds of
severance taxes in the Company's Val Verde Basin. Exploration costs increased
$0.1 million due to an exploratory dry hole in the second quarter of 1996.
General and administrative expenses increased $0.4 million due to additional
costs incurred with the addition of KNPC. Depreciation, depletion and
amortization increased $1.6 million due to the addition of the KNPC properties
and additional Val Verde Basin wells.
Costs and expenses for the six months ended June 30, 1996 decreased to $23.2
million from $27.6 million for the same period in 1995 due primarily to a
writedown of properties of $8.4 million resulting from the early adoption of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-lived Assets...", in the first quarter of 1995. The
decrease was partially offset as a result of incremental operating costs
associated with KNPC in January, 1996.
The Company incurred a current tax liability in the amount of $171,000 and
$149,000 for the six months ended June 30, 1996 and 1995, respectively, as a
result of the application of the alternative minimum tax rules as provided
under the Internal Revenue Code and state taxes.
The Company recognized in the first quarter of 1995 a net deferred tax asset
in the amount of $13,967,000 and corresponding credit to deferred income tax
expense. Deferred tax assets (related primarily to the Company's net operating
loss and investment tax credit carryforwards) were initially recorded in 1993,
but these tax assets had been reserved entirely by a valuation allowance up
until 1995. Based on
13
<PAGE> 14
TOM BROWN, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
recent additions to the Company's gas and oil reserves, the resulting increases
in anticipated future income and the absence of significant option plan
compensation charges to future income, the Company expects to realize a major
portion of the future benefit of its net operating loss carryforwards prior to
their expiration. Accordingly, that portion of the valuation allowance was
reversed in the first quarter of 1995. A valuation allowance of approximately
$10.0 million will be retained against the Company's deferred tax assets,
primarily because the Company's investment tax credit carryforwards are still
not expected to be realized in future periods. The deferred tax assets and
related valuation allowance will be monitored for potential adjustments as
future events so indicate, although management does not expect such adjustments
to be significant in the near term.
Capital Resources and Liquidity
The Company continues to operate under the strategy of maintaining a strong
balance sheet, adding value by increasing the Company's reserve base and
presence in significant natural gas areas and further developing the ability to
control and market the Company's production.
In May 1995, the Company announced that it had written to Presidio Oil
Company ("Presidio") in order to propose a business combination between the two
companies. In June 1995, the Company announced that it had purchased $56
million principal amount of the $100 million principal amount outstanding of
the Senior Gas Indexed Notes ("GINs") of Presidio. The purchase closed on
June 28, 1995 and was funded through a bank loan.
In November 1995, the Company was notified by Presidio that the Company had
been selected as the party with which it would pursue negotiations for the
potential sale of substantially all of Presidio's assets. The Company's offer
for Presidio amounted to $180 million, subject to certain adjustments, of which
the cash portion would be an amount sufficient to repay the outstanding bank
debt and senior secured indebtedness. The remainder is to be paid in Common
Stock.
On August 6, 1996, the Company announced that it had executed a definitive
agreement with Presidio for the acquisition of Presidio for $183 million
(consisting of approximately $101 million of cash and 5 million shares
(approximately 2.677 million shares after deducting the portion representing
the Company's previous investment in the Presidio GINs) of the
Company's Common Stock valued at $16.50 per share), plus the assumption of
certain liabilities. The transaction would be consummated through a Chapter 11
bankruptcy proceeding which was filed by Presidio on August 5, 1996. The
Company's obligation to consummate the transaction is conditioned upon, among
other things, the receipt of the bankruptcy court confirmation order approving
the transaction by November 15, 1996.
The Company maintains a $65 million Credit Facility under a Credit Agreement
entered into in September 1995. The Credit Facility matures in September 1998.
Borrowings under the Credit Facility are unsecured and bear interest, at the
election of the Company, at a rate equal to (i) the greater of the agent bank's
prime rate or the federal funds effective rate plus 0.50% or (ii) the agent
bank's eurodollar rate plus a margin ranging from 0.75% to 1.00%. Interest on
amounts outstanding under the Credit Facility is due on the last day of each
month in the case of loans bearing interest at the prime rate or federal funds
rate and, in the case of loans bearing interest at the eurodollar rate,
interest payments are due on the last day of each applicable interest period of
one, two or three month periods, as selected by the Company at the time of
borrowing or, in the case of six month periods if selected by the Company,
interest payments are due on the last day of each three-month period.
The Company has obtained a commitment letter from its lead bank to increase
the Credit Facility to $125 million. If the Company is successful in its bid
for Presidio Oil Company, a major portion of the Credit Facility will be used
in that financing.
In December 1995, the Company and KN Energy, Inc. ("KNE") jointly announced
the execution of a letter of intent providing for the merger of KNE's
wholly-owned gas and oil subsidiary, KNPC, into the Company and the formation of
a new gas services company, Wildhorse Energy Partners, LLC ("Wildhorse"). On
January 31, 1996, this transaction was completed with the Company issuing 1.0
million shares of Series A Preferred Stock and 0.9 million shares of Common
Stock.
The addition of the KNPC reserves added approximately 34.5 Bcfe of proved gas
equivalent reserves.
Wildhorse was created to provide gathering, processing, marketing, storage
and field services to Rocky Mountain gas and oil producers and others. It will
also pursue the construction or acquisition of gathering, processing and
storage areas of the Rocky Mountain region. Wildhorse is jointly owned by the
Company (45 percent) and KNE (55 percent) and is operated by KNE under
the direction of an operating team with equal representation from KNE and the
Company.
The Company has dedicated significant amounts of its Rocky Mountain gas
production to Wildhorse for gathering, processing and marketing. KNE
contributed gas marketing contracts and storage assets in western Colorado.
The level of capital expenditures by the Company will vary in future periods
depending on energy market conditions and other related economic factors. The
Company has no material long-term commitments and consequently, is able to
adjust the level of its expenditures as circumstances warrant. Exclusive of
the purchase price paid by the Company for KNPC, the Company's capital
expenditures for the three and six month periods ended June 30, 1996 were
approximately $3.3 million and $7.9 million as compared to $7.9 million and
$14.9 million, respectively, in the same periods in 1995.
The Company has historically funded capital expenditures and working capital
requirements with internally generated cash and borrowings. During the six
months ended June 30, 1996, net cash provided by operating activities was
$11.3 million as compared to $6.1 million for the same period of 1995.
The Company continues to pursue opportunities which will add value by
increasing its reserve base and presence in significant natural gas areas and
further developing the Company's ability to control and market production of
natural gas. The Common Stock offering in November 1995, the purchase of KNPC
and the elimination of all debt served to strengthen the Company's balance
sheet. As the Company continues to evaluate potential acquisitions and
development its existing properties, it will benefit from its financing
flexibility and the leverage potential of the Company's overall capital
structure.
14
<PAGE> 15
TOM BROWN, INC.
P. O. Box 2608
500 Empire Plaza Bldg.
Midland, Texas 79701
__________________________
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
FORM 10-Q
__________________________
PART II OF TWO PARTS
OTHER INFORMATION
15
<PAGE> 16
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on May 28, 1996. At
the meeting, the following persons were elected to serve as Directors of the
Company until the 1997 annual meeting of stockholders and until their
respective successors are duly qualified and elected: (1) Thomas C. Brown, (2)
Donald L. Evans, (3) William R. Granberry, (4) Henry Groppe, (5) Edward W.
LeBaron, Jr., (6) James B. Wallace, (7) Robert H. Whilden, Jr., (8) David M.
Carmichael and (9) George M. Simmons.
Set forth below is a tabulation of votes with respect to each nominee for
Director:
<TABLE>
<CAPTION>
Votes Votes Broker
Cast For Withheld Non-votes
-------- -------- ---------
<S> <C> <C> <C>
Thomas C. Brown 18,579,134 238,306 -0-
Donald L. Evans 18,597,289 220,151 -0-
William R. Granberry 18,579,289 238,151 -0-
Henry Groppe 18,699,114 118,326 -0-
Edward W. LeBaron, Jr. 18,717,139 100,301 -0-
James B. Wallace 18,699,137 118,303 -0-
Robert H. Whilden, Jr. 18,699,287 118,153 -0-
</TABLE>
In addition to the above directors elected by the holders of the Common Stock,
the sole holder of the Company's 1,000,000 shares of outstanding Preferred
Stock also designated David M. Carmichael and George M. Simmons as directors.
An amendment to amend the Certificate of Incorporation of the Company to
increase the number of authorized shares of Common Stock to 40,000,000 was
adopted at the annual meeting of stockholders on May 28, 1996.
Set forth below is a tabulation of votes with respect to this amendment:
<TABLE>
<CAPTION>
Votes Votes Broker
Cast for Cast Against Abstentions Non-votes
-------- ------------ ----------- ---------
<S> <C> <C> <C>
16,800,766 1,941,913 74,761 -0-
</TABLE>
16
<PAGE> 17
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Description
Exhibit No. 2 Exchange Agreement dated August 5, 1996 by and among
Presidio Oil Company, Presidio Exploration, Inc.,
Presidio West Virginia, Inc., Palisade Oil, Inc.
and Tom Brown, Inc. (1)
Exhibit No. 4 Certificate of Incorporation, as amended
Exhibit No. 11 Computation of Per Share Earnings
Exhibit No. 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
- - ----------------
(1) Not included with Exhibit 2 are the following exhibits and schedules
thereto, copies of which will be furnished supplementally to the
Commission on request:
Exhibit A Oil and Gas Leases
Exhibit B Oil and Gas Wells
Exhibit D Form of Disclosure Statement
Exhibit E Form of Affiliate Letter
Schedule 4.19 Limitation on Acquisitions and Expenditures
Schedule 4.22 Officers and Employees; Severance Plan and
Agreements
Schedule 4.26 Letters of Credit
Schedule 5.5 Claims and Litigation
Schedule 5.8 Tax Matters
Schedule 5.9 Employee Benefit Plans
Schedule 5.11 Capital Structure
Schedule 5.12 Liabilities
Schedule 5.13 Absence of Certain Changes
Schedule 5.15 Labor Matters
Schedule 5.16 Accounts Receivable
Schedule 5.19 Accuracy of Oil and Gas Reserve Report
Schedule 5.20 Oil and Gas Operations
Schedule 5.21 Environmental Matters
Schedule 5.22 No Brokers
Schedule 5.23 Compliance With Laws
Schedule 5.24 Material Insurance Policies
Schedule 5.25 Oil and Gas Operating Agreements and
Material Contracts
Schedule 6.7 Capital Structure of Tom Brown, Inc.
Schedule 6.8 Claims and Litigation
17
<PAGE> 18
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
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 thereunto duly authorized.
TOM BROWN, INC.
---------------------------------------------
(Registrant)
August 13, 1995 /s/ Kim Harris
- - --------------- ---------------------------------------------
Date Kim Harris
Controller
(Mr. Harris is the Chief Financial Officer
and is duly authorized to sign on behalf
of the Registrant)
18
<PAGE> 19
TOM BROWN, INC. AND SUBSIDIARIES
OTHER INFORMATION
INDEX TO EXHIBITS
Exhibit No. 2 Exchange Agreement dated August 5, 1996 by and among
Presidio Oil Company, Presidio Exploration, Inc.,
Presidio West Virginia, Inc., Palisade Oil, Inc.
and Tom Brown, Inc.
Exhibit No. 4 Certificate of Incorporation, as amended
Exhibit No. 11 Computation of Per Share Earnings
Exhibit No. 27 Financial Data Schedule
<PAGE> 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- - -----------------------------------------)
In re: ) Chapter 11
)
PRESIDIO OIL COMPANY, ) Case No. 96-______(__)
PRESIDIO EXPLORATION, INC., )
PALISADE OIL, INC., and ) (Jointly Administered)
PRESIDIO WEST VIRGINIA, INC., )
)
Debtors and )
Debtors-in-Possession. )
- - ------------------------------------------
JOINT PLAN OF REORGANIZATION
Presidio Oil Company, Presidio Exploration, Inc., Palisade Oil, Inc.,
and Presidio West Virginia, Inc. (collectively, the "Debtors"), together with
Tom Brown, Inc. ("Tom Brown"), jointly propose, except with respect to Article
V ("Identification and Treatment of Classes Impaired Under the Plan"), which
Article V is proposed solely by the Debtors, the following plan of
reorganization (the "Plan") for each of the above-captioned Debtors pursuant to
the provisions of Chapter 11 of title 11, United States Code (the "Bankruptcy
Code").
ARTICLE I
DEFINITIONS
Capitalized terms have the respective meanings specified below. For
purposes of the Plan: (a) whenever from the context it is appropriate, each
term, whether stated in the singular or the plural, will include both the
singular and the plural; (b) unless otherwise specified herein, any reference
to an entity as a holder of a Claim or Equity Interest (each as defined below)
includes that entity's predecessors, successors, assigns and affiliates; (c)
unless otherwise specified herein, all references in the Plan to sections,
articles, and appendices are references to sections, articles, and appendices
of or to the Plan; (d) the words "herein" and "hereto" refer to the Plan in its
entirety rather than to a particular portion of the Plan; (e) captions and
headings to articles and sections are inserted for convenience of reference
only and are not intended to be a part of or to affect the interpretation of
the Plan; and (f) the rules of construction of the Bankruptcy Code will apply.
<PAGE> 2
1.01 ADMINISTRATIVE BAR DATE ORDER means the Order(s) of the
Bankruptcy Court establishing the last date by which requests for payment of
Administrative Expense Claims must be filed and which Order(s) shall provide
the mechanism for establishing the maximum entitlement to Fee Claims prior to
the Confirmation Date in accordance with Section 3.05 of the Plan.
1.02 ADMINISTRATIVE EXPENSE CLAIM means a Claim for any cost or
expense of administration of the Chapter 11 Cases allowed under sections 503(b)
and 507(a)(1) of the Bankruptcy Code, including, without limitation, any actual
and necessary expenses of preserving the Debtors' respective Estates, any
actual and necessary expenses of operating the Debtors' businesses, Fee Claims,
and any fees or charges assessed against the respective Debtors under section
1930 of title 28, United States Code.
1.03 AGGREGATE COMMON SHARE VALUE shall have the meaning set forth
in the Exchange Agreement.
1.4 AGENT BANK means The Chase Manhattan Bank (National
Association), or its successor, as agent for the Banks under the Bank Credit
Agreement.
1.05 ALLOWED CLAIM, or the term ALLOWED used conjunctively with the
term Claim, or with respect to any class or subcategory of Claims, means a
Claim (or, if and to the extent permitted, a class of Claims), proof of which
was properly filed on or before the Claims Bar Date or, if no proof of claim
was filed, which has been or hereafter is listed by the respective Debtors on
their Schedules as liquidated in amount and not disputed or contingent, and, in
either case, as to which no objection to the allowance thereof has been
interposed on or before the Effective Date or such other applicable period of
limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy
Court, or as to which any objection has been determined by a Final Order to the
extent such objection is determined in favor of the respective holder. Unless
otherwise specified herein or by order of the Bankruptcy Court, an "Allowed
Claim" shall not for purposes of computation of distributions under the Plan
include interest on such Claim from the Petition Date.
1.06 ALLOWED EQUITY INTEREST, or the term ALLOWED used
conjunctively with the term Equity Interest, or with respect to any class or
subcategory of Equity Interests, means an Equity Interest (or, if and to the
extent permitted, a class of Equity Interests) in Presidio, proof of which was
properly filed or, if no proof of interest was filed, which has been or
hereafter is listed by Presidio on its Schedules as liquidated in amount and
not disputed or contingent, and, in either case, as to which no objection to
the allowance thereof has been interposed on or before the Effective Date or
such other applicable period of limitation fixed by the Bankruptcy Code, the
Bankruptcy Rules or the Bankruptcy Court, or as to which any objection has been
determined by a Final Order to the extent such objection is determined in favor
of the respective holder.
1.07 BANKS means the lenders who are parties to the Bank Credit
Agreement.
2
<PAGE> 3
1.08 BANK CLAIMS means the Claims of the Banks and the Agent Bank
against any of the Debtors pursuant to or arising under the Bank Credit
Agreement and any Subsidiary Guaranty thereon, including any Claim for
principal, unpaid interest and any related fees, charges or attorneys' fees
payable in accordance with the instruments evidencing and governing the Bank
Claims, and any liens and security interests granted to secure repayment of or
relating to the foregoing.
1.09 BANK CREDIT AGREEMENT means the Amendment and Restatement of
Amendment, Restatement and Consolidation of Credit Agreement, dated August 6,
1993, as amended, between Presidio, Presidio Exploration, the Banks and each
other bank which is a signatory thereto or a successor or assign thereof and
the Agent Bank.
1.10 BANKRUPTCY CODE means the Bankruptcy Code, Title 11, United
States Code, as amended.
1.11 BANKRUPTCY COURT means the United States Bankruptcy Court for
the District of Delaware, or such other court that exercises jurisdiction over
the Chapter 11 Cases.
1.12 BANKRUPTCY EVENT shall have the meaning set forth in the
Exchange Agreement.
1.13 BANKRUPTCY RULES means the Federal Rules of Bankruptcy
Procedure, as amended, promulgated under 28 U.S.C. Section 2075, and the
local rules of the Bankruptcy Court as applicable to the Chapter 11 Cases.
1.14 BUSINESS DAY means any day except Saturday, Sunday or any
other day on which commercial banks in Wilmington, Delaware are required or
authorized by law to be closed for business.
1.15 CASH means cash or cash equivalents in immediately available
funds.
1.16 CASH CONSIDERATION shall have the meaning set forth in the
Exchange Agreement.
1.17 CHAPTER 11 CASES means the cases filed by the respective
Debtors under Chapter 11 of the Bankruptcy Code.
1.18 CLAIM or CLAIMS means, as to each Debtor: (i) any right to
payment from the respective Debtors, whether or not such right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
any right to an equitable remedy for breach of performance if such breach gives
rise to a right of payment from the respective Debtors, whether or not such
right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured, and including,
without limitation, any Claim for attorneys' fees, other professional fees, or
court costs incurred in connection with collection thereof or in connection
with the Chapter 11 Cases.
3
<PAGE> 4
1.19 CLAIMS BAR DATE means the date the Bankruptcy Court sets as
the date by which all proofs of Claims must be filed.
1.20 CLASS A COMMON STOCK, when used in connection with Presidio
Common Stock, means the Class A common stock, $.10 par value per share, issued
by Presidio.
1.21 CLASS B COMMON STOCK, when used in connection with Presidio
Common Stock, means the Class B Common Stock, $.10 par value per share, issued
by Presidio.
1.22 CLOSING shall have the meaning set forth in the Exchange
Agreement.
1.23 CLOSING DATE shall have the meaning set forth in the Exchange
Agreement.
1.24 CONFIRMATION DATE shall have the meaning set forth in the
Exchange Agreement.
1.25 CONFIRMATION HEARING means the hearing conducted by the
Bankruptcy Court to consider confirmation of the Plan.
1.26 CONFIRMATION ORDER shall have the meaning set forth in the
Exchange Agreement.
1.27 DGCL means the General Corporation Law of the State of
Delaware, as amended from time to time.
1.28 DEBT OBLIGATIONS means the Senior Secured Note Claims, Senior
GIN Claims and Subordinated Debenture Claims, together with all Claims arising
directly or indirectly under the instruments governing same, and any guaranty
or Subsidiary Guaranty of any such Claims.
1.29 DEBTORS OR DEBTOR(S), means, individually or collectively as
the context requires, Presidio, Presidio Exploration, Palisade Oil, Presidio
West, or each of them.
1.30 DESIGNATED CONTRACTS shall have the meaning set forth in the
Exchange Agreement.
1.31 DESIGNATED CONTRACT ORDER means a Final Order of the Bankruptcy
Court (which may be the Confirmation Order) authorizing the assumption by the
applicable Debtor under Sections 365 or 1123(b)(2) of the Bankruptcy Code of
the Designated Contracts, which order shall provide that (i) the occurrence of
a Bankruptcy Event and (ii) the insolvency or financial condition of any Debtor
prior to the Effective Date shall not constitute a basis for the removal of any
Debtor as operator under any Designated Contract.
1.32 DISCLOSURE STATEMENT shall have the meaning set forth in the
Exchange Agreement.
1.33 DISPUTED CLAIM means any Claim (i) listed on the Schedules
as unliquidated, disputed or contingent or (ii) as to which the respective
Debtor, Tom Brown or any other party in
4
<PAGE> 5
interest has interposed a timely objection or request for estimation in
accordance with the Bankruptcy Code and the Bankruptcy Rules, which objection
or request for estimation has not been withdrawn or determined by Final Order.
1.34 DISPUTED EQUITY INTEREST means any Equity Interest as to which
the respective Debtor, Tom Brown or any other party in interest has interposed
a timely objection or request for estimation in accordance with the Bankruptcy
Code and the Bankruptcy Rules, which objection or request for estimation has
not been withdrawn or determined by Final Order.
1.35 DISTRIBUTEE means a holder of a Bank Claim, Debt Obligation or
Presidio Common Stock.
1.36 EFFECTIVE DATE means the Closing Date.
1.37 EQUITY INTEREST means any equity interest in Presidio, which
shall include any common stock, preferred stock, and any security which is
exercisable for or convertible into shares of common stock or preferred
stock of Presidio.
1.38 ESTATE means, as to each Debtor, the estate created for such
Debtor in its Chapter 11 Case pursuant to Section 541 of the Bankruptcy Code.
1.39 EXCHANGE AGENT means either (i) such person or entity as may
be designated in and pursuant to the Exchange Agreement, or (ii) in the absence
of such designation, or if such person or entity as designated has ceased to be
the Exchange Agent and no other person or entity has been designated, a person
designated by Tom Brown and Presidio and approved by the Bankruptcy Court in
the Confirmation Order.
1.40 EXCHANGE AGREEMENT means that Exchange Agreement dated August
5, 1996 by and among the Debtors and Tom Brown, and all Schedules and Exhibits
attached thereto, a copy of which is attached to the Plan as Exhibit "A", and
as such Exchange Agreement may be amended from time to time.
1.41 EXCHANGE COMMON STOCK shall have the meaning set forth in the
Exchange Agreement; provided, however, that solely for the purposes of
computing the amount of Exchange Common Stock to be distributed to holders of
Allowed Class 5 Claims under section 5.03 of the Plan, the term Exchange Common
Stock shall mean the amount of shares that would exist, without regard to any
adjustments or reductions to the Aggregate Common Share Value and the amount of
Exchange Common Stock that may be made, (i) under the Exchange Agreement in
respect of the shares of Tom Brown Common Stock which otherwise would be
distributable to Tom Brown in respect of its Class 5 Claims and (ii) pursuant
to Section 5.09 of the Plan.
1.42 EXCHANGE CONSIDERATION shall have the meaning set forth in the
Exchange Agreement.
5
<PAGE> 6
1.43 EXISTING PLANS shall have the meaning set forth in the Exchange
Agreement.
1.44 FEE CLAIM means a claim for compensation and reimbursement of
expenses pursuant to Sections 327, 328, 330, 331, 503(b) and 1103 of the
Bankruptcy Code for services rendered or expenses incurred prior to the
Effective Date.
1.45 FINAL ORDER shall have the meaning set forth in the Exchange
Agreement.
1.46 GENERAL UNSECURED CLAIM means (i) a Claim for goods, materials
or services provided to the respective Debtor or rendered to such Debtor in the
ordinary course of business prior to the commencement of its Chapter 11 Case,
(ii) damage Claims arising from the rejection, if any, of executory contracts
or unexpired leases pursuant to a Final Order of the Bankruptcy Court or the
Plan, (iii) Litigation Claims, and (iv) any Miscellaneous Unsecured Claims.
Without limiting the foregoing, (x) in the case of damages for the rejection of
an unexpired lease, General Unsecured Claim shall mean the Allowed Claim as
determined by operation of subsections 502(b)(6) and 502(g) of the Bankruptcy
Code, and (y) in the case of any unsecured claim for reimbursement or
contribution of an entity which is liable with the respective Debtor or has
secured the claim of a creditor, General Unsecured Claim shall mean the Allowed
Claim as determined by operation of Section 502(e) of the Bankruptcy Code.
General Unsecured Claim shall not include any Administrative Expense Claim,
Priority Tax Claim, Priority Claim, Bank Claim, Senior Secured Note Claim,
Miscellaneous Secured Claim, Intercompany Claim, Senior GIN Claim, Subordinated
GIN Claim, Indemnity Claim, or Subordinated Debenture Claim.
1.47 INTERCOMPANY CLAIM means any Claim by one or more of the
Debtors against any other of the Debtors, whether based upon an account (as
reflected in one or more intercompany book entries), or as otherwise recorded,
evidenced, or held.
1.48 INDEMNITY CLAIM means any Claim relating to or arising from the
obligations of any Debtor to indemnify, hold harmless, or reimburse the past or
present directors, officers, and any former directors and officers of any of
the Debtors, whether or not such service terminated prior to the Petition Date
or extended beyond the Petition Date, against any obligation pursuant to,
related to, or arising under their respective articles of incorporation,
certificates of incorporation, or bylaws (whether in their form as of the
Petition Date or as amended on or before the Effective Date), by any other
contract of employment or other agreement, or pursuant to state laws or any
agreements, or any combination of the foregoing, and including, without
limitation, all such obligations as may arise or which may have arisen on,
before, or in connection with the Effective Date and the Closing.
1.49 LITIGATION CLAIMS means the Claims against the Debtors listed
in Schedule 5.5 of the Exchange Agreement.
1.50 MISCELLANEOUS SECURED CLAIM means a Claim, to the extent of the
value, as determined by the Bankruptcy Court pursuant to subsection 506(a) of
the Bankruptcy Code, of any interest in property of the Estate securing such
Claim, including, without limitation, Claims secured
6
<PAGE> 7
by mortgages or trust deeds of real property, mechanics' or materialmen's
liens, artisans' liens or security deposits, or by miscellaneous personal
property such as office furniture, telephone systems, copiers and mailing
equipment, including any Claim for principal, unpaid interest thereon, and any
related fees, charges or attorneys' fees (including those incurred before the
Petition Date in accordance with the instruments evidencing and governing such
obligations and those incurred from and after the Petition Date as may be
allowed pursuant to section 506(b) of the Bankruptcy Code), and any liens or
security interests granted to secure the foregoing. Miscellaneous Secured
Claims shall not include any Bank Claim or Senior Secured Note Claim.
1.51 MISCELLANEOUS UNSECURED CLAIMS means an unsecured claim not
entitled to priority under Section 507(a) of the Bankruptcy Code that is not an
Administrative Claim, Priority Tax Claim, Priority Claim, Bank Claim, Senior
Secured Note Claim, Miscellaneous Secured Claim, Senior GIN Claim, Subordinated
GIN Claim, Indemnity Claim, or Subordinated Debenture Claim and which is not
included in clauses (i), (ii), or (iii) of Section 1.46 in the definition of
General Unsecured Claims. Without limiting the foregoing, in the case of an
unsecured claim for reimbursement or contribution of any entity which is liable
with the respective Debtor or has secured the claim of a creditor,
Miscellaneous Unsecured Claim shall mean the Allowed Claim as determined by
operation of Section 502(e) of the Bankruptcy Code.
1.52 NEW D&O INSURANCE means the policies of directors and officers
liability insurance identified in the Exchange Agreement, including those
policies, endorsements, or riders to be obtained pursuant to the Exchange
Agreement.
1.53 PALISADE OIL means Palisade Oil, Inc., a Colorado corporation,
a wholly-owned subsidiary of Presidio.
1.54 PETITION DATE or PETITION DATES means the respective dates on
which each Debtor, respectively, files or has filed its petition for relief
commencing its Chapter 11 Case; provided, however, that in the case of Presidio
West only, Petition Date means March 15, 1996.
1.55 PLAN means this plan of reorganization, as it may be amended,
modified or supplemented from time to time in accordance herewith, the Exchange
Agreement, the Bankruptcy Code and the Bankruptcy Rules.
1.56 PRESIDIO means Presidio Oil Company, a Delaware corporation,
at all times before, during and after the filing of the Chapter 11 Cases.
1.57 PRESIDIO COMMON STOCK means all outstanding shares of Class A
Common Stock and all outstanding shares of Class B Common Stock in each case
determined as of the Record Date.
1.58 PRESIDIO COMMON STOCK CASH CONSIDERATION shall have the
meaning set forth in the Exchange Agreement.
7
<PAGE> 8
1.59 PRESIDIO EXPLORATION means Presidio Exploration, Inc., a
Colorado corporation, a wholly-owned subsidiary of Presidio.
1.60 PRESIDIO STOCK OPTIONS means any and all options or other
rights arising under any stock option plan of Presidio in effect as of the
Petition Date and which remain unexercised as of the Confirmation Date.
1.61 PRESIDIO WARRANTS means any and all warrants or other rights
arising under any warrant agreement of Presidio in effect as of the Petition
Date and which remain unexercised as of the Confirmation Date.
1.62 PRESIDIO WEST means Presidio West Virginia, Inc., a Delaware
corporation, a wholly-owned subsidiary of Presidio Exploration.
1.63 PRIORITY CLAIM means a Claim for an amount entitled to
priority under subsection 507(a) of the Bankruptcy Code, other than an
Administrative Expense Claim or a Priority Tax Claim.
1.64 PRIORITY TAX CLAIM means a Claim entitled to priority under
subsection 507(a)(8) of the Bankruptcy Code.
1.65 PRO RATA SHARE means, with respect to any distribution of
property to a class under the Plan, proportionate sharing pursuant to which the
ratio of the amount of property distributed on account of an Allowed Claim or
Allowed Equity Interest in Presidio Common Stock to the amount of such Allowed
Claim or Allowed Equity Interest is the same as the ratio of the total amount
of property distributed to such class to the total amount of all Allowed Claims
or Allowed Equity Interests in such class.
1.66 PROPOSED AMENDMENTS means the proposed amendments to the
articles or certificate of incorporation of each Debtor, which shall be
effective from and after the Effective Date, and which shall be substantially
in the form set forth in an Appendix to the Disclosure Statement or as
otherwise filed with the Bankruptcy Court prior to the Confirmation Hearing.
1.67 RECORD DATE means, in accordance with Bankruptcy Rule 3018(a),
the date upon which the Bankruptcy Court's order approving the Disclosure
Statement is or has been entered, which date shall thereafter govern the
eligibility of any holder to vote either to accept or reject the Plan.
1.68 REMAINING EXCHANGE COMMON STOCK means the number of shares of
Exchange Common Stock remaining after (i) deducting the amount of distributions
to be made to holders of Allowed Class 5 Claims pursuant to Section 5.03 of the
Plan and (ii) the reduction to the Aggregate Common Share Value and the amount
of Exchange Common Stock in the amount (A) which would
8
<PAGE> 9
otherwise be distributable to Tom Brown in respect of its Class 5 Claims and
(B) that is made pursuant to clause (iii) of Section 5.09 of the Plan.
1.69 REORGANIZED DEBTOR(S) means, individually or collectively, as
the context requires, the Debtors on and after the Effective Date.
1.70 REORGANIZED PRESIDIO means Presidio on and after the Effective
Date.
1.71 SCHEDULES means the schedules of assets and liabilities and
the statement of financial affairs filed by the respective Debtor as required
by Section 521 of the Bankruptcy Code and the Bankruptcy Rules.
1.72 SENIOR GAS INDEXED NOTES means the $100,000,000 original
principal amount of Senior Gas Indexed Notes due 2002 issued under the Senior
GIN Indenture and any Claim arising thereunder or relating thereto.
1.73 SENIOR GIN CLAIM means a Claim against any of the Debtors
arising under or relating to the Senior Gas Indexed Notes or the Senior GIN
Indenture, including, without limitation, (x) any Claim for principal, unpaid
interest thereon, and any related fees, charges or attorneys' fees incurred
before the Petition Date, and any liens granted to secure the foregoing and (y)
a Claim against any Debtor for any guaranty, including any applicable
Subsidiary Guaranty, of the Senior Gas Indexed Notes and any liens or security
interests granted to secure the foregoing or relating thereto.
1.74 SENIOR GIN INDENTURE means the Indenture, dated as of August
6, 1993, among Presidio, various of its subsidiaries and U.S. Trust Company of
New York, as Indenture Trustee, relating to the Senior Gas Indexed Notes.
1.75 SENIOR SECURED NOTES means the $75,000,000 original principal
amount of 11.5% Senior Secured Notes due 2000 issued under the Senior Secured
Note Indenture and any Claim arising thereunder or relating thereto.
1.76 SENIOR SECURED NOTE CLAIM means a Claim against any of the
Debtors arising under or relating to the Senior Secured Notes or the Senior
Secured Note Indenture, including, without limitation, (x) any Claim for
principal, unpaid interest thereon, and any related fees, charges or attorneys'
fees, and any liens granted to secure the foregoing and (y) any Claim against a
Debtor for any guaranty, including any applicable Subsidiary Guaranty, of the
Senior Secured Notes and any liens or security interests granted to secure the
foregoing or relating thereto.
1.77 SENIOR SECURED NOTE INDENTURE means the Indenture, dated as of
August 6, 1993, among Presidio, various of its subsidiaries and U.S. Trust
Company of New York, as Indenture Trustee, relating to the Senior Secured
Notes.
9
<PAGE> 10
1.78 SUBORDINATED DEBENTURES means the $50,000,000 original
principal amount of 9% Convertible Subordinated Debentures due 2015 issued
under the Subordinated Debenture Indenture and any Claim arising thereunder or
relating thereto.
1.79 SUBORDINATED DEBENTURE CLAIM means a Claim against any of the
Debtors arising under or relating to the Subordinated Debentures or the
Subordinated Debenture Indenture, including (x) any Claim for principal, unpaid
interest thereon, and any related fees, charges or attorneys' fees, and any
liens granted to secure the foregoing and (y) a Claim against any Debtor for
any guaranty, including any applicable Subsidiary Guaranty, of the Subordinated
Debentures, including any liens or security interests granted to secure the
foregoing or relating thereto.
1.80 SUBORDINATED DEBENTURE INDENTURE means the Indenture, dated as
of February 14, 1990, among Presidio and the Bank of Montreal Trust Company, as
Indenture Trustee, relating to the Subordinated Debentures.
1.81 SUBORDINATED GAS INDEXED NOTES means the $100,000,000 original
principal amount of Senior Subordinated Gas Indexed Notes due 1999 issued under
the Subordinated GIN Indenture and any Claim arising thereunder or relating
thereto.
1.82 SUBORDINATED GIN CONVENIENCE CLAIM means a Claim against any
of the Debtors arising under or relating to the Senior Subordinated Gas Indexed
Notes or the Subordinated GIN Indenture, including, without limitation, (x) any
Claim for principal, unpaid interest thereon, and any related fees, charges or
attorneys' fees, and any liens granted to secure the foregoing and (y) a Claim
against any Debtor for any guaranty, including any applicable Subsidiary
Guaranty, of the Subordinated Gas Indexed Notes and any liens or security
interests granted to secure the foregoing or relating thereto.
1.83 SUBORDINATED GIN INDENTURE means the Indenture, dated as of
February 16, 1989, among Presidio, various of its subsidiaries and U.S. Trust
Company of New York, as Indenture Trustee, relating to the Subordinated Gas
Indexed Notes.
1.84 SUBSIDIARY GUARANTY means any guaranty or other agreement
whereby any Debtor is, has become, or may be liable with, or has secured or may
secure a Claim against any other Debtor, including, without limitation, any
guaranty of collection, payment, or performance.
1.85 TOM BROWN means Tom Brown, Inc., a Delaware corporation.
1.86 TOM BROWN COMMON STOCK shall have the meaning set forth in the
Exchange Agreement.
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ARTICLE II
CLASSES OF CLAIMS AND INTERESTS
2.01 The Plan constitutes a separate plan of reorganization for
each Debtor, and each class of Claims and Equity Interests identified below
constitutes a separate class for each Debtor unless otherwise indicated. All
Claims and Equity Interests, except Administrative Expense Claims and Priority
Tax Claims, are placed in the following classes for each of the Debtors. The
following are the respective classes of Claims against and Equity Interests in
the respective Debtors, without any substantive consolidation of the Debtors.
Joint references to classes of more than one Debtor herein are for convenience
and ease of reference only, and do not indicate the assumption of liabilities
of any of the Debtors by any of the other Debtors.
(a) Class 1 -- Priority Claims.
(b) Class 2 -- Bank Claims.
(c) Class 3 -- Senior Secured Note Claims.
(d) Class 4 -- Miscellaneous Secured Claims.
(e) Class 5 -- Senior GIN Claims.
(f) Class 6 -- General Unsecured Claims.
(g) Class 7 -- Subordinated GIN Convenience Claims.
(h) Class 8 -- Indemnity Claims.
(i) Class 9 -- Subordinated Debenture Claims.
(j) Class 10 -- Intercompany Claims.
(k) Class 11 -- Intercompany Equity Interests.
(l) Class 12 -- Presidio Common Stock.
(m) Class 13 -- Presidio Stock Options.
(n) Class 14 -- Presidio Warrants.
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ARTICLE III
TREATMENT OF UNCLASSIFIED CLAIMS
3.01 UNCLASSIFIED CLAIMS. In accordance with subsection 1123(a)(1)
of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims
are not classified herein.
3.02 ADMINISTRATIVE EXPENSE CLAIMS GENERALLY. Subject to the
Administrative Bar Date and except as otherwise provided herein, unless
otherwise agreed by the holder of an Administrative Expense Claim and the
applicable Debtor, each holder of an Allowed Administrative Expense Claim will
receive, in full satisfaction of its Claim, Cash equal to the amount of such
Administrative Expense Claim on the later of fifteen (15) Days after the
Effective Date or the date such Claim is due and payable by its terms or, if
such Administrative Expense Claim does not become an Allowed Claim as of the
Effective Date, thirty (30) Business Days after the date the order allowing
such Claim becomes a Final Order.
3.03 STATUTORY FEES. On or before the Effective Date, all fees
payable pursuant to section 1930 of title 28, United States Code, will be paid
in Cash.
3.04 ADMINISTRATIVE EXPENSE CLAIMS FOR GOODS, MATERIALS AND
SERVICES INCURRED IN THE ORDINARY COURSE OF BUSINESS. Administrative Expense
Claims based on liabilities incurred by one or more of the Debtors for goods,
materials, and services delivered, obtained, or received in the ordinary course
of business (which includes, without limitation, such expenses as they relate
to the ordinary course of drilling, operation or maintenance of any oil or gas
well, property or prospect and in carrying out such Debtor's general and
administrative operations) will be assumed and paid by the applicable Debtor
pursuant to the terms and conditions of the particular transaction giving rise
to such Administrative Expense Claims, and, unless the Bankruptcy Court orders
otherwise, holders of Administrative Expense Claims based on liabilities
incurred by one or more of the Debtors for goods, materials, and services
delivered, obtained, or received in the ordinary course of business (which
includes, without limitation, such expenses as they relate to the ordinary
course of drilling, operation or maintenance of any oil or gas well, property
or prospect and in carrying out such Debtor's general and administrative
operations) will not be required to file or serve a request for payment of such
Claim, and will not be subject to the Administrative Bar Date referenced in
Section 3.05(a) of the Plan.
3.05 BAR DATES FOR ADMINISTRATIVE EXPENSE CLAIMS.
(a) GENERAL BAR DATE PROVISIONS. Holders of Administrative
Expense Claims that are required to file and serve a request for payment of
such Claims and that do not file and serve a request by the applicable
Administrative Bar Date will be forever barred from asserting such Claims
against the Debtors, as reorganized, or their respective property; and
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(b) PROCEDURES AND LIMITATIONS APPLICABLE TO FEE CLAIMS. (i) At
least ten days prior to the actual commencement of the Confirmation Hearing,
entities intending to assert and request payment of Fee Claims shall file with
the Bankruptcy Court a written estimate of the maximum amount of compensation
and reimbursement of expenses to be requested for the period through the
Effective Date. Unless the Bankruptcy Court orders otherwise, and subject to
subsection (iii) below, such estimates shall thereafter establish the maximum
amounts which may thereafter be Allowed with respect to such entity, and any
Fee Claims for which such a written maximum estimate is not timely filed shall
be forever barred. (ii) Subject to the immediately foregoing subsection (i),
entities asserting and requesting payment of Fee Claims must file and serve on
Presidio, Tom Brown, and their respective counsel, and on such other entities
who are designated by the Bankruptcy Rules, the Confirmation Order, or by other
order of the Bankruptcy Court a fee application within the later of fifteen
(15) Business Days after the Effective Date and twenty (20) Business Days after
the entry of the Confirmation Order or such other date as the Bankruptcy Court
may fix after motion and a hearing, and any and all objections to any such fee
applications shall be filed within ten (10) Business Days after such filing
deadline. The Bankruptcy Court shall retain jurisdiction to determine all such
fee applications and Fee Claims. (iii) In any event, unless the Debtors and
Tom Brown agree otherwise, the maximum amount of Allowed Fee Claims shall be
determined prior to Closing.
3.06 PAYMENT OF PRIORITY TAX CLAIM. (a) Pursuant to subsection
1129(a)(9)(C) of the Bankruptcy Code, unless otherwise agreed by the holder of
a Priority Tax Claim and the applicable Debtor or Reorganized Debtor, each
holder of a Priority Tax Claim will receive, in full satisfaction of its
Allowed Priority Tax Claim, deferred Cash payments over a period not exceeding
six years from the date of assessment of such Allowed Priority Tax Claim.
Payments will be made in equal annual installments of principal, plus simple
interest accruing from the Effective Date at seven percent (7%) per annum on
the unpaid portion of each Allowed Priority Tax Claim (or upon such other terms
determined by the Bankruptcy Court to provide the holders of Allowed Priority
Tax Claims with deferred cash payments having a value, as of the Effective
Date, equal to such Claim). Unless otherwise agreed by the holder of such
Claim and the applicable Debtor or Reorganized Debtor, the first payment will
be payable one year after the Effective Date or, if the Allowed Priority Tax
Claim is not Allowed within one year after the Effective Date, a date which is
not later than thirty (30) days after the date on which an order allowing such
Claim becomes a Final Order;
(b) Notwithstanding anything to the contrary in Section 3.06(a) of
the Plan, the Reorganized Debtors may pay any Allowed Priority Tax Claim, or
any remaining balance of such Claim, in full, at any time on or after the
Effective Date, without premium or penalty.
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ARTICLE IV
IDENTIFICATION AND TREATMENT OF
CLASSES NOT IMPAIRED UNDER PLAN
The following treatment shall be provided for the enumerated classes
of the respective Debtors, without any substantive consolidation of the
Debtors. Joint references to classes of more than one Debtor herein are for
convenience and ease of reference only, and do not indicate the assumption of
liabilities of any of the Debtors by any other Debtor. The treatment and the
consideration received by holders of allowed Claims or Equity Interests
pursuant to this Article IV shall be in full satisfaction, release and
discharge of such holders' Claims against each of the Debtors and any other
Claims, obligations, rights, causes of action and liabilities which such holder
may be entitled to assert against any of the Debtors, whether known or unknown,
foreseen or unforeseen, then existing or thereafter arising or based in whole
or in part upon any act, omission or other occurrence taking place on or prior
to the Effective Date.
4.01 CLASS 1 - PRIORITY CLAIMS. Unless otherwise agreed, each
Priority Claim that becomes an Allowed Claim against any of the Debtors shall,
at the applicable Reorganized Debtor's sole option, either (a) be paid the
Allowed amount of such Priority Claim in full, in Cash, by the Debtor or
Debtors obligated on such Claim on or promptly after the later of the Effective
Date and the date such Claim becomes an Allowed Claim; or (b) be paid or
performed in accordance with the terms and conditions of each agreement
relating thereto in the ordinary course of such Reorganized Debtor's business.
4.02 CLASS 4 - MISCELLANEOUS SECURED CLAIMS. Unless otherwise
agreed, each holder of an Allowed Miscellaneous Secured Claim shall be treated,
at the sole option of the respective Reorganized Debtor obligated thereon,
notwithstanding any contractual provision or applicable law that entitles the
holder of such Claim to demand or receive accelerated payment of such Claim
after the occurrence of a default, in one of the following three ways: (i) the
applicable Debtor will, on or promptly after the Effective Date, (A) cure any
such default that occurred before or after the Petition Date, other than a
default of a kind specified in subsection 365(b)(2) of the Bankruptcy Code, (B)
reinstate the maturity of such Claim as such maturity existed before such
default, (C) compensate the holder of such Claim for any damages incurred as a
result of any reasonable reliance by such holder on such contractual provision
or such applicable law and (D) execute a written undertaking in favor of such
holder, whereby the respective Debtor assumes such Claim and, except as
permitted in clauses (A), (B) and (C) hereof, does not otherwise alter the
legal, equitable or contractual rights of such holder with respect to such
Claim; (ii) the respective Reorganized Debtor will, on or promptly after the
Effective Date, pay Cash equal to such holder's Allowed Claim; or (iii) the
respective Debtor will, on or promptly after the Effective Date, distribute to
the holder of the Claim the property securing such Claim.
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4.03 CLASS 6 - GENERAL UNSECURED CLAIMS. Each General Unsecured
Claim that becomes an Allowed Claim shall be assumed by, and become a liability
of, the Reorganized Debtor obligated on such Allowed Claim and shall (a) be
paid in full by the Debtor or Debtors obligated on such Claim on or promptly
after the later of the Effective Date and, if such Claim is a Disputed Claim,
the date such Claim becomes an Allowed Claim or, (b) if such Claim is not due
and payable by the Effective Date, be paid or performed in accordance with the
terms and conditions of each agreement relating thereto in the ordinary course
of such Reorganized Debtor's business; provided, that no payment shall be made
on a date later than that required in the Exchange Agreement.
4.04 CLASS 7 - SUBORDINATED GIN CONVENIENCE CLAIMS. Allowed
Subordinated GIN Convenience Claims will, on or promptly after the Effective
Date, be paid in full in Cash so that such Claims are deemed redeemed in
accordance with the terms of the Subordinated GIN Indenture. On the Effective
Date, the Subordinated Gas Indexed Notes and any Subsidiary Guaranty thereon
shall be canceled, and the Debtors shall each be relieved of any further
obligations thereunder.
4.05 CLASS 10 - INTERCOMPANY CLAIMS. Intercompany Claims are not
impaired.
4.06 CLASS 11 - INTERCOMPANY EQUITY INTERESTS. Intercompany Equity
Interests are not impaired.
ARTICLE V
IDENTIFICATION AND TREATMENT OF
CLASSES IMPAIRED UNDER PLAN
Article V is proposed solely by the Debtors and not by Tom Brown. The
following treatment shall be provided for the enumerated Classes of the
respective Debtors, without any substantive consolidation of the other Debtors.
Joint references to more than one Debtor herein are for convenience and ease of
reference only, and do not indicate the assumption of liabilities of any of the
Debtors by any other Debtor. The treatment and the consideration received by
the holders of Allowed Claims or Equity Interests pursuant to this Article V
shall be in full satisfaction, release and discharge of such holders' Claims
against each and all of the Debtors, any other Claims, obligations, rights,
causes of action, liabilities, or interests (including Equity Interests) which
such holder may be entitled to assert against or with respect to any of the
Debtors, whether known or unknown, foreseen or unforeseen, then existing or
thereafter arising, whether based in whole or in part upon any act, omission or
other occurrence taking place or accruing on or prior to the Effective Date.
5.01 CLASS 2 - BANK CLAIMS. In full satisfaction, discharge and
release of the Bank Claims, the Agent Bank, on behalf of the Banks, shall
receive from the Exchange Agent on or promptly after the Effective Date, Cash
equal to the Allowed Bank Claim; provided, however, that any letters of credit
issued under or in connection with the Bank Claims shall be substituted in
accordance with Section 4.26 of the Exchange Agreement; and, further provided,
however, that the Allowed Bank Claim shall include post-petition interest
computed at the contractual non-default rate
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contained in the Bank Credit Agreement but in any event shall not include (x)
interest on any outstanding letters of credit which have not been drawn upon by
the beneficiaries thereof and (y) post-petition interest computed in excess of
the contractual non-default rate contained in the Bank Credit Agreement. On
the Effective Date, but in any event contemporaneously with and not before the
payments to the Agent Bank contemplated in this Section, the Bank Claims, all
Subsidiary Guaranties thereon and all liens and security interests which secure
repayment of the Bank Claims or the Subsidiary Guarantees shall be transferred
absolutely and unconditionally to Tom Brown in accordance with the Exchange
Agreement and Section 8.05 of the Plan. Subject to the limitations of Section
5.09(b)(iii) of the Plan, the Agent Bank, on behalf of the Banks, may also
receive on or promptly after the Effective Date the additional increment of
Exchange Consideration specified therein, but distribution of this additional
consideration need not be contemporaneous with and may occur after the transfer
of liens, security interests and Subsidiary Guarantees to Tom Brown.
5.02 CLASS 3 - SENIOR SECURED NOTE CLAIMS. In full satisfaction,
discharge and release of all Claims against each of the Debtors, each holder of
Allowed Claims in Class 3 shall receive from the Exchange Agent on or promptly
after the Effective Date, the sum of $1,050.40 for each $1,000 principal amount
of Senior Secured Notes. On the Effective Date, the Senior Secured Notes, all
Subsidiary Guaranties thereon and all liens and security interests arising
thereunder which secure repayment of the Senior Secured Claims shall be
transferred absolutely and unconditionally to Tom Brown in accordance with the
Exchange Agreement and Section 8.05 of the Plan. Subject to the limitations of
Section 5.09(b) of the Plan, Class 3 may also receive on or promptly after the
Effective Date the additional increment of Exchange Consideration specified
therein.
5.03 CLASS 5 - SENIOR GIN CLAIMS. In full satisfaction, discharge
and release of all Claims against each of the Debtors, each holder of an
Allowed Senior GIN Claim shall receive from the Exchange Agent on or promptly
after the Effective Date (i) in the event that Class 5 accepts the Plan, its
Pro Rata Share of 83% of the Exchange Common Stock, or (ii) in the event that
Class 5 rejects the Plan, its Pro Rata Share of 78.85% of the Exchange Common
Stock. No distributions of Exchange Common Stock will be made to Tom Brown on
account of its Class 5 Claims, and, after making the above calculation of the
allocation of Exchange Common Stock contemplated by this Section 5.03, the
amount of Exchange Common Stock and Aggregate Common Share Value will be
reduced by such amounts otherwise allocable or distributable to Tom Brown's
Class 5 Claims. On the Effective Date, the Senior Gas Indexed Notes and all
Subsidiary Guaranties thereon shall be transferred absolutely and
unconditionally to Tom Brown in accordance with the Exchange Agreement and
Section 8.05 of the Plan. Subject to the limitations of Section 5.09(b)(i)
and (ii) of the Plan, Class 5 may also receive on or promptly after the
Effective Date the additional increment of Exchange Consideration specified
therein.
5.04 CLASS 8 - INDEMNITY CLAIMS. Indemnity Claims shall receive no
distributions under the Plan and shall be discharged against each of the
Debtors, except that, pursuant to Section 4.15 of the Exchange Agreement, Tom
Brown shall use its reasonable efforts to obtain and maintain or cause the
Reorganized Debtors to obtain and maintain in effect the New D&O Insurance.
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5.05 CLASS 9 - SUBORDINATED DEBENTURE CLAIMS. In full
satisfaction, discharge and release of all Claims against each of the Debtors,
each holder of an Allowed Subordinated Debenture Claim shall receive (i) in the
event that Classes 5 and 9 accept the Plan, from the Exchange Agent, on or
promptly after the Effective Date, its Pro Rata Share of 83.25% of the
Remaining Exchange Common Stock or (ii) in the event that either of Classes 5
or 9 rejects the Plan, no distributions. On the Effective Date, all outstanding
Subordinated Debentures and Subsidiary Guaranties thereof shall be transferred
absolutely and unconditionally to Tom Brown in accordance with the Exchange
Agreement and Section 8.05 of the Plan. Subject to the limitations of Section
5.09(b)(i) of the Plan, Class 9 may also receive on or promptly after the
Effective Date the additional increment of Exchange Consideration specified
therein.
5.06 CLASS 12 - PRESIDIO COMMON STOCK. In full satisfaction,
discharge, release of all Presidio Common Stock, each holder of an Allowed
Equity Interest in Presidio Common Stock shall receive (i) in the event that
each of Classes 5, 9 and 12 accepts the Plan, from the Exchange Agent, on or
promptly after the Effective Date, its Pro Rata Share of (x) 16.75% of the
Remaining Exchange Common Stock and (y) the Presidio Common Stock Cash
Consideration or (ii) if any of Classes 5, 9 or 12 rejects the Plan, no
distributions. On the Effective Date, all certificates evidencing Presidio
Common Stock shall be transferred absolutely and unconditionally to Tom Brown
in accordance with the Exchange Agreement and Section 8.05 of the Plan.
5.07 CLASS 13 -- PRESIDIO STOCK OPTIONS. Holders of Presidio Stock
Options shall receive and retain nothing under the Plan, and are deemed to
reject the Plan. From and after entry of the Confirmation Order, holders of
Presidio Stock Options may not exercise such Presidio Stock Options in any
manner, and all instruments evidencing such Presidio Stock Options shall, upon
the Effective Date, be canceled and thereafter deemed null and void.
5.08 CLASS 14 -- PRESIDIO WARRANTS. Holders of Presidio Warrants
shall receive and retain nothing under the Plan, and are deemed to reject the
Plan. From and after entry of the Confirmation Order, holders of Presidio
Warrants may not exercise such Presidio Warrants in any manner, and all
instruments evidencing such Presidio Warrants shall, upon the Effective Date,
be canceled and thereafter deemed null and void.
5.09 REALLOCATION OF AND REDUCTION IN AGGREGATE COMMON SHARE VALUE
AND NUMBER OF SHARES OF EXCHANGE COMMON STOCK ISSUED. (a) If: (i) any of
Class 5, Class 9, or Class 12 rejects the Plan, then Class 12 shall receive no
distributions under the Plan; (ii) either Class 5 or Class 9 rejects the Plan,
then Class 9 shall receive no distributions under the Plan; and, (iii) Class 5
rejects the Plan, then Class 5 shall receive the distribution provided for in
Clause (ii) of Section 5.03 of the Plan.
(b) If (i) Class 12 rejects the Plan but the Plan is accepted by
Classes 5 and 9, then the Exchange Consideration that otherwise would have been
distributed to Class 12 had it accepted the Plan shall be reallocated to
Classes 3, 5, and 9 ratably, according to the ratio of the Exchange
Consideration which would otherwise have been distributed to each of Classes 3,
5 and 9 compared
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to the total amount of the Exchange Consideration which would otherwise have
been distributed to Classes 3, 5, and 9, and distributed Pro Rata as additional
Exchange Consideration within each of Classes 3, 5, and 9; (ii) Class 9 rejects
the Plan but the Plan is accepted by Class 5 (and without regard to whether
Class 12 votes to accept or reject the Plan), then the Exchange Consideration
that otherwise would have been distributed to Classes 9 and 12 had each such
Class accepted the Plan shall be reallocated to Classes 3 and 5 ratably,
according to the ratio of the Exchange Consideration which would otherwise have
been distributed to each of Classes 3 and 5 compared to the total amount of the
Exchange Consideration which would otherwise have been distributed to Classes 3
and 5, and distributed Pro Rata as additional Exchange Consideration within
each of Classes 3 and 5; and (iii) Class 5 rejects the Plan (and without regard
to whether Classes 9 or 12 vote to accept or reject the Plan), then the
Exchange Consideration that otherwise would have been distributable to Classes
5 (as if Clause (i) of Section 5.03 of the Plan were applicable and less the
Exchange Consideration actually distributable to Class 5 by operation of Clause
(ii) of Section 5.03 of the Plan), 9, and 12 had each such Class accepted the
Plan shall be reallocated to and distributed as additional Exchange
Consideration in the following order of priority:
FIRST, Pro Rata within Class 3 unless and until each Allowed Claim in
Class 3 is paid in full with interest in accordance with the terms of
the Senior Secured Notes without reference to any limitation on
payment otherwise applicable pursuant to Section 5.02 of the Plan;
SECOND, Pro Rata within Class 2 until each Allowed Claim in Class 2 is
paid in full with interest in accordance with the terms of the Bank
Credit Agreement and without reference to any limitation on payment
otherwise applicable pursuant to Section 5.01 of the Plan; and
THIRD, Pro Rata within Class 5 until each Allowed Claim in Class 5 is
paid in full with interest in accordance with the terms of the Senior
Gas Indexed Notes without reference to any limitation on payment
otherwise applicable pursuant to Section 5.03 of the Plan.
ARTICLE VI
ACCEPTANCE OR REJECTION OF PLAN
6.01 VOTING CLASSES. Each holder of an Allowed Claim in Classes 2,
3, 5, 8 and 9 or an Allowed Equity Interest in Class 12, respectively, shall be
entitled to vote to accept or reject the Plan as to all Debtors.
6.02 DEEMED ACCEPTANCE OF PLAN. Classes 1, 4, 6, 7, 10 and 11
respectively, are unimpaired under the Plan and, therefore are also
conclusively presumed to accept the Plan as to all Debtors.
6.03 DEEMED REJECTION OF PLAN. Classes 13 and 14 shall receive and
retain nothing under the Plan and, accordingly, are deemed to reject the Plan.
Confirmation of the Plan as to such Classes shall be pursuant to subsection
1129(b)(2)(C)(ii) of the Bankruptcy Code. In the event that Classes
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9 or 12 receive and retain no distributions by virtue of a rejection of the
Plan by Classes 5, 9, or 12, then Classes 9 or 12, respectively, will also be
deemed to reject the Plan.
6.04 NONCONSENSUAL CONFIRMATION. The Debtors and Tom Brown reserve
the right to request that the Bankruptcy Court confirm the Plan in accordance
with subsection 1129(b) of the Bankruptcy Code as to any impaired Class
notwithstanding the actual or deemed rejection by such impaired classes, in
addition to Classes 13 and 14. In the event that Classes 9 or 12 receive and
retain no distributions by virtue of a rejection of the Plan by Classes 5, 9,
or 12, or if Class 5 receives a reduced distribution by virtue of a rejection
of the Plan by Class 5, the Debtors and Tom Brown also reserve the right to
request confirmation of the Plan in accordance with subsection 1129(b) of the
Bankruptcy Code as to Classes, 5, 9, or 12, respectively, and as appropriate.
6.05 ONE VOTE PER HOLDER. If a holder of a Claim holds more than
one Claim in any one class, all Claims of such holder in such class shall be
aggregated and deemed to be one Claim for purposes of determining the number of
Claims and claimants voting for or against the Plan.
ARTICLE VII
PROCEDURES FOR DISTRIBUTIONS AND TREATMENT OF DISPUTED CLAIMS
7.01 EXCHANGE CONSIDERATION AND THE EXCHANGE FUND. (a) PAYMENT ON
CLOSING. At the Closing, Tom Brown shall pay or issue (in accordance with
Section 2.4 of the Exchange Agreement) the Exchange Consideration.
(b) DEPOSIT OF EXCHANGE CONSIDERATION. At the Closing, Tom Brown
shall deposit with the Exchange Agent, the Exchange Consideration, including
certificates representing the Exchange Common Stock. The Cash Consideration
shall be tendered and paid to the Exchange Agent in immediately available
funds. The Exchange Agent shall hold and distribute the Exchange Consideration
in accordance with the Plan.
(c) DELIVERY TO REORGANIZED PRESIDIO. Any portion of the Exchange
Consideration held by the Exchange Agent that is not distributed pursuant to
the Plan within ninety (90) days after the Closing Date shall, upon Reorganized
Presidio's request, be delivered to Reorganized Presidio. Thereafter, a
Distributee shall look only to the Reorganized Presidio for distribution of
that portion and amount of the Exchange Consideration (including any dividends
or distributions made in respect of Exchange Common Stock but excluding
interest on such amount) that such Distributee is entitled to receive pursuant
to the Plan.
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7.02 PROCEDURES FOR THE EXCHANGE AND SURRENDER OF INSTRUMENTS.
(a) DEBT INSTRUMENTS. No distribution shall be made to or on
behalf of a holder of a Claim in Classes 2, 3, 5, 7, or 9 under the Plan unless
and until such holder, in accordance with written instructions to such holder
from Presidio, shall have surrendered to the Exchange Agent, as may be
applicable, the promissory notes and any other instruments representing such
holder's Allowed Bank Claims in the case of Class 2 Claims, all certificates
and any other instruments representing such holder's Allowed Senior Secured
Note Claims in the case of Class 3 Claims, all certificates and any other
instruments representing such holder's Allowed Senior GIN Claims in the case of
Class 5 Claims, all certificates and other instruments representing such
holder's Allowed Subordinated GIN Convenience Claims in the case of Class 7
Claims, and all certificates and other instruments representing such holder's
Allowed Subordinated Debenture Claims in the case of Class 9 Claims;
(b) PRESIDIO COMMON STOCK. Distributions, if any, to be made to
or on behalf of a holder of a Class 12 Equity Interest under the Plan shall not
be made unless and until such holder, in accordance with written instructions
to such holder from Presidio, shall have surrendered to the Exchange Agent all
certificates and other instruments representing its Presidio Common Stock
certificate;
(c) LOST OR STOLEN INSTRUMENTS. Any holder of a Claim or Equity
Interest in Classes 2, 3, 5, 7, 9 or 12 whose instruments or certificates
evidencing such Claims or Equity Interests have been lost, stolen, mutilated,
or destroyed shall, in lieu of surrendering such instruments, deliver to the
Exchange Agent (i) evidence satisfactory to Presidio and the Exchange Agent of
the loss, theft, mutilation, or destruction of such instruments or certificates
and (ii) such security or indemnity as may be reasonably required by Presidio
and the Exchange Agent to hold Presidio and the Exchange Agent harmless with
respect thereto; and,
(d) LIMITATION PERIOD FOR THE SURRENDER OF INSTRUMENTS. Any
holder of a Claim or Equity Interest in Classes 2, 3, 5, 7, 9 or 12 that has
not satisfied the applicable requirements of this Section 7.02 of the Plan
within two (2) years after the Effective Date shall receive no distribution on
account of such Claims or Equity Interests, and shall be forever barred from
asserting such Claim or Equity Interest. To the extent permitted by applicable
law, any Exchange Consideration which has not been distributed from and after
the second anniversary of the Effective Date (other than Exchange Consideration
reserved in connection with disputed Claims or Equity Interests) shall become
the property of Reorganized Presidio, free and clear of any Claims or Equity
Interests.
7.03 CASH DISTRIBUTIONS UNDER PLAN.
(a) IN GENERAL. Any cash distributions to Classes 2, 3, 7, and 12
provided for herein, or to Classes 5 or 9 if and to the extent provided in
Section 5.09(b), if applicable, shall be made by the Exchange Agent from the
Exchange Consideration. All cash distributions to other Classes shall
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be made by the respective Reorganized Debtors obligated thereon from their
respective cash balances and operations; provided, however, that the Debtors
and the Reorganized Debtors will be entitled to transfer funds between and
among themselves as they determine to be necessary or appropriate to enable
each Reorganized Debtor to satisfy its obligations under the Plan.
(b) TIMING. Except as otherwise provided (and subject to the
provisions herein relating to the surrender and exchange of instruments), the
Exchange Agent or the respective Debtors, as the case may be, shall make all
distributions of cash and property pursuant to the Plan on or within fifteen
(15) Business Days (x) after the Effective Date or (y) in the case of Disputed
Claims or Disputed Equity Interests, after a Claim or Equity Interest becomes
an Allowed Claim or Allowed Equity Interest.
(c) INVESTMENT IN CASH. Cash held by the Exchange Agent or
otherwise held by the Debtors for distribution hereunder shall be invested by
the Exchange Agent in United States Treasury Bills, interest-bearing
certificates of deposit, interest-bearing savings accounts and investments
permitted by Section 345 of the Bankruptcy Code.
(d) MANNER OF PAYMENT UNDER PLAN. Any payment of Cash made by the
Exchange Agent or Debtors, respectively, pursuant to the Plan may be made
either by check drawn on a domestic bank or by wire transfer from a domestic
bank, at the option of the Exchange Agent or Debtors, respectively.
(e) FRACTIONAL DOLLARS/SHARES. No fractional shares of the
Exchange Common Stock shall be issued to a Distributee. The Exchange Agent
shall, on behalf of all Distributees otherwise entitled to receive fractional
shares of Exchange Common Stock, promptly following the Closing, aggregate such
fractional shares of Exchange Common Stock and sell the resulting whole shares
of Exchange Common Stock for the account of such Distributees, and such
Distributees shall be entitled to receive their allocable portion of the net
proceeds of the sale thereof.
(f) DE MINIMIS DISTRIBUTIONS. Except for distributions pursuant
to Sections 5.06 or 7.03(e) of the Plan, no cash payment of less than $5.00
shall be made by the Exchange Agent or the Debtors, respectively, to any holder
of a Claim unless a request therefor is made in writing to the party, including
the Exchange Agent or Debtors, respectively, responsible hereunder for making
such payment.
7.04 RESERVE OF CASH FOR DISPUTED ADMINISTRATIVE EXPENSE CLAIMS,
PRIORITY TAX CLAIMS, PRIORITY CLAIMS, MISCELLANEOUS SECURED CLAIMS, AND GENERAL
UNSECURED CLAIMS. In the sole discretion of each Reorganized Debtor, such
Reorganized Debtor may segregate from its available cash an amount of cash
equal to such Debtor's estimate of its disputed Administrative Expense Claims,
Priority Tax Claims, Priority Claims, Miscellaneous Secured Claims, and General
Unsecured Claims allegedly owed by such Debtor. Cash, if any, so segregated
shall be held in interest bearing accounts for the benefit of holders of such
Disputed Claims pending determination of their entitlement thereto. Such
Reorganized Debtor shall have the right to seek an order of the
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Bankruptcy Court, after notice and a hearing, estimating or limiting the amount
of any Disputed Claim for purposes of such discretionary reserves.
7.05 DISTRIBUTION OF SEGREGATED CASH FUND. Cash segregated
pursuant to Section 7.04 hereof shall be distributed by the respective
Reorganized Debtor to the holder of a disputed Administrative Expense Claim,
Priority Tax Claim, Priority Claim, Miscellaneous Secured Claim or General
Unsecured Claim, respectively, when, and to the extent that, (i) such Disputed
Claim becomes an Allowed Claim pursuant to a Final Order or (ii) the respective
Debtor otherwise compromises and settles any such Disputed Claim subject to the
approval of the Bankruptcy Court. Such distribution shall be made to the
holder of such Claim in accordance with the terms of the Plan to the extent
such Disputed Claim becomes an Allowed Claim. To the extent that such a
Disputed Claim ultimately becomes an Allowed Claim in an amount less than the
amount of the Disputed Claim, the resulting surplus shall be released to the
respective Debtor for its unrestricted use.
7.06 ACCRUED DISTRIBUTIONS ON ACCOUNT OF ALLOWED CLAIMS AND ALLOWED
EQUITY INTERESTS. The holder of an Allowed Claim or Allowed Equity Interest in
Classes 5, 9 and 12, and in Classes 2 and 3 if and to the extent provided in
Section 5.09(b), if applicable, otherwise entitled to a distribution under the
Plan shall be entitled to receive dividends and other distributions with
respect to the Exchange Common Stock to be distributed to such Distributee
pursuant to the Plan upon such holder's compliance with the requirements of
Section 7.02(a) or (b) of the Plan, as applicable.
7.07 VOTING OF EXCHANGE COMMON STOCK BY HOLDERS OF ALLOWED CLAIMS
AND ALLOWED EQUITY INTERESTS. Prior to full compliance by a holder of an
Allowed Claim or Allowed Equity Interest in Classes 5, 9 or 12, or in Classes 2
and 3 if and to the extent provided in Section 5.09(b), if applicable, with the
exchange and surrender requirements set forth in Section 7.02(a) or (b) of the
Plan, as applicable, and the actual distribution by the Exchange Agent to such
holder of any shares of Exchange Common Stock to such holder in accordance with
the Plan, such holder shall have no right to vote such shares of Exchange
Common Stock or to direct or request the Exchange Agent, Reorganized Presidio,
or any other person to vote or to refrain from voting such shares.
7.08 RESOLUTION OF DISPUTED CLAIMS. The Debtors, Tom Brown, or
Reorganized Presidio, as the case may be, shall determine whether any Claim is
disputed. After such determination, the respective Debtor, Tom Brown, or
Reorganized Presidio shall file an objection to each such Disputed Claim and
shall serve a copy of the objection on the holder thereof as soon as
practicable. Unless otherwise provided by the Plan or ordered by the
Bankruptcy Court, all objections by any Debtor, Tom Brown, Reorganized
Presidio, or any other party in interest to any Claims must be filed and served
upon the holders of such Claims (and upon counsel for the Debtors and Tom Brown
if filed by another party in interest) on or before 180 days after the
Effective Date.
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ARTICLE VIII
MEANS FOR EXECUTION OF PLAN
8.01 GENERAL. Subject to the provisions of the Plan and the
Exchange Agreement, on the Effective Date, Tom Brown shall be the holder of one
hundred percent (100%) of the then-issued and outstanding stock of Reorganized
Presidio. The Bank Claims and the Debt Obligations shall be discharged.
8.02 CORPORATE ACTION. (a) Upon entry of the Confirmation Order,
all actions reasonably required in and by virtue of the Exchange Agreement and
the Plan, including, without limitation, the items expressly enumerated in
either the Exchange Agreement or in the Plan, shall be authorized and approved
in all respects and will occur and be effective without further action,
authorization, or approval by the Debtors, any of the Debtors' shareholders,
officers, or directors, or, except as enumerated herein or in the Bankruptcy
Code, by the Bankruptcy Court.
(b) On or before the Effective Date, or as soon thereafter as is
practicable, Presidio shall file with the Secretary of State of the State of
Delaware in accordance with section 303 of the DGCL the Proposed Amendment that
shall, among other things, prohibit each Debtor from creating, designating,
authorizing or causing to be issued any class or series of nonvoting stock. On
the Effective Date, the Proposed Amendments to the articles or certificate of
incorporation of each Debtor shall automatically become effective, and all
other matters provided under the Plan involving the corporate structure of any
of the Debtors or Reorganized Presidio, or corporate action by any of these,
shall be deemed to have occurred and shall be in effect from and after the
Effective Date pursuant to section 303 of the DGCL without any requirement of
further action by the stockholders, the directors of Reorganized Presidio, or
Reorganized Presidio.
(c) On and after the Confirmation Date, the appropriate officers
of each of the Debtors are authorized and directed to execute and deliver, in
the name and on behalf of each Debtor, all agreements, documents and
instruments contemplated by the Plan and the Disclosure Statement.
(d) The Exchange Agreement; the adoption of new or amended and
restated certificates or articles of incorporation and by-laws or regulations
or similar constituent documents for the Reorganized Debtors; the initial
selection of directors and officers for the Reorganized Debtors; the
distribution of cash pursuant to the Exchange Agreement; the issuance and
distribution of Exchange Common Stock pursuant to the Exchange Agreement; the
grant of mortgages, deeds of trust, liens and other security interests; the
adoption, execution, delivery and implementation of all contracts, leases,
instruments, releases, indentures and other agreements or documents related to
any of the foregoing; the adoption, execution and implementation of employment,
retirement and indemnification agreements, incentive compensation programs,
retirement income plans, welfare benefit plans and other employee plans and
related agreements; and the other matters provided for under the Plan or the
Exchange Agreement involving the corporate structure of any Debtor or
Reorganized Debtor or corporate action to be taken by or required of any Debtor
or Reorganized
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Debtor will occur and be effective as provided herein and/or in the Exchange
Agreement, and will be authorized and approved in all respects and for all
purposes without any requirement of further action by stockholders or directors
of any of the Debtors or the Reorganized Debtors.
(e) In the event that, notwithstanding Article II of the Exchange
Agreement and Section 8.05 of the Plan, the Presidio Common Stock held by Class
12 is canceled (rather than transferred to Tom Brown as contemplated by Section
8.05 of the Plan), upon the Effective Date, 1000 shares of Presidio Common
Stock will then be transferred to Tom Brown upon the Effective Date and upon
Tom Brown paying $100 to Presidio in cash.
8.03 STATUS OF TOM BROWN, INC. Tom Brown shall be deemed an
affiliate or successor to the Debtors for the purposes of subsections 1125(e)
and 1145(a) of the Bankruptcy Code incident to the issuance and distribution of
the Exchange Common Stock and any shares of Tom Brown Common Stock issued
pursuant to Section 4.22 of the Exchange Agreement, and not to be an
underwriter thereof for any purpose. However, Tom Brown shall have no
obligation to the Debtors except as specified in the Exchange Agreement and
does not otherwise assume any liabilities of any of the Debtors. No holder of
any Claim or Equity Interest in or against any of the Debtors (other than
Presidio and Tom Brown or as otherwise provided in Sections 4.15, 4.22, 4.24,
4.25, and 10.06 of the Exchange Agreement) shall have any standing to enforce
the Exchange Agreement or to seek any remedy thereunder whatsoever.
8.04 IMPLEMENTATION OF THE EXCHANGE AGREEMENT. From and after the
Confirmation Date, the Debtors shall take all actions contemplated in the
Exchange Agreement in anticipation of and in preparation for Closing and shall
take all actions as and when contemplated in the Exchange Agreement to
implement the Exchange Agreement.
8.05 ASSIGNMENT TO TOM BROWN OF BANK CLAIMS, GUARANTIES OF THE BANK
CLAIMS, SENIOR SECURED NOTES, SENIOR GAS INDEXED NOTES, SUBORDINATED GAS
INDEXED NOTES, SUBORDINATED DEBENTURES, SUBSIDIARY GUARANTIES THEREOF, PRESIDIO
COMMON STOCK, PRESIDIO STOCK OPTIONS, AND PRESIDIO WARRANTS, AND CANCELLATION
OF CERTAIN OTHER AGREEMENTS. On the Effective Date, except to the extent
already owned by Tom Brown or canceled pursuant to the Plan of Reorganization,
all of (a) the Bank Claims, (b) the Debt Obligations and (c) the Presidio
Common Stock shall be transferred absolutely and unconditionally to Tom Brown
in exchange for that portion and amount of the Exchange Consideration (if any)
allocated to the existing holders of such Claims and Equity Interests as are
Allowed Claims or Allowed Equity Interests, pursuant to the Plan. Upon
delivery of the Exchange Consideration to the Exchange Agent as provided in
Section 2.4 of the Exchange Agreement, Tom Brown shall be deemed the sole
equity holder, and the sole holder of the Bank Claims (subject to the
provisions of Section 5.01 of the Plan requiring contemporaneous payment to the
Agent Bank) and Debt Obligations, and Presidio's obligations to the holders of
the (a) Bank Claims, (b) the Debt Obligations and (c) the Presidio Common Stock
under the Plan shall be deemed to be satisfied in full and discharged. As of
the Closing Date, the Presidio Stock Options and Presidio Warrants shall be
canceled pursuant to the Plan. Tom Brown, as the sole stockholder of Presidio,
shall, immediately following the Exchange described in Section
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2.1 of the Exchange Agreement, contribute to Presidio all of the Bank Claims
and Debt Obligations. No additional shares of Presidio capital stock shall be
issued to Tom Brown in exchange therefor. The Bank Claims and Debt Obligations
shall thereupon be canceled, terminated, and discharged.
8.06 EXECUTORY CONTRACTS AND UNEXPIRED LEASES GENERALLY.
(a) On the Effective Date, to the extent permitted by
applicable law and subject to Section 8.07 hereof, all executory contracts and
unexpired leases of the respective Debtors will be assumed in accordance with
the provisions of Section 365 of the Bankruptcy Code concurrently with and by
virtue of entry of the Confirmation Order (or at the option of Tom Brown, by
separate order(s) at such time) other than (i) any and all executory contracts
and unexpired leases which are the subject of separate motions filed pursuant
to Section 365 of the Bankruptcy Code by any of the Debtors prior to the
Confirmation Date, and (ii) any and all executory contracts and unexpired
leases rejected prior to entry of the Confirmation Order.
(b) All proofs of claim evidencing any Claims arising out
of the rejection of contracts or leases at or concurrently with entry of the
Confirmation Order under subsection (a) of this Section 8.06 must be filed with
the Bankruptcy Court within thirty (30) days after the Confirmation Date or be
forever barred. Any Claims arising out of a contract or lease rejected after
the Confirmation Date shall be filed within thirty (30) days of entry of the
order permitting such rejection unless a different bar date is established in
such order.
8.07 DESIGNATED CONTRACTS. On or before the Effective Date, the
Designated Contracts shall be assumed by the applicable Debtors pursuant to
Section 365 of the Bankruptcy Code in accordance with the provisions of the
Designated Contract Order.
8.08 EXEMPTION FROM CERTAIN TRANSFER TAXES. The designated
officers of each Debtor or Reorganized Debtor or such other persons as the
Bankruptcy Court may designate will be authorized to execute, deliver, file or
record such contracts, instruments, releases, indentures and other agreements
or documents and take such actions as may be necessary or appropriate to
effectuate and implement the provisions of the Plan. The Secretary or any
Assistant Secretary of each Debtor or Reorganized Debtor or such other persons
as the Bankruptcy Court may designate will be authorized, pursuant to
subsection 1146(c) of the Bankruptcy Code, to certify or attest to any of the
foregoing actions. Neither (a) the issuance, transfer or exchange of the
Exchange Common Stock; (b) the creation of any mortgage, deed of trust or other
security interest; (c) the making or assignment of any lease or sublease; nor
(d) the making or delivery of any deed or other instrument of transfer under,
in furtherance of, or in connection with, the Plan, will be subject to any
stamp tax, real estate transfer tax or similar tax.
8.09 RESIGNATION OF DEBTORS' DIRECTORS AND OFFICERS AND ELECTION OF
NEW DIRECTORS AND OFFICERS. The directors and officers of each of the Debtors
immediately prior to the Effective Date shall resign as of the Closing Date,
and shall thereupon be replaced by designees of Tom Brown who shall be
identified at or prior to the conclusion of the Confirmation Hearing.
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8.10 EFFECT OF TERMINATION OF THE EXCHANGE AGREEMENT PRIOR TO
CLOSING. If the Exchange Agreement is terminated after the Confirmation Date
but prior to Closing, (a) any cancellation of instruments otherwise effected by
any provision of this Plan shall be rendered null and void, (b) any instruments
surrendered by or on behalf of the previous holders thereof pursuant to any
provision of this Plan shall be returned to the party who surrendered same, and
the rights and privileges of the holders thereof shall be reinstated subject to
the Chapter 11 Cases of the Debtors, (c) the automatic stay shall be
reinstated, (d) the Confirmation Order shall, upon request of the Debtors, be
vacated so that another plan of reorganization may be subsequently confirmed
and, in the event of such termination and vacatur, (i) each of the Debtors
shall continue in their Chapter 11 Cases as debtors-in-possession as if the
Confirmation Order had not been entered, (ii) any unexpired lease or executory
contract assumed or rejected solely by virtue of entry of the Confirmation
Order (and not assumed or rejected by a separate order or by operation of law)
shall be treated as if it had neither been assumed nor rejected and shall
remain subject to rejection, assumption, and assignment, (iii) the Debtors'
corporate structure shall be restored as it existed immediately prior to entry
of the Confirmation Order, and (iv) all rights, privileges, powers, and duties
incident to the Chapter 11 Cases shall be restored to the Debtors as if the
Plan had not been confirmed.
8.11 SUBORDINATION. The provisions of the Plan, including, without
limitation, the distribution provisions hereof, take into account the relative
priority of the Claims and Equity Interests in each class in connection with
any contractual subordination provisions relating thereto, together with other
factors such as concessions or tentative concessions by one or more of the
classes entitled to assert subordination rights, the costs of an extended
bankruptcy proceeding, and the costs of a contested confirmation proceeding.
Accordingly, except as to Classes 9 and 12 if Classes 5, 9, or 12 shall have
rejected the Plan (so that receipt of a distribution by Classes 9 or 12 is
eliminated), the distributions to the holders of any Claim or Equity Interest
in Presidio Common Stock shall not be subject to levy, garnishment, attachment
or other legal process by any holder of any other Claim or Equity Interest or
class of Claims or Equity Interests by reason of claimed contractual
subordination rights, and on the Effective Date, all holders of impaired Claims
and impaired Equity Interests will be deemed to have waived any and all
contractual subordination rights which they may have with respect to such
distributions. In such case, the Confirmation Order shall permanently enjoin,
as of the Effective Date, all holders of impaired Claims and impaired Equity
Interests from enforcing or attempting to enforce any such rights with respect
to the distributions under the Plan to the holders of any other Claim or Equity
Interest.
8.12 RETIREE AND OTHER BENEFITS. Pursuant to subsection
1129(a)(13) of the Bankruptcy Code, each Debtor will continue to pay retiree
benefits (as that term is defined in Section 1114 of the Bankruptcy Code) on
which it is obligated at the level established pursuant to subsection (e)(1)(B)
or (g) of Section 1114, at any time prior to confirmation of the Plan, for the
duration of the period such Debtor, as the case may be, has obligated itself to
provide such benefits. All obligations of any Debtor with respect to the
Existing Plans shall be performed in accordance with the Exchange Agreement and
to the extent not required thereunder to be so performed at the Closing all
such obligations shall be treated as Miscellaneous Unsecured Claims.
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8.13 NO SUBSTANTIVE CONSOLIDATION. The Debtors are not
substantively consolidated in or by virtue of the Plan. Except as otherwise
expressly provided herein, no Debtor is assuming the pre-Effective Date
obligations of any other Debtor. Joint references to or groupings of classes
of more than one Debtor in any article, section, subsection, or paragraph of
the Plan are for convenience and ease of reference only, and do not indicate
the assumption of liabilities of any of the Debtors by any of the other
Debtors.
ARTICLE IX
CONDITIONS PRECEDENT
9.01 CONDITIONS PRECEDENT TO ENTRY OF THE CONFIRMATION ORDER. The
Confirmation Order shall not be entered by the Bankruptcy Court:
(a) unless the Bankruptcy Court shall have entered the
Administrative Bar Date Order in accordance with Section 3.05 of the Plan; or,
(b) if Tom Brown has previously exercised its right to
terminate the Exchange Agreement pursuant to Section 9.1(b) or (c) of the
Exchange Agreement.
9.02 CONDITIONS PRECEDENT TO THE EFFECTIVE DATE. The Plan shall
not become effective and the Closing Date shall not occur unless all conditions
precedent to the obligations of the Debtors and Tom Brown pursuant to Article
VIII (Conditions to Closing) of the Exchange Agreement have been satisfied or
duly waived in accordance with the provisions of the Exchange Agreement.
ARTICLE X
EFFECT OF PLAN CONFIRMATION,
DISCHARGE INJUNCTION AND
SUBORDINATION RIGHTS
10.01 DISCHARGE OF THE DEBTORS. Except as otherwise expressly
provided in the Plan, confirmation of the Plan shall (i) bind all holders of
Claims and Equity Interests, whether or not they accept the Plan, and (ii)
discharge each Debtor from any Claim and any "debt" (as that term is defined in
subsection 101(12) of the Bankruptcy Code) incurred before the Confirmation
Date, together with any obligation under any Subsidiary Guaranty, and each
Debtor's liability in respect of each of the foregoing shall be extinguished
completely, including, without limitation, any liability of a kind which is
disallowed pursuant to the Bankruptcy Code, including subsections 502(b)(6),
502(g) and 502(e) thereof. In addition, except as otherwise provided in the
Plan, confirmation of the Plan pursuant to the Confirmation Order shall act as
a discharge, effective as of the Confirmation Date, as to each holder of a
Claim or Equity Interest in respect of any direct or indirect right or Claim or
Equity Interest such holder had or may have had against or in any of the
Debtors that arose at any time prior to the Effective Date.
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10.02 REVESTING. On the Confirmation Date, each of the Debtors will
be revested with all of the property of its respective Estate, free and clear
of all claims, liens, encumbrances, charges and other interests of holders of
Claims and Equity Interests except as otherwise provided in the Plan, and may
thereupon operate its business free of any restrictions imposed by the
Bankruptcy Code or by the Bankruptcy Court.
10.03 POST-CONFIRMATION RELEASES AND INJUNCTIONS GENERALLY. Holders
of Claims and Equity Interests will be deemed to forever release, waive and
discharge, and to be enjoined from asserting, to the fullest extent permitted
under applicable law, all claims (as defined in subsection 101(5) of the
Bankruptcy Code), demands, debts, rights, causes of action, and liabilities in
connection with or related to the Exchange Agreement, the Chapter 11 Cases, the
Debtors, or the Plan, whether such claims are liquidated or unliquidated, fixed
or contingent, matured or unmatured, known or unknown, foreseen or unforeseen,
then existing or thereafter arising, that are based in whole or in part on any
act, omission, or other occurrence taking place on or prior to the Effective
Date and that may be asserted by or on behalf of such parties against the
Debtors, the Reorganized Debtors, Tom Brown, or their respective agents,
advisors, attorneys and representatives (including current and former
directors, officers, employees, members and professionals) acting in such
capacity.
10.04 POST-CONFIRMATION INJUNCTION WITH RESPECT TO OIL AND GAS
ASSETS. From and after the Effective Date, each and every owner or holder of a
working interest, royalty interest, overriding royalty interest, production
payment or other interest in any well or pool of wells for which any Debtor
serves or served as lessee or operator, as the case may be, and any partner,
limited partner, or joint venturer with any Debtor in any well, pool of wells,
or oil, gas or mineral estate, shall, as of the Petition Date(s) and
thereafter, and in accordance with the Designated Contract Order, be
permanently enjoined from asserting or taking any action to assert, directly or
indirectly, that (i) the occurrence of a Bankruptcy Event and (ii) the
insolvency or financial condition of any Debtor prior to the Effective Date
constitutes a basis for removal of any Debtor as operator under any Designated
Contract.
10.05 FAILURE OF COURT TO EXERCISE JURISDICTION. If the Bankruptcy
Court abstains from exercising or declines to exercise jurisdiction, or is
otherwise without jurisdiction over any matter arising out of the Chapter 11
Case(s), including the matters set forth in this Article X, this Article X
shall not prohibit or limit the exercise of jurisdiction by any other court
having competent jurisdiction with respect to such matter.
10.06 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided, all
injunctions or stays provided for in the Chapter 11 Case(s) pursuant to
sections 105 or 362 of the Bankruptcy Code or otherwise and in effect on the
Confirmation Date shall remain in full force and effect until the Closing Date.
10.07 DEEMED RELEASE OF CLAIMS BY THE DEBTORS AND BY THIRD-PARTIES
AGAINST OFFICERS AND DIRECTORS. (a) All claims for liability which the
Debtors may otherwise have been entitled to
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assert, whether in their capacities as corporations or as debtors in possession
by operation of the Bankruptcy Code, against the present directors and officers
and any former directors or officers that were directors or officers of one or
more of the Debtors on or before the Petition Date, pertaining to any
obligations, actions, or omissions which may have arisen or occurred prior to
the Effective Date, or as may arise or which may have arisen on, before, or in
connection with the Effective Date and Closing, shall be deemed released upon
the occurrence of the Effective Date, without the need for the execution of any
further agreement or release, and such release shall be binding upon any party
who may otherwise have asserted such claims derivatively.
(b) On the Effective Date, each holder of a Claim or Equity
Interest shall be deemed to release any claim for liability which such holder
may otherwise have been entitled to assert against the Debtors' present and
former directors or officers that were directors or officers of one or more of
the Debtors on or before the Petition Date, pertaining to any obligations,
actions, or omissions which may have arisen or occurred prior to the Effective
Date or as may arise or which may have arisen on, before, or in connection with
the Effective Date and Closing, without the need for the execution of any
further agreement or release, unless such holder shall have affirmatively
opted, in the appropriate space provided in the official ballot approved by the
Bankruptcy Court for accepting or rejecting the Plan, not to grant such release
(and thereby elects instead to retain its rights against such non-debtor
directors and officers). All brokers and intermediaries who receive ballots
from any holder of public debt and who submit summary ballots based thereon
shall be required to maintain any and all ballots wherein the holder has opted
not to grant such release for a period of three (3) years following the
Effective Date.
ARTICLE XI
RETENTION OF JURISDICTION
11.01 Notwithstanding entry of the Confirmation Order or the
Effective Date having occurred, the Bankruptcy Court will retain jurisdiction:
(a) to determine the allowed amount of Disputed Claims;
(b) to determine the allowed amount of any Miscellaneous Secured
Claims and the extent of any liens asserted in connection therewith;
(c) to determine Fee Claims and requests for payment of Claims
entitled to priority under subsection 507(a)(1) of the Bankruptcy Code,
including compensation of and reimbursement of expenses of parties entitled
thereto;
(d) to resolve controversies and disputes regarding the
interpretation and implementation of this Plan;
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(e) to enter orders in aid of this Plan, including, without
limitation, appropriate orders (which may include contempt or other sanctions)
to protect Reorganized Debtor(s);
(f) to modify this Plan or to remedy any apparent defect or
omission in this Plan;
(g) to determine any and all applications, claims, adversary
proceedings and contested matters pending on the Confirmation Date or timely
filed pursuant to the Bankruptcy Code, this Plan, or an order of the Bankruptcy
Court;
(h) to allow, disallow, estimate, liquidate or determine any Claim
or Fee Claim and to enter or enforce any order requiring the filing of any such
Claim or Fee Claim before a particular date;
(i) to determine any and all pending applications for the
assumption or rejection of executory contracts or unexpired leases, or for the
assignment of assumed executory contracts and unexpired leases, and to hear
determine and liquidate, any Claims arising therefrom;
(j) to recover all assets and property of the Debtors' Estates
pursuant to sections 542, 543, 544, 545, 547, 548, 549, 550, 551 or 553 of the
Bankruptcy Code;
(k) to enter a final decree closing the Chapter 11 Case(s); and
(l) to determine such other matters that may arise in connection
with the Chapter 11 Case (s), this Plan or the Confirmation Order.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01 SUBSTANTIAL CONSUMMATION. Substantial consummation, for
purposes of Section 1127 of the Bankruptcy Code, shall occur concurrently with
the completion of Closing.
12.02 NO LIABILITY FOR UNCLAIMED OR ESCHEATED DISTRIBUTIONS. None
of the Debtors, Tom Brown, the Exchange Agent, or any other person shall be
liable to any Distributee or holder of any other Claim or Equity Interest for
any amount properly delivered to any public official pursuant to any applicable
abandoned property, escheat, or similar law. Any amounts remaining unclaimed
for a period of two (2) years following the Closing (or such earlier date
immediately prior to the time at which such amounts would otherwise escheat to
or become property of any governmental entity) shall, to the extent permitted
by applicable law, become the property of the Reorganized Debtors, free and
clear of any Claims or Equity Interests of any such Distributee or of any
holder of any other Claim or Equity Interest or their successors, assigns, or
personal representatives previously entitled thereto.
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12.03 MODIFICATION OF PLAN. Subject to the limitations set forth in
the Bankruptcy Code and the Exchange Agreement, the Plan may be amended or
modified (a) upon the mutual consent of Tom Brown and the Debtors or, (b) in
the event the Exchange Agreement is terminated in accordance with its terms, by
the Debtors.
12.04 WITHDRAWAL OF PLAN. In the event the Exchange Agreement is
terminated in accordance with its terms, the Debtors reserve the right, at any
time prior to entry of the Confirmation Order, to revoke or withdraw the Plan.
12.05 NOTICES. From and after the Effective Date, all notices which
are required or may be given pursuant to the Plan or the Exchange Agreement
shall be sufficient in all respects if given in writing and delivered
personally, by telecopy or by registered or certified mail, postage prepaid, as
follows:
IF TO PRESIDIO OR ANY OTHER DEBTOR:
c/o Presidio Exploration, Inc.
5613 DTC Parkway, Suite 750
P.O. Box 6525
Englewood, Colorado 80155-6525
Attention: President
Telephone: (303) 773-0100
Fax: (303) 850-1111
IF TO TOM BROWN:
Tom Brown, Inc.
508 West Wall, Suite 500
Midland, Texas 79702
Attention: Donald L. Evans
Telephone: (915) 682-9715
Fax: (915) 683-9327
All notices shall be deemed to have been duly given at the time of receipt by
the party to which such notice is addressed.
12.06 COMMITTEES. The appointment of all statutory committees shall
terminate on the Effective Date except as provided in the Confirmation Order.
12.07 CONSTRUCTION. In the event of any conflict between the terms
of the Plan and the Disclosure Statement, the terms of the Plan shall control.
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12.08 WITHHOLDING AND REPORTING REQUIREMENTS. In connection with
the Plan and all instruments issued in connection herewith and distributions
hereunder, Reorganized Presidio shall comply with all withholding and reporting
requirements imposed by any federal, state, local or foreign taxing authority
and all distributions hereunder shall be subject to such withholding and
reporting requirements.
12.09 BINDING EFFECT. This Plan shall be binding upon and inure to
the benefit of each Debtor, Tom Brown, the holders of Claims, the holders of
Equity Interests, other parties enumerated herein, all other parties in
interest, and their respective successors and assigns.
12.10 GOVERNING LAW. THE EXCHANGE AGREEMENT, THOSE PROVISIONS OF
THIS PLAN WHICH ARE SUBJECT TO STATE LAW, AND THE LEGAL RELATIONS BETWEEN THE
PARTIES TO THE EXCHANGE AGREEMENT AND
32
<PAGE> 33
UNDER THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
Dated: Wilmington, Delaware
August 5, 1996
PRESIDIO OIL COMPANY
By:
------------------------------------
Its:
- and -
PRESIDIO EXPLORATION, INC.
By:------------------------------------
Its:
- and -
PALISADE OIL, INC.
By:
------------------------------------
Its:
- and -
PRESIDIO WEST VIRGINIA, INC.
By:
------------------------------------
Its:
- and -
TOM BROWN, INC.
By:
------------------------------------
Its:
33
<PAGE> 34
================================================================================
EXCHANGE AGREEMENT
BY AND AMONG
PRESIDIO OIL COMPANY,
PRESIDIO EXPLORATION, INC.,
PRESIDIO WEST VIRGINIA, INC.,
PALISADE OIL, INC.,
AND
TOM BROWN, INC.
Dated August 5, 1996
================================================================================
<PAGE> 35
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
-----------
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
1.2 References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
ARTICLE II
THE EXCHANGE
------------
2.1 Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
2.2 Directors and Officers of the Presidio Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.3 Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.4 Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.5 Tom Brown Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.6 No Further Ownership Rights in Presidio Securities . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.7 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
--
2.9 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
2.10 Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
2.11 Merger Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
ARTICLE III
CLOSING AND PRE-CLOSING ACTIONS
-------------------------------
3.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
3.2 Adjustment to Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--
ARTICLE IV
COVENANTS
---------
4.1 Access to Assets, Personnel, and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--
4.2 Confidentiality Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--
4.3 Indemnity Regarding Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
4.4 Tom Brown to Vote for Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
4.5 Petition Under the Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
4.6 Preparation of Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--
4.7 Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--
4.8 Solicitation of Presidio Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--
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4.9 Cooperation; Notification of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
4.10 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
4.11 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
4.12 Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
4.13 Amendment to Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--
4.14 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--
4.15 New D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--
4.16 Information Kept Confidential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
4.17 Pre-Closing Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
4.18 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
4.19 Conduct of Presidio's Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
--
4.20 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--
4.21 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
4.22 Severance Plan and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
4.23 Presidio ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
4.24 Presidio 401K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
4.25 Other Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
4.26 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
4.27 Certain Tom Brown Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PRESIDIO
------------------------------------------
5.1 Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
--
5.2 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
5.3 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
5.4 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
5.5 Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
5.7 Presidio SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
5.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--
5.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
5.11 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
5.12 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
5.13 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
5.14 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
5.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
5.16 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
5.17 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
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5.18 Presidio's Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
5.19 Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
5.20 Oil and Gas Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
5.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--
5.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
5.23 Compliance with Law; Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
5.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
5.25 Contracts, Agreements, Commitments and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 40
--
5.26 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TOM BROWN
-------------------------------------------
6.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.2 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.3 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.5 Tom Brown SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
--
6.7 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
6.8 Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
6.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
--
ARTICLE VII
NATURE OF REPRESENTATIONS AND WARRANTIES
----------------------------------------
7.1 Limited Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
--
7.2 Nonsurvival of Representations, Warranties, Covenants, and Agreements . . . . . . . . . . . . . . . 45
--
ARTICLE VIII
CONDITIONS TO CLOSING
---------------------
8.1 Conditions Precedent to the Obligations of Presidio . . . . . . . . . . . . . . . . . . . . . . . . 45
--
8.2 Conditions Precedent to the Obligations of Tom Brown . . . . . . . . . . . . . . . . . . . . . . . . 46
--
</TABLE>
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<TABLE>
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<S> <C>
ARTICLE IX
TERMINATION
-----------
9.1 Termination Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
--
9.2 Payment of Termination Expenses and Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--
9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--
ARTICLE X
MISCELLANEOUS
-------------
10.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--
10.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
--
10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--
10.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--
10.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--
10.6 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--
10.7 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
--
10.8 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--
10.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
--
LIST OF EXHIBITS
Exhibit A -- Leases
Exhibit B -- Wells
Exhibit C -- Form of Plan of Reorganization
Exhibit D -- Form of Disclosure Statement
Exhibit E -- Form of Affiliate Letter
</TABLE>
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LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
401k Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
Acreage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
Aggregate Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Aggregate Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Allocated Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Alternative Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
--
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Bankruptcy Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
Bar Date Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--
Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
CERCLIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confirmation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confirmation Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Defensible Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Distributee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Environmental Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Environmental Response Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Exchange Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
</TABLE>
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DEFINED TERMS, CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Existing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Hart Scott Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
Initial Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Major Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
New D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--
NRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Oil and Gas Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
Palisade Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
Permitted Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Plan Proponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Common Stock Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Options or Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Presidio Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--
Presidio Tax Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Presidio West Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Released Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--
</TABLE>
-vi-
<PAGE> 41
DEFINED TERMS, CONTINUED
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Releasing Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--
Reorganization Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Schedule and Exhibit Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
SEC Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Senior Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Senior Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Severance Plan and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Subordinated Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Subordinated Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Termination Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--
Third Party Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
Tom Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tom Brown Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tom Brown Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
Tom Brown SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
Tom Brown Trading Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
US Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Wells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
</TABLE>
-vii-
<PAGE> 42
LIST OF SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule 5.25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Schedule 4.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--
Schedule 4.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Schedule 4.26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
Schedule 5.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
Schedule 5.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Schedule 5.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Schedule 5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--
Schedule 5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--
Schedule 5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--
Schedule 5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
Schedule 5.16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
Schedule 5.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--
Schedule 5.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
</TABLE>
-viii-
<PAGE> 43
EXCHANGE AGREEMENT
This Exchange Agreement dated August 5, 1996, is entered into by and
among Presidio Oil Company, a Delaware corporation, Presidio Exploration, Inc.,
a Colorado corporation, Presidio West Virginia, Inc., a Delaware corporation,
Palisade Oil, Inc., a Colorado corporation, and Tom Brown, Inc., a Delaware
corporation.
RECITALS:
A. The boards of directors of Presidio and Tom Brown have each
determined that it is in the best interests of their respective constituencies
for Tom Brown to acquire Presidio upon the terms and subject to the conditions
set forth in this Agreement.
B. Presidio and Tom Brown desire to make certain representations,
warranties, covenants, and agreements in connection with such acquisition and
also to prescribe various conditions to such acquisition.
Now, therefore, for and in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms, as used herein, have the
following meanings:
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Acreage" means the Leases set forth on Appendix A-1 to Exhibit A
attached hereto.
"Affiliate" of a person means any person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
person. The term "control" including, with correlative meaning, the terms
"controlled by" and "under common control with" as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.
-1-
<PAGE> 44
"Aggregate Common Share Value" means a dollar amount equal to the
difference between the Aggregate Consideration and the Cash Consideration, as
adjusted pursuant to Section 5.09 of the Plan of Reorganization.
"Aggregate Consideration" means $183,000,000 except as such may be
adjusted pursuant to Section 5.09 of the Plan of Reorganization.
"Agreement" means this Exchange Agreement and all Schedules and
Exhibits attached hereto.
"Allocated Value" means (a) the net present value allocated to the
interest of the Presidio Parties in and to each Oil and Gas Asset that is
separately valued on the Reserve Report or (b) the amounts set forth on
Appendix A-1 to Exhibit A in respect of the Leases comprising the Acreage.
"Alternative Transaction" has the meaning set forth in Section
4.20(a).
"Bank Obligations" means the obligations of Presidio and its
Affiliates pursuant to the Amendment and Restatement of Amendment, Restatement
and Consolidation of Credit Agreement dated August 6, 1993, as amended, between
Presidio, Presidio Exploration, each bank which is a signatory thereto or
successor or assign thereof and The Chase Manhattan Bank, N.A., as agent.
"Bankruptcy Code" means Title 11 of the United States Code, as amended
from time to time.
"Bankruptcy Court" means the Bankruptcy Court presiding over the
Presidio Parties' Chapter 11 cases.
"Bankruptcy Event" has the meaning set forth in Section 4.5(a).
"Bar Date Order" has the meaning set forth in Section 4.5(d).
"Cash Consideration" means a cash payment in an amount equal to the
sum of (a) the Presidio Common Stock Cash Consideration, plus (b) the excess of
(i) the sum of (x) $100,193,267, plus (y) the amount of accrued and unpaid
interest on the Bank Obligations allowed by an order of the Bankruptcy Court,
over (ii) all amounts, if any, paid by a Presidio Party in respect of the Bank
Obligations (other than interest paid in respect thereof) or the Senior Secured
Notes from the date of this Agreement through and including the Closing.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List.
"Closing" has the meaning set forth in Section 3.1(a).
-2-
<PAGE> 45
"Closing Date" has the meaning set forth in Section 3.1(b).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Share Value" means a value per share of Tom Brown Common Stock
equal to $16.50, as adjusted pursuant to Section 3.2.
"Confidentiality Agreement" means that certain letter agreement dated
August 15, 1995 between Tom Brown and Presidio, as amended by letters dated
October 30, 1995 and November 10, 1995 and as such may be hereafter amended.
"Confirmation Date" means the date upon which the Confirmation Order
is entered.
"Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan of Reorganization pursuant to Sections 1129 and 1141 of the
Bankruptcy Code.
"Contract" has the meaning set forth in Section 5.4.
"Debt Obligations" means the obligations of Presidio pursuant to the
following:
(a) Indenture dated as of August 6, 1993 among Presidio,
various of its subsidiaries and U.S. Trust Company of New York ("US
Trust") relating to $75,000,000 original aggregate principal amount of
11.5% Senior Secured Notes due 2000 (the "Senior Secured Notes");
(b) Indenture dated as of August 6, 1993 among Presidio,
various of its subsidiaries and US Trust relating to $100,000,000
original aggregate principal amount of Senior Gas Indexed Notes due
2002 (the "Senior Gas Indexed Notes");
(c) Indenture dated as of February 16, 1989 among
Presidio, various of its subsidiaries and US Trust, as amended,
relating to $100,000,000 original aggregate principal amount of Senior
Subordinated Gas Indexed Notes due 1999 (the "Subordinated Gas Indexed
Notes"); and
(d) Indenture dated as of February 14, 1990 among
Presidio and Bank of Montreal Trust Company relating to $50,000,000
original aggregate principal amount of 9% Convertible Subordinated
Debentures Due 2015.
"Defensible Title" with respect to the Major Assets means that title
of a Presidio Party which, subject to Permitted Encumbrances:
(a) is deducible of record (either from the records of
the applicable county clerk and recorder or, in the case of federal
leases, from the records of the applicable office of the Bureau of
Land Management, or in the case of Indian leases, from the applicable
offices of the Bureau of Indian Affairs, or in the case of state
leases, from
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the records of the applicable state land office, or from some
combination of the foregoing official records), and is free from
reasonable doubt such that a prudent person with knowledge of all the
facts and their legal bearing would be willing to accept the same;
(b) entitles a Presidio Party to receive not less than
the net revenue interest (indicated by the letters "NRI") set forth in
Exhibit B attached hereto of all oil, gas and associated liquid and
gaseous hydrocarbons produced, saved and marketed from each of the
Major Assets throughout the life of such Major Asset, provided, that
the provisions of this clause (b) shall not be applicable to the
Leases comprising the Acreage;
(c) obligates a Presidio Party to bear costs and expenses
relating to the maintenance, development, and operation of each of the
Major Assets in an amount not greater than the working interest
(indicated by the letters "WI") set forth in Exhibit B attached hereto
throughout the life of such Major Asset except to the extent such
increase in working interest is accompanied by a proportionate
increase in the net revenue interest attributable to such Major Asset,
provided, that the provisions of this clause (c) shall not be
applicable to the Leases comprising the Acreage; and
(d) is free and clear of Liens.
"Designated Contracts" shall mean each of the operating agreements set
forth on Schedule 5.25.
"Directors and Officers"shall have the meaning given such terms in the
New D&O Insurance.
"Disclosure Statement" means the disclosure statement in the form
attached hereto as Exhibit D as such may be amended or supplemented after the
date of this Agreement, together with such other solicitation materials that
may be jointly prepared by the Plan Proponents and filed by Presidio pursuant
to Section 1125 of the Bankruptcy Code in connection with the Plan of
Reorganization.
"Distributee" means a person who is a holder of Bank Obligations, Debt
Obligations or Presidio Common Stock.
"Employee Benefit Plans" has the meaning set forth in Section 5.9(a).
"Environmental Laws" means any and all applicable laws (including, but
not limited to, CERCLA and corresponding state or local acts), statutes,
ordinances, rules, regulations, policies, guidelines, consents, approvals,
licenses, judgments, memoranda of understanding, orders, judicial decrees, or
administrative decrees, treaties, permit conditions, or injunctions of any
Governmental Authority or court of competent jurisdiction pertaining to the
protection of the environment.
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"Environmental Material" means (a) any hazardous substance, as defined
by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended through the date of this Agreement, (c) any
hazardous, dangerous, or toxic chemical, material, waste, or substance, within
the meaning of and regulated by any Environmental Law, (d) any material
emitting radiation in excess of ordinary background conditions, including any
naturally occurring radioactive material, and any source, special, or byproduct
material as defined in 42 U.S.C. Section 2011 et seq. and any amendments or
authorizations thereof, (e) any asbestos-containing materials in any form or
condition, or (f) any polychlorinated biphenyls in any form or condition.
"Environmental Response Action" means any remedial action, removal
action, remedial investigation and feasibility study, site characterization,
Natural Resource Damage Matters, Brownfield Agreements, or other investigations
whatsoever relating to the presence or suspected presence of Environmental
Materials on or originating from operations of Presidio. The term
Environmental Response Action shall not include customary well plugging,
abandonment, and drill site restoration requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ESOP" has the meaning set forth in Section 4.23.
"Exchange" means the transactions contemplated in Section 2.1.
"Exchange Agent" means a person appointed by Tom Brown and Presidio to
serve as Exchange Agent hereunder or absent such appointment a person appointed
pursuant to the Plan of Reorganization.
"Exchange Common Stock" means a number of shares of Tom Brown Common
Stock (or other securities as may be required under Section 3.2) obtained by
dividing (a) the Aggregate Common Share Value by (b) the Common Share Value,
less the number of shares of Tom Brown Common Stock to which Tom Brown
otherwise would have been entitled pursuant to Section 2.1 in respect of its
ownership of Senior Gas Indexed Notes or any other Presidio Securities it may
acquire hereafter. As of the date of this Agreement, the Exchange Common Stock
is initially established hereunder at 5,003,438 shares of Tom Brown Common
Stock (with such number of shares being calculated without any reduction
thereof in respect of the shares of Tom Brown Common Stock to which Tom Brown
otherwise would be entitled to receive in respect of its ownership of Senior
Gas Indexed Notes).
"Exchange Consideration" means the Cash Consideration and the Exchange
Common Stock and shall also include the net proceeds received from the sale of
fractional shares of Exchange Common Stock pursuant to Section 2.7.
"Existing Plans" means the Employee Benefit Plans and the Severance
Plan and Agreements.
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"Final Order" means an order or judgment of the Bankruptcy Court which
shall not have been reversed, stayed, modified, or amended and as to which (a)
the time to appeal from or to seek review, rehearing or certiorari shall have
expired and (b) no appeal or petition for review, rehearing, or certiorari is
pending or if appealed shall have been affirmed, or the appeal dismissed by the
highest court to which such order was appealed, or if review, rehearing or
certiorari was sought, such review, rehearing, or certiorari has been denied
and no further hearing, appeal or petition for review, rehearing, or certiorari
can be taken or granted or as to which any right to appeal or to seek a review,
rehearing, or certiorari has been waived.
"401k Plan" has the meaning set forth in Section 4.24.
"GAAP" means those generally accepted accounting principles and
practices that are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
"Governmental Authority" means any federal, state, local, foreign
government, or political subdivision thereof, exercising competent
jurisdiction.
"Hart Scott Act" has the meaning set forth in Section 4.9.
"Initial Order" has the meaning set forth in Section 4.5(c).
"Knowledge" means actual knowledge as of the date of this Agreement of
each of the officers and employees named in Schedule 4.22 and for the purposes
of Section 5.21, the term Knowledge shall also include the actual knowledge as
of the date of this Agreement of Brant Gimmeson.
"Leases" has the meaning set forth in the definition of Oil and Gas
Assets.
"Liabilities" has the meaning set forth in Section 5.12.
"Lien" means any mortgage, pledge, hypothecation, security interest,
encumbrance, charge or lien (statutory or otherwise) or assignment, deposit
arrangement or other preferential arrangement in respect of an interest in
property intended to secure, support or otherwise assure payment of an
obligation (including any conditional sale or other title retention agreement
and any lease having substantially the same economic effects as any of the
foregoing).
"Major Assets" means (a) each Oil and Gas Asset that is separately
valued on the Reserve Report as having an Allocated Value individually in
excess of $50,000 and (b) the Acreage.
"Material Contracts" has the meaning set forth in Section 5.25.
"Merger" has the meaning set forth in Section 2.11.
"NASDAQ" means the Nasdaq National Market of The Nasdaq Stock Market.
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"New D&O Insurance" has the meaning set forth in Section 4.15(a).
"Oil and Gas Assets" means the following:
(a) All right, title, and interest of the Presidio
Parties in and to (i) all oil and gas leases, all oil, gas and mineral
leases or other similar leases, mineral interests, fee estates,
production payments, net profits interests, carried interests,
royalties, and overriding royalties and all lands subject thereto,
whether producing or non-producing (the "Leases"), including the
leases, mineral interests, overriding royalties and royalties set
forth on Exhibit A attached hereto, and any other oil, gas or other
mineral interests of any type of a Presidio Party wherever situated
and including any and all right, title and interest of a Presidio
Party in and to the oil, gas and other hydrocarbons in, on or under
any of the foregoing, and (ii) all oil and gas wells and injection and
disposal wells located on any of the foregoing, or used or useful in
connection therewith, or on lands pooled or unitized therewith (the
"Wells"), including the wells set forth on Exhibit B attached hereto;
(b) All right, title, and interest of the Presidio
Parties in, to and under or derived from all presently existing or
proposed unitization, pooling and communitization agreements,
declarations and orders, and the properties covered and the units
created or to be created thereby (including all units formed or to be
formed under orders, regulations, rules or other official actions of
any federal, state or other governmental agency having jurisdiction)
to the extent that they relate to or affect the Leases or the Wells;
(c) All right, title, and interest of the Presidio
Parties in, to and under or derived from all presently existing and
effective oil, gas liquids, condensate, casinghead gas and gas sales,
purchase, marketing, exchange, gathering, transportation and
processing contracts, operating agreements, farmout agreements,
exploration agreements, option agreements, joint venture agreements,
partnership agreements, settlement agreements and all other agreements
and instruments to the extent that they relate to the Leases or the
Wells;
(d) All right, title, and interest of the Presidio
Parties in or to all personal property, fixtures, equipment,
improvements and other personal property, whether real, personal or
mixed (including well equipment, casing, tubing, tanks, pumping units,
rods, tank batteries, natural gas, crude oil, condensate or products
placed into storage or into pipelines, buildings, pumps, motors,
machinery, injection facilities, disposal facilities, field separators
and liquid extractors, compressors, pipelines, gathering and flow
lines, roads, field treating facilities, field offices and office
furnishings related thereto, field office leases, storage yards and
off-site inventories, equipment leases, vehicles, trailers, operating
supplies, inventories and all other appurtenances thereunto
belonging), and in and to all easements, permits, licenses,
servitudes, rights-of-way, surface leases and other surface rights to
the extent any of the foregoing is now being used or proposed to be
used in connection with the exploration, development, operation or
maintenance of the Leases or Wells or now being used or proposed to be
used in connection with the producing, treating, processing, storing,
gathering, transporting or marketing of oil and gas attributable to
such properties or interests
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and other hydrocarbons and products in association therewith, and all
contract rights (including rights under leases to third parties)
related to any of the foregoing; and
(e) All right, title, and interest of the Presidio
Parties in and to all oil, gas, and other minerals owned by a Presidio
Party or any interests credited to the account of a Presidio Party
pursuant to any production imbalances or balancing agreements relating
to any interests owned by a Presidio Party in the Leases or the Wells
or otherwise arising by virtue of the fact that a Presidio Party may
not have taken or marketed its full share of oil, gas or other
minerals attributable to its ownership in the Leases or the Wells
prior to the Closing Date.
"Palisade Oil" means Palisade Oil, Inc., a Colorado corporation.
"Permitted Claims" means any Liens, Liabilities, claims, or causes of
action arising from any defect adversely affecting a Presidio Party's title to
any Oil and Gas Asset, which defect arises from or is attributable to any
facts, events, or circumstances in existence on or before June 19, 1996. The
term Permitted Claims shall also include all Title Defects in existence on or
before June 19, 1996.
"Permitted Encumbrances" means:
(a) Lessors' royalties, overriding royalties,
reversionary interests and similar burdens as of the date of this
Agreement to the extent that (i) they burden the Leases comprising the
Acreage, or (ii) they do not prevent the Presidio Parties from
receiving the proceeds of production from each of the Major Assets
attributable to the net revenue interests reflected in Exhibit B;
(b) preferential rights to purchase;
(c) Third Party Consents with respect to which on or
before the Closing a waiver, consent or a judicial order or
determination is obtained as contemplated in Section 4.11;
(d) Liens for Taxes not yet delinquent or, if delinquent,
that are being contested in good faith in the normal course of
business;
(e) Materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, and other similar Liens or charges arising
in the ordinary course of business (i) if they have not been filed
pursuant to law, (ii) if so filed, they have not yet become due and
payable or payment is being withheld as provided by law, or (iii) if
their validity is being contested in good faith by appropriate action;
(f) All rights to consent by, required notices to,
filings with, or other actions by Governmental Authorities in
connection with the sale or conveyance of oil and
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gas leases or interests therein if they are customarily obtained
subsequent to the sale or conveyance;
(g) Conventional rights of reassignment upon the
surrender or expiration of any Lease;
(h) Easements, rights-of-way, servitudes, permits,
surface leases, and other rights in respect of surface operations;
(i) All other Liens, charges, contracts, agreements,
instruments, obligations, defects, and irregularities affecting
the Leases or Wells which taken individually or together (i) do not
interfere materially with the operation, value or use of any of the Oil
and Gas Assets, (ii) do not prevent a Presidio Party from receiving the
proceeds of production from any of the Major Assets attributable to the
net revenue interests reflected in Exhibit B or the ownership interests
of the Presidio Parties in the Acreage, as may be applicable, (iii) do
not adversely affect the net revenue interest of a Presidio Party as
reflected in Exhibit B or the ownership interests of the Presidio
Parties in the Acreage, as may be applicable, with respect to its share
of the oil and gas produced from any such Major Asset, or (iv) do not
increase the portion of the costs and expenses that a Presidio Party is
obligated to pay above the working interests reflected in Exhibit B or
the ownership interests of the Presidio Parties in the Acreage, as may
be applicable; such Liens, charges, contracts, agreements, instruments,
obligations, defects, and irregularities include the following:
(A) those created by the terms and conditions of
division orders, sales contracts, and other existing contracts
burdening the Oil and Gas Assets, including any and all terms
and conditions affecting or relating to production imbalances;
(B) those which have not prevented the receipt of
production proceeds by a Presidio Party or its predecessors in
title without suspense by a production purchaser and as to
which no challenge to title has been raised on the basis of
such defect, so long as it can reasonably be concluded either
that such challenge is highly unlikely or that such challenge
would be unsuccessful by reason of statutes of limitation,
waiver, estoppel, or other defenses;
(C) those described by an attorney's title
opinion as advisory or waivable as a matter of business
judgment; or
(D) those in the nature of customary defects
expected to be encountered in the area involved and
customarily acceptable to prudent operators and interest
owners in that area, including defects that have been cured by
possession under applicable statutes of limitation, defects in
the early chain of title such as failure to recite marital
status in documents, omission of heirship or succession
proceedings, lack of survey and failure to record releases of
liens, production payments, or mortgages that have expired of
their own terms or which through the
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passage of time or statute are no longer enforceable or other
defects that either as a practical matter have not resulted or
are not likely to result in a material claim or are considered
waivable under local bar association-approved title standards
or customary title practices in the area;
(j) All rights reserved to or vested in any Governmental
Authority to control or regulate any of the Leases or Wells in any
manner, and all applicable laws, rules, and orders of governmental
authorities;
(k) Any Title Defects, Liens or other defects affecting
the Oil and Gas Assets which are to be discharged at or prior to
Closing pursuant to the Plan of Reorganization;
(l) Permitted Claims; and
(m) The Liens securing the Bank Obligations and certain
Debt Obligations which are discharged at or prior to Closing pursuant
to the Plan of Reorganization.
"person" means an individual, a corporation, a partnership, an
association, a trust, an estate or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan Documents" means all documents and exhibits that aid in
effecting the Plan of Reorganization.
"Plan of Reorganization" means the plan of reorganization in the form
attached hereto as Exhibit C as such may be amended after the date of this
Agreement, which is to be proposed by the Plan Proponents and filed by the
Presidio Parties in accordance with the Bankruptcy Code as a part of the
Reorganization Cases of the Presidio Parties and which upon confirmation
implements the transactions contemplated by this Agreement.
"Plan Proponents" means the Presidio Parties and Tom Brown as the
joint plan proponents of the Plan of Reorganization.
"Presidio" means Presidio Oil Company, a Delaware corporation.
"Presidio Class A Common Stock" means the Class A Common Stock of
Presidio, par value $.10 per share.
"Presidio Class B Common Stock" means the Class B Common Stock of
Presidio, par value $.10 per share.
"Presidio Common Stock" means the Presidio Class A Common Stock and
the Presidio Class B Common Stock.
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"Presidio Common Stock Cash Consideration" means a cash payment to be
made pursuant to the Plan of Reorganization in an amount of $250,000 to the
holders of the Presidio Common Stock, as adjusted pursuant to Section 5.09 of
the Plan of Reorganization.
"Presidio Exploration" means Presidio Exploration, Inc., a Colorado
corporation.
"Presidio Financial Statements" means the audited and unaudited
consolidated financial statements of Presidio and its consolidated subsidiaries
(including the related notes) included (or incorporated by reference) in
Presidio's Annual Report on Form 10-K for the year ended December 31, 1995.
"Presidio Options or Warrants" has the meaning set forth in Section
5.11(b).
"Presidio Parties" means Presidio, Presidio Exploration, Presidio West
Virginia, and Palisade Oil.
"Presidio Representative" means any director, officer, employee,
agent, advisor (including legal, accounting, and financial advisors), or other
representative of a Presidio Party.
"Presidio SEC Documents" means each report, schedule, registration
statement and definitive proxy statement filed by Presidio with the SEC since
January 1, 1995 and prior to the date of this Agreement.
"Presidio Security" means the Presidio Common Stock, the promissory
notes evidencing the Bank Obligations, the Debt Obligations and the Presidio
Options or Warrants.
"Presidio Securityholders" has the meaning set forth in Section
4.6(a).
"Presidio Tax Affiliates" has the meaning set forth in Section 5.8(a).
"Presidio West Virginia" means Presidio West Virginia, Inc., a
Delaware corporation.
"Released Claims" has the meaning set forth in Section 8.2(i).
"Releasing Parties" has the meaning set forth in Section 8.2(i).
"Reorganization Cases" has the meaning set forth in Section 4.5(a).
"Reserve Report" means the engineering report prepared by Presidio
based on an SEC Case as of December 31, 1995 and reviewed by Huddleston & Co.,
Inc. on behalf of Presidio concerning certain of the Oil and Gas Assets.
"Schedule and Exhibit Volume" means the volume containing the
Schedules and Exhibits A and B to this Agreement to which has been attached a
cover page executed by the parties hereto for identification with this
Agreement.
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"SEC" means the Securities and Exchange Commission.
"SEC Case" means the present value of estimated future net revenues
from oil and gas properties discounted at ten percent (10%) before taxes and
determined in all material respects in accordance with the rules and
regulations of the SEC using prices and costs in effect on the valuation date.
"Senior Gas Indexed Notes" has the meaning set forth in the definition
of Debt Obligations.
"Senior Secured Notes" has the meaning set forth in the definition of
Debt Obligations.
"Severance Plan and Agreements" has the meaning set forth in Section
4.22.
"Subordinated Gas Indexed Notes" has the meaning set forth in the
definition of Debt Obligations.
"Tax Returns" means all federal and all material state, local, and
foreign returns, claims for refund, declarations, reports, estimates,
information returns and statements required to be filed with respect to any
Taxes.
"Taxes" means taxes of any kind, levies, or other like assessments,
customs, duties, imposts, charges, or fees, including income, gross receipts,
ad valorem, value added, excise, stamp, environmental (including taxes under
Code Section 59A), alternative or add-on minimum, real or personal property,
asset, sales, use, license, payroll, transaction, capital, net worth and
franchise taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes,
or other governmental taxes imposed or payable to the United States or any
state, local, or foreign governmental subdivision or agency thereof, and in
each instance such term shall include any interest, penalties, or additions to
tax attributable to any such Tax, including penalties for the failure to file
any Tax Return or report.
"Termination Expenses" has the meaning set forth in Section 9.2(b).
"Termination Fee" has the meaning set forth in Section 9.2(a).
"Third Party Consent" has the meaning set forth in Section 4.11.
"Title Defects" means any defect adversely affecting any Major Asset
which causes a Presidio Party not to have Defensible Title to such Major Asset.
"Tom Brown" means Tom Brown, Inc., a Delaware corporation.
"Tom Brown Common Stock" means the common stock of Tom Brown, par
value $.10 per share.
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"Tom Brown Financial Statements" means the audited and unaudited
consolidated financial statements of Tom Brown and its consolidated
subsidiaries (including the related notes) included (or incorporated by
reference) in Tom Brown's Annual Report on Form 10-K for the year ended
December 31, 1995.
"Tom Brown SEC Documents" means each report, schedule, registration
statement, and definitive proxy statement filed by Tom Brown with the SEC since
January 1, 1995 and prior to the date of this Agreement.
"Tom Brown Trading Value" means the average of the closing sales
prices of the Tom Brown Common Stock on the NASDAQ (as reported by The Wall
Street Journal or, if not reported thereby, by another authoritative source)
over the twenty (20) trading days immediately preceding the date that is five
trading days prior to the Confirmation Date.
"Wells" has the meaning set forth in the definition of Oil and Gas
Assets.
1.2 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. Each of the Schedules referenced in this Agreement together with
Exhibits A and B are contained in the Schedule Volume. 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" and "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "or" is not exclusive,
and 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.
ARTICLE II
THE EXCHANGE
2.1 Exchange. Pursuant to this Agreement and the Plan of
Reorganization as confirmed by the Bankruptcy Court, on the Closing Date,
except to the extent already owned by Tom Brown or cancelled pursuant to the
Plan of Reorganization, all of (a) the Bank Obligations, (b) the Debt
Obligations and (c) the Presidio Common Stock shall be transferred absolutely
and unconditionally to Tom Brown in exchange for that portion and amount of the
Exchange Consideration (if any) allocated to the existing holders of such
claims and interests pursuant to the Plan of Reorganization. No Exchange
Consideration shall be issued or paid to Tom Brown in respect of its ownership
of (i) Senior Gas Indexed Notes or (ii) any other Presidio Securities which it
may acquire hereafter to
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<PAGE> 56
the extent it would be entitled to receive Exchange Common Stock in exchange
therefor. Upon delivery of the Exchange Consideration to the Exchange Agent as
provided in Section 2.4 hereof, Tom Brown shall be deemed the sole equity
holder, and the sole holder of the Bank Obligations and Debt Obligations of
Presidio, and Presidio's obligations to the holders of the (a) Bank
Obligations, (b) the Debt Obligations and (c) the Presidio Common Stock under
the Plan of Reorganization shall be deemed to be satisfied in full and
discharged. As of the Closing Date, the Presidio Options and Warrants shall be
cancelled pursuant to the Plan of Reorganization. Tom Brown, as the sole
equity owner of Presidio, shall, immediately following the Exchange described
in this Section 2.1, contribute to Presidio all of the Bank Obligations and
Debt Obligations. No additional shares of Presidio capital stock shall be
issued to Tom Brown in exchange therefor. The Bank Obligations and Debt
Obligations shall thereupon be cancelled, terminated, and discharged.
2.2 Directors and Officers of the Presidio Parties. The directors
and officers of each of the Presidio Parties shall resign as of the Closing.
2.3 Exchange Consideration. At the Closing, Tom Brown shall pay
or issue (in accordance with Section 2.4 hereof) the Exchange Consideration.
2.4 Exchange Fund. At the Closing, Tom Brown shall deposit with
the Exchange Agent, for the benefit of each of the Distributees, the Exchange
Consideration including certificates representing the Exchange Common Stock.
The Cash Consideration shall be tendered and paid to the Exchange Agent in
immediately available funds. The Exchange Agent will distribute to the
Distributees the Exchange Consideration (together with any interest earned
thereon) in accordance with the Plan of Reorganization. The Exchange Agent
shall receive and hold all dividends or other distributions paid or distributed
with respect to the Exchange Common Stock held by it for the account of the
Distributees entitled thereto.
2.5 Tom Brown Distributions. A Distributee shall be entitled to
receive dividends and other distributions with respect to the Exchange Common
Stock to which such Distributee is entitled pursuant to the Plan of
Reorganization.
2.6 No Further Ownership Rights in Presidio Securities. Except
for the contribution to be made by Tom Brown pursuant to Section 2.1, if, after
the Closing, a certificate representing a Presidio Security registered in the
name of a Distributee (other than Tom Brown) is presented to Presidio or the
Exchange Agent for any reason, it shall be cancelled and exchanged for that
portion and amount, if any, of the Exchange Consideration allocated thereto
pursuant to the Plan of Reorganization.
2.7 No Fractional Shares. No fractional shares of the Exchange
Common Stock shall be issued to a Distributee. The Exchange Agent shall, on
behalf of all Distributees otherwise entitled to receive fractional shares of
Exchange Common Stock, promptly following the Closing, aggregate such
fractional shares of Exchange Common Stock and sell the resulting whole shares
of Exchange Common Stock for the account of such Distributees, and such
Distributees shall be entitled to receive their allocable portion of the net
proceeds of the sale thereof.
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2.8 Termination of Exchange Fund. Any portion of the Exchange
Consideration held by the Exchange Agent that is not distributed pursuant to
the Plan of Reorganization within ninety (90) days after the Closing shall,
upon Presidio's request, be delivered to Tom Brown. Thereafter, a Distributee
shall look only to Presidio for distribution of that portion and amount of the
Exchange Consideration (including any dividends or distributions made in
respect of Exchange Common Stock) that such Distributee is entitled to receive
pursuant to the Plan of Reorganization. Such amounts shall bear no interest.
2.9 No Liability. None of Presidio, Tom Brown, the Exchange
Agent, or any other person shall be liable to any Distributee for any amount
properly delivered to any public official pursuant to any applicable abandoned
property, escheat, or similar law. Any amounts remaining unclaimed by a
Distributee for a period of two years following the Closing (or such earlier
date immediately prior to the time at which such amounts would otherwise
escheat to or become the property of any governmental entity) shall, to the
extent permitted by applicable law, become the property of Tom Brown free and
clear of any claims or interest of any such Distributee or his successors,
assigns, or personal representative previously entitled thereto.
2.10 Lost, Stolen, or Destroyed Certificates. If any certificate
representing a Presidio Security shall have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the Distributee claiming such
certificate to be lost, stolen, or destroyed and, if required by Tom Brown, the
issuance by such Distributee of such reasonable indemnity as Tom Brown may
require against any claim that may be made against it with respect to such
certificate, the Exchange Agent or Tom Brown, as applicable, shall issue in
exchange for such lost, stolen, or destroyed certificate that portion and
amount of the Exchange Consideration allocated to such Presidio Security in
accordance with the Plan of Reorganization.
2.11 Merger Alternative. If Tom Brown shall determine that the
transaction described in this Article II will not have the legal effects
described in the third sentence of Section 2.1, then the Exchange shall be
recast as a merger to be effected under the laws of the State of Delaware (the
"Merger"), pursuant to which a subsidiary of Tom Brown shall be merged with and
into Presidio, with Presidio to be the surviving corporation and a wholly-owned
subsidiary of Tom Brown. In such event, this Agreement shall constitute an
Agreement and Plan of Merger and the parties shall prepare and file all such
documents (including any Certificate of Merger) necessary to effect the Merger.
ARTICLE III
CLOSING AND PRE-CLOSING ACTIONS
3.1 Time and Place of Closing.
(a) Consummation of the Exchange as contemplated by this
Agreement (the "Closing"), shall, unless otherwise agreed to in
writing by Tom Brown and Presidio, take place at the offices of
Andrews & Kurth L.L.P., located at 425 Lexington Avenue, New York, New
York 10017 at 10:00 a.m., New York City time, on the fifth business
day
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following the date that the conditions specified in Article VIII have
been satisfied, unless another time, date and place is agreed to by
the parties.
(b) The date on which the Closing occurs is herein
referred to as the "Closing Date".
3.2 Adjustment to Common Share Value. If at any time or from time
to time after the date of this Agreement and on or before the Closing Date, Tom
Brown shall (a) pay a dividend in Tom Brown Common Stock or make a distribution
in Tom Brown Common Stock (or in securities convertible into Tom Brown Common
Stock), (b) subdivide the outstanding Tom Brown Common Stock, (c) combine the
outstanding Tom Brown Common Stock into a smaller number of shares of Tom Brown
Common Stock, or (d) issue any shares of its capital stock or other securities
by reclassification of the Tom Brown Common Stock, then the Common Share Value
(or if necessary the securities comprising the Exchange Common Stock) in effect
at the time of the record date for such dividend or distribution or as of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the aggregate number and kind of shares of
Exchange Common Stock shall be the aggregate number and kind of shares of Tom
Brown Common Stock or other securities of Tom Brown which, if the Exchange
Common Stock had been outstanding immediately prior to such time, the Exchange
Common Stock would represent by virtue of such dividend, distribution,
subdivision, combination or reclassification.
ARTICLE IV
COVENANTS
4.1 Access to Assets, Personnel, and Information. From the date
of this Agreement until the Closing, Presidio shall afford to Tom Brown and its
representatives, at Tom Brown's sole risk and expense, full access to any of
the assets, books, records (including files, Tax Returns, and accountants'
workpapers), contracts, employees, representatives, and agents (including
attorneys, accountants, and independent engineers) and facilities (including
office facilities) of the Presidio Parties, during normal business hours and
provided that such access does not unreasonably interfere with the ongoing
business or operations of any of the Presidio Parties. Presidio shall upon
request furnish promptly to Tom Brown (at Tom Brown's expense) a copy of any
file, book, record, contract, or other written information concerning a
Presidio Party (or any of their respective assets) that is within the
possession or control of a Presidio Party. During such period, Presidio will
make available to a reasonable number of Tom Brown representatives adequate
office space and facilities at the principal office facility of Presidio in
Denver, Colorado.
4.2 Confidentiality Obligations. Notwithstanding anything in this
Article IV to the contrary, Presidio shall not be obligated under the terms of
this Article IV to disclose to Tom Brown or its representatives, or grant Tom
Brown or its representatives access to, information that is within Presidio's
possession or control but subject to a valid and binding confidentiality
agreement with a third party without first obtaining the consent of such third
party, and Presidio, to the extent reasonably requested by Tom Brown, will use
its reasonable efforts to obtain any such consent.
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4.3 Indemnity Regarding Access. Tom Brown agrees to indemnify,
defend, and hold harmless each Presidio Party, their respective directors,
officers, employees, agents, and representatives from and against any and all
claims, liabilities, losses, costs, and expenses (including court costs,
expenses of litigation and reasonable attorneys' fees) in connection with
personal injuries to personnel of Tom Brown or its representatives, including
death or property damage arising out of or relating to the access to the
business, property, and records afforded to Tom Brown.
4.4 Tom Brown to Vote for Plan of Reorganization. Tom Brown shall
vote, or shall cause to be voted, all Presidio Securities beneficially owned by
Tom Brown or any Affiliate thereof in favor of the Plan of Reorganization.
4.5 Petition Under the Bankruptcy Code.
(a) Each of the Presidio Parties (other than Presidio
West Virginia) shall, on or before August 1, 1996, commence their respective
Chapter 11 cases (together with Presidio West Virginia's pending Chapter 11
case, collectively, the "Reorganization Cases"). If prior to the voluntary
commencement of the Reorganization Cases by the Presidio Parties (other than
Presidio West Virginia) there should be commenced an involuntary case against
Presidio or Presidio Exploration, and such Presidio Party consents to the entry
of an order for relief in such involuntary case, then each of the Presidio
Parties that are not subject to the involuntary case shall promptly commence a
Reorganization Case. Each of the foregoing voluntary filings or consents by
the Presidio Parties (other than Presidio West Virginia) is hereinafter
referred to as a "Bankruptcy Event".
(b) Upon the occurrence of a Bankruptcy Event, the
Presidio Parties will file, or will cause to be filed, all pleadings, requests,
and other items and information required to be filed with the Bankruptcy Court
in a form reasonably acceptable to Tom Brown. The Presidio Parties will use
their reasonable efforts to file the Plan of Reorganization and a Disclosure
Statement by no later than thirty (30) days following the occurrence of a
Bankruptcy Event. The Presidio Parties hereto shall use their reasonable
efforts to cause the Bankruptcy Court to confirm the Plan of Reorganization and
approve the Disclosure Statement and approve, authorize, and order assumption
of this Agreement and all other agreements contemplated by, or related to, this
Agreement.
(c) Not later than three (3) business days after the
occurrence of a Bankruptcy Event, Presidio shall file a motion in form and
substance reasonably acceptable to Tom Brown and seek a prompt hearing thereon
before the Bankruptcy Court for an order reasonably satisfactory in form and
substance to Tom Brown approving the provisions of Section 9.2 of this
Agreement (the "Initial Order").
(d) Not later than three (3) business days after the
occurrence of a Bankruptcy Event, Presidio shall file a motion in form and
substance reasonably acceptable to Tom Brown and seek a prompt hearing thereon
before the Bankruptcy Court for an order establishing a claims bar date setting
the last date for filing prepetition claims and administration claims (in each
case, other than claims in respect of trade obligations for services,
materials, or goods incurred or arising in the ordinary course of business, the
Bank Obligations, the Debt Obligations, or the Presidio Securities),
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including claims described in Section 510(b) of the Bankruptcy Code, which date
shall not be less than twenty (20) days prior to the Confirmation Date (the
"Bar Date Order").
(e) The parties acknowledge that Presidio West Virginia
currently has its Reorganization Case pending and that notwithstanding the
execution and delivery of this Agreement by Presidio West Virginia or any
provision contained herein to the contrary, this Agreement shall not be
effective as to Presidio West Virginia until such time as the Bankruptcy Court
shall have entered an order authorizing Presidio West Virginia to execute and
deliver this Agreement. After the date of this Agreement, Presidio shall cause
Presidio West Virginia to promptly seek entry of an order of the Bankruptcy
Court in Presidio West Virginia's Reorganization Case approving Presidio West
Virginia's execution and delivery of this Agreement.
4.6 Preparation of Disclosure Statement.
(a) Prior to the date of this Agreement, the parties
hereto have prepared the Disclosure Statement in a form necessary to
obtain lawful and enforceable acceptances or rejections of the Plan of
Reorganization from the appropriate impaired classes of creditors and
equity securityholders (the "Presidio Securityholders") and to
implement and to obtain a Final Order confirming the Plan of
Reorganization and to cause the issuance and distribution of the
Exchange Common Stock in accordance with the Plan of Reorganization to
be effected in compliance with all applicable provisions of the
Bankruptcy Code, the 1933 Act, the 1934 Act, and any other federal or
state law relating to the transactions contemplated by this Agreement.
(b) The solicitation of acceptances or rejections of the
Plan of Reorganization shall be conducted in accordance with the
requirements of Chapter 11 of the Bankruptcy Code (including Sections
1125 and 1145 thereof), the attendant bankruptcy rules of practice,
and those federal or state securities laws which are not preempted or
rendered moot by the applicability of the Bankruptcy Code and
attendant bankruptcy rules of practice.
(c) The parties heretofore have furnished and will
continue to furnish to each other such information with respect to
themselves, their respective associates and Affiliates and their
respective assets and businesses (including such separate financial
information of or relating to each party hereto) as shall be required
for the Disclosure Statement and all additional filings as required by
the Bankruptcy Code, the 1933 Act, the 1934 Act, state securities
laws, the rules and regulations under such laws, and the rules and
regulations of any applicable securities exchanges. All information
that may be hereafter included in the Disclosure Statement and such
additional filings, as applicable, relating to Tom Brown shall be
approved by Tom Brown and all information that may be hereafter
included in the Disclosure Statement and such additional filings, as
applicable, relating to the Presidio Parties shall be approved by
Presidio.
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4.7 Disclosure Statement.
(a) Presidio hereby covenants and agrees with Tom Brown
that the Disclosure Statement (at the time it is first mailed to the
Presidio Securityholders and at the Closing) will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein in light of the circumstances under which they are
made, not misleading (provided, however, that this clause shall only
apply to information contained in the Disclosure Statement that was
supplied by Presidio specifically for inclusion therein). If, at any
time prior to the Closing, any event with respect to Presidio, or with
respect to other information supplied by Presidio specifically for
inclusion in the Disclosure Statement occurs and such event is
required by the Bankruptcy Code to be described in an amendment or
supplement to the Disclosure Statement, then Presidio shall promptly
notify Tom Brown of such occurrence and the parties shall cooperate
with each other in the preparation and filing and obtaining Bankruptcy
Court approval of such amendment or supplement, and, after obtaining
Bankruptcy Court approval thereof, its dissemination.
(b) Tom Brown hereby covenants and agrees with Presidio
that the Disclosure Statement (at the time it is first mailed to the
Presidio Securityholders, and at the Closing) will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading (provided, however, that this clause shall only
apply to information contained in the Disclosure Statement that was
supplied by Tom Brown specifically for inclusion therein). If, at any
time prior to the Closing, any event with respect to Tom Brown, or
with respect to other information supplied by Tom Brown specifically
for inclusion in the Disclosure Statement occurs and such event is
required by the Bankruptcy Code to be described in an amendment or
supplement to the Disclosure Statement, then Tom Brown shall promptly
notify Presidio of such occurrence and the parties shall cooperate
with each other in the preparation and filing and obtaining Bankruptcy
Court approval of such amendment or supplement, and, after obtaining
Bankruptcy Court approval thereof, its dissemination.
(c) No amendment or supplement to the Disclosure
Statement will be filed or otherwise disseminated to the Presidio
Securityholders without the approval of both Tom Brown and Presidio.
4.8 Solicitation of Presidio Securityholders. Presidio will use
its good faith efforts to cause to be solicited from the Presidio
Securityholders their acceptance of the Plan of Reorganization, and except as
the board of directors of Presidio may otherwise determine appropriate in order
to properly discharge its fiduciary duties, Presidio will recommend acceptance
of the Plan of Reorganization to the Presidio Securityholders; provided,
however, that no solicitation of the Presidio Securityholders with respect to
the Plan of Reorganization shall be made until:
(a) The Bankruptcy Court has entered an order determining
and finding that (i) the Disclosure Statement complies with the
provisions of Section 1125 of the Bankruptcy
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Code, (ii) the solicitation of the Presidio Securityholders with
respect to their approval of the Plan of Reorganization may be made by
means of the Disclosure Statement pursuant to Section 1125 of the
Bankruptcy Code, and (iii) each of Tom Brown and Presidio will be
afforded the protection granted by Section 1125(e) of the Bankruptcy
Code with respect to such solicitation; and
(b) The written opinion of Presidio's investment bankers
or financial advisors referred to in Section 5.18 shall have been
reconfirmed and shall not have been withdrawn or revised in any
material respect.
4.9 Cooperation; Notification of Certain Changes. The parties
hereto will cooperate and use their reasonable efforts to (a) obtain (and will
prepare all registrations, filings, applications, requests, and notices
required to obtain) all permits, approvals, and consents of governmental bodies
or third parties which may be necessary to consummate the transactions
contemplated by this Agreement, including but not limited to all filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended from time to time (the "Hart Scott Act"), and the rules and regulations
promulgated thereunder and (b) to cure existing title defects. The parties
hereto will otherwise cooperate and provide each other with such assistance as
may reasonably be required to perform or satisfy all covenants and conditions
required to be performed or satisfied hereunder. Each party will promptly
notify the other parties hereto of any event of which they obtain knowledge
which has or might reasonably be expected to have a material adverse effect on
their respective businesses or which, if known on the date of this Agreement,
would have been required to be disclosed pursuant to this Agreement.
4.10 Listing Application. On or before the date of filing of the
Disclosure Statement, Tom Brown will file a listing application with NASDAQ for
the approval of the listing thereon of the Exchange Common Stock.
4.11 Third Party Consents. Promptly after the commencement of a
case under the Bankruptcy Code as contemplated herein, Presidio will use its
reasonable efforts to obtain each Third Party Consent, or if not otherwise
obtained, to file, or cause to be filed, all pleadings, requests, and other
items and information required to be filed with, the Bankruptcy Court (to the
extent applicable), seeking to obtain a Final Order or determination from the
Bankruptcy Court establishing that such Third Party Consent is not applicable
to or necessary in connection with the transactions contemplated by this
Agreement. As used in this Agreement, "Third Party Consent" means any
third-party consents relating to the Oil and Gas Assets that would be required
in respect of the transactions contemplated by this Agreement.
4.12 Agreements of Affiliates. At least thirty (30) days prior to
the Closing Date, Presidio shall cause to be prepared (and updated from time to
time as may be necessary) and delivered to Tom Brown a list identifying all
persons who, at that time, may be deemed to be "affiliates" of Presidio as that
term is used in paragraph (a) of Section 1145 of the Bankruptcy Code and
paragraphs (c) and (d) of Rule 145 under the 1933 Act. Presidio shall use its
reasonable efforts to cause each person who is identified as an affiliate of
Presidio in such list to execute and deliver to Tom Brown, on or prior to the
Closing Date, a written agreement, in the form attached hereto as Exhibit E.
Tom Brown
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shall be entitled to place legends as specified in such agreements on the
certificates representing any Exchange Common Stock to be distributed to such
persons in the Exchange.
4.13 Amendment to Plan. Without the prior consent of Tom Brown,
which shall not be unreasonably withheld, no Presidio Party shall amend the
terms and provisions of the Plan of Reorganization.
4.14 Costs and Expenses. Except as set forth in Section 9.2(b),
each party to this Agreement will be responsible for and will pay all costs,
fees, and expenses incurred by such party in connection with the preparation,
negotiation, and execution of this Agreement, the Plan of Reorganization, the
Disclosure Statement and all other documents and instruments contemplated
herein, including:
(a) all fees, costs, and expenses of its counsel,
engineers, accountants, financial advisors, and others engaged by such
party; and
(b) all fees, costs and expenses incurred by such party
in connection with filings made by it relating to the transactions
contemplated by this Agreement under the Hart Scott Act, the 1933 Act,
the 1934 Act, the Bankruptcy Code, or any other federal or state laws,
rules, and regulations.
4.15 New D&O Insurance.
(a) At the Closing, Tom Brown shall take all reasonable
actions necessary to acquire or to cause (which shall include the
payment of the required premium in the amount described in the policy
attached to the letter identified below to the extent not previously
paid) Presidio to acquire for the benefit of each of the Directors and
Officers the policy of directors and officers liability insurance in
the form attached to that certain letter of even date herewith from
Presidio to Tom Brown and identified therein as being provided
pursuant to this Section 4.15 (the "New D&O Insurance"). For the time
period commencing as of the Closing Date and ending as of the sixth
anniversary of the Closing Date, Tom Brown shall take all reasonable
actions required by the terms of the New D&O Insurance policy
necessary to keep in full force and effect the New D&O Insurance.
(b) From and after the Closing neither Tom Brown nor any
Presidio Party shall take any action to modify any provision contained
in the certificate of incorporation or bylaws of any Presidio Party or
any contract or agreement which exculpates, limits, or restricts the
liability of any of the Directors and Officers to any Presidio Party;
any Presidio Securityholder or any other person arising out of or
pertaining to acts or omissions, by such person in his capacity as a
director, officer, employee or agent of a Presidio Party.
(c) On or before the Closing, Presidio shall (i) use its
reasonable efforts to obtain waivers and releases effective as of the
Closing, in form and substance reasonably satisfactory to Tom Brown,
of all rights to indemnity which may exist in favor of any officers or
directors of any of the Presidio Parties (and from any other persons
who may be
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entitled to indemnity from any of the Presidio Parties) under the
respective charters, by-laws or agreements of any of the Presidio
Parties or under applicable law or (ii) obtain a Final Order of the
Bankruptcy Court which discharges all such obligations of indemnity.
(d) From and after the Closing, Tom Brown shall use its
best efforts or shall take all actions necessary to cause Presidio to
use its best efforts to give each Director and Officer notice (within
five (5) business days) of the assertion or threatened (in writing)
assertion of any claims, actions, suits, or proceedings that name or
threaten (in writing) to name any Director or Officer as a party or
which relates to acts or omissions by any such person in his capacity
as a director, officer, employee or agent of a Presidio Party.
(e) The provisions of this Section 4.15 are intended to
be for the benefit of, and shall be enforceable by, the parties hereto
and each of the Directors and Officers and their respective heirs and
representatives.
4.16 Information Kept Confidential. Except as otherwise
contemplated in this Agreement, Tom Brown shall hold in strict confidence all
aspects of the transactions contemplated by this Agreement and all information
and data concerning the Oil and Gas Assets which has been obtained from
Presidio in connection with the transactions contemplated by this Agreement in
accordance with the terms and provisions of the Confidentiality Agreement,
which Confidentiality Agreement is hereby ratified and adopted by the parties
hereto and incorporated by reference herein.
4.17 Pre-Closing Action. Presidio and Tom Brown shall use all
reasonable efforts to cause all of the conditions precedent to the consummation
of the transactions contemplated by this Agreement applicable to each of them
to be met as promptly as possible and to take all such other actions as may be
reasonably necessary to effect the consummation of the transactions
contemplated by this Agreement.
4.18 Public Announcements. Each party hereto shall consult with
the other party hereto prior to any public announcement by such party regarding
the existence of this Agreement, the contents hereof or the transactions
contemplated hereby; provided, however, the foregoing shall not restrict
disclosures by Tom Brown or Presidio made in order to comply with applicable
securities or other laws or made in order to comply with judicial decrees or
orders or existing loan or other agreements binding such party (or its
Affiliates), as determined in such party's discretion.
4.19 Conduct of Presidio's Business Pending Closing. Except as
otherwise contemplated by this Agreement, Presidio covenants and agrees with
Tom Brown that, from the date of this Agreement until the Closing, each
Presidio Party will conduct its business only in the ordinary and usual course
consistent with past practices. Notwithstanding the preceding sentence,
Presidio covenants and agrees with Tom Brown that, except as otherwise
contemplated in this Agreement or the Plan of Reorganization, from the date of
this Agreement until the Closing, without the prior written consent of Tom
Brown:
(a) No Presidio Party will engage in any type of business
in which it is not engaged as of the date of this Agreement;
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(b) No Presidio Party will (i) amend its certificate or
articles of incorporation or bylaws, (ii) split, combine, or
reclassify any of its outstanding capital stock or other securities or
make any other changes in its capital structure, (iii) except for
dividends or distributions made to another Presidio Party, declare,
set aside, or pay any dividends or other distributions (whether
payable in cash, property, or securities) with respect to its capital
stock, (iv) issue, sell, or agree to issue or sell any securities,
including its capital stock, any rights, options, or warrants to
acquire its capital stock, or securities convertible into or
exchangeable or exercisable for its capital stock (other than shares
of Presidio Common Stock issued pursuant to the exercise of any
Presidio Options or Warrants), (v) purchase, cancel, retire, redeem,
or otherwise acquire any of its outstanding capital stock or other
securities, (vi) merge or consolidate with, or transfer all or
substantially all of its assets to, another corporation or other
business entity, (vii) liquidate, wind-up, or dissolve (or suffer any
liquidation or dissolution), or (viii) enter into any contract,
agreement, commitment, or arrangement with respect to any of the
foregoing;
(c) Except as set forth in Schedule 4.19, no Presidio
Party will (i) acquire any corporation, partnership, or other business
entity or any interest therein (other than interests in joint
ventures, joint operation or ownership arrangements, or tax
partnerships acquired in the ordinary course of business), (ii) sell,
lease or sublease, transfer, or otherwise dispose of or mortgage,
pledge, or otherwise encumber or grant any rights or interests with
respect to any Oil and Gas Assets that, individually or in the
aggregate, were assigned a value in the Reserve Report of $100,000 or
more or any other assets that, individually or in the aggregate, have
a value at the time of such sale, lease, sublease, transfer, or
disposition of $100,000 or more (except that this clause shall not
apply to the sale of severed oil, gas and other minerals produced and
sold in the ordinary course of business or the expenditure of the
Presidio Parties' cash and cash items in the ordinary course of
business), (iii) farm-out any Oil and Gas Assets or interest therein,
(iv) sell, transfer, or otherwise dispose of or mortgage, pledge, or
otherwise encumber any securities of any other person, (v) enter into
any agreement requiring a payment or expenditure thereunder by a
Presidio Party in excess of $100,000 and not terminable by a Presidio
Party upon notice of thirty (30) days or less and without penalty or
other obligation, (vi) enter into any transaction (x) pursuant to
which a Presidio Party will make a payment or incur an expenditure in
excess of $100,000 or (y) not in the ordinary course of business and
not contemplated by this Agreement, (vii) agree with any person to
limit or otherwise restrict in any manner the ability of a Presidio
Party to compete or otherwise conduct its business, or (viii) enter
into any contract, agreement, commitment, or arrangement with respect
to any of the foregoing;
(d) No Presidio Party shall make any payments in respect
of the Debt Obligations; provided, however, that the Presidio Parties
may make interest payments accruing on the Subordinated Gas Indexed
Notes not to exceed $8,000 per quarter;
(e) No Presidio Party will (i) except for loans extended
by another Presidio Party, incur any additional indebtedness for
borrowed money or any other obligation or liability (other than
interest accruing on existing indebtedness and liabilities incurred in
the ordinary course of business and consistent with past practices),
(ii) assume, endorse (other than
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endorsements of negotiable instruments in the ordinary course of
business), guarantee, or otherwise become liable or responsible
(whether directly, contingently, or otherwise) for the liabilities or
obligations of any person not a Presidio Party, (iii) make any
material loans, advances or capital contributions to, or investments
in any person (other than loans or advances in the ordinary course of
business and consistent with past practices, advances for business
expenses made to officers and employees of such Presidio Party,
short-term investments made pursuant to customary cash management
systems of such Presidio Party in the ordinary course and consistent
with past practices and loans, advances, capital contributions to, or
investments in, another Presidio Party) or (iv) enter into any
contract, agreement, commitment, or arrangement with respect to any of
the foregoing;
(f) Each Presidio Party will operate, maintain, and
otherwise deal with the Oil and Gas Assets in accordance with good and
prudent oil and gas field practices (including the making of all
appropriate repairs, renewals, and replacements of equipment
associated therewith) and in material compliance with all applicable
oil and gas leases and other contracts or agreements and all
applicable laws, rules, and regulations;
(g) No Presidio Party will pay or incur drilling or other
capital expenditures in excess of $100,000 with respect to any well
(other than in accordance with the expenditures listed in Schedule
4.19 or, under emergency circumstances, expenditures necessary for the
preservation or protection of a Presidio Party's assets or the
preservation or protection of the public safety or health);
(h) No Presidio Party shall voluntarily resign, transfer
or otherwise relinquish any right it has as of the date of this
Agreement, as operator of any of the Oil and Gas Assets;
(i) No Presidio Party will (i) enter into, or otherwise
become liable or obligated under or pursuant to (x) any employee
benefit, pension, or other plan (whether or nor subject to ERISA), (y)
any stock option, stock purchase, incentive, or deferred compensation
plans or arrangements or fringe benefit plan, or (z) any consulting,
employment, severance, termination, or similar agreement with any
person, except for the Existing Plans, (ii) hire any key employee,
(iii) grant, or otherwise become liable for or obligated to pay, any
severance or termination payments, bonuses, or increases in
compensation or benefits to, or forgive any indebtedness of, any
director, officer, employee, or consultant (other than payments,
bonuses or increases in compensation or benefits or forgiveness of
indebtedness that are required by the terms of the Existing Plans as
in effect as of the date of this Agreement), or (iv) enter into any
contract, agreement, commitment, or arrangement to do any of the
foregoing;
(j) Presidio will keep and maintain accurate consolidated
books, records, and accounts in accordance with GAAP;
(k) Each Presidio Party, as appropriate, will (i) pay all
Taxes, assessments, and other governmental charges imposed upon any of
its assets or with respect to its franchises, business, income, or
assets before any penalty or interest accrues thereon, (ii) pay all
claims (including claims for labor, services, materials, and supplies)
that have become due and
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payable and which by law have or may become a Lien upon any of its
assets prior to the time when any penalty or fine shall be incurred
with respect thereto or any such Lien shall be imposed thereon, and
(iii) comply in all material respects with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental
Authority (provided, however, that a Presidio Party may contest the
imposition of any Taxes, assessments, and other governmental charges,
any such claim, or the requirements of any applicable law, rule,
regulation, or order if done so in good faith by appropriate
proceedings and if adequate reserves are established in accordance
with GAAP or as may be determined as sufficient by Presidio's board of
directors);
(l) Each Presidio Party will use its reasonable efforts
to maintain in full force and effect the policies or binders of
insurance currently maintained by it and shall promptly notify Tom
Brown if any are not so maintained;
(m) Each Presidio Party will use its reasonable efforts
to preserve intact its assets and business organization and to
preserve the goodwill of those having business relationships with it;
provided, however, that a Presidio Party shall not be required to make
any payments (other than as may be contractually committed and due) or
enter into or amend any contractual arrangements to satisfy the
foregoing obligation; and
(n) Each Presidio Party will at all times preserve and
keep in full force and effect its corporate existence and rights and
franchises material to its performance under this Agreement.
4.20 No Solicitation.
(a) From and after the date of this Agreement, no
Presidio Party will (and each Presidio Party will use its reasonable
efforts to cause the Presidio Representatives not to), directly or
indirectly, make, solicit, initiate, engage or participate in
discussions or negotiations with or provide information to, any person
(other than Tom Brown or any of its representatives) or enter into any
agreement or agreement in principle, or announce any intention to do
any of the foregoing, with respect to any offer or proposal to acquire
all or any part of the outstanding capital securities of any Presidio
Party or all or any material portion of the assets or business of a
Presidio Party, whether by merger, purchase of assets, tender offer,
exchange offer, business combination, sale of substantial assets, sale
of securities, liquidation, dissolution, or otherwise (an "Alternative
Transaction"), other than the transactions contemplated by this
Agreement.
(b) Promptly following the execution of this Agreement,
each Presidio Party will (and will cause the Presidio Representatives
to) terminate any existing activities, discussions, or negotiations
with third parties (other than Tom Brown) with respect to any possible
Alternative Transaction.
(c) Notwithstanding the provisions of Section 4.20(a) and
Section 4.20(b), (i) a Presidio Party and the Presidio Representatives
may furnish information to and negotiate and
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have discussions with any person who has made an unsolicited bona fide
proposal in regard to an Alternative Transaction if the board of
directors of Presidio determines, after consultation with its outside
legal counsel, that the failure to furnish such information to or
negotiate or have discussions with such person conflicts with the
proper discharge of their fiduciary duties and (ii) the board of
directors of Presidio shall not be prohibited from taking and publicly
disclosing a position with respect to an Alternative Transaction if
required to do so pursuant to Rule 14d-9 and Rule 14e-2 under the 1934
Act or from making such disclosure which, in the judgment of the board
of directors of Presidio, may be required under applicable law.
Presidio will promptly notify Tom Brown in the event of any
discussion, negotiation, proposal or offer of the type referred to
above or any decision to furnish information or take any other action
referred to in this Section 4.20(c).
4.21 Employees. Within sixty (60) days of the date of this
Agreement, Tom Brown shall provide Presidio with a list of the employees of the
Presidio Parties who as of that date, Tom Brown intends not to be employed
after the Closing by either Tom Brown, Presidio, or an Affiliate thereof,
together with the proposed date that each such employee's employment will be
terminated. From and after such date, Tom Brown shall use its reasonable
efforts to provide Presidio with one or more supplements to such list and, at
least thirty (30) days prior to the Closing, Tom Brown shall use its reasonable
efforts to provide Presidio with a final supplement to such list. The
provisions of this Section 4.21 are not intended to create and shall not be
construed as creating any right in favor of any such employee of the Presidio
Parties, including any continuing right of employment on the part of any
employee who is not named on such list or supplement thereto.
4.22 Severance Plan and Agreements. Tom Brown shall take all
actions necessary to cause (which, if necessary, shall include making
additional capital contributions to Presidio consisting of cash or shares of
Tom Brown Common Stock, as appropriate) Presidio to pay at the Closing to all
employees who are either named in the list or any supplement thereto to be
provided pursuant to Section 4.21 or whose employment is otherwise terminated
at Closing, all amounts which such employees would be due (at or within thirty
(30) days of the time of their termination of employment) under the Severance
Plan and Key Employee Severance Agreements set forth in Schedule 4.22,
including all amendments and modifications thereto (collectively, the
"Severance Plan and Agreements"). From and after the Closing, Tom Brown shall
take all actions necessary to cause (which, if necessary, shall include making
additional capital contributions to Presidio consisting of cash or shares of
Tom Brown Common Stock, as appropriate) Presidio to assume and make all other
payments, and to assume and provide all benefits, required to be paid or
provided to the employees and officers of the Presidio Parties in accordance
with the provisions of the Severance Plan and Agreements. Tom Brown hereby
acknowledges that the obligations under the Key Employee Severance Agreements
set forth in Schedule 4.22 include the obligation arising under Section 2
thereof to provide the rights and benefits described in Section 3 thereof to
any such employee whose employment is terminated at any time within two years
following the Closing Date. Tom Brown shall take all actions necessary to
cause Presidio to not amend or modify the terms and provisions of the Severance
Plan and Agreements without the prior consent of the beneficiaries or
beneficiary, as applicable, of such Severance Plan and Agreements. Tom Brown
shall take all actions necessary to cause (which, if necessary, shall include
making additional cash capital contributions to Presidio) Presidio to provide
insurance coverage for the time period required under
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the Severance Plan and Agreements, under one or more insurance plans providing
substantially comparable benefits to those provided under Presidio's current
insurance plans and at no employee cost, to all employees of Presidio who are
entitled to such benefits under the Severance Plan and Agreements. Nothing in
this Section 4.22 shall be construed to limit the right of any employee to any
benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
4.23 Presidio ESOP. Prior to the Closing, Presidio shall terminate
the Employee Stock Ownership Plan of Presidio Oil Company (the "ESOP"), cause
all current participants in the ESOP to become 100% vested in their accounts
under the ESOP, and file an application for a favorable determination letter
with the Internal Revenue Service that the termination of the ESOP does not
adversely affect the qualification of the ESOP. At the Closing, Presidio shall
cause the ESOP accounts (then consisting of Exchange Common Stock) to be
distributed to the participants and beneficiaries pursuant to the terms of the
ESOP.
4.24 Presidio 401K. Subsequent to the Closing, Tom Brown may cause
Presidio to terminate the Presidio Oil Company 401k Plan (the "401k Plan") or
merge the 401k Plan into another qualified plan of Tom Brown. From and after
the Closing, Tom Brown shall take all actions necessary to cause Presidio to
cause each employee of a Presidio Party who is not employed by Tom Brown or an
Affiliate thereof after the Closing or any such employee who is employed by Tom
Brown or an Affiliate thereof after the Closing but whose employment is
subsequently terminated to receive a distribution of all benefits under the
401k Plan of such person as soon after such termination of employment as is
administratively possible.
4.25 Other Plans. Except to the extent already provided in Section
4.22, at the Closing, Tom Brown shall take all actions necessary to cause
(which, if necessary, shall include making additional cash contributions to
Presidio) Presidio to pay at the Closing to the employees and officers of the
Presidio Parties all amounts which such employees and officers would be due (at
or within thirty (30) days of the time of their termination of employment) in
accordance with the provisions of the Employee Benefit Plans. Except to the
extent already provided in Sections 4.22, 4.23 and 4.24, from and after the
Closing, Tom Brown shall take all actions necessary to cause (which, if
necessary, shall include making additional cash capital contributions to
Presidio) Presidio to assume and make all vested payments, and provide all
benefits, required to be paid or provided to the employees and officers of the
Presidio Parties in accordance with the provisions of the Employee Benefit
Plans.
4.26 Letters of Credit. At the Closing, Tom Brown shall or shall
cause Presidio to have issued by a commercial bank or banks a substitute letter
of credit for each of the letters of credit set forth in Schedule 4.26 in form
and substance acceptable to each of the beneficiaries of each such letter of
credit.
4.27 Certain Tom Brown Transactions. Except as otherwise
contemplated by this Agreement, Tom Brown covenants and agrees with Presidio
that, from the date of this Agreement until the Closing, Tom Brown and its
Affiliates who are controlled by it will, taken as a whole, remain primarily
engaged in the businesses relating to the exploration and production of oil,
gas and other minerals and the treatment, processing, storage, transportation
and marketing of oil, gas and
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other minerals. Prior to the Exchange and until the Closing or termination of
this Agreement, Tom Brown shall not and it shall not allow any Affiliate
thereof to directly or indirectly sell, transfer, or otherwise dispose of
(except to an Affiliate) any Presidio Securities beneficially owned as of the
date of this Agreement by Tom Brown or any Affiliate thereof or any Presidio
Securities hereafter acquired by Tom Brown or any Affiliate thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PRESIDIO
5.1 Disclaimers.
(a) Prior to the execution of this Agreement, Tom Brown
has been afforded the opportunity to inspect the Oil and Gas Assets
and to examine the records of Presidio at Presidio's offices with
respect to the Oil and Gas Assets, and has been afforded access to all
information in Presidio's possession with respect to the Oil and Gas
Assets. TOM BROWN ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
THIS ARTICLE V, PRESIDIO, ITS OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS HAVE MADE NO, AND PRESIDIO HEREBY EXPRESSLY
DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION, AS TO A PRESIDIO PARTY'S TITLE TO
THE OIL AND GAS ASSETS, OR AS TO ANY OTHER INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED TO TOM BROWN BY OR ON BEHALF OF
PRESIDIO (INCLUDING THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER
MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY
SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCTION PRICING
ASSUMPTIONS, PRESENT OR PAST PRODUCTION RATES, COMPLIANCE WITH LEASE
TERMS, THE CONDITION OF ANY WELL, AND THE ABILITY TO SELL OIL OR GAS
PRODUCTION AFTER CLOSING).
(b) PRESIDIO EXPRESSLY DISCLAIMS ANY WARRANTY AS TO THE
CONDITION OF ANY PERSONAL PROPERTY, FIXTURES AND ITEMS OF MOVABLE
PROPERTY COMPRISING ANY PART OF THE OIL AND GAS ASSETS INCLUDING (i)
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED
OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (iv) ANY RIGHTS OF TOM BROWN UNDER APPLICABLE STATUTES TO
CLAIM DIMINUTION OF CONSIDERATION, AND (v) ANY CLAIM BY TOM BROWN FOR
DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING
EXPRESSLY UNDERSTOOD BY TOM BROWN THAT THE PERSONAL PROPERTY, FIXTURES
AND ITEMS ARE TO BE ACCEPTED AS IS, WHERE IS, WITH ALL FAULTS, AND IN
THEIR PRESENT CONDITION AND STATE OF REPAIR AND THAT TOM BROWN HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS TOM BROWN DEEMS
APPROPRIATE.
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(c) NOTWITHSTANDING ANY PROVISIONS CONTAINED HEREIN TO
THE CONTRARY, NO REPRESENTATION AND WARRANTY CONTAINED IN THIS ARTICLE
V MAY BE BREACHED BY REASON OF ANY PERMITTED CLAIM.
(d) All information and data set forth in each of the
separately numbered Schedules hereto shall be deemed by this reference
to be set forth in all such other Schedules delivered pursuant to this
Agreement; provided, that the information and data set forth in
Schedule 5.25 shall not be deemed pursuant to this Section 5.1(d) to
be set forth in Schedule 5.12. Except as otherwise provided in this
Section 5.1(d), it is the intent of the parties that once particular
information and data is disclosed in a Schedule hereto, that the same
information and data need not be contained in another Schedule hereto.
(e) Subject to this Section 5.1, and the information and
data disclosed on any Schedule hereto, Presidio hereby makes the
representations and warranties contained in the remaining Sections of
this Article V.
5.2 Existence. Each of Presidio Exploration and Palisade Oil is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado and each of Presidio and Presidio West Virginia
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Each Presidio Party is duly qualified to do
business as a foreign corporation in the state(s) where the character of the
properties owned or leased by such Presidio Party or the nature of its
activities make such qualification necessary. Each of the Presidio Parties has
full corporate power and authority to own its properties and assets and to
carry on its business as now being conducted.
5.3 Authorization and Enforceability. Each Presidio Party has the
corporate power and authority to enter into and, subject to the requisite
approval of the Bankruptcy Court and the Presidio Securityholders and the
issuance of the Confirmation Order, perform this Agreement and the transactions
contemplated by this Agreement. The execution, delivery, and performance of
this Agreement, and the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of each
Presidio Party except for the requisite approval of the Presidio
Securityholders. This Agreement constitutes the valid and binding obligation
of Presidio enforceable in accordance with its terms.
5.4 No Violations. Subject to the requisite approval of the
Presidio Securityholders and the issuance of the Confirmation Order, the
execution, delivery and performance of this Agreement by each Presidio Party
and the consummation of the transactions contemplated by this Agreement, will
not (a) violate, conflict with or result in a breach of any provision of the
certificates of incorporation or bylaws of any Presidio Party, (b) violate,
conflict with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation of any Lien upon any of
the assets of any Presidio Party under, any contract, agreement, note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, plan,
instrument or other document ("Contract") binding on any Presidio Party, (c)
violate any judgment, injunction, order, ruling, or decree applicable to any
Presidio Party
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as a party in interest, or the assets of any Presidio Party, or (d) violate any
law, rule, or regulation applicable to any Presidio Party or relating to its
assets.
5.5 Claims and Litigation. Except for the claims, actions, suits,
or proceedings expressly set forth in the Presidio SEC Documents or in Schedule
5.5, there are no claims, actions, suits, or proceedings pending (including
claims described in Section 510(b) of the Bankruptcy Code and new claims
asserted or new actions arising after the date of this Agreement that form a
part of suits or proceedings set forth in Schedule 5.5), or to the Knowledge of
Presidio, threatened against a Presidio Party.
5.6 Consents and Approvals. No consent, approval, order, or
authorization of, registration, declaration, or filing with, or permit (other
than filings required under the 1933 Act, the 1934 Act, the Hart Scott Act and
filings required by and the approval of the Bankruptcy Court) from any
Governmental Authority is required by or with respect to the Presidio Parties
in connection with the execution and delivery of this Agreement by the Presidio
Parties or the consummation by the Presidio Parties of the transactions
contemplated hereby, except for the approval of the Presidio Securityholders
and those otherwise expressly contemplated herein.
5.7 Presidio SEC Documents. Presidio has made available to Tom
Brown a true and complete copy of the Presidio SEC Documents, which are all the
documents (other than preliminary material) that Presidio was required to file
with the SEC since January 1, 1995. As of their respective dates, the Presidio
SEC Documents complied in all material respects with the requirements of the
1933 Act or the 1934 Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Presidio SEC Documents, and
none of the Presidio SEC Documents contained 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.
5.8 Taxes.
(a) Each Presidio Party and any affiliated, combined, or
unitary group of which any such corporation is or was a member
("Presidio Tax Affiliates") has timely filed all Tax Returns that are
required to be filed by it. All such Tax Returns were correct and
complete in all material respects.
(b) Each Presidio Party and each Presidio Tax Affiliate
has timely paid all Taxes that are due and payable (except for Taxes
that are being contested in good faith by appropriate proceedings as
of the date of this Agreement and for which reserves, which are
adequate under GAAP, have been established in the Presidio Financial
Statements).
(c) Each Presidio Party and each Presidio Tax Affiliate
has complied in all material respects with all applicable laws, rules,
and regulations relating to the withholding and payment of Taxes and
has in all material respects timely withheld and paid to the proper
governmental authorities all amounts required to have been withheld
and paid in connection
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with amounts paid or owing to any employee, independent contractor,
creditor, or stockholder.
(d) Except as set forth in Schedule 5.8, (i) no audits or
other administrative or court proceedings are currently pending
against a Presidio Party with regard to any Taxes for which a Presidio
Party could be liable, (ii) no dispute or claim concerning any Taxes
for which a Presidio Party could be liable either (A) has been claimed
or raised by any taxing authority in writing or (B) is known by the
directors and officers (and employees responsible for Tax matters) of
a Presidio Party, (iii) with respect to each Presidio Party, there are
no pending requests for rulings from any taxing authority with respect
to any Taxes, (iv) with respect to each Presidio Party, there are no
proposed reassessments by any taxing authority of any of the assets of
a Presidio Party, (v) with respect to each Presidio Party, there are
no agreements in effect to extend the time to file any material Tax
Return or to extend or waive the period of limitations for the
assessment or collection of any Taxes for which a Presidio Party may
be liable, and (vi) to the Knowledge of each Presidio Party, no claim
has been made by any taxing authority in a jurisdiction where a
Presidio Party does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
(e) Except as set forth in Schedule 5.8, none of the
Presidio Parties has made any payments, is obligated to make any
payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(f) Each of the Presidio Parties has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(g) No Presidio Party (i) is a party to any Tax
allocation or sharing agreement with any member of an Affiliated Group
filing a consolidated federal income Tax Return with such Presidio
Party, (ii) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return other than the group of which
Presidio is the parent or (iii) has liability for the federal income
taxes of any Person under Treas. Reg. Section 1.1502-6, as a
transferee or successor, by contract, or otherwise.
(h) Prior to the Closing, no material election with
respect to future Taxes will be made after the date of this Agreement
without the written consent of Tom Brown.
(i) The Presidio Parties have not filed a consent
pursuant to the collapsible corporation provisions of Section 341(f)
of the Code (or any corresponding provisions of state, local, or
foreign income tax law) or agreed to have Section 341(f)(2) of the
Code (or any corresponding provision of state, local, or foreign
income tax law) apply to any disposition of any asset owned by it.
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(j) None of the Major Assets is property that the
Presidio Parties are required to treat as being owned by any other
person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(k) None of the Major Assets directly or indirectly
secures any debt the interest on which is tax- exempt under Section
103(a) of the Code.
(l) None of the Major Assets is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(m) No Presidio Party has agreed to make nor to the
Knowledge of any of the Presidio Parties is it required to make any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(n) The Presidio Parties have not participated in and
will not participate in any international boycott within the meaning
of Section 999 of the Code.
(o) The Presidio Parties are not and have not been a
United States real property holding corporation as defined in Section
897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(p) The Presidio Parties do not have and have not had a
permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such
foreign country.
(q) The Presidio Parties have not made or will not make a
consent dividend election under Section 565 of the Code.
5.9 Employee Benefit Plans.
(a) Notwithstanding any other provision of this Agreement
to the contrary, this Section 5.9 contains the exclusive
representations and warranties of Presidio with respect to matters
governed by ERISA. Except for the Severance Plan and Agreements,
Schedule 5.9 sets forth a complete and accurate list of all "employee
benefit plans," as defined in Section 3(3) of ERISA, and any other
material employee compensation or benefit arrangement, including
severance pay, sick leave, vacation pay, salary continuation for
disability, consulting, or other compensation agreements, retirement,
supplemental executive retirement agreements, deferred compensation,
bonus, long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, dental insurance, life insurance,
and educational assistance programs maintained by a Presidio Party or
to which a Presidio Party is obligated to contribute, or with respect
to which any Presidio Party has any liability, and each employment
related agreement under which a Presidio Party is obligated (the
"Employee Benefit Plans"). Except for the Employee Benefit Plans and
the Severance Plan and Agreements, no Presidio Party maintains or has
any obligation under any other compensation
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based or related arrangement. Copies of each Employee Benefit Plan
have been furnished to Tom Brown.
(b) There is no material violation of ERISA with respect
to any of the Employee Benefit Plans.
(c) The Employee Benefit Plans have been maintained, in
all material respects, in accordance with their terms and with all
applicable federal and state law, each Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code is so qualified, and
no Presidio Party nor any "party in interest" or "disqualified person"
with respect to the Employee Benefit Plans has engaged in any
"prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA for which there is no exemption.
(d) No Employee Benefit Plan is subject to Title IV of
ERISA and no Presidio Party has any obligation, including any
contingent liability, to contribute to a "multiemployer plan" within
the meaning of Section 3(37) of ERISA.
(e) Except as set forth in Schedule 5.9, no Presidio
Party has any liability under any group health plan with respect to
any current or former employees beyond their termination of
employment, other than as required by Section 4980B of the Code or
pursuant to the Severance Plan and Agreements.
5.10 Financial Statements. The Presidio Financial Statements were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of 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 or which will be material) the consolidated financial
position of Presidio and its consolidated subsidiaries as of their respective
dates and the consolidated results of operations and the consolidated cash
flows of Presidio and its consolidated subsidiaries for the periods presented
therein.
5.11 Capital Structure.
(a) As of the date of this Agreement, the authorized
capital stock of each Presidio Party is as set forth in Schedule 5.11.
(b) As of the close of business on June 30, 1996, there
were issued and outstanding (i) 25,318,085 shares of Presidio Class A
Common Stock and 3,216,585 shares of Presidio Class B Common Stock and
(ii) options and warrants relating to 1,268,000 shares of Presidio
Class A Common Stock and 1,025,981 shares of Presidio Class B Common
Stock as set forth in Schedule 5.11 (the "Presidio Options or
Warrants"). Except as set forth in this Section 5.11(b) or as
otherwise disclosed in the Presidio SEC Documents, there are
outstanding as of the date of this Agreement (i) no shares of capital
stock or other equity securities of Presidio, (ii) no securities of
Presidio or any other person convertible into or exchangeable or
exercisable for shares of capital stock or other equity securities of
Presidio,
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and (iii) no subscriptions, options, warrants, calls, rights
(including preemptive rights), commitments, understandings, or
agreements to which Presidio is a party or by which it is bound
obligating Presidio to issue, deliver, sell, purchase, redeem, or
acquire shares of capital stock or other equity securities of Presidio
(or securities convertible into or exchangeable or exercisable for
shares of capital stock or other equity securities of Presidio) or
obligating Presidio to grant, extend, or enter into any such
subscription, option, warrant, call, right, commitment, understanding,
or agreement.
(c) All outstanding shares of Presidio Common Stock are
validly issued, fully paid, and nonassessable and not subject to any
preemptive right.
(d) Presidio directly or indirectly owns all outstanding
shares of capital stock and other equity securities of each of the
other Presidio Parties, free and clear of all liens, claims, and
options of any nature (except for Permitted Encumbrances set forth in
clause (m) of the definition thereof). Except as set forth in
Schedule 5.11, there are outstanding as of the date of this Agreement
(i) no securities of a Presidio Party, or any other person convertible
into or exchangeable or exercisable for shares of capital stock or
other equity securities of a Presidio Party and (ii) no subscriptions,
options, warrants, calls, rights (including preemptive rights),
commitments, understandings, or agreements to which either a Presidio
Party is a party or by which it is bound obligating a Presidio Party
to issue, deliver, sell, purchase, redeem, or acquire shares of
capital stock or other equity securities of a Presidio Party or
securities convertible into or exchangeable or exercisable for shares
of capital stock or other equity securities of a Presidio Party or
obligating a Presidio Party to grant, extend, or enter into any such
subscription, option, warrant, call, right, commitment, understanding,
or agreement.
5.12 No Undisclosed Liabilities. No Presidio Party has any direct
or indirect liabilities, indebtedness, obligations, expenses, claims (including
claims as defined in Section 101(5) of the Bankruptcy Code, and disputed
claims, obligations or liens as defined in Section 101(37) of the Bankruptcy
Code), deficiencies, guarantees or endorsements of or by any person (other than
endorsements of notes, bills and checks presented to banks for collection or
deposit in the ordinary course of business) of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable, or otherwise
("Liabilities"), other than (a) Liabilities reflected in the Presidio Financial
Statements in accordance with GAAP or disclosed in the Presidio SEC Documents,
(b) Liabilities incurred in the ordinary course of business subsequent to
December 31, 1995, (c) Liabilities arising under or otherwise disclosed in this
Agreement (except for disclosures made pursuant to Section 5.25), (d)
Liabilities set forth in Schedule 5.12, (e) Liabilities that have been
reimbursed or paid under insurance coverage maintained by the Presidio Parties
or any other person or as to which an insurance company or other insuring
entity has acknowledged its obligation to reimburse or pay such Liabilities,
and (f) Liabilities arising from any agreement, fact, event, or action that is
the subject matter of any other representation and warranty contained in this
Article V (other than Section 5.25).
5.13 Absence of Certain Changes or Events. Except as otherwise set
forth in either Schedule 5.13, or the Presidio SEC Documents, or as
contemplated by this Agreement, since
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December 31, 1995, the Presidio Parties have used all reasonable efforts to
preserve and retain the business, employees, properties, suppliers, and
goodwill of the Presidio Parties and have operated their respective operations
and conducted business generally only in the ordinary and usual course
consistent with past practice, and no Presidio Party has done any of the
following:
(a) Discharged or satisfied any Lien or paid any
obligation or liability, absolute or contingent, other than current
liabilities incurred and paid in the ordinary course of business and
consistent with past practices;
(b) Except for transactions between the Presidio Parties,
paid or declared any dividends or distributions, purchased, redeemed,
acquired, or retired any indebtedness, stock, or other securities from
its stockholders or other securityholders, made any loans or advances
or guaranteed any loans or advances to any person, or otherwise
incurred any liabilities (other than current liabilities incurred in
the ordinary course of business and consistent with past practices);
(c) Except for Permitted Encumbrances and Permitted
Claims, suffered or permitted any Lien to arise or be granted or
created against or upon any of its assets;
(d) Cancelled, waived, or released any rights or claims
against, or indebtedness owed by, third parties;
(e) Amended its certificate or articles of incorporation
or by-laws;
(f) Made or permitted any amendment, supplement,
modification, or termination of any material agreement;
(g) Paid or made any agreement to pay any bonuses,
severance or termination payment to any employee or consultant;
(h) (i) Sold, leased or subleased, transferred, or
otherwise disposed of or mortgaged, pledged, or otherwise encumbered
or granted any rights or interests with respect to any Oil and Gas
Assets that, individually or in the aggregate, were assigned a value
in the Reserve Report of $100,000 or more or any other assets that,
individually or in the aggregate, have a value at the time of such
sale, lease, sublease, transfer, or disposition of $100,000 or more
(except that this clause shall not apply to the sale of severed oil,
gas and other minerals produced and sold in the ordinary course of
business or the expenditure of the Presidio Parties' cash and cash
items in the ordinary course of business), (ii) farmed-out any Oil and
Gas Assets or interest therein, (iii) sold, transferred, or otherwise
disposed of or mortgaged, pledged, or otherwise encumbered any
securities of any other person, (iv) made any material loans,
advances, or capital contributions to, or investments in, any person
(other than loans or advances in the ordinary course of business and
consistent with past practices or loans, advances or capital
contributions to, or investments in, another Presidio Party), (v)
entered into any agreement requiring a payment or expenditure
thereunder by a Presidio Party in excess of $100,000 and not
terminable upon notice of thirty (30) days or less and without
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penalty or other obligation (other than agreements entered into in the
ordinary course of business and consistent with past practices), (vi)
entered into any transaction (x) pursuant to which a Presidio Party
will make a payment or incur an expenditure in excess of $100,000 or
(y) which is not in the ordinary course of business and not
contemplated by this Agreement, (vii) other than areas of mutual
interest commonly set forth in operating agreements, agreed with any
person to limit or otherwise restrict in any manner the ability of a
Presidio Party to compete or otherwise conduct its business, or (viii)
entered into any contract, agreement, commitment, or arrangement with
respect to any of the foregoing;
(i) Made any investment in or contribution, payment, or
advance to any person (other than investments, contributions,
payments, or advances made in the ordinary course of business and
consistent with past practices);
(j) (i) entered into or amended any material employment,
compensation or severance agreements, (ii) changed or established any
new bonuses, (iii) increased the level of compensation or benefits,
including under any Employee Benefit Plans, of any officer, director,
or other executive personnel or any consultant, (iv) established,
entered into or amended in any material respect any pension, employee
benefit or health plans or any other plans, policies, programs,
practices, or arrangements relating to employee benefits or
compensation other than to maintain compliance with any applicable law
or regulation or (v) paid any bonuses to any officer, director, or
other executive personnel or any consultant; provided, however,
Presidio shall terminate its Employee Stock Ownership Plan as provided
in Section 4.23; or
(k) Made any change in any of the accounting principles
followed by it or the method of applying such principles other than in
accordance with GAAP.
5.14 Governmental Regulation. No Presidio Party is subject to
regulation under the Public Utility Holding Company Act of 1935 or the
Investment Company Act of 1940.
5.15 Labor Matters.
(a) No employees of a Presidio Party are represented by
any labor organization. To the Knowledge of Presidio, there are no
organizing activities involving a Presidio Party pending with any
labor organization or group of employees of a Presidio Party.
(b) Except as set forth in Schedule 5.15, each Presidio
Party is in material compliance with all laws, rules, regulations, and
orders relating to the employment of labor, including all such laws,
rules, regulations, and orders relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation, and the collection and payment of withholding or Social
Security Taxes and similar Taxes.
5.16 Accounts Receivable. Except as otherwise set forth in
Schedule 5.16, all of the accounts, notes, and loans receivable that have been
recorded on the Presidio Financial Statements are bona fide and represent
accounts, notes, and loans receivable validly due for goods sold or
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services rendered and are reasonably expected to be collected in full within
ninety (90) days after the applicable invoice or note maturity date (other than
to the extent of the allowance or reserve for uncollectible accounts, notes,
and loan receivables contained in the Presidio Financial Statements). Except
for Permitted Encumbrances set forth in clause (m) of the definition thereof,
all of such accounts, notes, and loans receivable are free and clear of any and
all Liens. None of the obligors on such accounts, notes, or loans receivable
has given notice to a Presidio Party that it will or may refuse to pay the full
amount or any portion thereof.
5.17 Intangible Property. There are no material trademarks, trade
names, patents, service marks, brand marks, brand names, computer programs,
databases, industrial designs, copyrights, or other intangible property that
are necessary for the operation, or continued operation, of the business of a
Presidio Party or the ownership and operation, or continued ownership and
operation, of any of their assets, for which such Presidio Party does not hold
valid and continuing authority and consent in connection with the use thereof.
5.18 Presidio's Title. The Presidio Parties have Defensible Title
to the Major Assets.
5.19 Reserve Report. The historical production and operating cost
data in respect of the Wells provided in the lease operating statements and
historical oil and gas price information provided in the data room were true
and correct in all material respects. To the Knowledge of Presidio, the
Reserve Report was prepared in accordance with generally accepted engineering
and evaluation principles and is true and correct as of such date in all
respects to the extent applicable to the business of the Presidio Parties.
Except as set forth in Schedule 5.19, to the Knowledge of Presidio, no fact or
circumstance has occurred since the date of the Reserve Report that results in
any material adverse change, determined in the aggregate and after
consideration of all favorable changes, in the reserves of Presidio as set
forth in the Reserve Report, other than changes attributable to normal
depletion by subsequent production, general economic conditions in the oil and
gas industry or subsequent drilling, reworking or recompletion activities.
Except as set forth in Schedule 5.19, in all respects, the net revenue
interests and the working interests of the Presidio Parties shown on Exhibit B
hereto are the same net revenue interests and working interests used in the
preparation of the Reserve Report, and the information contained in Exhibit B
regarding payout and similar events that cause adjustments to said net revenue
interests and working interests is the information used in the preparation of
the Reserve Report. OTHER THAN AS EXPRESSLY SET FORTH ABOVE IN THIS SECTION
5.19, PRESIDIO MAKES NO WARRANTY AND HEREBY DISCLAIMS ANY WARRANTY THAT THE
RESERVE ESTIMATES, CASH FLOW ESTIMATES, PRICE ESTIMATES, OR PRODUCTION OR FLOW
RATE ESTIMATES CONTAINED IN THE RESERVE REPORT OR IN ANY SUPPLEMENT THERETO OR
UPDATE THEREOF ARE IN ANY WAY COMPLETE, ACCURATE OR NOT MISLEADING, THE SAME
BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE INHERENTLY SUBJECT TO
INCOMPLETENESS AND INACCURACY.
5.20 Oil and Gas Operations. Except as otherwise set forth in
Schedule 5.20:
(a) None of the Wells has been overproduced such that it
is subject or liable to being shut-in or to any other overproduction
penalty;
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(b) There have been no changes proposed in the production
allowables for any Wells;
(c) All Wells have been drilled and (if completed)
completed, operated, and produced in accordance with good oil and gas
field practices and in compliance in all material respects with
applicable oil and gas leases and applicable laws, rules, and
regulations except where permit applications or requests for
exceptions are pending;
(d) Proceeds from the sale of oil, gas and other minerals
produced from the Oil and Gas Assets are being received by the
applicable Presidio Party in a timely manner and are not being held in
suspense for any reason, except for (i) amounts held in suspense as of
the date of this Agreement that individually or in the aggregate are
not in excess of $100,000, (ii) amounts held in suspense in the
ordinary course of business after the date of this Agreement, and
(iii) amounts held in suspense after the date of this Agreement
because of the occurrence of a Bankruptcy Event or because of concerns
regarding the financial condition of a Presidio Party;
(e) Except as may be required under any "non-consent"
penalty, none of the Leases or Wells is subject to any production
payment or prepayment arrangement arising under any contract for the
purchase or sale of oil, gas or other minerals to deliver, or to
suffer the delivery of, any oil, gas or other minerals at some future
time without then or thereafter receiving full payment therefor;
(f) No person has any call upon, option to purchase or
similar right to obtain oil, gas or other hydrocarbons production from
the Oil and Gas Assets other than rights contained in existing
production sales contracts, call contracts, farmouts, assignments or
similar contracts;
(g) None of the Presidio Parties are obligated to deliver
a material quantity of gas to any pipeline or other party as make-up
for any net under-deliveries of gas from the Oil and Gas Assets for
transportation, nor is any Presidio Party liable for any material
scheduling or imbalance penalties or charges imposed by any pipeline
or other party for transportation of gas produced from any of the Oil
and Gas Assets;
(h) Subject to Permitted Encumbrances, each of the
Presidio Parties has the necessary easements and rights-of-way to
install, maintain, and operate the gathering systems that are owned by
such Presidio Party as of the date of this Agreement;
(i) As of June 30, 1996, none of the Presidio Parties is
obligated to deliver any quantity of gas or make any payment by virtue
of any common law, statutory or contractual balancing arrangement with
respect to the Oil and Gas Assets; and
(j) Except for monies properly held in suspense, paid
into escrow, or paid to a Governmental Authority in accordance with
applicable laws, all royalties, shut-in royalties and similar payments
payable in connection with the Oil and Gas Assets have been timely
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paid and in the correct amount. All delay rental payments payable in
connection with the Leases have been timely paid and in the correct
amount, except to the extent that a Presidio Party has determined, in
the ordinary course of business, not to make such payment.
5.21 Environmental Matters. Notwithstanding any other provision of
this Agreement to the contrary, this Section 5.21 contains the exclusive
representations and warranties of Presidio with respect to "Environmental
Matters." Except as set forth in Schedule 5.21:
(a) Each Presidio Party has conducted its business and
operated its assets, and is conducting its business and operating its
assets, in material compliance with all applicable Environmental Laws;
(b) To the Knowledge of Presidio, no Presidio Party and
none of the operations or assets of any Presidio Party are the subject
of any pending investigation or inquiry by any governmental authority
evaluating whether any material Environmental Response Action is
needed to respond to a release of any Environmental Material or to the
improper storage, generation, transportation, treatment, or disposal
of any Environmental Material;
(c) No Presidio Party has filed any notice under federal,
state, or local law indicating that a Presidio Party is responsible
for the improper release into the environment or the improper storage,
generation, transportation, treatment, or disposal of any
Environmental Material;
(d) No Presidio Party has received any claim, complaint,
notice, inquiry, or request for information, which remains unresolved,
with respect to any alleged violation of any applicable Environmental
Law or regarding potential liability under any applicable
Environmental Law or under any common law theories relating to
operations or conditions of any facilities or property owned, leased,
or operated by a Presidio Party;
(e) To the Knowledge of Presidio, no property now or
previously owned, leased, or operated by a Presidio Party is listed on
the National Priorities List pursuant to CERCLA or on the CERCLIS or
on any other similar federal or state list as a site requiring an
Environmental Response Action;
(f) To the Knowledge of Presidio, there are no sites,
locations, or operations at which a Presidio Party is now required to
undertake any material Environmental Response Action under any
applicable Environmental Law;
(g) To the Knowledge of Presidio, all underground and
aboveground storage tanks and solid waste disposal facilities owned or
operated by a Presidio Party are used and operated in material
compliance with applicable Environmental Laws;
(h) To the Knowledge of Presidio, there are no existing
financial assurances given by any Presidio Party under any
Environmental Law that would require monetary funding by a Presidio
Party after the date of Closing; and
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(i) To the Knowledge of Presidio, there are no claims,
complaints, notices, inquiries, requests for information, or
Environmental Response Actions for which the Presidio Parties may be
responsible that relate to properties, assets, or entities previously
owned by the Presidio Parties.
5.22 Brokers. Except as set forth in Schedule 5.22, no broker,
finder, investment banker, or other similar person is or will be, in connection
with the transactions contemplated by this Agreement, entitled to any
brokerage, finder's, or other similar fee or compensation based on any
arrangement or agreement made by or on behalf of a Presidio Party.
5.23 Compliance with Law; Governmental Authorizations. Except as
set forth in Schedule 5.23, the Presidio Parties are not in violation of any
order, injunction, judgment, ruling, law, or regulation of any Governmental
Authority applicable to the property or business of the Presidio Parties. The
licenses, permits, and other governmental authorizations held by the Presidio
Parties are valid and sufficient for the conduct of the Presidio Parties'
businesses as currently conducted.
5.24 Insurance. Schedule 5.24 lists all material insurance
policies covering the Oil and Gas Assets, employees and operations of the
Presidio Parties as of the date of this Agreement. Such policies are in full
force and effect and except for the bankruptcy proceeding contemplated herein,
to the Knowledge of Presidio, as of the date of this Agreement, there does not
exist any event that, with the giving of notice or the lapse of time, or both,
would constitute a default by a Presidio Party under any such policies.
5.25 Contracts, Agreements, Commitments and Other Matters.
(a) Schedule 5.25 is a true, correct, and complete list
of all of the following described items (whether written or oral),
including all amendments thereto, existing as of the date of this
Agreement to which any Presidio Party is a party ("Material
Contracts"):
(i) any note, agreement, mortgage, indenture,
security agreement, and other instruments relating to the
borrowing of money or evidence of credit for the deferred
purchase price of property, or the direct or indirect
guarantee by a Presidio Party of any such indebtedness or
deferred purchase price in excess of $50,000, in each case
other than the Bank Obligations and the Debt Obligations;
(ii) any lease of real property and material
personal property providing for annual payments by a Presidio
Party under any such lease or group of related leases in
excess of $25,000, other than the Oil and Gas Assets;
(iii) any partnership agreement requiring a
Presidio Party to make capital contributions or expenditures
at an annual rate in excess of $100,000;
(iv) any management, employment, and consulting
agreement or other contract for personal services that is not
terminable on not more than one month's notice without
penalty, in each case other than the Severance Plan and
Agreements;
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(v) any agreement providing for severance pay,
collective bargaining agreements, labor contracts, or labor or
personnel policies, in each case other than the Employee
Benefit Plans and the Severance Plan and Agreements;
(vi) any surety, performance and maintenance bond
in excess of $50,000;
(vii) any agreement or commitment requiring a
Presidio Party to make capital expenditures in excess of
$100,000 for any single project, other than customary
operating agreements;
(viii) any plan, contract, or arrangement providing
for bonuses, pensions, deferred compensation, retirement plan
payments, profit sharing, incentive pay, or for any other
employee benefit plan, in each case other than the Employee
Benefit Plans and the Severance Plan and Agreements;
(ix) other than as set forth in Schedule 5.22, any
brokerage or finder's agreement obligating a Presidio Party to
make a payment thereunder in excess of $50,000;
(x) any noncompetition agreement (other than
areas of mutual interest commonly set forth in operating
agreements) that restricts the right of any Presidio Party to
engage in any place in any line of business;
(xi) any contract, commitment, or agreement
between any of the Presidio Parties or between any Presidio
Party and any Affiliate thereof involving a payment thereunder
in excess of $100,000, in each case other than the Bank
Obligations, the Debt Obligations, the Employee Benefit Plans
and Severance Plan and Agreements;
(xii) any contract (x) for the sale of oil or other
liquid hydrocarbons produced or to be produced from the Oil
and Gas Assets that is not terminable by a Presidio Party
thereto or its respective successor without penalty on no more
than ninety (90) days' notice or (y) for the sale of gas
produced or to be produced from the Oil and Gas Assets that
has a term exceeding six (6) months;
(xiii) any advance payment agreement or any oil and
gas balancing agreement, or any other similar agreements,
under which a Presidio Party has a net obligation, as of the
most recent date available, which shall be no more than ninety
(90) days prior to the date of this Agreement, in excess of
$50,000 in cash or market value in oil or gas;
(xiv) other than the Bank Obligations and the Debt
Obligations, any contract or agreement relating to the Oil and
Gas Assets under which a Presidio Party has outstanding
indebtedness, obligations or liability for borrowed money, or
liability for the deferred purchase price of property,
excluding normal trade payables due in
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less than ninety (90) days, or has the obligation to incur any
such indebtedness, obligation or liability;
(xv) any contract, commitment, or agreement that
involves commodity or interest rate swaps, floors, caps,
collars, futures, options, or other similar transactions; and
(xvi) any contract, commitment or agreement that
involves the disposition of any assets of any Presidio Party
having a value of $50,000 or more not entered into in the
ordinary course of business consistent with past practice.
(b) Presidio has provided Tom Brown with access to true,
correct and complete copies of all written Material Contracts and has
provided Tom Brown with accurate descriptions of all oral Material
Contracts.
(c) Except with respect to past due accounts payable or
outstanding indebtedness to the suppliers disclosed in Schedule 5.25
and as such may be affected by the Reorganization Cases, to the
Knowledge of Presidio, as of the date of this Agreement, the Presidio
Parties' relationships are generally satisfactory with their
respective suppliers who are material to the conducting of their
respective businesses.
(d) Other than as set forth in Schedule 5.25, as of the
date of this Agreement, the Presidio Parties do not have outstanding
any powers of attorney with any person who is not as of the date of
this Agreement an employee of a Presidio Party, including powers of
attorney with respect to representation before Governmental Agencies,
customers, agents, and brokers or given in connection with
qualification to conduct business in any jurisdiction.
(e) Except as set forth in Schedule 5.25 and as such may
be affected by the Reorganization Cases, each of the Material
Contracts to which a Presidio Party is a signatory thereto has been
duly executed by the applicable Presidio Party thereto and is in full
force and effect and to the Knowledge of Presidio, as of the date of
this Agreement, except in respect of the Bank Obligations and the Debt
Obligations, no Presidio Party is in breach of any such Material
Contract.
5.26 Fairness Opinion. Presidio has received a written opinion
from Jefferies & Company, Inc., a financial advisor to Presidio, to the effect
that the Exchange Consideration to be received pursuant to the Plan of
Reorganization is fair to the Presidio Securityholders, in the aggregate, from
a financial point of view and as of the date of this Agreement such opinion has
not been withdrawn, revoked, or modified.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TOM BROWN
Tom Brown represents and warrants to Presidio the following:
6.1 Existence. Tom Brown is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly qualified to do business as a foreign corporation in the states where the
properties owned or leased by it or the nature of its activities make such
qualification necessary.
6.2 Authorization and Enforceability. Tom Brown has the
corporate power to enter into and perform this Agreement and the transactions
contemplated by this Agreement, including the necessary corporate power
regarding the issuance and payment of the Exchange Consideration as
contemplated herein. The execution, delivery and performance of this
Agreement, and the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Tom Brown. This
Agreement constitutes the valid and binding obligations of Tom Brown,
enforceable in accordance with its terms.
6.3 No Violations. The execution, delivery and performance of
this Agreement by Tom Brown, and the transactions contemplated by this
Agreement, will not violate (a) any provision of the certificate of
incorporation or bylaws of Tom Brown, (b) any material agreement or instrument
to which Tom Brown is a party or by which Tom Brown or any of its properties
are bound, (c) any judgment, order, ruling, or decree applicable to Tom Brown
as a party in interest, or (d) any law, rule, or regulation applicable to Tom
Brown.
6.4 Consents and Approvals. No consent, approval, order, or
authorization of, registration, declaration, or filing with, or permit (other
than any filings required under the 1933 Act, the 1934 Act or the Hart Scott
Act) from any Governmental Authority is required other than Bankruptcy Court
approval by or with respect to Tom Brown in connection with the execution and
delivery of this Agreement by Tom Brown or the consummation by Tom Brown of the
transactions contemplated hereby, except for those expressly contemplated
herein.
6.5 Tom Brown SEC Documents. Tom Brown has made available to
Presidio a true and complete copy of the Tom Brown SEC Documents, which are all
the documents (other than preliminary material) that Tom Brown was required to
file with the SEC since January 1, 1995. As of their respective dates, the Tom
Brown SEC Documents complied in all material respects with the requirements of
the 1933 Act or the 1934 Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Tom Brown SEC Documents,
and none of the Tom Brown SEC Documents contained 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.
6.6 Financial Statements. The Tom Brown Financial Statements were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be
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indicated in the notes thereto or, in the case of 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 will be
material) the consolidated financial position of Tom Brown and its consolidated
subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of Tom Brown and its consolidated
subsidiaries for the periods presented therein.
6.7 Capital Structure.
(a) The authorized capital stock of Tom Brown is as set
forth in Schedule 6.7.
(b) At the close of business on June 30, 1996, (i) there
were issued and outstanding 21,124,694 shares of Tom Brown Common
Stock and (ii) no shares of Tom Brown Common Stock were held by Tom
Brown as treasury stock. Except as set forth in this Section 6.7(b)
or as otherwise disclosed in the Tom Brown SEC Documents or set forth
in Schedule 6.7, and except for 1,000,000 issued and outstanding
shares of preferred stock of Tom Brown and options to acquire shares
of common stock of Tom Brown issued to officers, directors and
employees of Tom Brown or its subsidiaries (covering not more than
1,924,800 shares of Tom Brown Common Stock), there are outstanding as
of the date of this Agreement (i) no shares of capital stock or other
equity securities of Tom Brown, (ii) no securities of Tom Brown or any
other person convertible into or exchangeable or exercisable for
shares of capital stock or other equity securities of Tom Brown, and
(iii) no subscriptions, options, warrants, calls, or rights (including
preemptive rights, commitments, understandings, or agreements) to
which Tom Brown is a party or by which it is bound obligating Tom
Brown to issue, deliver, sell, purchase, redeem, or acquire shares of
capital stock or other equity securities of Tom Brown (or securities
convertible into or exchangeable or exercisable for shares of capital
stock or other equity securities of Tom Brown) or obligating Tom Brown
to grant, extend, or enter into any such subscription, option,
warrant, call, right, commitment, understanding, or agreement.
(c) All outstanding shares of Tom Brown capital stock
are, and (when issued) the Exchange Common Stock will be, validly
issued, fully paid, and nonassessable and not subject to any
preemptive right.
(d) As of the date of this Agreement, there is no
stockholder agreement, voting trust, or other agreement or
understanding to which Tom Brown is a party or by which it is bound
relating to the voting of any shares of the capital stock of Tom Brown
except as set forth in Schedule 6.7.
6.8 Claims and Litigation. Except as set forth in the Tom Brown
SEC Documents or in Schedule 6.8, there is no suit, action, claim, or inquiry
by any person or entity or by any administrative agency or governmental body
and no legal, administrative or arbitration proceeding pending or, to Tom
Brown's knowledge, threatened against Tom Brown or any affiliate of Tom Brown
which has or will materially affect Tom Brown's ability to consummate the
transactions contemplated by this Agreement.
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6.9 Financing. Tom Brown has, or has obtained commitments to
obtain, funds or other consideration, as required, sufficient to pay the Cash
Consideration in accordance with this Agreement. True and complete copies of
such commitments have been furnished to Presidio.
ARTICLE VII
NATURE OF REPRESENTATIONS AND WARRANTIES
7.1 Limited Recourse. If prior to the Closing, there is
discovered a breach of any of the representations and warranties contained in
Articles V and VI of this Agreement, then the only recourse that a party shall
have for such breach is an exercise of the rights provided in Article X.
7.2 Nonsurvival of Representations, Warranties, Covenants, and
Agreements. None of the representations, warranties, covenants, and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing, except for the agreements contained in
Sections 4.15, 4.22, 4.23, 4.24, and 4.25 and the agreements delivered pursuant
to Section 4.12.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to the Obligations of Presidio. The
obligations of Presidio to consummate the transactions contemplated by this
Agreement are subject to satisfaction at or prior to Closing of each of the
following conditions (any one or more of which may be waived in writing by
Presidio):
(a) The Confirmation Order, in form and substance
reasonably acceptable to Presidio, confirming the Plan of
Reorganization shall have been entered by the Bankruptcy Court and the
Confirmation Order shall have become a Final Order.
(b) The Confirmation Order shall recognize and declare
Tom Brown as a "successor" to Presidio pursuant to Sections 1125(e)
and 1145(a)(1) of the Bankruptcy Code.
(c) All Plan Documents and other applicable corporate
documents necessary or appropriate to the implementation of the Plan
of Reorganization shall have been executed, delivered, and where
applicable, filed with the appropriate Governmental Authorities.
(d) On the Closing Date, each of the representations and
warranties of Tom Brown contained in this Agreement shall be true and
correct in all material respects at and as of such time; and on the
Closing Date Tom Brown shall deliver to Presidio a certificate to such
effect signed by an authorized officer of Tom Brown, except that such
certificate may
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state that the information provided therein is given to the best
information, knowledge, and belief of the authorized representative
signing the same.
(e) Each of the obligations of Tom Brown to be performed
on or before the Closing Date pursuant to the terms of this Agreement
shall have been duly performed in all material respects on the Closing
Date; and on the Closing Date Tom Brown shall have delivered to
Presidio a certificate to such effect signed by an authorized officer
of Tom Brown, except that such certificate may state that the
information provided therein is given to the best information,
knowledge, and belief of the authorized representative signing the
same.
(f) The necessary and material consents and approvals of
all Governmental Authorities and others shall have been obtained and
remain in effect, and all required waiting periods under the Hart
Scott Act and the rules and regulations promulgated thereunder
relating to this Agreement and the transactions contemplated hereby
shall have expired.
(g) No Governmental Authority shall have issued an
injunction, order, decree, or ruling or taken any other action
restraining or preventing the consummation of the transactions
contemplated hereby that shall not have been vacated, withdrawn,
cancelled, or otherwise voided.
(h) The Exchange Common Stock shall have been authorized
for listing on NASDAQ, subject only to official notice of issuance.
(i) The written opinion of Presidio's financial advisors
referred to in Section 5.26 shall have been reconfirmed in writing as
of the Closing Date as if given as of such date and shall not have
been withdrawn or revoked or modified in any material respect.
(j) The New D&O Insurance shall be in full force and
effect.
8.2 Conditions Precedent to the Obligations of Tom Brown. The
obligations of Tom Brown to consummate the transactions contemplated by this
Agreement are subject to satisfaction at or prior to Closing of the following
conditions (any one or more of which may be waived in writing by Tom Brown):
(a) The Confirmation Order, in form and substance
reasonably acceptable to Tom Brown, confirming the Plan of
Reorganization shall have been entered by the Bankruptcy Court and the
Confirmation Order shall have become a Final Order.
(b) The Confirmation Order shall recognize and declare
Tom Brown as a "successor" to Presidio pursuant to Sections 1125(e)
and 1145(a)(1) of the Bankruptcy Code.
(c) All Plan Documents and other applicable corporate
documents necessary or appropriate to the implementation of the Plan
of Reorganization shall have been executed, delivered, and where
applicable, filed with the appropriate Governmental Authorities.
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(d) On the Closing Date, each of the representations and
warranties of Presidio contained in this Agreement shall be true and
correct in all material respects at and as of such time and each of
the obligations of Presidio to be performed on or before the Closing
Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects on the Closing Date, except to the
extent that any such breach or failure to perform does not give rise
to the right of Tom Brown to terminate this Agreement pursuant to
clause (iii) of Section 9.1(c). On the Closing Date Presidio shall
have delivered to Tom Brown a certificate regarding such
representations, warranties and obligations signed by an authorized
representative of Presidio, except that such certificate may state
that the information provided therein is given to the best
information, knowledge, and belief of the authorized representative
signing the same.
(e) The necessary and material consents and approvals of
all Governmental Authorities, the Presidio Securityholders (to the
extent required under the Plan of Reorganization or applicable law)
and others shall have been obtained and remain in effect, and all
required waiting periods under the Hart Scott Act and the rules and
regulations promulgated thereunder relating to this Agreement and the
transactions contemplated hereby shall have expired.
(f) No Governmental Authority shall have issued an
injunction, order, decree, or ruling or taken any other action
restraining or preventing the consummation of the transactions
contemplated hereby, that shall not have been vacated, withdrawn,
cancelled, or otherwise voided.
(g) This Agreement and all other agreements and letter
agreements contemplated under this Agreement or otherwise entered into
between Tom Brown or any Affiliate of Tom Brown and Presidio or any
Affiliate of Presidio in connection with the transactions contemplated
by this Agreement shall have been assumed in their entirety and
without modification thereto (except to the extent such modification
shall have been consented to in writing by Tom Brown) pursuant to
Section 365 or Section 1123(b)(2), as applicable, of the Bankruptcy
Code on or before the Confirmation Date.
(h) On the Closing Date, none of the Major Assets shall
be subject to any Liens other than (i) Permitted Encumbrances and (ii)
Liens arising through Tom Brown or as a result of Tom Brown's actions.
(i) The Plan of Reorganization and the Confirmation Order
shall provide that as of the Closing Date each of the Presidio Parties
and their respective creditors and holders of equity interests (the
"Releasing Parties") will be deemed to forever release, waive and
discharge, and to be enjoined from asserting, to the fullest extent
permitted under applicable law, all claims (as defined in Section
101(5) of the Bankruptcy Code), demands, debts, rights, causes of
action, and liabilities (collectively, the "Released Claims") in
connection with or related to this Agreement, the Reorganization
Cases, the Presidio Parties, or the Plan of Reorganization whether
such Released Claims are liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or
unforeseen, then existing
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<PAGE> 90
or thereafter arising, that are based in whole or in part on any act,
omission, or other occurrence taking place on or prior to the Closing
Date and that may be asserted by or on behalf of the Releasing Parties
against Tom Brown or its respective agents, advisors, attorneys and
representatives (including current and former directors, officers,
employees, members and professionals) acting in such capacity.
(j) Presidio shall, upon application or motion therefor
filed with the Bankruptcy Court, have obtained a Final Order (which
may be a part of the Confirmation Order) authorizing the assumption by
the applicable Presidio Party under Section 365 or Section 1123(b)(2)
of the Bankruptcy Code of the Designated Contracts and such Final
Order shall provide (as contemplated in the Plan of Reorganization)
that (i) the mere occurrence of a Bankruptcy Event (which for purposes
of this Section 8.2(j) shall include Presidio West Virginia) and (ii)
the insolvency or financial condition of a Presidio Party prior to the
Closing, shall not constitute a basis for the removal of a Presidio
Party as operator under any of the Designated Contracts.
(k) The Bar Date Order, in a form and substance
reasonably acceptable to Tom Brown, shall have been entered by the
Bankruptcy Court and shall have become a Final Order.
ARTICLE IX
TERMINATION
9.1 Termination Rights. This Agreement may be terminated and the
Exchange may be abandoned at any time prior to the Closing (provided that the
right of Tom Brown to terminate pursuant to clause (iii) of Section 9.1(c)
shall not be exercisable by Tom Brown subsequent to the fifth day following the
date on which the Confirmation Order becomes a Final Order), whether before or
after the approval of the Exchange or Plan of Reorganization by the Presidio
Securityholders as follows:
(a) By mutual written consent of Tom Brown and Presidio;
(b) By either Tom Brown or Presidio if:
(i) the Closing has not occurred on or before the
first anniversary of the commencement of Presidio's
Reorganization Case (provided, however, that the right to
terminate this Agreement pursuant to this clause (i) shall not
be available to any party whose breach of this Agreement has
been the cause of or resulted in the failure of the Closing to
occur on or before such date); or
(ii) any Governmental Authority shall have issued
an injunction, order, decree, or ruling or taken any other
action restraining or preventing the
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<PAGE> 91
consummation of the transactions contemplated by this
Agreement and such order, decree, ruling, or other action
shall have become final and non-appealable;
(c) By Tom Brown if:
(i) the board of directors of Presidio shall fail
to recommend approval of the Exchange at the time the
Disclosure Statement is first mailed to the Presidio
Securityholders or if such recommendation of approval, if
made, is amended in a manner adverse to Tom Brown or withdrawn
thereafter or if Presidio elects not to consummate the
Exchange as a result of the condition set forth in Section
8.1(i) not having been satisfied;
(ii) Presidio has notified Tom Brown that it is
prepared to enter into a binding agreement to effect an
Alternative Transaction described in Section 4.20(c);
(iii) (x) there has been one or more breaches of
the representations and warranties made by Presidio in Article
V of this Agreement or a failure of Presidio to perform or
comply with one or more covenants or agreements contained in
this Agreement, (y) Tom Brown has given Presidio written
notice of the existence of each such breach or failure at
least ten (10) business days prior to the then scheduled
Confirmation Date and such breach or failure is not resolved
or cured on or before the Confirmation Date and (z) if the
Exchange were to be consummated without such breaches or
failures (individually or together with any other breaches or
failures) being so resolved or cured and, as a result thereof,
such breach or failure would cause Tom Brown to suffer or
sustain damages in an amount greater than $3,000,000, (for
purposes of this clause (iii), the amount of damages that
would be suffered or sustained by Tom Brown shall be
calculated (1) after taking into consideration and reducing
(to the extent that such have not previously been considered
in determining the existence of such breach or failure) such
damages for (A) amounts that have been reimbursed or paid
under insurance coverage maintained by the Presidio Parties or
any other person or amounts as to which an insurance company
or other insuring entity has acknowledged its obligation to
reimburse or pay and (B) the amount of any reserves
established in the Presidio Financial Statements for the
Liability or event giving rise to damages and (2) by netting
against the aggregate of all such damages (A) the amount by
which (I) the actual recovery (through the date of any such
determination of aggregate damages) of accounts receivable
reflected on the balance sheet forming a part of the Presidio
Financial Statements exceeds (II) the stated value of such
accounts receivable on such balance sheet, and (B) the amount
by which (I) any Liability reflected on such balance sheet
exceeds (II) the amount for which such Liability is liquidated
prior to the date of any such determination of aggregate
damages);
(iv) INTENTIONALLY LEFT BLANK;
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<PAGE> 92
(v) the Tom Brown Trading Value is more than 120%
of the Common Share Value; provided, however, Tom Brown shall
not have the right to terminate this Agreement pursuant to
this clause (v) if prior to the Closing Date Presidio elects
to reduce the number of shares of Exchange Common Stock to a
number of shares equal to the quotient obtained by dividing
(A) the Aggregate Common Share Value by (B) 120% of the Common
Share Value;
(vi) the Initial Order (A) shall not have been
entered within fifteen (15) business days after the occurrence
of a Bankruptcy Event and (B) shall not have become a Final
Order within twenty-five (25) business days after a Bankruptcy
Event; or
(vii) the Confirmation Order, in form and substance
reasonably acceptable to Tom Brown and confirming the Plan of
Reorganization, shall not have been entered by the Bankruptcy
Court on or before November 15, 1996 or the Confirmation Order
shall not have become a Final Order on or before December 13,
1996 (as either of such dates shall be extended by the number
of days, if any, that Presidio's solicitation of the
acceptance by the Presidio Securityholders of the Plan of
Reorganization may be delayed or extended by reason of (x) any
material change in or material events regarding Tom Brown and
which occur after the date of this Agreement and which are
required to be disclosed in the Disclosure Statement or in any
amendment or supplement to the Disclosure Statement or (y) the
providing of any additional disclosure concerning Tom Brown or
concerning the post-Closing business or financial condition of
any Presidio Party); provided, that Tom Brown shall not be
entitled to terminate this Agreement pursuant to this clause
(vii) unless Tom Brown has given Presidio prior written notice
of its intention to terminate this Agreement pursuant to this
clause (vii) within thirty (30) days after the above
applicable described date; or
(viii) the Reorganization Cases shall not have been
commenced on or before August 6, 1996.
(d) By Presidio if:
(i) there has been a breach of the
representations and warranties made by Tom Brown in Article VI
of this Agreement which is material to the financial condition
of Tom Brown or its ability to perform its obligations under
this Agreement or which adversely affects the benefits to be
received by Presidio under this Agreement at Closing or a
failure to perform or comply with any covenant or agreement
contained in this Agreement which adversely affects Presidio
or its ability to obtain the benefits contemplated by this
Agreement or which adversely affects the benefits to be
received by Presidio under this Agreement at Closing; provided
that Presidio shall not be entitled to terminate this
Agreement pursuant to this clause (i) unless (A) Presidio has
given Tom Brown written notice of the existence of such
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<PAGE> 93
breach or failure and (B) Tom Brown has not resolved or cured
such breach or failure within ten (10) days of such notice;
(ii) Presidio has notified Tom Brown that Presidio
is prepared to enter into a binding definitive agreement to
effect an Alternative Transaction described in Section
4.20(c);
(iii) the Tom Brown Trading Value is less than 80%
of the Common Share Value; provided, however, Presidio shall
not have the right to terminate this Agreement pursuant to
this clause (iii) if prior to the Closing Date Tom Brown
elects to increase the number of shares of Exchange Common
Stock to a number of shares equal to the quotient obtained by
dividing (A) the Aggregate Common Share Value by (B) 80% of
the Common Share Value; or
(iv) Presidio has notified Tom Brown that the
board of directors of Presidio, in the exercise of their
fiduciary duties, has determined not to recommend or to
withdraw their prior recommendation of the Exchange to the
Presidio Securityholders or if Presidio elects not to
consummate the Exchange as a result of the condition set forth
in Section 8.1(i) not having been satisfied.
9.2 Payment of Termination Expenses and Fee.
(a) If this Agreement is terminated pursuant to either
clause (i) or (ii) of Section 9.1(c) or clauses (ii) or (iv) of
Section 9.1(d), then Presidio shall pay Tom Brown an amount equal to
$6,000,000 (the "Termination Fee").
(b) If this Agreement is terminated pursuant to either
clauses (i), (ii), (iii) or (vi) of Section 9.1(c) or clauses (ii) or
(iv) of Section 9.1(d), then Presidio shall pay Tom Brown an amount
equal to the documented out-of-pocket costs and expenses (including
attorneys', financial advisors', accountants', engineers' and other
consultants' fees) incurred by Tom Brown from and after November 15,
1995 (the "Termination Expenses") in connection with (x) the
preparation, negotiation of the Plan of Reorganization, the Disclosure
Statement and this Agreement, (y) the due diligence efforts of Tom
Brown and their professionals and advisors in connection with the
contemplated transactions and (z) the pursuit of the transactions
contemplated hereby and thereby; provided, however, that the
aggregated amount of Termination Expenses that Tom Brown shall be
entitled to recoup herein shall not exceed $3,000,000.
(c) Subject to the approval of the Bankruptcy Court, the
Termination Expenses and Termination Fee shall constitute first
priority administrative expenses of Presidio pursuant to section
364(c)(1) of the Bankruptcy Code and shall be secured by a lien on
property of the Presidio estate pursuant to section 364(c)(2) of the
Bankruptcy Code and shall be paid upon the earlier of (i) the closing
of the transactions contemplated by an accepted Alternative
Transaction and (ii) entry of any order of the Bankruptcy Court
directing payment by Presidio of such amounts. From and after a
termination by Presidio
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<PAGE> 94
pursuant to Section 9.1(d)(ii) until payment in full of the
Termination Fee and the Termination Expenses, interest shall accrue on
any unpaid portion of the Termination Fee and the Termination Expenses
at a rate per annum equal to the prime commercial lending rate
announced from time to time by the Chase Manhattan Bank, N.A.
(d) If the Initial Order has not been entered by the
Bankruptcy Court as contemplated in Section 4.5(c), then Tom Brown
shall be entitled to assert as liquidated damages the Termination Fee
and the Termination Expenses as a claim under section 502 and/or
503(b) of the Bankruptcy Code.
9.3 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no further
force or effect (except for the provisions of Sections 4.14 and 9.2 which shall
continue in full force and effect).
ARTICLE X
MISCELLANEOUS
10.1 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all
such counterparts together shall constitute but one agreement.
10.2 Notice. All notices which are required or may be given
pursuant to this Agreement shall be sufficient in all respects if given in
writing and delivered personally, by telecopy or by registered or certified
mail, postage prepaid, as follows:
IF TO PRESIDIO PARTIES:
Presidio Oil Company
5613 DTC Parkway, Suite 750
P.O. Box 6525
Englewood, Colorado 80155-6525
Attention: Robert L. Smith
Telephone: (303) 773-0100
Fax: (303) 850-1111
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<PAGE> 95
IF TO TOM BROWN:
Tom Brown, Inc.
508 West Wall, Suite 500
Midland, Texas 79702
Attention: Donald L. Evans
Telephone: (915) 682-9715
Fax: (915) 683-9327
All notices shall be deemed to have been duly given at the time of receipt by
the party to which such notice is addressed.
10.3 Governing Law. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
10.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
10.5 Assignment. No party shall assign all or any part of this
Agreement, nor shall any party assign or delegate any of its rights or duties
hereunder, without the prior written consent of the other party and any
assignment made without such consent shall be void. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
10.6 Entire Agreement; Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and the documents and instruments
delivered by the parties in connection with this Agreement) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written or oral, among the parties with respect to the subject matter
hereof and (b) except for Sections 4.15, 4.22, 4.24 and 4.25, is solely for the
benefit of the parties hereto and their respective successors, legal
representatives, and assigns and does not confer on any other person any rights
or remedies hereunder. The provisions of Sections 4.15, 4.22, 4.24 and 4.25
are intended to be for the benefit of, and shall be enforceable by, the parties
hereto and each of the other parties who are beneficiaries of the rights and
obligations arising thereunder and their respective heirs and representatives.
10.7 Amendment.
(a) At any time prior to the Closing Date this Agreement
may be amended or modified in any respect by the parties by an
agreement in writing executed in the same manner as this Agreement.
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<PAGE> 96
(b) No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the
party to be bound thereby.
10.8 Exhibits and Schedules. All Exhibits and Schedules attached
to or referred to in this Agreement are incorporated into and made a part of
this Agreement.
10.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
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<PAGE> 97
IN WITNESS WHEREO, this Agreement has been signed by each of the
parties hereto, all as of the date above written.
<TABLE>
<S> <C>
PRESIDIO OIL COMPANY
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
PRESIDIO EXPLORATION, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
PRESIDIO WEST VIRGINIA, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
PALISADE OIL, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
TOM BROWN, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
----------------------------------------------
</TABLE>
-55-
<PAGE> 1
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
FIRST: The name of the Corporation is Tom Brown, Inc.
SECOND: The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle 19801. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business of the Corporation and the objects and
purposes and business thereof proposed to be transacted, promoted or carried on
are as follows:
To transact any and all lawful act or activity for which a corporation
may be incorporated under the laws of the State of Delaware.
FOURTH: The total number of shares of all classes that the Corporation shall
have authority to issue is 250,000,000, of which 50,000,000 shares shall be
Preferred Stock, par value $.10 per share, and 200,000,000 shares shall be
Common Stock, $.10 par value per share. All of such shares shall, upon
issuance thereof, be fully paid and nonassessable.
The designations, preferences, limitations and relative rights of the
shares of each class that the Corporation shall have authority to issue are as
follows:
A. Preferred Stock. The Board of Directors is hereby expressly
vested with the authority to adopt a resolution or resolutions
providing for the issue of authorized but unissued shares of
Preferred Stock, which shares may be issued from time to time
in one or more series and in such amounts as may be determined
by the Board of Directors in such resolution or resolutions.
The designations, preferences, limitations or relative rights
of the Preferred Stock and the qualifications, limitations or
restrictions, if any, of such preferences and/or rights
(collectively, the "Series Terms") may vary between series in
any and all respects and shall be such as are stated and
expressed in a resolution or resolutions providing for the
creation or revision of such Series Terms set forth in a
Certificate of Designations (a "Preferred Stock Series
Resolution") adopted by the Board of Directors; provided that
all shares of any one series of Preferred Stock so designated
by the Board of Directors shall be identical in all respects
except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon may be
cumulative. The powers of the Board of Directors with respect
to the Series Terms of a particular series shall include, but
not be limited to, determination of the following:
<PAGE> 2
1. The right to receive dividends, if any, and the rate,
dates, terms and other conditions on which such dividends
shall be payable;
2. The nature of the dividend payable, if any, with respect
to shares of such series as cumulative, noncumulative or
partially cumulative;
3. The redemption rights of such series including the price
at and the terms and conditions on which such shares may
be redeemed;
4. The amount payable upon shares in the event of involuntary
liquidation;
5. The amount payable upon shares in the event of voluntary
liquidation;
6. Sinking fund provisions for the redemption or purchase of
shares;
7. The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege
of conversion;
8. Voting rights, if any; and
9. Repurchase obligations of the Corporation with respect to
the shares of each series.
Any of the Series Terms, including voting rights, of any
series may be made dependent upon facts ascertainable outside
this Certificate of Incorporation and the Preferred Stock
Series Resolution, provided that the manner in which such
facts shall operate upon such Series Terms is clearly and
expressly set forth herein or in the Preferred Stock Series
Resolution.
Subject to the provisions of this Paragraph Fourth, shares of
one or more series of Preferred Stock may be authorized or
issued from time to time as shall be determined by and for
such consideration as shall be fixed by the Board of
Directors, in an aggregate amount not exceeding the total
number of shares of Preferred Stock authorized herein. Except
in respect of Series Terms fixed by the Board of Directors as
permitted hereby, all shares of Preferred Stock shall be of
equal rank and shall be identical.
B. Common Stock.
1. Dividends. Subject to the provisions of any Preferred
Stock Series Resolution, the Board of Directors may, in
its discretion, out of funds
2
<PAGE> 3
legally available for the payment of dividends and at such
times and in such manner as determined by the Board of
Directors, declare and pay dividends on the Common Stock
of the Corporation.
No dividend (other than a dividend in capital stock
ranking on a parity with the Common Stock or cash in lieu
of fractional shares with respect to such stock dividend)
shall be declared or paid on any share or shares of any
class of stock or series thereof ranking on a parity with
the Common Stock in respect of payment of dividends for
any dividend period unless there shall have been declared,
for the same dividend period, like proportionate dividends
on all shares of Common Stock then outstanding.
2. Liquidation. In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the
debts and other liabilities of the Corporation and after
payment of any preferential amount due to the holders of
any other class or series of stock, the holders of the
Common Stock shall be entitled to receive ratably any or
all assets remaining to be paid or distributed.
3. Voting Rights. Subject to any special voting rights set
forth in any Preferred Stock Series Resolution, the
holders of the Common Stock of the Corporation shall be
entitled at all meetings of shareholders to one vote for
each share of such stock held by them.
C. Prior, Parity or Junior Stock. Whenever reference is made in
this Paragraph Fourth or in any Preferred Stock Series
Resolution to shares "ranking prior to" another class or
series of stock or "on a parity with" another class or series
of stock, such reference shall mean and include all other
shares of the Corporation in respect of which the rights of
the holders thereof as to the payment of dividends or as to
distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
Corporation are given preference over, or rank on an equality
with, as the case may be, the rights of the holders of such
other class or series of stock. Whenever reference is made to
shares "ranking junior to" another class of stock, such
reference shall mean and include all shares of the Corporation
in respect of which the rights of the holders thereof as to
the payment of dividends and as to distributions in the event
of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of
3
<PAGE> 4
the Corporation are junior and subordinate to the rights of the
holders of such class or series of stock.
Except as otherwise provided herein or in any Preferred Stock
Series Resolution, each series of Preferred Stock ranks on a
parity with each other series and each series ranks prior to
the Common Stock. Common Stock ranks junior to the Preferred
Stock.
D. Liquidation. For the purposes of Section (2) of Section B of
this Paragraph Fourth and for the purpose of the comparable
sections of any Preferred Stock Series Resolution, the merger
or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it,
or the sale, lease or conveyance of all or substantially all
the assets, property or business of the Corporation, shall not
be deemed to be a liquidation, dissolution or winding up of
the Corporation.
E. Reservation and Retirement of Shares. The Corporation shall
at all times reserve and keep available, out of its authorized
but unissued shares of Common Stock or out of shares of Common
Stock held in its treasury, the full number of shares of
Common Stock into which all shares of any series of Preferred
Stock having conversion privileges from time to time
outstanding are convertible.
Unless otherwise provided in a Preferred Stock Series
Resolution with respect to a particular series of Preferred
Stock, all shares of Preferred Stock redeemed or acquired (as
a result of conversion or otherwise) shall be retired and
restored to the status of authorized but unissued shares.
F. Preemptive Rights.
1. No holder of shares of Preferred Stock or Common Stock of
the Corporation shall have any preemptive right to
purchase or subscribe for or receive any shares of any
class, or series thereof, of stock of the Corporation,
whether now or hereafter authorized, or any warrants,
options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase
any shares of any class, or series thereof, of stock; but
such additional shares of stock and such warrants,
options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase
any shares of any class, or series thereof, of stock may
be issued or disposed of by the Board of Directors to such
persons, and on such terms and for such lawful
4
<PAGE> 5
consideration, as in its discretion it shall deem
advisable.
2. The stockholders of the Corporation shall have no
rights to acquire the shares of Common Stock of the
Corporation now held in the treasury of the Corporation or
any shares of Common Stock of the Corporation hereafter
acquired by the Corporation and held as treasury shares.
G. No Cumulative Voting. Cumulative voting shall not be allowed
in the election of Directors or for any other purpose.
H. Repurchases of Capital Stock. The Corporation may, without
shareholder approval, purchase, directly or indirectly, its
own shares to the extent permitted by the Delaware General
Corporation Law.
FIFTH: The names and mailing address of the incorporators are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Thomas C. Brown 500 Empire Plaza
Midland, Texas 79701
Donald L. Evans 500 Empire Plaza
Midland, Texas 79701
</TABLE>
SIXTH: The name and mailing addresses of the persons who are to serve as
directors until the first annual meeting of stockholders or until their
successors are duly elected and qualified are:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Thomas C. Brown 500 Empire Plaza
Midland, Texas 79701
Donald L. Evans 500 Empire Plaza
Midland, Texas 79701
Joe G. Roper 5609 West Industrial
Boulevard
Midland, Texas 79701
</TABLE>
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: The Board of Directors shall have power to enact, alter, amend and
repeal bylaws not inconsistent with the laws of the State of Delaware and this
Certificate of Incorporation.
NINTH: Limitation of Certain Liability of Directors. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of
5
<PAGE> 6
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. In addition to the circumstances in which a
director of the Corporation is not personally liable as set forth in the
preceding sentence, a director shall not be liable to the fullest extent
permitted by any amendment to the Delaware General Corporation law hereafter
enacted that further limits the liability of a director.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation with respect to any matter
occurring or any cause of action, suit or claim that, but for this Article
Ninth, would accrue or arise, prior to the time of such repeal or modification.
TENTH: Indemnification and Insurance.
A. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in
any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was a director or
officer, of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by such
person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided,
however, that, except as provided in paragraph (b) hereof, the
Corporation shall
6
<PAGE> 7
indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The
right to indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director
or officer in his or her capacity as a director of officer
(and not in any other capacity in which service was or is
rendered by such person while a director or officer,
including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Paragraph A or otherwise. The
Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing
indemnification of directors and officers.
B. Right of Claimant to Bring Suit. If a claim under Paragraph A
of this Paragraph Tenth is not paid in full by the Corporation
within ninety days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it
permissible under the Delaware General Corporation Law for the
Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination
by the Corporation (including its Board of Directors,
independent legal counsel, or its
7
<PAGE> 8
stockholders) that the claimant has not met such applicable
standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the
applicable standard of conduct.
C. Non-Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Paragraph
shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
D. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee
or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against
any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware
General Corporation Law.
ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is our act and deed and the facts herein
stated are true, and accordingly, have hereunto set our hands this 25th day of
February, 1987.
/s/ Thomas C. Brown
------------------------------
Thomas C. Brown
/s/ Donald L. Evans
------------------------------
Donald L. Evans
8
<PAGE> 9
TOM BROWN, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIAL PREFERRED STOCK -
SERIES A NON-VOTING CONVERTIBLE 6%
CUMULATIVE PREFERRED STOCK
The undersigned, President and Secretary, respectively, of Tom Brown,
Inc., a Delaware corporation (the "Company"), certify that pursuant to
authority granted to and vested in the Board of Directors of the Company by
provisions of the Certificate of Incorporation of the Company, the Board of
Directors has duly adopted the following resolutions creating a series of
serial preferred stock of the Company designated as the Series A Non-Voting
Convertible 6% Cumulative Preferred Stock:
"RESOLVED, That the Board of Directors of Tom Brown, Inc. (the
"Company"), in the exercise of its best business judgment and
intending to act in full compliance with the applicable provisions of
the Company's Certificate of Incorporation and Bylaws and the
provisions of the Delaware General Corporation Law, hereby establishes
a series of Preferred Stock, par value $0.10 per share, of the Company
designated as "Series A Non-Voting Convertible 6% Cumulative Preferred
Stock" (the "Series A Shares"), and the number of Series A Shares
which the Company is authorized to issue from time to time shall be
22,000,000 and the designations, preferences, limitations, and
relative rights, and qualifications, limitations and restrictions, of
the Series A Shares shall be as follows:
1. Liquidation. The Series A Shares shall be preferred as to
assets over Junior Shares so that, in the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Company, the
holders of the Series A Shares shall be entitled, in conjunction with
any provision then being made for the holders of Parity Shares, if
any, to have set apart for them or to be paid out of the assets of the
Company, after payment or provision for payment of the debts and other
liabilities of the Company and after provision for the holders of
Senior Shares, if any, but before any distribution is made to or set
apart for the holders of Junior Shares, an amount in cash equal to
$1.1364 per Series A Share (as adjusted for any stock split, reverse
stock split, stock dividend or similar event resulting in a change in
the Series A Shares) (the "Liquidation Value"), together with all
dividends accrued on such Series A Shares to the date of payment,
irrespective of whether such dividends were earned, declared or
legally available, and the holders of the Series A Shares shall not be
entitled to any further payment in connection with the voluntary or
involuntary liquidation, dissolution or winding up of the Company
<PAGE> 10
except as expressly provided for in this resolution. If, upon such
liquidation, dissolution or winding up of the Company, the assets of
the Company available for distribution to the holders of the Series A
Shares and the holders of Parity Shares, if any, shall be insufficient
to permit the distribution in full of the amounts receivable as
aforesaid by the holders of the Series A Shares and the amounts
receivable by the holders of Parity Shares, if any, then all such
assets of the Company shall be distributed ratably among the holders
of the Series A Shares and the holders of Parity Shares, if any, in
proportion to the amounts that each would have been entitled to
receive if such assets were sufficient to permit distribution in full
as aforesaid. Neither the consolidation or merger of the Company with
or into any corporation or corporations, nor the sale, lease or
transfer by the Company of all or any part of its assets, nor the
reduction of the authorized or issued shares of the Company of any
class, whether now or hereafter authorized, shall be deemed to be a
liquidation, dissolution or winding up of the Company for the purposes
of this Section 1. Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, setting the
payment date and the place where the amounts to be distributed shall
be paid and containing a reference to the conversion option granted by
Section 2 hereof, shall be given not less than thirty (30) days prior
to the payment date stated therein to the holders of record of the
Series A Shares at their respective addresses as the same shall appear
on the stock ledger of the Company.
2. Conversion.
(a) Subject to the terms and conditions of this Section 2,
the Series A Shares shall be convertible, at any time and from time to
time, at the option of the holder thereof, into Common Shares by
surrender of the certificate or certificates for the Series A Shares
to be so converted, duly endorsed, at the principal office of the
Company (or at such other place or places as may be designated by the
Company from time to time by notice sent to the holders of the Series
A Shares at their respective addresses as the same shall appear on the
stock ledger of the Company) or at the corporate trust office of any
transfer agent for the Series A Shares at any time during normal
business hours, together with notice that the holder elects to convert
such Series A Shares, or a stated number of such shares, in accordance
with the provisions of this Section 2. Such notice shall also state
the name or names (with addresses) in which the certificate or
certificates for Common Shares shall
2
<PAGE> 11
be issued. The number of Common Shares that any such holder shall
receive in return for each Series A Share converted by such holder
shall be computed by dividing (x) $1.1364 (as adjusted for any stock
split, reverse stock split, stock dividend or similar event resulting
in a change in the Series A Shares) by (y) the Conversion Price then
in effect.
(b) As promptly as practicable after exercise by any holder of
Series A Shares of such holder's option to convert Series A Shares
pursuant to the provisions of this Section 2, the Company shall
deliver or cause to be delivered to or upon the written order of such
holder one or more certificates representing the number of Common
Shares issuable upon such conversion, issued in such name or names as
such holder may direct, together with, if the certificate or
certificates surrendered evidence a greater number of Series A Shares
than the number of Series A Shares to be converted, one or more
certificates evidencing the Series A Shares not to be converted,
issued in such name or names as such holder may direct, and
accompanied by any cash in respect of any fractional interest in a
Common Share issuable upon such conversion. Each such conversion
shall be deemed to have been made immediately prior to the close of
business on the day the option to convert is exercised, and all rights
of the converting holder as the holder of the Series A Shares
surrendered for conversion shall cease at such time and the person or
persons in whose name or names the certificate or certificates for the
Common Shares issuable upon conversion are to be issued shall be
treated for all purposes as having become the record holder or holders
thereof at such time, except that, if the date of exercise of the
conversion option is a date when the stock ledger of the Company is
closed, such person or persons shall be deemed to have become the
holder or holders of such shares at the close of business on the next
succeeding date on which the stock ledger is open.
(c) The initial Conversion Price shall be $0.2841. The
Conversion Price shall be subject to adjustment as follows:
A. If the Company shall pay a dividend or make any
other distribution to all holders of the Common Shares payable
in Common Shares or shall subdivide its outstanding Common
Shares into a greater number of shares, the Conversion Price
in effect immediately prior thereto shall be proportionately
reduced, and if the Company shall combine its outstanding
3
<PAGE> 12
Common Shares into a smaller number of shares, the Conversion
Price in effect immediately prior thereto shall be
proportionately increased. An adjustment made pursuant to this
subdivision A shall become effective as of the date the record
is taken for such dividend or distribution or such subdivision
or combination or, if no record is taken, the date as of which
the record holders of Common Shares entitled to such payment
or other distribution or to participate in such subdivision or
combination are determined.
B. If on or after December 24, 1986, the Company
issues or sells, or in accordance with subdivision C below is
deemed to have issued or sold, any Common Shares (other than
(i) Common Shares issued or sold pursuant to the exercise of
options, warrants or rights outstanding as of December 24,
1986, (ii) by reason of the grant of options under the Tom
Brown, Inc. Incentive Stock Option Plan, to purchase up to a
total of 600,000 Common Shares (as adjusted pursuant to the
provisions of the plan designed to protect against dilution)
at a per share purchase price of not less than 100% of the
fair market value of a Common Share on the date of grant and
Common Shares issued or sold pursuant to the exercise of such
options, (iii) issuances or sales of Common Shares for which
an adjustment of the Conversion Price is made pursuant to
subdivision A above, or (iv) pursuant to transactions for
which appropriate provision is made pursuant to Section 2(d)
or 2(e) hereof) for a consideration per share less than the
Conversion Price or the Market Price, as the case may be, in
effect immediately prior to such time, then forthwith upon
such issuance or sale the Conversion Price shall be adjusted
to that Conversion Price determined by multiplying the
Conversion Price then in effect by a fraction (1) the
numerator of which shall be the number of Common Shares
outstanding immediately prior to the issuance or sale of such
additional Common Shares plus the number of Common Shares
which the aggregate consideration received by the Company for
the total number of Common Shares so issued or sold would
purchase at the Conversion Price or the Market Price, as the
case may be, in effect immediately before such
4
<PAGE> 13
adjustment, and (2) the denominator of which shall be the
number of Common Shares outstanding immediately after the
issuance or sale of such Common Shares.
C. For the purposes of determining the adjusted
Conversion Price under subdivision B above, the following
shall be applicable:
(i) If on or after December 24, 1986, the
Company in any manner grants any right or option to
subscribe for or to purchase Common Shares or any
stock or other securities convertible into or
exchangeable for Common Shares (such rights or
options being herein called "Options" and such
convertible or exchangeable stock or securities being
herein called "Convertible Securities") and the
lowest price per share for which any one Common Share
is issuable upon the exercise of any such Option or
upon conversion or exchange of any such Convertible
Security is less than the Conversion Price or the
Market Price, as the case may be, in effect
immediately prior to the time of the granting of such
Option, then the Conversion Price shall be adjusted
as provided in subdivision B above on the basis that
the maximum number of Common Shares issuable upon the
exercise of all such Options and upon conversion or
exchange of all such Convertible Securities shall be
deemed to have been issued as of the date of such
grant and the aggregate consideration for such
maximum number of additional Common Shares shall be
deemed to be the minimum consideration received or
receivable by the Company (if any) upon the issuance
of such additional Common Shares on the exercise of
the Options or the conversion or exchange of the
Convertible Securities. For the purposes of this
paragraph (i), the "lowest price per share for which
any one Common Share is issuable" shall be equal to
the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with
respect to any one Common Share upon the granting of
the Option, upon the exercise of the Option, and upon
5
<PAGE> 14
the conversion or exchange of the Convertible
Security. No further adjustment of the Conversion
Price shall be made upon the actual issue of such
Common Shares or of such Convertible Securities upon
the exercise of such Option or upon the actual issue
of such Common Shares upon conversion or exchange of
such Convertible Securities.
(ii) If on or after December 24, 1986, the
Company in any manner issues or sells any Convertible
Security and the lowest price per share for which any
one Common Share is issuable upon conversion or
exchange thereof is less than the Conversion Price or
the Market Price, as the case may be, in effect
immediately prior to the time of such issuance or
sale, then the Conversion Price shall be adjusted as
provided in subdivision B above on the basis that the
maximum number of Common Shares issuable upon
conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of
the date of such issue or sale and the aggregate
consideration for such maximum number of additional
Common Shares shall be deemed to be the minimum
consideration received or receivable by the Company
(if any) upon the issuance of such additional Common
Shares or the issuance or sale of such Convertible
Securities and the conversion or exchange thereof.
For the purposes of this paragraph (ii), the "lowest
price per share for which any one Common Share is
issuable" shall be equal to the sum of the lowest
amounts of consideration (if any) received or
receivable by the Company with respect to any one
Common Share upon the issuance or sale of such
Convertible Security and upon the conversion or
exchange of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon
the actual issue of such Common Shares upon
conversion or exchange of such Convertible Security,
and if any such issue or sale of such Convertible
Security is made upon exercise of any Options for
which adjustments of the
6
<PAGE> 15
Conversion Price had been or are to be made pursuant
to other provisions of this subdivision C, no further
adjustment of the Conversion Price shall be made by
reason of such issue or sale.
(iii) If the purchase price provided for in
any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any
Convertible Security, or the rate at which any
Convertible Security is convertible into or
exchangeable for Common Shares changes at any time,
the Conversion Price in effect at the time of such
change shall be readjusted to the Conversion Price
that would have been in effect at such time had such
Option or Convertible Security originally provided
for such changed purchase price, changed additional
consideration or changed conversion rate, as the case
may be, at the time initially granted, issued or
sold; provided, however, that if such adjustment of
the Conversion Price shall result in an increase in
the Conversion Price then in effect, such adjustment
shall not be effective until thirty (30) days after
notice thereof has been given to all holders of the
Series A Shares at their respective addresses as the
same shall appear on the stock ledger of the Company.
(iv) Upon the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Security without the exercise of any such
Option or right, the Conversion Price then in effect
shall be adjusted to the Conversion Price that would
have been in effect at the time of such expiration or
termination had such Option or Convertible Security,
to the extent outstanding immediately prior to such
expiration or termination, never been issued;
provided, however, that if the Company shall
accelerate the expiration of any Option or the
termination of any right to convert or exchange any
Convertible Security, such adjustment shall not be
effective until thirty (30)
7
<PAGE> 16
days after notice of such acceleration has been given
to all holders of the Series A Shares.
(v) If any Common Share, Option or
Convertible Security is issued or sold or deemed to
have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount
received by the Company therefor, without deduction
therefrom of any expenses incurred or any
underwriting commissions or concessions paid or
allowed by the Company in connection therewith.
Except as provided below in this subdivision (v), in
case any Common Share, Option or Convertible Security
is issued or sold or deemed to have been issued or
sold for a consideration other than cash, the amount
of the consideration other than cash received by the
Company shall be the fair value of such
consideration, determined in good faith by the Board
of Directors of the Company, except where such
consideration consists of securities, in which case
the amount of consideration received by the Company
shall be the Market Price thereof as of the date of
receipt, but in each such case without deduction of
any expenses incurred or any underwriting commission
or concessions paid or allowed by the Company in
connection therewith. In computing the Market Price
of a note or other obligation that is not listed on
any securities exchange or quoted in the NASDAQ
System or for which market quotations are not
otherwise readily available, the total consideration
to be received by the Company thereunder (including
interest) shall be discounted to present value at the
prime rate of interest of InterFirst Bank Dallas,
N.A., (or its successor in interest) in effect at the
time the note or obligation is deemed to have been
issued. If any Common Share, Option or Convertible
Security is issued in connection with any merger in
which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be
the fair value, as determined in good
8
<PAGE> 17
faith by the Board of Directors, of such portion of
the net assets and business of the nonsurviving
corporation as is attributable to such Common Share,
Option or Convertible Security, as the case may be.
If any Common Share, Option or Convertible Security
is issued in payment or satisfaction of any dividend
upon any class of stock other than Common Shares, the
amount of consideration therefor will be deemed to be
equal to the amount of such dividend so paid or
satisfied.
(vi) In case any Option is issued in
connection with the issue or sale of other securities
of the Company, together comprising one integrated
transaction in which no specific consideration is
allocated to such Option by the parties thereto, the
Option shall be deemed to have been granted for
consideration of $0.01.
(vii) If the purchase price provided for in
any option, warrant or right referred to in clause
(i) or (ii) of the parenthetical in subdivision B
above shall change at any time (other than by reason
of the provisions designed to protect against
dilution), then such change shall be deemed the
issuance of a new Option as of the date of such
change for the purposes of said subdivision B.
(d) If the Company shall distribute (pursuant to a dividend or
otherwise) to all holders of the Common Shares shares of its capital
stock (other than Common Shares), evidences of indebtedness, assets or
other property (excluding dividends payable in cash out of surplus
(determined in accordance with generally accepted accounting
principles, consistently applied)), or options, warrants or rights to
subscribe for or to purchase securities of the Company or other
property, then, in each such case, appropriate provision shall be made
(without any adjustment of the Conversion Price) to ensure that the
holder of each Series A Share then outstanding shall have the right to
receive, upon conversion of such Series A Share, with respect to the
Common Shares such holder shall receive upon conversion and in
addition thereto and without payment of any consideration therefor,
such capital stock, evidences of indebtedness, assets or other
property, or such options,
9
<PAGE> 18
warrants or rights, that such holder would have received upon such
distribution had such holder been the holder of record of the number
of Common Shares into which such Series A Share could have been
converted immediately prior to such distribution on the date on which
the record was taken for such distribution, or, if no record was
taken, the date as of which the record holders of Common Shares
entitled to such distribution were determined.
(e) In case of (i) any reclassification or change of the
outstanding Common Shares (other than a change in par value, or from
par value to no par value, or from no par value to par value, or a
change in the Common Shares as a result of a subdivision or
combination for which an adjustment of the Conversion Price is made
pursuant to subdivision A of Section 2(c), or (ii) any consolidation
or merger of the Company or any Subsidiary with or into another
entity, or (iii) any sale or conveyance to another corporation of the
assets of the Company as an entirety or substantially as an entirety,
as a result of which in any such case the holders of all the Common
Shares are entitled to receive (either directly or upon subsequent
liquidation pursuant to a plan of liquidation adopted in connection
with such transaction) stock or other securities or property with
respect to or in exchange for the Common Shares, then, in each such
case, without any adjustment of the Conversion Price, effective as of
the effective time of any such reclassification, change,
consolidation, merger, sale or conveyance, as the case may be, the
holder of each Series A Share then outstanding shall have the right to
receive or acquire, upon conversion of such Series A Share, in lieu of
or in addition to the Common Shares theretofore receivable upon such
conversion, the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of
Common Shares into which such Series A Share could have been converted
immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. The Company shall not effect any such
consolidation, merger, sale or conveyance unless prior to or
simultaneously with the consummation thereof the successor corporation
(if other than the Company) resulting from such consolidation or
merger or the entity purchasing such assets assumes by written
instrument (in form reasonably satisfactory to the holders of a
majority of the Series A Shares then outstanding) the obligation to
deliver to each such holder such shares of stock or other securities
or property as, in accordance with the foregoing provisions of this
subsection (e), such holder may be entitled to
10
<PAGE> 19
receive or acquire. In each such case, appropriate adjustments shall
be made in the application of the provisions of this Section 2 with
respect to the rights and interests thereafter of the holders of the
Series A Shares, to the end that the provisions of this Section 2
shall thereafter be applicable, as nearly as reasonably may be, to the
stock or other securities or property thereafter deliverable in lieu
of Common Shares upon the conversion of Series A Shares. The
provisions of this subsection (e) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and
conveyances. If the occurrence of any one event shall give rise to an
adjustment under both this subsection (e) and Section 2(d) hereof,
then the terms of this subsection (e) shall control.
(f) If on or after December 24, 1986, the Company shall take
any action affecting the Common Shares, other than an action described
in subsections (c), (d) or (e) above, which, in the opinion of the
Board of Directors of the Company, would have a material adverse
effect upon the conversion option granted by this Section 2, the
Conversion Price shall be adjusted in such manner and at such time as
the Board may in good faith determine to be equitable in the
circumstances.
(g) Except as otherwise provided in this Section 2, if an
adjustment to the Conversion Price is required under more than one
subsection or subdivision of this Section 2, then the Conversion Price
shall be adjusted in the manner provided herein which will result in
the greater reduction in the Conversion Price.
(h) Any determination as to fair value or as to whether any
adjustment (including an adjustment of the Conversion Price) is
required hereunder, or as to the amount of any such adjustment, if
required, shall be binding upon the holders of the Series A Shares and
the Company if made in good faith by the Board of Directors of the
Company.
(i) Whenever the Conversion Price is adjusted as provided in
this Section 2, then, in each such case, the Company shall notify the
transfer agent, if any, for the Series A Shares and shall promptly
give to the holders of the Series A Shares who are holders of record
not more than fifteen (15) days before the date such notice is given,
a notice stating (i) the event requiring the adjustment, (ii) the
method by which the adjustment was calculated (including a description
of the basis on which the Board of Directors of the Company made any
determination hereunder), and (iii) the adjusted
11
<PAGE> 20
Conversion Price then and thereafter effective under this Section 2.
An affidavit of the transfer agent for the Series A Shares or of the
Secretary of the Company that any such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein.
(j) In case at any time:
(i) the Board of Directors of the Company shall
declare a dividend (or any other distribution) on the Common
Shares; or
(ii) the Board of Directors of the Company shall
authorize the granting to all holders of the Common Shares of
options, warrants or rights to subscribe for or to purchase
any shares of stock of any class or of any other options,
warrants or rights; or
(iii) the Board of Directors of the Company shall
authorize any reclassification of the Common Shares, any
consolidation or merger of the Company or any Subsidiary with
or into another corporation, or the sale or conveyance of all
or a substantial portion of the assets of the Company; or
(iv) the Board of Directors of the Company shall
authorize the voluntary liquidation, dissolution or winding up
of the Company;
then the Company shall cause to be given to each holder of Series A
Shares, as promptly as possible but in any event at least twenty (20)
days (sixty (60) days in the case of any merger or consolidation to
which the Company or any Subsidiary is a party or the sale or
conveyance of all or a substantial portion of the Company's assets)
prior to the applicable date hereinafter specified, a notice stating
(1) the date on which a record is to be taken for the purposes of such
dividend, distribution or granting of options, warrants or rights, 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 options, warrants or rights are to be determined, or (2) the date
on which such reclassification, consolidation, merger, sale,
conveyance, liquidation, dissolution or winding up is expected to
become effective, the terms of such transaction, and the date as of
which it is expected that holders of Common Shares of record shall be
entitled to exchange their
12
<PAGE> 21
Common Shares for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, conveyance,
liquidation, dissolution or winding up. Failure to give any such
notice or any defect therein shall not affect the validity of the
proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
Nothing contained in this subsection (j) shall be deemed to adversely
affect the rights of the holders of the Series A Shares, under the
Delaware General Corporation Law or under the Certificate of
Incorporation of the Company, to be given notice of, or to vote upon,
a proposal to effect any transaction described in this subsection (j).
(k) No fractional Common Shares shall be issued upon the
conversion of Series A Shares. If more than one Series A 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 Series A Shares so
surrendered. If any fractional interest in a Common Share would,
except for the provisions of this subsection (k), be deliverable upon
the conversion of any Series A Share or Shares, the Company shall, in
lieu of delivering the fractional share therefor, pay to the holder of
such surrendered Series A Share or Shares an amount in cash (computed
to the nearest cent) equal to such fractional interest multiplied by
the Market Price of a Common Share as of the close of business on the
date of conversion.
(l) The Company shall as promptly as practicable seek the
approval of its shareholders to cause its Certificate of Incorporation
to be amended to increase the number of authorized Common Shares to a
number sufficient to permit the conversion of all outstanding Series A
Shares from time to time as necessary under the circumstances. Upon
any issuance of Series A Shares, the Company shall reserve a number of
Common Shares sufficient to permit conversion of all of such Series A
Shares at such time; provided, however, that if and to the extent the
number of authorized Common Shares is not then sufficient to permit
conversion of all then issued Series A Shares, all then authorized but
unissued Common Shares which are not otherwise reserved shall be
reserved for purposes of permitting conversion of a portion of such
Series A Shares and after approval by the Company's shareholders of an
amendment to the Company's Certificate of Incorporation increasing the
number of authorized Common Shares, the Company shall reserve such
number of newly authorized Common Shares so as to permit, immediately
following such approval, the conversion of all such Series A Shares,
and thereafter the Company
13
<PAGE> 22
shall at all times have reserved and available out of its authorized
but unissued Common Shares solely for the purpose of issue upon
conversion of the Series A Shares, as provided in this Section 2, such
number of Common Shares as shall from time to time be sufficient to
permit the conversion of all outstanding Series A Shares. Upon the
issuance thereof upon conversion, all in accordance with the
provisions of this Section 2, such Common Shares shall be validly
issued, fully paid and nonassessable. Series A Shares converted
pursuant to this Section 2 shall be cancelled and shall not be
reissued. Upon any conversion, no adjustment shall be made for
dividends on the Common Shares payable to holders of record of Common
Shares on a date prior to the date of such conversion.
(m) The issuance of certificates for Common Shares shall be
made without charge for any tax in respect of such issuance. However,
if any such certificate is to be issued in the name other than that of
the holder of the converted Series A Shares, the Company shall not be
required to issue or deliver any certificate or certificates unless
(i) the holder has paid to the Company the amount of any tax that may
be payable in respect of any transfer involved in such issuance or
shall establish to the satisfaction of the Company that such tax has
been paid and (ii) the certificate for the Series A Shares surrendered
for conversion shall be duly endorsed or accompanied by a duly
executed stock power.
(n) If the issuance of any Common Shares upon the conversion
of Series A Shares requires approval of or by any securities exchange
before such shares may be issued, and the Company determines to secure
such approval, then the Company may suspend the conversion of all
Series A Shares for the period during which it is endeavoring to
secure such approval.
3. Voting Rights. The holders of the Series A Shares shall
not have, and shall not be entitled to exercise, exercise, any voting
rights with respect to the Series A Shares, except for such voting
rights which such holders may be entitled to exercise as holders of a
class or series of capital stock of the Company pursuant to, under or
in accordance with specific provisions of the Delaware General
Corporation Law.
4. Dividends.
(a) The holders of the Series A Shares shall be entitled to
receive out of funds legally available therefor, cumulative cash
dividends at the rate of 6% per annum of the Liquidation Value per
Series A Share
14
<PAGE> 23
($1.1364, as adjusted for any stock split, reverse stock split, stock
dividend or similar event resulting in a change in the Series A
Shares) (the "Dividend Rate"), payable on June 30 of each year in
which any Series A Shares shall be outstanding, commencing June 30,
1987, to the holders of record of such Series A Shares on the
respective dates fixed for such purpose by the Board of Directors of
the Company in advance of payment of each dividend. Dividends on each
Series A Share shall be cumulative from the date of issue thereof.
The first dividend payable with respect to any Series A Share shall be
computed by multiplying the Dividend Rate by a fraction of which (i)
the numerator shall be the number of days from the date of issue of
such Series A Share through the date as of which such first dividend
is payable, inclusive, and (ii) the denominator shall be 360.
(b) All other equity securities of the Company, including,
without limitation, the Senior Shares, if any, and the Junior Shares,
if any, shall rank junior to the Series A Shares in the payment of
dividends.
(c) To the extent any dividend accrues on a Series A Share,
and is not fully paid in the manner specified in Section 4(a) hereof,
such dividend (or, if paid in part, the unpaid portion thereof) shall
be added to the Liquidation Value of such Series A Share and shall
remain a part of such Liquidation Value until such dividend (or unpaid
portion thereof) is paid. In addition, any such unpaid dividend shall
not result in an adjustment to the Conversion Price, and any such
unpaid dividend shall no longer be payable to a holder of such Series
A Share upon the effective date of the conversion thereof into Common
Shares.
(d) If at any time the Company pays less than the total amount
of dividends then accrued and payable with respect to the Series A
Shares, such payment shall be distributed ratably among the holders of
the Series A Shares based upon the aggregate Liquidation Value of the
Series A Shares then held by each such holder.
(e) So long as any Series A Shares shall remain outstanding,
no dividend whatsoever (other than a dividend payable in Common
Shares) shall be declared or paid on any Junior Shares, nor shall any
Junior Shares be redeemed or purchased by the Company or any
Subsidiary thereof, nor shall any monies be paid to or made available
for a sinking fund for the redemption or purchase of any Junior
Shares, unless in each such instance full dividends on all outstanding
Series A
15
<PAGE> 24
Shares for all past dividend periods and the dividend on all
outstanding Series A Shares for the then current dividend period shall
have been paid and sufficient funds set apart therefor.
5. Definitions.
(a) As used herein, the following terms shall have the
meanings specified in the sections listed below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Company Preamble
Conversion Price 2(c)
Convertible Securities 2(c)C(i)
Liquidation Value 1
Options 2(c)C(i)
Series A Shares Preamble
</TABLE>
(b) As used herein, the following terms shall have the
following meanings:
"Common Shares" shall mean and include the shares of Common
Stock, par value $0.10 per share, of the Company as constituted on the
date of the original issue of the Series A Shares and shall also
include any class of shares of capital stock of the Company thereafter
authorized that shall not be limited to a fixed sum or percentage in
respect of the right of the holders thereof to receive dividends or to
participate in the assets of the Company distributable to shareholders
upon any liquidation, dissolution or winding up of the Company;
provided, however, that the shares into which the Series A Shares
shall be convertible pursuant to Section 2 hereof shall mean and
include, and, as used in Section 2 hereof, the term "Common Shares"
shall mean and include, only the Common Stock, par value $0.10 per
share, of the Company as constituted on the date of the original issue
of the Series A Shares or (i) in the case of any reclassification,
change, consolidation, merger, sale or conveyance of the character
referred to in Section 2(e) hereof, the shares or other securities or
property deliverable in lieu thereof or (ii) in the case of any change
or reclassification of the outstanding Common Shares issuable upon
conversion of the Series A Shares as a result of a subdivision or
combination or consisting of a change in par value, or from par value
to no par value,
16
<PAGE> 25
or from no par value to par value, such Common Shares as so changed or
reclassified.
"Junior Shares" shall mean (i) Common Shares and (ii) all
those classes and series of preferred or special shares which, by the
terms of the Certificate of Incorporation of the Company, shall be
subordinate to the Series A Shares with respect to the right of the
holders thereof to participate in the assets of the Company
distributable to shareholders upon any liquidation, dissolution or
winding up of the Company.
"Market Price" of any security shall mean the average of the
closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there have been
no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such
date, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as
of 4:00 p.m., New York time, or, if on any day such security is not
quoted in the NASDAQ System, the average of the high and low bid and
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Inc., or any similar
successor organization, in each such case averaged over a period of 21
days consisting of the day as of which "Market Price" is being
determined and the 20 consecutive business days prior to such date.
If at any time such security is not listed on any securities exchange
or quoted in the NASDAQ System or the over-the-counter market, the
"Market Price" of such security shall be the fair value thereof
determined in good faith by the Board of Directors of the Company.
"Parity Shares" shall mean all those classes and series of
preferred or special shares which, by the terms of the Certificate of
Incorporation of the Company, shall be on a parity with the Series A
Shares with respect to the right of the holders thereof to participate
in the assets of the Company distributable to shareholders upon any
liquidation, dissolution or winding up of the Company.
"Senior Shares" shall mean all those classes and series of
preferred or special shares which, by the terms of the Certificate of
Incorporation of the Company, shall be senior to the Series A Shares
with respect to the right of the holders thereof to participate in the
assets of the Company distributable to shareholders upon any
liquidation, dissolution or winding up of the Company.
17
<PAGE> 26
"Subsidiary" shall mean any entity of which shares of stock or
other equity interests having at least a majority of the ordinary
voting power in electing the board of directors or similar governing
body are, at the time as of which any determination is being made,
owned by the Company either directly or indirectly through one or more
Subsidiaries.
8. Miscellaneous.
(a) If any other class or series of preferred or special
shares of the Company, whether ranking prior to or on a parity with or
junior to the Series A Shares as to dividends or assets, shall be
created, nothing herein shall prevent the holders of any such other
class or series of preferred or special shares from being given any
designations, preferences, limitations or relative rights authorized
by law and the Certificate of Incorporation of the Company, except as
otherwise expressly provided herein with respect to the foregoing
matters.
(b) All notices or other communications referred to herein,
except as otherwise expressly provided, shall be hand delivered or
given by registered or certified mail, return receipt requested,
postage prepaid, and shall be deemed to have been given when so hand
delivered or mailed.
DATED this 8th day of April, 1987.
/s/ Donald L. Evans
-------------------------------
Donald L. Evans, President
/s/ James M. Alsup
- - --------------------------------
James M. Alsup, Secretary
18
<PAGE> 27
CERTIFICATE OF MERGER
MERGING
TOM BROWN, INC.
A NEVADA CORPORATION
INTO
TOM BROWN, INC.
A DELAWARE CORPORATION
(Pursuant to Section 252 of the General Corporation
Law of the State of Delaware)
Tom Brown, Inc., a corporation organized under the laws of the State
of Delaware, does hereby certify that:
1. The names and states of incorporation of each of the
constituent corporations are:
Name of Corporation State
------------------- -----
Tom Brown, Inc. Nevada
Tom Brown, Inc. Delaware
2. A Plan and Agreement of Merger has been approved, adopted,
certified, executed and acknowledged by each of the constituent corporations in
accordance with Section 252(c) of the General Corporation Law of the State of
Delaware.
3. The name of the surviving corporation is Tom Brown, Inc., a
Delaware corporation.
4. The Certificate of Incorporation of Tom Brown, Inc., a
Delaware corporation, shall be the Certificate of Incorporation of the
surviving corporation.
5. The executed Plan and Agreement of Merger is on file at the
principal place of business of the surviving corporation as follows:
Tom Brown, Inc.
500 Empire Plaza
Midland, Texas 79701
6. A copy of the Plan and Agreement of Merger will be furnished
by the surviving corporation on request and without cost, to any stockholder of
any constituent corporation.
7. The authorized capital stock of Tom Brown Inc., Nevada, is
150,000,000 shares, of which 100,000,000 shares are common stock and 50,000,000
shares are preferred stock.
<PAGE> 28
IN WITNESS WHEREOF, said Tom Brown, Inc., a Delaware corporation, has
caused this certificate to be signed by Donald L. Evans, its President, and
attested by James M. Alsup, its Secretary, this 9th day of April, 1987.
By: /s/ Donald L. Evans
-----------------------------------
Donald L. Evans, President
ATTEST:
/s/ James M. Alsup
- - ------------------------------
James M. Alsup, Secretary
THE STATE OF TEXAS )
)
COUNTY OF MIDLAND )
This instrument was acknowledged before me on April 9, 1987, by Donald
L. Evans, President of Tom Brown, Inc., a Delaware corporation, on behalf of
said Corporation.
/s/ Rita K. Turner
------------------------------------
Name Rita K. Turner
--------------------------------
Notary Public in and for
the State of Texas
My Commission Expires:
10/23/89
- - ------------------------
<PAGE> 29
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
TBI MANAGEMENT, INC.
INTO
TOM BROWN, INC.,
A DELAWARE CORPORATION
(Pursuant to Sections 253 of the
General Corporation Law of the State of Delaware)
TOM BROWN, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify that:
1. Tom Brown, Inc. is the parent corporation of TBI Management,
Inc., a Texas corporation, and Tom Brown, Inc. owns 100% of the outstanding
shares of stock of TBI Management, Inc., and therefore is entitled to Merge TBI
Management, Inc. into Tom Brown, Inc. under the provisions of Section 253 of
the General Corporation Law of the State of Delaware.
2. The provision for making this Certificate of Ownership and
Merger is contained in the Tom Brown, Inc. Unanimous Consent of Directors,
attached hereto as Exhibit "A".
3. The names and state of incorporation of each of the
constituent corporations are:
Name of Corporation State
------------------- -----
TBI Management, Inc. Texas
Tom Brown, Inc. Delaware
4. The name of the surviving corporation is Tom Brown, Inc., a
Delaware corporation.
5. The principal place of business of the surviving corporation
is:
Tom Brown, Inc.
500 Empire Plaza
Midland, Texas 79701
Attn: Mr. Donald L. Evans
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Ownership and Merger to be signed on its behalf by its President and attested
by its Secretary this 25th day of April, 1988.
Attest: TOM BROWN, INC.
/s/ James M. Alsup By: /s/ Donald L. Evans
- - ------------------------- ------------------------------
James M. Alsup, Secretary Donald L. Evans, President
<PAGE> 30
EXHIBIT A
SPECIAL MEETING UNANIMOUS CONSENT
OF THE DIRECTORS OF TOM BROWN, INC.
PURSUANT TO SECTION 141(f) OF THE
GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
The undersigned, being all of the Directors of TOM BROWN, INC. (the
"Corporation"), and being entitled to vote upon the resolutions hereinafter set
forth, do hereby consent that the resolutions set forth below are deemed to be
adopted to the same extent and to have the same force and effect as if adopted
by unanimous consent in a formal meeting of the Board of Directors of the
Corporation duly called and held for the purpose of acting upon a proposal to
adopt such resolutions:
"RESOLVED, That the Corporation shall merge with its 100% owned
subsidiary corporation, TBI Management, Inc., a Texas corporation,
pursuant to the provisions of Section 253 of the General Corporation
Law of the State of Delaware and Articles 5.07B(2) and (3) and 5.16 of
the Business Corporation Act of the State of Texas.
"RESOLVED, That the officers of the Corporation shall be fully
authorized to take any actions necessary to accomplish the merger
between the Corporation and TBI Management, Inc.
"RESOLVED, That the Corporation shall be the surviving corporation in
such merger, and that TBI Management, Inc. shall cease to exist.
"RESOLVED, That such merger shall be effective as of April 25, 1988."
ADOPTED April 25, 1988.
/s/ Thomas C. Brown
-----------------------------------
Thomas C. Brown, Director
/s/ Donald L. Evans
-----------------------------------
Donald L. Evans, Director
/s/ Edward W. LeBaron, Jr.
-----------------------------------
Edward W. LeBaron, Jr., Director
/s/ Joe G. Roper
-----------------------------------
Joe G. Roper, Director
<PAGE> 31
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
GENERAL RESOURCES, INC.
INTO
TOM BROWN, INC.,
A DELAWARE CORPORATION
(Pursuant to Sections 253 of the
General Corporation Law of the State of Delaware)
TOM BROWN, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify that:
1. Tom Brown, Inc. is the parent corporation of General
Resources, Inc., a Texas corporation, and Tom Brown, Inc. owns 100% of the
outstanding shares of stock of General Resources, Inc., and therefore is
entitled to merge General Resources, Inc. into Tom Brown, Inc. under the
provisions of Section 253 of the General Corporation Law of the State of
Delaware.
2. The provision for making this Certificate of Ownership and
Merger is contained in the Tom Brown, Inc. Unanimous Consent of Directors,
attached hereto as Exhibit A.
3. The names and state of incorporation of each of the
constituent corporations are:
Name of Corporation State
------------------- -----
General Resources, Inc. Texas
Tom Brown, Inc. Delaware
4. The name of the surviving corporation is Tom Brown, Inc., a
Delaware corporation.
5. The principal place of business of the surviving corporation
is:
Tom Brown, Inc.
500 Empire Plaza
Midland, Texas 79701
Attn: Mr. Donald L. Evans
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Ownership and Merger to be signed on its behalf by its President and attested
by its Secretary this 25th day of April, 1988.
Attest: TOM BROWN, INC.
/s/ James M. Alsup By: /s/ Donald L. Evans
- - ------------------------- ----------------------------
James M. Alsup, Secretary Donald L. Evans, President
<PAGE> 32
EXHIBIT A
SPECIAL MEETING UNANIMOUS CONSENT
OF THE DIRECTORS OF TOM BROWN, INC.
PURSUANT TO SECTION 141(f) OF THE
GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
The undersigned, being all of the Directors of TOM BROWN, INC. (the
"Corporation"), and being entitled to vote upon the resolutions hereinafter set
forth, do hereby consent that the resolutions set forth below are deemed to be
adopted to the same extent and to have the same force and effect as if adopted
by unanimous consent in a formal meeting of the Board of Directors of the
Corporation duly called and held for the purpose of acting upon a proposal to
adopt such resolutions:
"RESOLVED, That the Corporation shall merge with its 100% owned
subsidiary corporation, General Resources, Inc., a Texas corporation,
pursuant to the provisions of Section 253 of the General Corporation
Law of the State of Delaware and Articles 5.07B(2) and (3) and 5.16 of
the Business Corporation Act of the State of Texas.
"RESOLVED, That the officers of the Corporation shall be fully
authorized to take any actions necessary to accomplish the merger
between the Corporation and General Resources, Inc.
"RESOLVED, That the Corporation shall be the surviving corporation in
such merger, and that General Resources, Inc. shall cease to exist.
"RESOLVED, That such merger shall be effective as of April 25, 1988."
ADOPTED April 25, 1988.
/s/ Thomas C. Brown
------------------------------------
Thomas C. Brown, Director
/s/ Donald L. Evans
------------------------------------
Donald L. Evans, Director
/s/ Edward W. LeBaron, Jr.
------------------------------------
Edward W. LeBaron, Jr., Director
/s/ Joe G. Roper
------------------------------------
Joe G. Roper, Director
<PAGE> 33
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does
hereby certify as follows:
FIRST: Pursuant to the provisions of the Delaware General Corporation
Law, the Board of Directors and the stockholders of the Corporation adopted an
amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the
Delaware General Corporation Law, the purpose of which amendment is to effect a
one-for-twenty reverse stock split:
"RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing Paragraph Fourth thereof, so that as amended, said
Paragraph Fourth shall read as follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 12,500,000, of
which 2,500,000 shares shall be Preferred Stock, par value
$.10 per share, and 10,000,000 shares shall be Common Stock,
$.10 par value per share. All of such shares shall, upon
issuance thereof, be fully paid and non-assessable.
The designations, preferences, limitations and relative rights
of the shares of each class that the Corporation shall have
authority to issue are as follows:
A. Preferred Stock. The Board of Directors is hereby
expressly vested with the authority to adopt a
resolution or resolutions providing for the issue of
authorized but unissued shares of Preferred Stock,
which shares may be issued from time to time in one
or more series and in such amounts as may be
determined by the Board of Directors in such
resolution or resolutions. The designations,
preferences, limitations or relative rights of the
Preferred Stock and the qualifications, limitations
or restrictions, if any, of such preferences and/or
rights (collectively, the "Series Terms") may vary
between series in any and all respects and shall be
such as are
<PAGE> 34
stated and expressed in a resolution or resolutions
providing for the creation or revision of such Series
Terms set forth in a Certificate of Designations (a
"Preferred Stock Series Resolution") adopted by the
Board of Directors; provided that all shares of any
one series of Preferred Stock so designated by the
Board of Directors shall be identical in all respects
except that shares of any one series issued at
different times may differ as to the dates from which
dividends thereon may be cumulative. The powers of
the Board of Directors with respect to the Series
Terms of a particular series shall include, but not
be limited to, determination of the following:
1. The right to receive dividends, if any, and
the rate, dates, terms and other conditions
on which such dividends shall be payable;
2. The nature of the dividend payable, if any,
with respect to shares of such series as
cumulative, non-cumulative or partially
cumulative;
3. The redemption rights of such series
including the price at and the terms and
conditions on which such shares may be
redeemed;
4. The amount payable upon shares in the event
of involuntary liquidation;
5. The amount payable upon shares in the event
of voluntary liquidation;
6. Sinking fund provisions for the redemption or
purchase of shares;
7. The terms and conditions on which shares may
be converted, if the shares of any series are
issued with the privilege of conversion;
8. Voting rights, if any; and
2
<PAGE> 35
9. Repurchase obligations of the Corporation
with respect to the shares of each series.
Any of the Series Terms, including voting rights, of
any series may be made dependent upon facts
ascertainable outside this Certificate of
Incorporation and the Preferred Stock Series
Resolution, provided that the manner in which such
facts shall operate upon such Series Terms is clearly
and expressly set forth herein or in the Preferred
Stock Series Resolution.
Subject to the provisions of this Paragraph Fourth,
shares of one or more series of Preferred Stock may
be authorized or issued from time to time as shall be
determined by and for such consideration as shall be
fixed by the Board of Directors, in an aggregate
amount not exceeding the total number of shares of
Preferred Stock authorized herein. Except in respect
of Series Terms fixed by the Board of Directors as
permitted hereby, all shares of Preferred Stock shall
be of equal rank and shall be identical.
B. Common Stock.
1. Dividends. Subject to the provisions of any
Preferred Stock Series Resolution, the Board
of Directors may, in its discretion, out of
funds legally available for the payment of
dividends and at such times and in such
manner as determined by the Board of
Directors, declare and pay dividends on the
Common Stock of the Corporation.
No dividend (other than a dividend in capital
stock ranking on a parity with the Common
Stock or cash in lieu of fractional shares
with respect to such stock dividend) shall be
declared or paid on any share or shares of
any class of stock or series thereof ranking
on a
3
<PAGE> 36
parity with the Common Stock in respect of
payment of dividends for any dividend period
unless there shall have been declared, for the
same dividend period, like proportionate
dividends on all shares of Common Stock then
outstanding.
2. Liquidation. In the event of any
liquidation, dissolution or winding up of the
Corporation, whether voluntary or
involuntary, after payment or provision for
payment of the debts and other liabilities of
the Corporation and after payment of any
preferential amount due to the holders of any
other class or series of stock, the holders
of the Common Stock shall be entitled to
receive ratably any or all assets remaining
to be paid or distributed.
3. Voting Rights. Subject to any special voting
rights set forth in any Preferred Stock
Series Resolution, the holders of the Common
Stock of the Corporation shall be entitled at
all meetings of shareholders to one vote for
each share of such stock held by them.
C. Prior, Parity or Junior Stock. Whenever reference is
made in this Paragraph Fourth or in any Preferred
Stock Series Resolution to shares "ranking prior to"
another class or series of stock or "on a parity
with" another class or series of stock, such
reference shall mean and include all other shares of
the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as
to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are given preference
over, or rank on an equality with, as the case may
be, the rights of the holders of such other class or
series of stock. Whenever reference is made to
shares "ranking junior to" another class of stock,
such
4
<PAGE> 37
reference shall mean and include all shares of the
Corporation in respect of which the rights of the
holders thereof as to the payment of dividends and as
to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are junior and
subordinate to the rights of the holders of such
class or series of stock.
Except as otherwise provided herein or in any
Preferred Stock Series Resolution, each series of
Preferred Stock ranks on a parity with each other
series and each series ranks prior to the Common
Stock. Common Stock ranks junior to the Preferred
Stock.
D. Liquidation. For the purposes of Section (2) of
Section B of this Paragraph Fourth and for the
purpose of the comparable sections of any Preferred
Stock Series Resolution, the merger or consolidation
of the Corporation into or with any other
corporation, or the merger of any other corporation
into it, or the sale, lease or conveyance of all or
substantially all the assets, property or business of
the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the
Corporation.
E. Reservation and Retirement of Shares. The
Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares
of Common Stock or out of shares of Common Stock held
in its treasury, the full number of shares of Common
Stock into which all shares of any series of
Preferred Stock having conversion privileges from
time to time outstanding are convertible.
Unless otherwise provided in a Preferred Stock Series
Resolution with respect to a particular series of
Preferred Stock, all shares of Preferred Stock
redeemed or acquired (as a result of conversion or
otherwise) shall be retired and restored to the
status of authorized but unissued shares.
5
<PAGE> 38
F. Preemptive Rights.
1. No holder of shares of Preferred Stock or
Common Stock of the Corporation shall have
any preemptive right to purchase or subscribe
for or receive any shares of any class, or
series thereof, of stock of the Corporation,
whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other
securities convertible into, exchangeable for
or carrying any right to purchase any shares
of any class, or series thereof, of stock;
but such additional shares of stock and such
warrants, options, bonds, debentures or other
securities convertible into, exchangeable for
or carrying any right to purchase any shares
of any class, or series thereof, of stock may
be issued or disposed of by the Board of
Directors to such persons, and on such terms
and for such lawful consideration, as in its
discretion it shall deem advisable.
2. The stockholders of the Corporation shall
have no rights to acquire the shares of
Common Stock of the Corporation now held in
the treasury of the Corporation or any shares
of Common Stock of the Corporation hereafter
acquired by the Corporation and held as
treasury shares.
G. No Cumulative Voting. Cumulative voting shall not be
allowed in the election of Directors or for any other
purpose.
H. Repurchases of Capital Stock. The Corporation may,
without shareholder approval, purchase, directly or
indirectly, its own shares to the extent permitted by
the Delaware General Corporation Law."
SECOND: Pursuant to the provisions of the Delaware General
Corporation Law, the Board of Directors and the stockholders of the Corporation
adopted an amendment to the Certificate of
6
<PAGE> 39
Designations, Preferences and Rights of Serial Preferred Stock Series A
Non-Voting Convertible 6% Cumulative Preferred Stock filed April 9, 1987 with
the Delaware Secretary of State and authorizing the creation and issuance of an
aggregate of 22,000,000 shares of Series A Non-Voting Convertible 6% Cumulative
Preferred Stock, which is set forth in the following resolution in accordance
with Section 242 of the Delaware General Corporation Law, the purpose of which
amendment is to effect a one-for-twenty reverse stock split:
"RESOLVED, That the Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - Series A Non-Voting Convertible.6%
Cumulative Preferred Stock filed with the Delaware Secretary of State
on April 9, 1987, be amended by changing the first paragraph of the
resolution creating the series of serial preferred stock designated as
the Series A Non-Voting Convertible 6% Cumulative Preferred Stock, so
that as amended, said paragraph shall read as follows:
"RESOLVED, That the Board of Directors of Tom Brown,
Inc. (the "Company"), in the exercise of its best
business judgment and intending to act in full
compliance with the applicable provisions of the
Company's Certificate of Incorporation and Bylaws and
the provisions of the Delaware General Corporation
Law, hereby establishes a series of Preferred Stock,
par value $0.10 per share, of the Company designated
as "Series A Non-Voting Convertible 6% Cumulative
Preferred Stock" (the "Series A Shares"), and the
number of Series A Shares which the Company is
authorized to issue from time to time shall be
1,100,000 and the designations, preferences,
limitations, and relative rights, and qualifications,
limitations and restrictions, of the Series A Shares
shall be as follows:"
"RESOLVED, That the Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - Series A Non-Voting Convertible 6%
Cumulative Preferred Stock filed with the Delaware Secretary of State
on April 9, 1987, be further amended by changing the numbered
paragraph 1 thereof, so that as amended, said paragraph 1 shall read
as follows:
1. Liquidation. The Series A Shares shall be preferred as to
assets over Junior Shares so that, in the event of the
voluntary or involuntary liquidation, dissolution or
7
<PAGE> 40
winding up of the Company, the holders of the Series A
Shares shall be entitled, in conjunction with any
provision then being made for the holders of Parity
Shares, if any, to have set apart for them or to be paid
out of the assets of the Company, after payment or
provision for payment of the debts and other liabilities
of the Company and after provision for the holders of
Senior Shares, if any, but before any distribution is made
to or set apart for the holders of Junior Shares, an
amount in cash equal to $22.7280 per Series A Share (as
adjusted for any stock split, reverse stock split, stock
dividend or similar event resulting in a change in the
Series A Shares) (the "Liquidation Value"), together with
all dividends accrued on such Series A Shares to the date
of payment, irrespective of whether such dividends were
earned, declared or legally available, and the holders of
the Series A Shares shall not be entitled to any further
payment in connection with the voluntary or involuntary
liquidation, dissolution or winding up of the Company
except as expressly provided for in this resolution. If,
upon such liquidation, dissolution or winding up of the
Company, the assets of the Company available for
distribution to the holders of the Series A Shares and the
holders of Parity Shares, if any, shall be insufficient to
permit the distribution in full of the amounts receivable
as aforesaid by the holders of the Series A Shares and the
amounts receivable by the holders of Parity Shares, if
any, then all such assets of the Company shall be
distributed ratably among the holders of the Series A
Shares and the holders of Parity Shares, if any, in
proportion to the amounts that each would have been
entitled to receive if such assets were sufficient to
permit distribution in full as aforesaid. Neither the
consolidation or merger of the Company with or into any
corporation or corporations, nor the sale, lease or
transfer by the Company of all or any part of its assets,
nor the reduction of the authorized or issued shares of
the Company of any class, whether now or hereafter
authorized, shall be deemed to be a liquidation,
dissolution or winding up of the Company for the purposes
of this Section 1. Written notice of any voluntary or
involuntary
8
<PAGE> 41
liquidation, dissolution or winding up of the Company,
setting the payment date and the place where the amounts
to be distributed shall be paid and containing a reference
to the conversion option granted by Section 2 hereof,
shall be given not less than thirty (30) days prior to the
payment date stated therein to the holders of record of
the Series A Shares at their respective addresses as the
same shall appear on the stock ledger of the Company."
"RESOLVED, That the Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - Series A Non-Voting Convertible 6%
Cumulative Preferred Stock filed with the Delaware Secretary of State
on April 9, 1987, be further amended by changing the numbered
paragraph 2(a) thereof, so that as amended, said paragraph 2(a) shall
read as follows:
2. Conversion.
(a) Subject to the terms and conditions of this
Section 2, the Series A Shares shall be convertible, at any
time and from time to time, at the option of the holder
thereof, into Common Shares by surrender of the certificate or
certificates for the Series A Shares to be so converted, duly
endorsed, at the principal office of the Company (or at such
other place or places as may be designated by the Company from
time to time by notice sent to the holders of the Series A
Shares at their respective addresses as the same shall appear
on the stock ledger of the Company) or at the corporate trust
office of any transfer agent for the Series A Shares at any
time during normal business hours, together with notice that
the holder elects to convert such Series A Shares, or a stated
number of such shares, in accordance with the provisions of
this Section 2. Such notice shall also state the name or
names (with addresses) in which the certificate or
certificates for Common Shares shall be issued. The number of
Common Shares that any such holder shall receive in return for
each Series A Share converted by such holder shall be computed
by dividing (x) $22.7280 (as adjusted for any stock split,
reverse stock split, stock dividend or similar event
9
<PAGE> 42
resulting in a change in the Series A Shares) by (y) the
Conversion Price then in effect."
"RESOLVED, That the Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - Series A Non-Voting Convertible 6%
Cumulative Preferred Stock filed with the Delaware Secretary of State
on April 9, 1987, be further amended by changing the first sentence of
paragraph 2(c) thereof, so that as amended, said sentence shall read
as follows:
2.(c) The initial Conversion Price shall be $5.6820."
"RESOLVED, That the Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - Series A Non-Voting Convertible 6%
Cumulative Preferred Stock filed with the Delaware Secretary of State
on April 9, 1987, be amended by changing the numbered paragraph 4(a)
thereof, so that as amended, said paragraph 4(a) shall read as
follows:
4. Dividends.
(a) The holders of the Series A Shares shall be
entitled to receive out of funds legally available therefor,
cumulative cash dividends at the rate of 6% per annum of the
Liquidation Value per Series A Share ($22.7280, as adjusted
for any stock split, reverse stock split, stock dividend or
similar event resulting in a change in the Series A Shares)
(the "Dividend Rate"), payable on June 30 of each year in
which any Series A Shares shall be outstanding, commencing
June 30, 1987, to the holders of record of such Series A
Shares on the respective dates fixed for such purpose by the
Board of Directors of the Company in advance of payment of
each dividend. Dividends on each Series A Share shall be
cumulative from the date of issue thereof. The first dividend
payable with respect to any Series A Share shall be computed
by multiplying the Dividend Rate by a fraction of which (i)
the numerator shall be the number of days from the date of
issue of such Series A Share through the date as of which such
first dividend is payable, inclusive, and (ii) the denominator
shall be 360."
10
<PAGE> 43
Upon the filing in the Office of the Secretary of State of Delaware of
this Certificate of Amendment, each twenty issued and outstanding shares of
common stock shall thereby and thereupon be combined into one share of common
stock and each twenty issued and outstanding shares of Series A Non-Voting
Convertible 6% Cumulative preferred stock shall thereupon be combined into one
share of Series A Non-Voting Convertible 6% Cumulative preferred stock. Each
certificate that theretofore represented shares of common stock prior to the
filing of this Certificate of Amendment shall thereafter represent the number
of shares of common stock into which the shares of common stock represented by
such certificate shall be combined, and each certificate that theretofore
represented shares of Series A Non-Voting Convertible 6% Cumulative preferred
stock prior to the filing of this Certificate of Amendment shall thereafter
represent the number of shares of Series A Non-Voting Convertible 6% Cumulative
preferred stock into which the shares of Series A Non-Voting Convertible 6%
Cumulative preferred stock represented by such certificate shall be combined.
To the extent a shareholder holds a number of shares of common stock not evenly
divisible by twenty, such shareholder will receive cash for each fractional
interest resulting from such division.
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Amendment to be signed by Thomas C. Brown, its Chairman of the Board of
Directors, and attested by Regina Neill, its Assistant Secretary, this 7th day
of September, 1988.
TOM BROWN, INC.
/s/ Thomas C. Brown
--------------------------------
Thomas C. Brown, Chairman of
the Board of Directors
ATTESTED:
/s/ Regina Neill
- - ----------------------------
Regina Neill, Assistant
Secretary
The undersigned Chairman of the Board of Directors of Tom Brown, Inc.,
being duly sworn, does verify that the foregoing instrument represents the act
and deed of Tom Brown, Inc. and that the facts stated in such instrument are
true.
/s/ Thomas C. Brown
----------------------------------
Thomas C. Brown, Chairman of
the Board of Directors
11
<PAGE> 44
THE STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
THOMAS C. BROWN and REGINA NEILL, Chairman of the Board of Directors and
Assistant Secretary, respectively, of Tom Brown, Inc., a corporation formed
under the laws of the State of Delaware, known to me to be the individuals
whose names are subscribed to the foregoing instrument, and acknowledged and
swore to me that they each executed the same for the purposes and consideration
therein expressed and as the act and deed of said corporation and that the
facts stated in the foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 7th day of September, 1988.
/s/ Rita K. Turner
--------------------------------
Name Rita K. Turner
----------------------------
Notary Public in and for
the State of Texas
Commission Expires:
10/23/89
- - --------------------
12
<PAGE> 45
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
Pursuant to the provisions of the Delaware General Corporation Law,
the Board of Directors and the stockholders of the Corporation adopted an
amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the
Delaware General Corporation Law, the purpose of which amendment is to increase
the number of authorized shares of Common Stock:
"RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing Paragraph Fourth thereof, so that as amended, said
Paragraph Fourth shall read as follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 22,500,000, of
which 2,500,000 shares shall be Preferred Stock, par value
$.10 per share, and 20,000,000 shares shall be Common Stock,
$.10 par value per share. All of such shares shall, upon
issuance thereof, be fully paid and nonassessable.
The designations, preferences, limitations and relative rights
of the shares of each class that the Corporation shall have
authority to issue are as follows:
A. Preferred Stock. The Board of Directors is hereby
expressly vested with the authority to adopt a
resolution or resolutions providing for the issue of
authorized but unissued shares of Preferred Stock,
which shares may be issued from time to time in one
or more series and in such amounts as may be
determined by the Board of Directors in such
resolution or resolutions. The designations,
preferences, limitations or relative rights of the
Preferred Stock and the qualifications, limitations
or restrictions, if any, of such preferences and/or
rights (collectively, the "Series Terms") may vary
between series in any
<PAGE> 46
and all respects and shall be such as are stated and
expressed in a resolution or resolutions providing
for the creation or revision of such Series Terms set
forth in a Certificate of Designations (a "Preferred
Stock Series Resolution") adopted by the Board of
Directors; provided that all shares of any one series
of Preferred Stock so designated by the Board of
Directors shall be identical in all respects except
that shares of any one series issued at different
times may differ as to the dates from which dividends
thereon may be cumulative. The powers of the Board
of Directors with respect to the Series Terms of a
particular series shall include, but not be limited
to, determination of the following:
1. The right to receive dividends, if any, and
the rate, dates, terms and other conditions
on which such dividends shall be payable;
2. The nature of the dividend payable, if any,
with respect to shares of such series as
cumulative, non-cumulative or partially
cumulative;
3. The redemption rights of such series
including the price at and the terms and
conditions on which such shares may be
redeemed;
4. The amount payable upon shares in the event
of involuntary liquidation;
5. The amount payable upon shares in the event
of voluntary liquidation;
6. Sinking fund provisions for the redemption or
purchase of shares;
7. The terms and conditions on which shares may
be converted, if the shares of any series are
issued with the privilege of conversion;
8. Voting rights, if any; and
2
<PAGE> 47
9. Repurchase obligations of the Corporation
with respect to the shares of each series.
Any of the Series Terms, including voting rights, of
any series may be made dependent upon facts
ascertainable outside this Certificate of
Incorporation and the Preferred Stock Series
Resolution, provided that the manner in which such
facts shall operate upon such Series Terms is clearly
and expressly set forth herein or in the Preferred
Stock Series Resolution.
Subject to the provisions of this Paragraph Fourth,
shares of one or more series of Preferred Stock may
be authorized or issued from time to time as shall be
determined by and for such consideration as shall be
fixed by the Board of Directors, in an aggregate
amount not exceeding the total number of shares of
Preferred Stock authorized herein. Except in respect
of Series Terms fixed by the Board of Directors as
permitted hereby, all shares of Preferred Stock shall
be of equal rank and shall be identical.
B. Common Stock.
1. Dividends. Subject to the provisions of any
Preferred Stock Series Resolution, the Board
of Directors may, in its discretion, out of
funds legally available for the payment of
dividends and at such times and in such
manner as determined by the Board of
Directors, declare and pay dividends on the
Common Stock of the Corporation.
No dividend (other than a dividend in capital
stock ranking on a parity with the Common
Stock or cash in lieu of fractional shares
with respect to such stock dividend) shall be
declared or paid on any share or shares of
any class of stock or series thereof ranking
on a
3
<PAGE> 48
parity with the Common Stock in respect of
payment of dividends for any dividend period
unless there shall have been declared, for the
same dividend period, like proportionate
dividends on all shares of Common Stock then
outstanding.
2. Liquidation. In the event of any
liquidation, dissolution or winding up of the
Corporation, whether voluntary or
involuntary, after payment or provision for
payment of the debts and other liabilities of
the Corporation and after payment of any
preferential amount due to the holders of any
other class or series of stock, the holders
of the Common Stock shall be entitled to
receive ratably any or all assets remaining
to be paid or distributed.
3. Voting Rights. Subject to any special voting
rights set forth in any Preferred Stock
Series Resolution, the holders of the Common
Stock of the Corporation shall be entitled at
all meetings of shareholders to one vote for
each share of such stock held by them.
C. Prior, Parity or Junior Stock. Whenever reference is
made in this Paragraph Fourth or in any Preferred
Stock Series Resolution to shares "ranking prior to"
another class or series of stock or "on a parity
with" another class or series of stock, such
reference shall mean and include all other shares of
the Corporation in respect of which the rights of the
holders thereof as to the payment of dividends or as
to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are given preference
over, or rank on an equality with, as the case may
be, the rights of the holders of such other class or
series of stock. Whenever reference is made to
shares "ranking junior to" another class of stock,
such
4
<PAGE> 49
reference shall mean and include all shares of the
Corporation in respect of which the rights of the
holders thereof as to the payment of dividends and as
to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of
the affairs of the Corporation are junior and
subordinate to the rights of the holders of such
class or series of stock.
D. Liquidation. For the purposes of Section (2) of
Section B of this Paragraph Fourth and for the
purpose of the comparable sections of any Preferred
Stock Series Resolution, the merger or consolidation
of the Corporation into or with any other
corporation, or the merger of any other corporation
into it, or the sale, lease or conveyance of all or
substantially all the assets, property or business of
the Corporation, shall not be deemed to be a
liquidation, dissolution or winding up of the
Corporation.
E. Reservation and Retirement of Shares. The
Corporation shall at all times reserve and keep
available, out of its authorized but unissued shares
of Common Stock or out of shares of Common Stock held
in its treasury, the full number of shares of Common
Stock into which all shares of any series of
Preferred Stock having conversion privileges from
time to time outstanding are convertible.
Unless otherwise provided in a Preferred Stock Series
Resolution with respect to a particular series of
Preferred Stock, all shares of Preferred Stock
redeemed or acquired (as a result of conversion or
otherwise) shall be retired and restored to the
status of authorized but unissued shares.
F. Preemptive Rights.
1. No holder of shares of Preferred Stock or
Common Stock of the Corporation shall have
any preemptive right to purchase or subscribe
for or receive any shares
5
<PAGE> 50
of any class, or series thereof, of stock of the
Corporation, whether now or hereafter authorized,
or any warrants, options, bonds, debentures or
other securities convertible into, exchangeable
for or carrying any right to purchase any shares
of any class, or series thereof, of stock; but
such additional shares of stock and such
warrants, options, bonds, debentures or other
securities convertible into, exchangeable for or
carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued
or disposed of by the Board of Directors to such
persons, and on such terms and for such lawful
consideration, as in its discretion it shall deem
advisable.
2. The stockholders of the Corporation shall
have no rights to acquire the shares of
Common Stock of the Corporation now held in
the treasury of the Corporation or any shares
of Common Stock of the Corporation hereafter
acquired by the Corporation and held as
treasury shares.
G. No Cumulative Voting. Cumulative voting shall not be
allowed in the election of Directors or for any other
purpose.
H. Repurchases of Capital Stock. The Corporation may,
without shareholder approval, purchase, directly or
indirectly, its own shares to the extent permitted
by the Delaware General Corporation Law."
6
<PAGE> 51
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Amendment to be signed by Donald L. Evans, its Chairman of the Board of
Directors, and attested by Kim Harris, its Assistant Secretary, this 1st day of
June, 1990.
TOM BROWN, INC.
By: /s/ Donald L. Evans
---------------------------
Donald L. Evans, Chairman
of the Board of Directors
ATTESTED:
/s/ Kim Harris
- - ------------------------
Kim Harris, Assistant
Secretary
The undersigned Chairman of the Board of Directors of Tom Brown, Inc.,
being duly sworn, does verify that the foregoing instrument represents the act
and deed of Tom Brown, Inc. and that the facts stated in such instrument are
true.
/s/ Donald L. Evans
---------------------------------
Donald L. Evans, Chairman of
the Board of Directors
STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
DONALD L. EVANS and KIM HARRIS, Chairman of the Board of Directors and
Assistant Secretary, respectively, of Tom Brown, Inc., a corporation formed
under the laws of the State of Delaware, known to me to be the individuals
whose names are subscribed to the foregoing instrument, and acknowledged and
swore to me that they each executed the same for the purposes and consideration
therein expressed and as the act and deed of said corporation and that the
facts stated in the foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 1st day of June, 1990.
My Commission Expires:
/s/ Carolyn Vannoy
--------------------------------
10/27/92 Name: Carolyn Vannoy
- - ---------------------- ---------------------------
Notary Public in and for
the State of Texas
7
<PAGE> 52
CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES
of
SERIES B PREFERRED STOCK, $.10 PAR VALUE
of
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That at a meeting of the Board of Directors of Tom Brown, Inc. the
following resolution, creating a series of three hundred thousand (300,000)
shares of Preferred Stock, designated as Series B Preferred Stock, was duly
adopted pursuant to the authority granted to and vested in the Board of
Directors of this corporation in accordance with the provisions of its
Certificate of Incorporation, as amended:
RESOLVED, that a series of Preferred Stock, $.10 par value, of
the corporation be, and it hereby is, created and that the designation
and amount thereof and the preferences and relative, participating,
optional and other special rights, and the qualifications, limitations
and restrictions thereof (in addition to the provisions set forth in
the Certificate of Incorporation, as amended, of the corporation,
which are applicable to the Preferred Stock of all classes and series)
are as follows:
I. Designation and Amount. The shares of such series
shall be designated as the "Series B Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting such series
shall be three hundred thousand (300,000). Such number of shares may
be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Series
B Preferred Stock to a number less than that of the shares then
outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the corporation.
II. Dividends and Distributions.
(A) Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock
ranking prior and superior to the shares of Series B Preferred
Stock with respect to dividends, the holders of shares of
Series B Preferred Stock, in preference to the holders of
common stock, $.10 par value, of the corporation (the "Common
Stock") and of any other stock ranking junior (as to
dividends) to Series B Preferred Stock, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, cumulative
quarterly dividends payable in
<PAGE> 53
cash or in kind, as hereinafter provided, on the last day of
March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a
share of Series B Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a)
$1.00 (payable in cash) or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per
share amount (payable in cash) of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all
non cash dividends or other distributions, other than a
dividend payable in shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a
share of Series B Preferred Stock. If the corporation shall
at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by
reclassification or otherwise), into a greater or lesser
number of shares of Common Stock, then in each such case the
amount to which holders of Series B Preferred Stock were
entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that was outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or
distribution on the Series B Preferred Stock as provided in
paragraph (A) of this Section immediately after it declares a
dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, if
no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series B
Preferred Stock shall nevertheless accrue and be cumulative on
the outstanding shares of Series B Preferred Stock as provided
in paragraph (C) of this Section.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series B Preferred Stock
from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series B Preferred Stock,
unless the date of issue of such shares is
2
<PAGE> 54
prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of
holders of shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of
Series B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share by share
basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination
of holders of shares of Series B Preferred Stock entitled to
receive a payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
III. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series B Preferred Stock
shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the share-holders of the corporation.
If the corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders
of shares of Series B Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which
is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided in the
Certificate of Incorporation or by law, the holders of shares
of Series B Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters
submitted to a vote of shareholders of the corporation.
3
<PAGE> 55
IV. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series B Preferred
Stock as provided in Section II are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Preferred Stock
outstanding shall have been paid in full, the corporation
shall not:
(i) declare or pay dividends on, make
any other distributions on, or redeem or purchase or
otherwise acquire for consideration any shares of
stock ranking junior (as to dividends) to the Series
B Preferred Stock;
(ii) declare or pay dividends on or make
any other distributions on any shares of stock
ranking on a parity (as to dividends) with the Series
B Preferred Stock, except dividends paid ratably on
the Series B Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled; or
(iii) purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock,
or any shares of stock ranking on a parity (as to
dividends) with the Series B Preferred Stock, except
in accordance with a purchase offer made in writing
or by publication (as determined by the Board of
Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration
of the respective annual dividend rates and other
relative rights and preferences of the respective
series and classes, shall determine in good faith
will result in fair and equitable treatment among the
respective series or classes.
(B) The corporation shall not permit any
subsidiary of the corporation to purchase or otherwise acquire
for consideration any shares of stock of the corporation
unless the corporation could, under paragraph (A) of this
Section IV, purchase or otherwise acquire such shares at such
time and in such manner.
4
<PAGE> 56
V. Reacquired Shares. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the corporation in any manner
whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be
reissued as part of a series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
VI. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (as to amounts payable upon liquidation, dissolution or
winding up) to the Series B Preferred Stock unless, prior thereto, the
holders of Series B Preferred Stock shall have received an amount per
share (rounded to the nearest cent) equal to the greater of (a)
$100.00 per share, or (b) an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of Common
Stock, plus, in either case, an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the
date of such payment, or (2) to the holders of stock ranking on a
parity (as to amounts payable or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock and all other such
parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up. If the corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect
a subdivision or combination of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series B Preferred Stock were entitled
immediately prior to such event under the provision in clause (1)(b)
of the preceding sentence shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
VII. Consolidation, Merger, Etc. If the corporation shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash or any other property, or any
combination thereof, then in any such case the shares of Series B
Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash or any other property, or any
combination thereof, into which or for which each share of Common
Stock is
5
<PAGE> 57
changed or exchanged. If the corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common Stock, or
effect a subdivision or combination of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
VIII. No Redemption. The shares of Series B Preferred
Stock shall not be redeemable.
IX. Rank. Except as otherwise provided in its
Certificate of Incorporation, as amended, the corporation may
authorize or create any series of Preferred Stock ranking prior to or
on a parity with the Series B Preferred Stock as to dividends or as to
distribution of assets upon liquidation, dissolution or winding up.
X. Amendment. The Certificate of Incorporation of the
corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the
Series B Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding
shares of Series B Preferred Stock, voting together as a single class.
The foregoing resolution was adopted by the Board of Directors of the
corporation, pursuant to the authority vested in it by the Certificate of
Incorporation of the corporation, at a meeting of the Board of Directors duly
held on the 1st day of March, 1991.
IN WITNESS WHEREOF, this Certificate has been executed on behalf of
the corporation by its President and attested by its Secretary this 13th day of
March, 1991.
TOM BROWN, INC.
By: /s/ Donald L. Evans
-----------------------------------
President
ATTEST:
/s/ James M. Alsup
- - --------------------------------
Secretary
6
<PAGE> 58
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
Pursuant to the provisions of the Delaware General Corporation Law,
the Board of Directors and the stockholders of the Corporation adopted an
amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the
Delaware General Corporation Law, the purpose of which amendment is to increase
the number of authorized shares of Common Stock:
"RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing the first sentence of Article Fourth thereof, so
that as amended, the first sentence of Article Fourth shall read as
follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 32,500,000, of
which 2,500,000 shares shall be Preferred Stock, par value
$.10 per share, and 30,000,000 shares shall be Common Stock,
$.10 par value per share.
Except as specifically amended hereby, all other provisions of Article
Fourth shall remain in full force and effect.
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Amendment to be signed by Donald L. Evans, its Chairman of the Board of
Directors, and attested by Kim Harris, its Assistant Secretary, this 18th day
of May, 1994.
TOM BROWN, INC.
By: /s/ Donald L. Evans
-----------------------------
Donald L. Evans, Chairman of
the Board of Directors
ATTESTED:
/s/ Kim Harris
- - -------------------------------
Kim Harris, Assistant Secretary
<PAGE> 59
The undersigned Chairman of the Board of Directors of Tom Brown, Inc.,
being duly sworn, does verify that the foregoing instrument represents the act
and deed of Tom Brown, Inc. and that the facts stated in such instrument are
true.
/s/ Donald L. Evans
-----------------------------------
Donald L. Evans, Chairman of
the Board of Directors
STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
DONALD L. EVANS and KIM HARRIS, Chairman of the Board of Directors and
Assistant Secretary, respectively, of Tom Brown, Inc., a corporation formed
under the laws of the State of Delaware, known to me to be the individuals
whose names are subscribed to the foregoing instrument, and acknowledged and
swore to me that they each executed the same for the purposes and consideration
therein expressed and as the act and deed of said corporation and that the
facts stated in the foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 18th day of May, 1994.
/s/ Carolyn Vannoy
------------------------------
Name: Carolyn Vannoy
-------------------------
Notary Public in and for
the State of Texas
2
<PAGE> 60
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
TOM BROWN, INC.
Tom Brown, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify as follows:
Pursuant to the provisions of the Delaware General Corporation Law,
the Board of Directors and the stockholders of the Corporation adopted an
amendment to the Certificate of Incorporation of the Corporation, which is set
forth in the following resolution in accordance with Section 242 of the
Delaware General Corporation Law, the purpose of which amendment is to increase
the number of authorized shares of Common Stock:
"RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by changing the first sentence of Article Fourth thereof, so
that as amended, the first sentence of Article Fourth shall read as
follows:
FOURTH: The total number of shares of all classes that the
Corporation shall have authority to issue is 42,500,000, of
which 2,500,000 shares shall be Preferred Stock, par value
$.10 per share, and 40,000,000 shares shall be Common Stock,
$.10 par value per share.
Except as specifically amended hereby, all other provisions of Article
Fourth shall remain in full force and effect.
IN WITNESS WHEREOF, Tom Brown, Inc. has caused this Certificate of
Amendment to be signed by Donald L. Evans, its Chairman of the Board of
Directors, and attested by Kim Harris, its Assistant Secretary, this 22nd day
of May, 1996.
TOM BROWN, INC.
By: /s/ DONALD L. EVANS
-----------------------------
Donald L. Evans, Chairman of
the Board of Directors
ATTESTED:
/s/ KIM HARRIS
- - -------------------------------
Kim Harris, Assistant Secretary
<PAGE> 61
The undersigned Chairman of the Board of Directors of Tom Brown, Inc.,
being duly sworn, does verify that the foregoing instrument represents the act
and deed of Tom Brown, Inc. and that the facts stated in such instrument are
true.
/s/ Donald L. Evans
------------------------------
Donald L. Evans, Chairman of
the Board of Directors
STATE OF TEXAS )
)
COUNTY OF MIDLAND )
Before me, the undersigned authority, on this day personally appeared
DONALD L. EVANS and KIM HARRIS, Chairman of the Board of Directors and
Assistant Secretary, respectively, of Tom Brown, Inc., a corporation formed
under the laws of the State of Delaware, known to me to be the individuals
whose names are subscribed to the foregoing instrument, and acknowledged and
swore to me that they each executed the same for the purposes and consideration
therein expressed and as the act and deed of said corporation and that the
facts stated in the foregoing instrument are true.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 22nd day of May, 1996.
/s/ Carolyn Vannoy
-------------------------------
Name: Carolyn Vannoy
Notary Public in and for
the State of Texas
2
<PAGE> 1
EXHIBIT NO. 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months ended Six Months ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Weighted average common
shares outstanding 21,121,775 15,536,860 21,117,484 15,530,606
Net effect of dilutive
stock options,
treasury stock method 683,559 596,962 611,957 664,842
---------- ---------- ---------- ----------
Total common
shares 21,805,334 16,133,822 21,729,441 16,195,448
========== ========== ========== ==========
Net income to common
shareholders $ 1,012,000 $ 273,000 $ 1,882,000 $ 4,803,000
========== ========== ========== ==========
Primary earnings per
common share $ .05 $ .02 $ .09 $ .30
========== ========== ========== ==========
Fully Diluted
Weighted average common
shares outstanding 21,121,775 15,536,860 21,117,484 15,530,606
Net effect of dilutive
stock options,
treasury stock method 724,051 596,962 726,106 664,842
Effect of convertible
preferred stock 1,666,000 - 1,666,000 -
---------- ---------- ---------- ----------
Total common
shares 23,511,826 16,133,822 23,509,590 16,195,448
========== ========== ========== ==========
Net income to common
shareholders $ 1,449,000 $ 273,000 $ 2,679,000 $ 4,803,000
========== ========== ========== ==========
Fully diluted earnings
per common share $ .06 $ .02 $ .11 $ .30
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 6,837
<SECURITIES> 0
<RECEIVABLES> 12,005
<ALLOWANCES> 58
<INVENTORY> 440
<CURRENT-ASSETS> 19,518
<PP&E> 246,249
<DEPRECIATION> 120,235
<TOTAL-ASSETS> 207,262
<CURRENT-LIABILITIES> 12,316
<BONDS> 0
<COMMON> 2,112
0
100
<OTHER-SE> 192,734
<TOTAL-LIABILITY-AND-EQUITY> 207,262
<SALES> 16,757
<TOTAL-REVENUES> 27,276
<CGS> 11,747
<TOTAL-COSTS> 23,211
<OTHER-EXPENSES> 2,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,065
<INCOME-TAX> 1,386
<INCOME-CONTINUING> 1,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,882
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
