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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
MESA Inc.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
590911103
(CUSIP Number)
Kenneth A. Hersh
777 Main Street, Suite 2700
Fort Worth, Texas 76102
(817) 820-6600
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 2, 1996
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this Statement. [X] (A
fee is not required only if the reporting person (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1 and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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<TABLE>
<CAPTION>
CUSIP NO. 590911103 SCHEDULE 13D
<S> <C>
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(1) Names of Reporting Persons
DNR-MESA HOLDINGS, L.P.
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(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) OO (See Item 3)
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(5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
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(6) Citizenship or Place of Organization DNR-MESA HOLDINGS, L.P. IS A LIMITED PARTNERSHIP
FORMED UNDER THE LAWS OF THE STATE OF TEXAS.
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(7) Sole Voting Power 58,849,557 (1)
Number of ---------------------------------------------------------------------------------------
Shares
Beneficially (8) Shared Voting Power 0
Owned by ---------------------------------------------------------------------------------------
Each
Reporting (9) Sole Dispositive Power 58,849,557 (1)
Person With: ---------------------------------------------------------------------------------------
(10) Shared Dispositive Power 0
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 58,849,557
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(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ]
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(13) Percent of Class Represented by Amount in Row (11) 47.8% (2)
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(14) Type of Reporting Person (See Instructions) PN
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</TABLE>
(1) As exercised through its sole general partner, Rainwater, Inc., a
Texas corporation.
(2) Based on the 64,260,723 shares of Common Stock outstanding as of June
28, 1996, plus the 58,849,557 additional shares of Common Stock issuable upon
the conversion of all of the Partnership's shares of Series B 8% Cumulative
Convertible Preferred Stock of the Issuer.
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is common
stock, par value $.01 per share (the "Common Stock"), of MESA Inc., a Texas
corporation (the "Issuer"). The address of the principal executive offices of
the Issuer is 1400 Williams Square West, 5205 North O'Connor Boulevard, Irving,
Texas 75039.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c) DNR-MESA Holdings, L.P. (the "Partnership") is a limited
partnership organized under the laws of the State of Texas. The Partnership's
principal business address and office is 777 Main Street, Suite 2700, Fort
Worth, Texas 76102. The principal business of the Partnership is the
acquisition, holding, selling, trading, exchanging and otherwise investing in
and dealing with securities of the Issuer, whether recourse or non-recourse to
the Issuer and without regard to whether such securities are publicly traded,
readily marketable or restricted as to transfer or sale.
Rainwater, Inc., the sole general partner of the Partnership (sometimes
referred to as the "General Partner"), is a corporation organized under the
laws of the State of Texas. Rainwater, Inc.'s principal business address and
business office is 777 Main Street, Suite 2700, Fort Worth, Texas 76102. The
principal business of Rainwater, Inc. is investments. The sole shareholder of
Rainwater, Inc. is Richard E. Rainwater.
The name, business address, present principal occupation or employment
and the name, principal business and address of any corporation or other
organization in which such employment is conducted, of each of the executive
officers and directors of Rainwater, Inc., are set forth below:
<TABLE>
<CAPTION>
Name, Principal Business
and Address of
Organization in which
Name and Capacity in Principal Principal Occupation
Business Address Which Serves Occupation is Conducted
---------------- ------------ ---------- ------------
<S> <C> <C> <C>
Richard E. Rainwater President, Director Personal investment Self-employed
777 Main Street for own account 777 Main Street
Suite 2700 Suite 2700
Fort Worth, Texas 76102 Fort Worth, Texas 76102
Darla D. Moore Vice President, Director Personal investment Self-employed
777 Main Street for own account 777 Main Street
Suite 2700 Suite 2700
Fort Worth, Texas 76102 Fort Worth, Texas 76102
Kenneth A. Hersh Vice President, Treasurer and Chief investment Rainwater, Inc. and GFW
777 Main Street Secretary, Director officer for II, L.L.C.
Suite 2700 Rainwater, Inc. and 777 Main Street
Fort Worth, Texas 76102 manager of related Suite 2700
partnerships Fort Worth, Texas 76102
</TABLE>
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The principal business of GFW II, L.L.C. is investments.
(d) None of the entities or individuals identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or individuals identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
(f) Each of the individuals identified in this Item 2 is a citizen of
the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Partnership purchased 58,849,557 shares (the "Initial Shares") of
Series B 8% Cumulative Convertible Preferred Stock, par value $.01 per share
(the "Series B Preferred Stock"), of the Issuer at a price per share of $2.26,
for a total purchase price of $133,000,000. In addition, the Partnership has
made a standby commitment (the "Standby Commitment") to purchase, under certain
circumstances, up to a maximum of approximately 58,599,252 shares of Series B
Preferred Stock at $2.26 per share for a total purchase price of approximately
$132,434,310 (subject to increase to reflect rounding). The Partnership
obtained the funds necessary to purchase the Initial Shares from capital
contributions made by the Partnership's general partner and limited partners.
Rainwater, Inc., as the sole general partner of the Partnership, provided
$1,330,000 to the Partnership as the General Partner's capital contribution to
the Partnership's funds to be used to purchase the Initial Shares. The General
Partner obtained the funds necessary to make its capital contribution to the
Partnership from its existing working capital.
Richard E. Rainwater, in his capacity as a limited partner of the
Partnership, provided $72,670,000 to the Partnership as his capital
contribution to the Partnership's funds to be used to purchase the Initial
Shares. Mr. Rainwater used $19,500,000 of his personal funds to make such
capital contribution and obtained the remaining $53,170,000 from a pre-existing
personal line of credit (the "Credit Line") with NationsBank of Texas, N.A.
(the "Bank"). Borrowings under the Credit Line are available for use for any
purpose, bear a variable interest rate tied to the London Interbank Offered
Rate (and in certain cases the Bank's daily prime rate), and are secured by
certain personal stock-holdings of Mr. Rainwater (which are unrelated to the
Issuer or any of the transactions described in this filing).
Mr. Rainwater has not pledged, and will not be required by the Bank to
pledge, any of the securities of the Issuer to secure the borrowings under the
Credit Line. Mr. Rainwater uses the Credit Line in the ordinary course of his
business merely for convenience as a source of liquidity. Mr. Rainwater
expects to fully repay, using personal assets, the above mentioned $53,170,000
borrowed under the Credit Line within 90 to 120 days.
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ITEM 4. PURPOSE OF TRANSACTION.
On April 26, 1996, the Issuer and the Partnership entered into a Stock
Purchase Agreement (as amended, the "Purchase Agreement") pursuant to which the
Issuer agreed to issue and sell, and the Partnership agreed to purchase (1) the
Initial Shares, and (2) pursuant to a standby commitment (the "Standby
Commitment") such number of additional shares of the Series B Preferred Stock
equal to the number of shares of Series A 8% Cumulative Convertible Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock") of the Issuer,
if any, not purchased in a rights offering (the "Rights Offering") to be
commenced by the Issuer promptly after the sale of the Initial Shares. The
closing of the sale of the Initial Shares to the Partnership occurred on July
2, 1996 (the "First Closing Date"). The Rights Offering will entitle the
holders of the Common Stock to purchase a pro-rata portion of an aggregate of
approximately 58,599,252 shares of Series A Preferred Stock for $2.26 per
share. Following the Rights Offering, the Partnership will own the 58,849,557
shares of Series B Preferred Stock obtained on the First Closing Date, plus any
additional shares of Series B Preferred Stock purchased pursuant to the Standby
Commitment, which number could range from 0 to 58,599,252 additional shares.
Thus, following the closing of the Rights Offering and the sale, if any,
pursuant to the Standby Commitment (the "Second Closing"), the Partnership will
own anywhere from 58,849,557 to 117,448,809 shares of Series B Preferred Stock.
Each share of Series B Preferred Stock is convertible into one share of
Common Stock (subject to customary anti-dilution adjustments). Therefore, by
reason of its conversion rights, the Partnership currently has beneficial
ownership of 58,849,557 shares, or 47.8%, of the outstanding shares of the
Common Stock. Following the Second Closing, the Partnership will have
beneficial ownership of a minimum of 47.8%, up to a maximum of approximately
65%, of the Common Stock, depending upon the number of additional shares of
Series B Preferred Stock purchased pursuant to the Standby Commitment.(3)
The Series B Preferred Stock entitles the holder to receive cumulative
dividends of 8% per annum of the stated value (the "Stated Value") of such
shares, compounded quarterly. The Stated Value is $2.26 initially, and is to
be increased by the amount of any accrued and unpaid dividends until such are
paid. Dividends are payable quarterly in arrears on the last business day of
March, June, September and December, beginning on September 30, 1996. For the
first four years after the issuance of Series B Preferred Stock, dividends
thereon will be payable in additional shares of Series B Preferred Stock ("PIK
Dividends"), based upon the then-current Stated Value. Subject to the actual
declaration of dividends by the Board of Directors and any applicable legal
restrictions, the Partnership would increase its beneficial ownership of the
Common Stock by virtue of any future receipt of PIK Dividends on the Series B
Preferred Stock.
(3) To comply with Rule 13d-3(d)(1)(i), promulgated by the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of
1934, the Partnership has calculated its 47.8% minimum beneficial ownership
interest by dividing: (1) 58,849,557 shares of Series B Preferred Stock, by (2)
58,849,557 shares of Common Stock issuable upon conversion of the Partnership's
Series B Preferred Stock plus the 64,260,723 shares of Common Stock outstanding
as of June 28, 1996. Please note that this required method of calculation
differs from the basis for calculating the percentage ownership of the Issuer's
securities represented by the Series B Preferred Stock as set forth in other
public filings relating to the transaction described herein.
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In addition, the Series B Preferred Stock entitles the holders thereof,
voting separately as a class, to elect a majority of the members of the
Issuer's Board of Directors, provided that: (1) the Partnership and/or its
affiliates continue to own either (a) at least 34,132,743 shares of the Series
B Preferred Stock or (b) at least 15% of the total number of shares of the
Common Stock outstanding (including shares issuable upon conversion of
outstanding Series A Preferred Stock and Series B Preferred Stock), and (2) at
least half of such shares in clause (1) are owned by, and the majority of the
voting power of the Series B Preferred Stock is exercised by, Richard E.
Rainwater and/or his affiliates. As the sole holder of the Series B Preferred
Stock, the Partnership will have the right to nominate and elect a majority of
the Board of Directors of the Issuer. Rainwater, Inc., as the sole general
partner of the Partnership, has the exclusive right to exercise such voting
rights on behalf of the Partnership.
The Partnership acquired the securities herein reported for investment
purposes and as a means to obtain control of the Issuer. Depending on market
conditions, general economic conditions, and other factors that each may deem
significant to his or its respective investment decisions, the Partnership,
Rainwater, Inc. and Richard E. Rainwater may purchase shares of Common Stock in
the open market or in private transactions or may dispose of all or a portion
of the shares of Common Stock that they or any of them may hereafter acquire;
provided, that such purchases and sales are otherwise made in compliance with
the terms and conditions of the Purchase Agreement and to the extent
applicable, the Articles of Incorporation and bylaws of the Issuer and any
credit agreements and indentures to which the Issuer is a party.
The Partnership has requested that Boone Pickens, the Chairman of the
Board and Chief Executive Officer of the Issuer, assist the Partnership in
identifying and retaining a new Chief Executive Officer and that Mr. Pickens
resign when such successor is retained.
Except as set forth in this Item 4, the reporting person has no present
plans or proposals that relate to or that would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.
The summary set forth in this Item 4 of Schedule 13D of certain aspects
of the transactions reported in this Schedule 13D does not purport to be a
complete description of, and is qualified in its entirety by reference to, the
provisions of the various agreements and documents attached as exhibits to this
Schedule 13D and incorporated herein by reference for all purposes.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Partnership. The Partnership is the beneficial owner of
58,849,557 shares of Common Stock. Based on the number of shares of Common
Stock issued and outstanding as of June 28, 1996, as contained in the Issuer's
most recently available filing with the Securities and Exchange Commission, the
Partnership is the beneficial owner of approximately 47.8% of the outstanding
shares of Common Stock.
Rainwater, Inc. Rainwater, Inc. may, as the sole general partner of the
Partnership, be deemed to be the beneficial owner of all 58,849,557 shares of
Common Stock beneficially owned by the Partnership which constitute (based on
the number of shares of Common Stock issued and outstanding) approximately
47.8% of the outstanding shares of Common Stock.
Richard E. Rainwater. Richard E. Rainwater may, as sole shareholder of
Rainwater, Inc., be deemed to be the beneficial owner of all 58,849,557 shares
of Common Stock beneficially owned by the Partnership, of which Rainwater, Inc.
is the sole general partner. Such 58,849,557 shares of Common Stock constitute
approximately 47.8% of the outstanding shares of Common Stock.
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(b) The Partnership. Through Rainwater, Inc., its general partner, the
Partnership has the sole power (and no shared power) to vote or direct the vote
or to dispose or direct the disposition of 58,849,557 shares of Common Stock.
Rainwater, Inc. As the sole general partner of the Partnership,
Rainwater, Inc. has the sole power (and no shared power) to vote or direct the
vote or to dispose or direct the disposition of 58,849,557 shares of Common
Stock.
Richard E. Rainwater. As the sole shareholder of Rainwater, Inc.,
Richard E. Rainwater has the sole power (and no shared power) to vote or direct
the vote or dispose or direct the disposition of 58,849,557 shares of Common
Stock.
(c) Except as otherwise described herein or in any Exhibit filed
herewith, none of the persons named in response to paragraph (a) above has
effected any transactions in shares of the Common Stock during the past 60
days.
(d) No person other than the Partnership, Rainwater, Inc. and Richard
E. Rainwater has the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares of Common Stock
deemed to be beneficially owned by them.
(e) It is inapplicable for the purposes herein to state the date on
which the Partnership, Rainwater, Inc. and Richard E. Rainwater cease to be the
owners of more than five percent (5%) of the shares of Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SECURITIES OF THE ISSUER.
Pursuant to an Agreement of Limited Partnership dated as of April 25,
1996, Rainwater, Inc., as general partner, and the limited partners named
therein formed the Partnership. The business of the Partnership is (a) to
enter into the Purchase Agreement, (b) to purchase or otherwise acquire and to
sell or otherwise dispose of the securities of the Issuer, (c) to exercise all
rights, powers, privileges and other incidents of ownership or possession with
respect to the securities of the Issuer held or owned by the Partnership and to
carry securities of the Issuer in the name of the Partnership or the name of a
nominee, (d) to provide continuing analysis and consulting assistance to the
Issuer during the course of the Partnership's investment, and (e) to do all
other acts and things necessary, incidental or convenient to carry on the
Partnership business as contemplated. Rainwater, Inc. has full power and
authority to do all things deemed necessary or desirable by it to conduct the
business of the Partnership in the name of the Partnership, including, without
limitation, the exercise of all rights, powers, privileges and other incidents
of ownership or possession with respect to securities held or owned by the
Partnership, including but not limited to the exercise of all voting rights
with respect to such securities. See Exhibit 10.2 attached hereto for a
complete copy of the Agreement of Limited Partnership.
On the First Closing Date, the Issuer and the Partnership entered into a
Registration Rights Agreement, which provides demand and piggyback registration
rights regarding (1) Series A Preferred Stock issued or issuable in exchange
for Series B Preferred Stock ("Registrable Series A Preferred Stock"), (2)
Common Stock issuable upon conversion or redemption of Registrable Series A
Preferred Stock or Series B Preferred Stock ("Preferred Stock"), and (3) any
securities issued or issuable in respect of any Preferred Stock or Common Stock
by way of any stock split or stock dividend or in connection with any share
combination, recapitalization, merger, consolidation, reorganization or
otherwise. The form of Registration Rights Agreement is attached as Exhibit B
to the Purchase Agreement, which is Exhibit 10.1 hereof.
Except as described herein or in the Exhibits filed or to be filed
herewith, there are no contracts, arrangements, understandings or relationships
between the Partnership, Rainwater, Inc. and Richard E. Rainwater or between
such persons and any other person with respect to the shares of Common Stock
deemed to be beneficially owned by the Partnership, Rainwater, Inc. and Richard
E. Rainwater.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1 - Stock Purchase Agreement dated as of April 26, 1996, as
amended by that certain Amendment to Stock Purchase
Agreement dated May 22, 1996, by and between DNR-MESA
Holdings, L.P. and MESA Inc.
Exhibit 10.2 - Agreement of Limited Partnership of DNR-MESA Holdings,
L.P. dated as of April 25, 1996
Exhibit 10.3 - Credit Agreement dated June 1, 1995 between Richard E.
Rainwater and NationsBank of Texas, N.A.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: July 2, 1996 DNR-MESA HOLDINGS, L.P.
By: Rainwater, Inc., its Sole
General Partner
By: /s/ Kenneth A. Hersh
---------------------------
Kenneth A. Hersh,
Vice President
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.1 - Stock Purchase Agreement dated as of April 26, 1996, as
amended by that certain Amendment to Stock Purchase
Agreement dated May 22, 1996, by and between DNR-MESA
Holdings, L.P. and MESA Inc.
10.2 - Agreement of Limited Partnership of DNR-MESA Holdings,
L.P. dated as of April 25, 1996
10.3 - Credit Agreement dated June 1, 1995 between Richard E.
Rainwater and NationsBank of Texas, N.A.
</TABLE>
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EXHIBIT 10.1
Stock Purchase Agreement dated as of April 26, 1996, as amended by
that certain Amendment to Stock Purchase Agreement dated May 22, 1996,
by and between DNR-MESA Holdings, L.P. and MESA Inc.
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated April 26, 1996,
between MESA Inc., a Texas corporation (the "Company" and, together with its
Subsidiaries, the "Companies"), and DNR-MESA Holdings, L.P., a Texas limited
partnership ("Buyer").
WHEREAS, the Company desires to sell to Buyer, and Buyer desires to
purchase from the Company, shares of Series B 8% Cumulative Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Series B
Preferred Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and Buyer hereby agree as follows:
ARTICLE I
TERMS OF THE TRANSACTION
1.1 Agreement to Sell and to Purchase Series B Preferred Stock.
On the terms and subject to the conditions set forth in this Agreement, the
Company shall sell and deliver to Buyer, and Buyer shall purchase and accept
from the Company at the times indicated below, the number of shares of Series B
Preferred Stock equal to the sum of the following:
(a) At the First Closing, 58,849,557 shares of Series B Preferred
Stock; and
(b) At the Second Closing, a number of shares of Series B
Preferred Stock equal to the number of Unsubscribed Shares, if any, upon
completion of the Rights Offering.
All of the shares of Series B Preferred Stock sold by the Company to
Buyer pursuant to this Section 1.1 are referred to collectively as the
"Shares". All of the Shares of the Series B Preferred Stock shall be issued
pursuant to the Statement of Resolution as set forth as Exhibit A hereto (the
"Statement of Resolution").
1.2 Purchase Price and Payment. The aggregate purchase price for
the Shares at each of the First Closing and the Second Closing shall be equal
to $2.26 per share times the total number of Shares to be purchased at the
First Closing and the Second Closing, respectively, pursuant to Section 1.1
(the "Purchase Price"). The Purchase Price payable by Buyer for the Shares to
be purchased by it shall be paid at the First Closing and the Second Closing,
as applicable, in immediately available funds by confirmed wire transfer to a
bank account to be designated by the Company (such designation to occur no
later than the third Business Day prior to the First Closing Date and the
Second Closing Date, respectively).
1.3 Intent of the Parties.
(a) The Company and Buyer intend that (i) the purchase and sale of
the Shares at the First Closing pursuant to this Agreement shall be made in
conjunction with the closing and funding of the loans to be provided under the
New Senior Credit Agreement and the closing of the issuance of the New Notes,
with the proceeds thereof to be used to pay in full all of the Companies'
indebtedness under the Existing Credit Agreement, the 12 3/4% Notes, the
Hugoton Notes and such other Existing Indebtedness as is mutually agreed upon
by the Company and Buyer (the "Debt
1
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Refinancing"), and (ii) the purchase and sale of the Shares at the Second
Closing pursuant to this Agreement shall be made in conjunction with the
closing of the Rights Offering. Any of the Shares that are purchased by Buyer
at the Second Closing shall be Series B Preferred Stock rather than Series A
Preferred Stock. The purchase and sale of the Shares, the Debt Refinancing and
the Rights Offering are herein collectively referred to as the "Transaction".
The Reverse Stock Split does not constitute part of the Transaction nor is the
Transaction conditioned in any manner whatsoever on the Reverse Stock Split.
(b) As used herein, the "Rights Offering" shall mean that certain
distribution by the Company to each record holder of Common Stock, as of a
record date after the Special Meeting Date to be set by the Company, of the
transferable right (the "Rights") to purchase, at $2.26 per share, a pro-rata
portion of approximately $132,000,000 (subject to rounding as set forth below)
of Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per
share, of the Company (the "Series A Preferred Stock"). It is currently
anticipated that in the Rights Offering (i) the Company will distribute .912
transferrable Rights with respect to each share of Common Stock outstanding as
of the record date for the Rights Offering, at no cost to the record holders;
(ii) one Right plus $2.26 in cash will entitle the holder to purchase one share
of Series A Preferred Stock; (iii) the Rights will be evidenced by transferable
subscription certificates (provided that such rounding shall not cause the
total purchase price of the Series A Preferred to exceed $132,500,000); (iv) no
fractional Rights or cash in lieu thereof will be issued or paid, and the
number of Rights distributed to each holder of Common Stock will be rounded up
to the nearest whole number of Rights; (v) brokers, dealers and other nominees
holding shares of Common Stock on the record date for more than one beneficial
owner will be entitled to obtain separate subscription certificates for their
beneficial owners so that they may each receive the benefit of rounding; and
(vi) each Right will also carry the right to subscribe at the $2.26
subscription price for additional shares of Series A Preferred Stock for which
the other holders of Rights did not subscribe through the exercise of the basic
subscription privileges (the "Excess Shares"), provided that (a) only Rights
holders who exercise their basic subscription privilege in full will be
entitled to exercise the oversubscription privilege and (b) if the Excess
Shares are not sufficient to satisfy all over-subscriptions, the Excess Shares
will be allocated pro rata (subject to the elimination of fractional shares)
among those Rights holders exercising the oversubscription privilege.
(c) The Company shall also submit to its shareholders a proposal
for the adoption and approval of a reverse stock split with respect to all of
the outstanding capital stock of the Company (the "Reverse Stock Split"). The
shareholder vote required for the adoption and approval of the Reverse Stock
Split shall be the vote required by Applicable Law, the Company's Articles of
Incorporation, and the rules of the New York Stock Exchange. The Transaction
is not conditioned in any manner whatsoever on shareholder approval or
implementation of the Reverse Stock Split; provided, however, that in the event
that the Company shall effectuate the Reverse Stock Split, the number of Shares
sold and purchased hereunder and the purchase price thereof, and the number of
shares of Series A Preferred Stock subject to the Rights and the exercise price
thereof, shall be adjusted accordingly.
2
<PAGE> 4
ARTICLE II
FIRST CLOSING, SECOND CLOSING AND CLOSING DATES
The closing of the purchase and sale of the Shares pursuant to Section
1.1(a) and the closing of the Debt Refinancing contemplated hereby (the "First
Closing"), and the closing of the purchase and sale of the Shares pursuant to
Section 1.1(b) and the Rights Offering contemplated hereby (the "Second
Closing") shall take place (i) at the offices of the Company, 1400 Williams
Square West, 5205 North O'Connor Boulevard, Irving, Texas, at 9:00 a.m., local
time, on the third Business Day following the satisfaction or waiver (subject
to Applicable Law) of each of the conditions to the obligations of the parties
set forth in Articles VI and VII hereof to the First Closing and the Second
Closing, respectively, or (ii) at such other times or places or on such other
date or dates as the parties hereto shall agree. The date on which the First
Closing is required to take place is herein referred to as the "First Closing
Date" and the date on which the Second Closing is required to take place is
herein referred to as the "Second Closing Date". All closing transactions at
the First Closing shall be deemed to have occurred simultaneously, and all
closing transactions at the Second Closing shall be deemed to have occurred
simultaneously.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer for itself and on behalf
of the Companies, as of the date hereof, that:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Texas and has all requisite corporate power and authority in all material
respects to own, lease, and operate its properties and to carry on its business
as now being conducted. No actions or proceedings to dissolve the Company are
pending or, to the best knowledge of the Company, threatened.
3.2 Qualification. Each of the Companies is duly qualified or
licensed to do business as a foreign corporation or limited partnership and is
in good standing in each jurisdiction in which the property owned, leased, or
operated by it or the conduct of its business requires such qualification or
licensing, except where the failure to do so would not have a Material Adverse
Effect.
3.3 Capitalization of the Company.
(a) The authorized capital stock of the Company (i) as of the date
hereof, consists of 100,000,000 shares of Common Stock, $.01 par value (the
"Common Stock"), and 10,000,000 shares of preferred stock, $.01 par value, and
(ii) immediately before the issuance of the Shares at the First Closing and
before the Reverse Stock Split, shall consist of 600,000,000 shares of the
Common Stock and 500,000,000 shares of preferred stock. As of the date hereof,
(i) 64,050,009 shares of Common Stock (with associated preferred stock purchase
rights issued pursuant to the Company's Rights Agreement dated as of July 6,
1995, as amended (the "Shareholder Rights Plan")) are outstanding and no shares
of preferred stock are outstanding and (ii) 2,932,390 shares of Common Stock
are reserved for issuance upon exercise of outstanding employee stock options
and 1,000,000 shares of preferred stock are reserved for issuance in connection
with the Shareholder Rights Plan. All outstanding shares of capital stock of
the Company have been validly issued and are fully paid
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and nonassessable, and no shares of capital stock of the Company are subject
to, nor have any been issued in violation of, preemptive or similar rights.
(b) Except as set forth above in subparagraph (a) of this Section
3.3 and as contemplated by this Agreement, there are outstanding (i) no shares
of capital stock or other voting securities of the Company; (ii) no securities
of the Company convertible into or exchangeable for shares of capital stock or
other voting securities of the Company; (iii) no options or other rights to
acquire from the Company, and no obligation of the Company to issue or sell,
any shares of capital stock or other voting securities of the Company or any
securities of the Company convertible into or exchangeable for such capital
stock or voting securities; and (iv) other than employee compensation plans
based on the Company's earnings and executive officer employment agreements, no
equity equivalents, interests in the ownership or earnings, or other similar
rights of or with respect to the Company. There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
shares of Common Stock or any other securities of the type described in clauses
(i) - (iv) of the preceding sentence.
3.4 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute, deliver, and perform this Agreement
and to execute, deliver, and where applicable, perform the Ancillary Documents
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement and the execution, delivery, and where applicable, performance by it
of the Ancillary Documents to which it is a party, and the consummation by it
of the transactions contemplated hereby and thereby, have been duly authorized
by all necessary corporate action of the Company (other than the approval of
the transactions contemplated in this Agreement by the shareholders of the
Company in accordance with Applicable Law and the Company's Articles of
Incorporation and the rules of the New York Stock Exchange). This Agreement
has been duly executed and delivered by the Company and constitutes, and each
Ancillary Document executed or to be executed by the Company has been, or when
executed will be, duly executed and delivered by the Company and constitutes,
or when executed and delivered will constitute, a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally, and (ii) general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
3.5 Noncontravention. Assuming shareholder approval as
contemplated by Section 3.6, the execution, delivery, and performance by the
Company of this Agreement and the execution, delivery, and where applicable,
the performance by it of Ancillary Documents to which it is a party and the
consummation by it of the Transaction do not and will not (i) conflict with or
result in a violation of any provision of the Company's Amended and Restated
Articles of Incorporation or the Company's Amended and Restated Bylaws, or the
charter, bylaws, partnership agreement or other governing instruments of any
Subsidiary, (ii) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any loss of material benefit, or of any right
of termination, cancellation, or acceleration under, any Material Agreement,
(iii) except as contemplated by the terms of the New Senior Credit Facility,
result in the creation or imposition of any Encumbrance upon the properties of
the Company or any Subsidiary, or (iv) assuming compliance with the matters
referred to in Section 3.6, violate any Applicable Law binding upon the Company
or any Subsidiary, except, in the case of clauses (ii), (iii), and (iv) above,
for any such conflicts, violations, defaults, terminations, cancellations,
accelerations, or
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Encumbrances which would not, individually or in the aggregate, have a Material
Adverse Effect. The execution, delivery, and performance by the Company of
this Agreement and the execution, delivery, and where applicable, the
performance by it of Ancillary Documents to which it is a party and the
consummation by it of the Transaction do not give rise to an event that causes
the rights outstanding pursuant to the Shareholder Rights Plan to be or to
become exercisable.
3.6 Consents and Approvals. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by the Company or any
Subsidiary in connection with the execution, delivery, or performance by the
Company of this Agreement and the execution, delivery, and where applicable,
performance of Ancillary Documents to which it is a party or the consummation
of the Transaction, other than (i) the filing of any notification report and
expiration or termination of any applicable waiting period that may be required
under the HSR Act; (ii) the filing of the Statement of Resolution with the
Secretary of State of the State of Texas; (iii) compliance with any applicable
requirements of the Securities Act; (iv) compliance with any applicable
requirements of the Exchange Act; (v) compliance with any applicable state
securities laws; (vi) such filings as may be necessary or appropriate in
connection with perfection of Encumbrances securing indebtedness under the New
Senior Credit Facility; (vii) such filings as may be necessary or appropriate
in connection with mergers of any of the Subsidiaries as contemplated pursuant
to the Debt Refinancing; and (viii) such consents, approvals, orders, or
authorizations which, if not obtained, and such declarations, filings, or
registrations which, if not made, would not, individually or in the aggregate,
have a Material Adverse Effect. Except as set forth in Section 3.6 of the
Disclosure Schedule attached hereto (the "Disclosure Schedule"), no consent or
approval of any person other than the Company, Buyer or any Governmental Entity
is required to be obtained or made by the Company or any Subsidiary in
connection with the execution, delivery, or performance by the Company of this
Agreement and execution, delivery and, where applicable, performance of the
Ancillary Documents to which it is a party or the consummation of the
Transaction, other than (a) New York Stock Exchange approval for the listing of
the Series A Preferred Stock and the Conversion Shares and the trading of the
Rights, (b) such approvals as are required to be received from the shareholders
of the Company, and (c) such consents, approvals, orders, or authorizations
which, if not obtained, and such declarations, filings, or registrations which,
if not made, would not, individually or in the aggregate, have a Material
Adverse Effect.
3.7 Authorization of Issuance; Reservation of Shares. When issued
and delivered pursuant to this Agreement against payment therefor, the Shares
will have been duly authorized, issued and delivered and will be fully paid and
nonassessable. During the period within which the Series B Preferred Stock may
be converted, the Company will at all times have authorized and reserved for
the purpose of issue upon conversion of the Series B Preferred Stock, a
sufficient number of shares of Common Stock to provide for the conversion of
the Series B Preferred Stock. All shares of Common Stock which are issuable
upon conversion of the Shares (the "Conversion Shares") will, when issued, be
validly issued, fully paid and nonassessable. The issuance of the Shares is
not, and upon conversion of the Series B Preferred Stock the issuance of the
Conversion Shares will not be, subject to any preemptive or similar rights.
3.8 Subsidiaries. (a) Except as otherwise set forth in Section
3.8 of the Disclosure Schedule, the Company does not own, directly or
indirectly, more than five percent of the capital stock or other securities of
any corporation or partnership or have any direct or indirect equity or
ownership interest of more than five percent in any other person, other than
the Subsidiaries. Section 3.8 of the Disclosure Schedule lists each Subsidiary
as of the date hereof and the jurisdiction of incorporation or formation of
each Subsidiary. Each corporate Subsidiary is a
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corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation, and each partnership Subsidiary
is a partnership duly formed and validly existing under the laws of the
jurisdiction of its formation. Each Subsidiary has all requisite corporate or,
in the case of a partnership Subsidiary, partnership power and corporate or, in
the case of a partnership Subsidiary, partnership authority to own, lease, and
operate its properties and to carry on its business as now being conducted.
Except as otherwise indicated on Section 3.8 of the Disclosure Schedule, no
actions or proceedings to dissolve any Subsidiary are pending.
(b) Except as otherwise indicated on Section 3.8 of the Disclosure
Schedule, all the outstanding capital stock or other equity interests of each
Subsidiary is owned directly or indirectly by the Company, free and clear of
all Encumbrances securing indebtedness for money borrowed and restrictions on
voting, sale, transfer or disposition. All outstanding shares of capital stock
of each corporate Subsidiary have been validly issued and are fully paid and
nonassessable. All partnership interests of each partnership Subsidiary have
been validly issued and are fully paid (to the extent required at such time).
No shares of capital stock or other equity interests of any Subsidiary are
subject to, nor have any been issued in violation of, preemptive or similar
rights.
(c) Except as set forth above in Section 3.8(b), there are
outstanding (i) no shares of capital stock or other voting securities of the
Subsidiaries; (ii) no securities of the Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities of any of
the Subsidiaries; (iii) no options or other rights to acquire from any of the
Subsidiaries, and no obligation of any of the Subsidiaries to issue or sell,
any shares of capital stock or other voting securities of any of the
Subsidiaries or any securities of the Subsidiaries convertible into or
exchangeable for such capital stock or voting securities; and (iv) other than
employee compensation plans based on the Subsidiaries' earnings and executive
officer employment agreements, no equity equivalents, interests in the
ownership or earnings, or other similar rights of or with respect to the
Subsidiaries. There are no outstanding contractual obligations of the
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock or any other securities of the type described in clauses (i)-(iv) of the
preceding sentence.
3.9 Employee Benefit Plans and Other Agreements.
(a) Section 3.9 of the Disclosure Schedule lists each "employee
benefit plan", as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (i) which is subject to any
provision of ERISA, (ii) which is maintained, administered, or contributed to
by the Company or any affiliate of the Company, and (iii) which covers any
employee or former employee of the Company or any affiliate of the Company or
under which the Company or any affiliate of the Company has any liability. The
Company has made available to Buyer accurate and complete copies of such plans
(and, if applicable, the related trust agreements) and all amendments thereto
and written interpretations thereof, together with (i) the most recent annual
reports (Form 5500 including, if applicable, Schedule B thereto) prepared in
connection with any such plan and (ii) the most recent actuarial valuation
report prepared in connection with any such plan. Such plans are referred to
in this Section as the "Employee Plans". For purposes of this Section only, an
"affiliate" of any person means any other person which, together with such
person, would be treated as a single employer under Section 414(b), (c) and (m)
of the Internal Revenue Code of 1986, as amended (the "Code"). The only
Employee Plans which individually or collectively would constitute an "employee
pension benefit plan" as defined in Section 3(2) of ERISA are identified as
such in Section 3.9 of the Disclosure Schedule.
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(b) Except as otherwise identified on Section 3.9 of the
Disclosure Schedule, (i) no Employee Plan constitutes a "multiemployer plan",
as defined in Section 3(37) of ERISA (for purposes of this Section, a
"Multiemployer Plan"), (ii) no Employee Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code, (iii) no Employee Plan is
subject to Title IV of ERISA or to the minimum funding standards of ERISA and
the Code, and (iv) during the past five years, neither the Company nor any of
its affiliates have made or been required to make contributions to any
Multiemployer Plan. There are no accumulated funding deficiencies as defined
in Section 412 of the Code (whether or not waived) with respect to any Employee
Plan. Except as has been currently or previously reflected on the financial
statements of the Company, neither the Company nor any affiliate of the Company
has incurred any material liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal from, any
plan covered or previously covered by Title IV of ERISA. There is no lien
arising under ERISA against any of the assets of the Company or any Subsidiary.
Neither the Company nor any Subsidiary or any director or officer of the
Company or any Subsidiary is subject to any liability under Title I of ERISA or
liable for any tax pursuant to Section 4975 of the Code that could have a
Material Adverse Effect. There are no threatened or pending claims by or on
behalf of the Employee Plans, or by any participant therein, alleging a breach
or breaches of fiduciary duties or violations of Applicable Laws which could
result in liability on the part of the Company, its officers or directors, or
such Employee Plans, under ERISA or any other Applicable Law, and to the
Company's knowledge, there is no basis for any such claim.
(c) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified since the
date of its adoption, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. Each Employee Plan has been maintained
in all material respects in compliance with its terms and with the requirements
prescribed by all Applicable Laws, including but not limited to ERISA and the
Code, which are applicable to such Employee Plans.
(d) Except as set forth in Schedule 3.9 to the Disclosure
Schedule, there is no contract, agreement, plan, or arrangement covering any
employee or former employee of the Company or any affiliate of the Company,
that, individually or collectively, could give rise to the payment of any
amount that would be an "excess parachute payment" within the meaning of
Section 280G of the Code.
(e) There are no collective bargaining agreements or other labor
union contracts applicable to any employees to or by which the Company or any
Subsidiary is a party or is bound and no such agreement or contract has been
requested by an employee or group of employees of the Company or any
Subsidiary.
(f) Except as otherwise set forth in Section 3.9 of the Disclosure
Schedule or in the Company's Form 10-K for its fiscal year ended December 31,
1995, other than the payment of wages and salaries in accordance with the
ordinary and usual payroll practices of the Company, there are no agreements,
arrangements or understandings (written or oral, formal or informal) to which
the Company or any Subsidiary is a party with any current or former director,
officer, employee, consultant or advisor or any affiliate of any such person by
which any such person shall receive any compensation, consideration or benefit
of any kind (whether cash or property) from any of the Companies. Except as
otherwise set forth in Section 3.9 of the Disclosure Schedule, no severance
payment or incentive payment, or similar obligation will be owed by the Company
or any Subsidiary to any of its respective directors, officers, or employees as
a direct result of the negotiation and/or the consummation of the Transaction
or any of the transactions constituting the
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<PAGE> 9
Transaction, nor will any such director, officer, or employee be entitled to
severance payments or other similar benefits as a direct result of the
Transaction in the event of the subsequent termination of his or her
employment.
3.10 SEC Filings. The Company has filed with the Securities and
Exchange Commission (the "SEC"), and has made available to Buyer a complete and
correct copy of, all forms, reports, schedules, statements, and other documents
(excluding exhibits and preliminary material) required to be filed by it under
the Securities Act, the Exchange Act, and all other federal securities laws,
during the period from December 31, 1993 to the date of this Agreement. All
forms, reports, schedules, statements, and other documents (including all
amendments thereto) filed by the Company with the SEC, including the Proxy
Statement and the Registration Statements at the time that such documents are
filed in accordance with Section 5.6 and Section 5.9 hereof, respectively, are
herein collectively referred to as the "SEC Filings". The SEC Filings, at the
time filed, complied as to form in all material respects with all applicable
requirements of federal securities laws. None of the SEC Filings, including,
without limitation, any financial statements or schedules included therein, at
the time filed, contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading except as the same was corrected or
superseded in a subsequent document duly filed with the SEC. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company included in the SEC Filings present fairly in all
material respects, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto
and, in the case of the unaudited consolidated interim financial statements,
except to the extent that preparation of such financial statements in
accordance with generally accepted accounting principles is not required by
applicable rules of the SEC), the consolidated financial position of the
Company as of the dates thereof and its consolidated results of operations and
cash flows for the periods then ended (subject to normal year-end audit
adjustments in the case of any unaudited interim financial statements). No
representations are made in this Section by the Company with respect to any
information furnished by and relative to Buyer for inclusion in the
Registration Statements or the Proxy Statement.
3.11 Absence of Undisclosed Liabilities. Except as set forth in
Section 3.11 of the Disclosure Schedule or to the extent disclosed in the SEC
Filings filed prior to the date hereof, (a) as of December 31, 1995, neither
the Company nor any Subsidiary had any liabilities or obligations (whether
accrued, absolute, contingent, unliquidated, or otherwise) material to the
Company and the Subsidiaries considered as a whole, and (b) since December 31,
1995, neither the Company nor any Subsidiary has incurred any such material
liabilities or obligations, other than those incurred in the ordinary course of
business consistent with past practice or pursuant to or as contemplated by
this Agreement.
3.12 Absence of Certain Changes. Since December 31, 1995, (i)
there has not been any Material Adverse Effect, specifically including, without
limitation, any event causing a material reduction (other than by production of
reserves) in the aggregate total of the proved oil and gas reserves of the
Company and its Subsidiaries, below the aggregate reserve totals reflected in
the most recent reserve report prepared by the Company's engineers estimating
the proved reserves attributable to the Company's oil and gas properties as of
December 31, 1995 and as described in the Company's most recent Form 10-K for
the fiscal year ended December 31, 1995 (the "Reserve Report") (provided that
it is understood and agreed for all purposes of this Agreement that the receipt
by the Company of any reserve report prepared by persons other than the
Company, containing estimates of proved reserves less than the estimate thereof
set forth in the Reserve
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Report, shall not of itself be deemed to constitute such a material reduction,
unless such other reserve report contains a materially lower estimate of proved
reserves due to taking into account (A) a physical event occurring subsequent
to the date of the Reserve Report or (B) additional interpretative data from
that available at the time of the preparation of the Reserve Report that, in
the case of (A) or (B), in the opinion of the Company's petroleum engineers,
exercising their independent professional judgment, would cause such persons to
materially reduce the estimates of proved reserves contained in the Reserve
Report), (ii) neither the Company nor any Subsidiary has incurred any liability
or engaged in any transaction that is material to the Company and its
Subsidiaries taken as a whole, or entered into any Material Agreement, except
in the ordinary course of business consistent with past practice, as
contemplated by this Agreement or as disclosed in Section 3.12 of the
Disclosure Schedule, or (iii) neither the Company nor any Subsidiary is in
default under (and no event has occurred which with the lapse of time or action
by a third party could result in a default under) any Material Agreement,
except for (x) such defaults that have been waived or cured in all respects
prior to the date hereof and (y) defaults as contemplated by the Company's Form
10-K for the fiscal year ended December 31, 1995, that may occur on and after
the date hereof under the Existing Bank Debt or the 12 3/4% Notes.
3.13 Compliance With Laws and Permits. Except as set forth in
Section 3.13 of the Disclosure Schedule or as otherwise specified in Section
3.9 or Section 3.21, since March 31, 1992, (i) the Company and the Subsidiaries
have complied with all Applicable Laws (including without limitation Applicable
Laws relating to securities, properties, production of hydrocarbons, sales of
hydrocarbons, employment practices, terms and conditions of employment, wages
and hours, safety, occupational safety, product safety, and civil rights) other
than violations which in the reasonable judgment of the Company, individually
or in the aggregate, do not and will not have a Material Adverse Effect; (ii)
each of the Companies has obtained and holds all material permits, licenses,
variances, exemptions, orders, franchises, approvals and authorizations of all
Governmental Entities necessary for the lawful conduct of its business or the
lawful ownership, use and operation of its assets; (iii) neither the Company
nor any Subsidiary has received any written notice, which has not been
dismissed or otherwise disposed of, that the Company or any Subsidiary has not
so complied; and (iv) neither the Company nor any Subsidiary is charged or, to
the best knowledge of the Company, threatened with, or, to the best knowledge
of the Company, under investigation with respect to, any violation of any
Applicable Law relating to any aspect of the business of the Company or any
Subsidiary other than violations which in the reasonable judgment of the
Company, individually or in the aggregate, do not and will not have a Material
Adverse Effect.
3.14 Litigation. The Company has delivered to Buyer an accurate
list of all Proceedings pending or, to the best knowledge of the Company,
threatened against or involving the Company or any Subsidiary (or any of their
respective directors or officers in connection with the business or affairs of
the Company or any Subsidiary) or any properties or rights of the Company or
any Subsidiary as of the date hereof. Any and all probable and estimated
liabilities of the Company and the Subsidiaries under such Proceedings are
adequately covered (except for standard deductible amounts) by the existing
insurance maintained by the Company or reserves established in the financial
statements of the Company. The Company has no knowledge of any facts that are
likely to give rise to any additional Proceedings that would reasonably be
expected to have a Material Adverse Effect. As of the date hereof, there are
no Proceedings pending or, to the best knowledge of the Company, threatened
seeking to restrain, prohibit, or obtain damages or other relief in connection
with this Agreement or the Transactions.
3.15 Settlement Agreement. All applicable requirements of that
certain Agreement of Compromise and Settlement dated September 20, 1995, among
the Company, Boone Pickens and
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the parties referred to as the WDB Parties therein (the "Settlement Agreement")
have been satisfied so that the issuance of stock to Buyer and upon the
exercise of Rights in the Rights Offering as contemplated hereby will be
classified as an "Endorsed Major Transaction" thereunder. To the knowledge of
the Company, the Settlement Agreement is in full force and effect as of the
date hereof. The Company has not entered into any amendment of the Settlement
Agreement nor waived any of its rights with respect thereto, and the Company is
not in default thereunder. As of the date hereof, to the knowledge of the
Company, no WDB Party has initiated a "Solicitation Action" (as defined in the
Settlement Agreement) or taken any actions in the nature of those which are
restricted by Sections 4, 6(a), 6(c) or 7 of the Settlement Agreement (except
that no representation or warranty is being made with respect to any letters to
the Board of Directors from Joel L. Reed and Dorn Parkinson, in form and
substance similar to the drafts thereof provided to Buyer on the date hereof).
3.16 True and Complete Disclosure. Taken in the aggregate, all
factual information (excluding estimates), including without limitation factual
information contained in the Reserve Report and any other reserve report
prepared by the Company in connection with the oil and gas properties of the
Companies, heretofore or contemporaneously furnished by the Company to Buyer in
writing for purposes of or in connection with this Agreement or the Transaction
has been true and accurate in all material respects on the date as of which
such information is dated and not incomplete by omitting to state any material
fact necessary to make the statements of fact contained therein, in the light
of the circumstances under which they were made, not misleading at such date.
All financial forecasts prepared and furnished by the Company to Buyer were
prepared in good faith on the basis of assumptions believed to be reasonable
and data, information, tests or conditions believed to be valid or accurate or
to exist at the time such forecasts were prepared.
3.17 Books and Records. All books, records and files of the
Companies (including those pertaining to the Companies' oil and gas properties,
wells and other assets, those pertaining to the production, gathering,
transportation and sale of hydrocarbons, and corporate, accounting, financial
and employee records) (a) have been prepared, assembled and maintained in
accordance with usual and customary policies and procedures and (b) fairly and
accurately reflect in all material respects the ownership, use, enjoyment and
operation by the Companies of their respective assets.
3.18 Governmental Regulation. Neither the Company nor any
Subsidiary is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended. Neither the Company nor any Subsidiary is a "holding company," or
a "subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended. Neither
the Company nor any Subsidiary has a similar status under any similar state
laws or regulations of the type regulating public utilities.
3.19 Investments and Guarantees. Except as set forth in Section
3.19 of the Disclosure Schedule or in the SEC Filings filed prior to the date
hereof, none of the Companies is a party to (i) any financial arrangement with
respect to or creating any indebtedness to any person (other than indebtedness
incurred in the ordinary course of business); (ii) any Material Agreement
relating to the making of any advance to, or investment in, any person; or
(iii) any Material Agreement providing for a guaranty or other contingent
liability with respect to any indebtedness for money borrowed or similar
obligation of any person.
3.20 Taxes. Except as disclosed in Section 3.20 of the Disclosure
Schedule: (i) the Company and each Subsidiary have duly filed all federal,
state, local, and foreign Tax Returns
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required to be filed by or with respect to them with the Internal Revenue
Service or other applicable taxing authority when due (as extended pursuant to
extensions with respect to such Tax Returns that have been requested or
granted); (ii) the Company and each Subsidiary have paid, or adequately
reserved against in the Company's financial statements, all Taxes due, or
claimed by any taxing authority to be due, from or with respect to them, except
Taxes that are being contested in good faith by appropriate legal proceedings
and for which adequate reserves have been established in such financial
statements; (iii) to the knowledge of the Company, there has been no issue
raised or adjustment proposed (and none is pending) by the Internal Revenue
Service or any other taxing authority in connection with any of the Tax
Returns, except for (a) such adjustments as the Company has settled prior to
the date of this Agreement with the Internal Revenue Service or applicable
taxing authority, or (b) adjustments that are being contested in good faith by
appropriate legal proceedings and for which adequate reserves have been
established in the Company's financial statements (each of which is disclosed
in Section 3.20 of the Disclosure Schedule); (iv) the Company and each
Subsidiary have made all deposits required with respect to Taxes; and (v) no
waiver or extension of any statute of limitations as to any federal Tax matter
has been given by or requested from the Company or any Subsidiary.
3.21 Environmental Matters. Except as set forth in Section 3.21 of
the Disclosure Schedule:
(a) Each of the Companies has conducted its business and operated
its assets, and is conducting its business and operating its assets, in
material compliance with all Applicable Laws pertaining to health, safety, the
environment, Hazardous Material (as such term is defined in CERCLA), or Solid
Wastes (as such term is defined in RCRA) (such Applicable Laws as they now
exist or are hereafter enacted and/or amended are collectively, for purposes of
this Section, called "Environmental Laws"), including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended, for purposes of this Section, called "CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act
of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended, for purposes of this Section,
called "RCRA");
(b) None of the Companies has been notified by any Governmental
Entity that any of the operations or assets of any of the Companies is the
subject of any investigation or inquiry by any Governmental Entity evaluating
whether any material remedial action is needed to respond to a release of any
Hazardous Material or to the improper storage or disposal (including storage or
disposal at offsite locations) of any Hazardous Material;
(c) None of the Companies and, to the Company's knowledge, no
other person has filed any notice under any federal, state or local law
indicating that (i) any of the Companies is responsible for the improper
release into the environment, or the improper storage or disposal, of any
Hazardous Material, or (ii) any Hazardous Material is improperly stored or
disposed of upon any property of any of the Companies;
(d) To the Company's knowledge, none of the Companies has any
material contingent liability in connection with (i) the release into the
environment at or on any property now or previously owned or leased by any of
the Companies, or (ii) storage or disposal of any Hazardous Material;
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(e) In the last six years, none of the Companies has received any
claim, complaint, notice, inquiry or request for information which remains
unresolved as of the date hereof with respect to any alleged material violation
of any Environmental Law or regarding potential material liability under any
Environmental Law relating to operations or conditions or any facilities or
property owned, leased or operated by any of the Companies;
(f) To the Company's knowledge, no property now or previously
owned, leased or operated by any of the Companies is listed on the National
Priorities List pursuant to CERCLA or on any similar federal or state list as
sites requiring investigation or cleanup;
(g) To the Company's knowledge, none of the Companies is directly
transporting, has directly transported, is directly arranging for the
transportation of, or has directly transported, any Hazardous Material to any
location which is listed on the National Priorities List pursuant to CERCLA or
on any similar federal or state list or which is the subject of federal, state
or local enforcement actions that may lead to material claims against such
company for remedial work, damage to natural resources or personal injury,
including claims under CERCLA;
(h) There are no sites, locations or operations at which any of
the Companies is currently undertaking any remedial or response action relating
to any disposal or release of any Hazardous Material, as required by
Environmental Laws; and
(i) All underground storage tanks and solid waste disposal
facilities owned or operated by the Companies are used and operated in material
compliance with Environmental Laws.
3.22 Insurance. Each of the Companies carry, and will continue to
carry, insurance with reputable insurers (except as to self-insurance) in
respect of such of their respective properties, in such amounts and against
such risks as is customarily maintained by other persons of similar size
engaged in similar businesses (which may include self-insurance in amounts
customarily maintained by companies similarly situated or has been maintained
in the past by the Companies.) None of such insurance was obtained through the
use of materially false or misleading information or the failure to provide the
insurer with all material information requested in order to evaluate the
liabilities and risks insured. The Companies have not received any notice of
cancellation or non-renewal of any insurance policies or binders.
3.23 Oil and Gas Operations. In those instances in which any of
the Companies serves as operator of a well that is currently a producing well
or undergoing drilling operations, it has drilled and completed (if applicable)
such well, and operated and produced such well, in accordance with generally
accepted oil and gas field practices and in compliance in all material respects
with applicable oil and gas leases and all Applicable Laws, except where any
failure or violation could not reasonably be expected to have a Material
Adverse Effect on the Companies. All proceeds from the sale of oil, gas and
other hydrocarbons produced by the Companies are being received by the
Companies in a timely manner and are not being held in suspense for any reason
(except for amounts, individually or in the aggregate, not in excess of
$500,000 and held in suspense in the ordinary course of business).
3.24 Marketing of Production. Except for contracts listed in
Section 3.24 of the Disclosure Schedule (with respect to all of which contracts
the Company represents that it or its Subsidiaries are receiving a price for
all production sold thereunder which is computed in accordance with the terms
of the relevant contract), there exist no Material Agreements for the sale of
production from the leasehold and other interests in oil, gas and other mineral
properties owned,
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or otherwise held in the name of, the Companies (collectively, the "Oil and Gas
Properties") (including without limitation, calls on, or other rights to
purchase, production, whether or not the same are currently being exercised)
other than (i) agreements or arrangements pertaining to the sale of production
at a price equal to or greater than a price that is the market price from time
to time existing in the areas where the Oil and Gas Properties subject to such
agreement or arrangement are located, and (ii) agreements or arrangements that
are cancelable on 60 days notice or less without penalty or detriment.
3.25 Prepayments. Neither the Company nor any Subsidiary is
obligated, by virtue of a prepayment arrangement, make-up right under a
production sales contract containing a "take or pay" or similar provision,
production payment or any other arrangement, to deliver hydrocarbons, or
proceeds from the sale thereof, attributable to any of its properties at some
future time without then or thereafter being entitled to receive payment of the
contract price therefor, except where any such arrangement would not have a
Material Adverse Effect.
3.26 Gas Imbalances. Except as disclosed in the SEC Filings filed
prior to the date hereof, neither the Company nor any Subsidiary had (i) any
obligation to deliver gas from the Oil and Gas Properties (or cash in lieu
thereof) to other owners of interests in those properties as a result of past
production by the Company, any Subsidiary or any of their predecessors in
excess of the share to which they were entitled nor (ii) any right to receive
deliveries of gas from the Oil and Gas Properties (or cash in lieu thereof)
from other owners of interests in those properties as a result of past
production by the Company, any Subsidiary or any of their predecessors of less
than the share to which they were entitled; in either case where any such gas
imbalance would have a Material Adverse Effect.
3.27 Customers and Suppliers. None of the current customers or
suppliers of the Companies has refused, or communicated in writing that it will
or may refuse, to purchase or supply products or services from or to the
Companies or has communicated in writing that it will or may substantially
reduce the amount of production, goods or services that it is willing to
purchase from or supply to the Companies where any such refusal or reduction
would have a Material Adverse Effect.
3.28 Material Personal Property. All pipelines, wells, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by the Company or any Subsidiary that are
necessary to conduct normal operations are being maintained in a state adequate
to conduct normal operations, and with respect to such of the foregoing which
are operated by the Company or any Subsidiary, in a manner consistent with the
Company's or the Subsidiaries' past practices.
3.29 Reserve Report. The Company acknowledges and agrees that
Buyer has been provided with a copy of the Reserve Report. The Company's and
each Subsidiary's ownership of the Oil and Gas Properties described in the
Reserve Report entitle the respective owner to receive a percentage of the oil,
gas and other hydrocarbons produced from each well or unit equal to not less
than the percentage set forth in the Reserve Report as the "Net Revenue
Interest" for such well or unit and cause the respective owner to be obligated
to bear a percentage of the cost of operation of such well or unit not greater
than the percentage set forth in the Reserve Report as the "Working Interest"
for such well or unit, and to the extent such percentages of production which
the respective owner is entitled to receive, and shares of expenses which the
respective owner is obligated to bear, may change after the date of such
report, such changes were properly reflected (based on reasonable
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assumptions) in preparing such report. The underlying historical information
used for preparation of the Reserve Report was, at the time of delivery, true
and correct in all material respects.
3.30 Nonconsent Operations. Except as set forth in Section 3.30 of
the Disclosure Schedule, there are no operations on the Oil and Gas Properties
in which the Company's or any Subsidiary's commitment would have exceeded
$1,000,000, being conducted as of January 1, 1995, or any time thereafter, in
which the Company or any Subsidiary has elected not to participate.
3.31 Intellectual Property. The Company and its Subsidiaries
either own or have valid licenses or other rights to use all patents,
copyrights, trademarks, software, databases, geological data, geophysical data,
engineering data, maps, interpretations and other technical information used in
their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are
customary for companies engaged in the business of the exploration and
production of oil, gas, condensate and other hydrocarbons, with such exceptions
as would not result in a Material Adverse Effect. There are no limitations
contained in the agreements of the type described in the immediately preceding
sentence which, upon consummation of the Transaction, will alter or impair any
such rights, breach any such agreement with any third party vendor, or require
payments of additional sums thereunder, except any such limitations that would
not have a Material Adverse Effect. The Company and its Subsidiaries are in
compliance in all material respects with such licenses and agreements and there
are no pending or, to the best knowledge of the Company or any Subsidiary,
threatened Proceedings challenging or questioning the validity or effectiveness
of any license or agreement relating to such property or the right of the
Company or any Subsidiary to use, copy, modify or distribute the same.
3.32 Prior Securities Offerings. Since January 1, 1993, the
Company has not sold any securities other than securities registered pursuant
to the Securities Act.
3.33 Private Offering of the Securities. Neither the Company nor
anyone acting on its behalf has offered or will offer the Shares or any part
thereof or any similar securities, other than the Series A Preferred Stock
issuable pursuant to the Rights Offering, for issue or sale to, or has
solicited or will solicit any offer to acquire any of the same from, anyone so
as to bring the issuance and sale of the Shares within the provisions of
Section 5 of the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
4.1 Organization. Buyer is a limited partnership that is duly
formed and validly existing as a limited partnership under the laws of the
State of Texas.
4.2 Authority Relative to This Agreement. Buyer has full power
and authority to execute, deliver, and perform this Agreement and execute,
deliver and, where applicable, perform the Ancillary Documents to which it is a
party and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by Buyer of this Agreement and execution,
delivery, and, where applicable, performance of the Ancillary Documents to
which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action of Buyer. This Agreement has been duly executed and
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delivered by Buyer and constitutes, and each Ancillary Document executed or to
be executed by Buyer has been, or when executed will be, duly executed and
delivered by Buyer and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except that such enforceability may
be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (ii)
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.3 Noncontravention. The execution, delivery, and performance by
Buyer of this Agreement and the execution, delivery and, where applicable,
performance of Ancillary Documents to which it is a party and the consummation
by it of the transactions contemplated hereby and thereby do not and will not
(i) conflict with or result in a violation of any provision of the agreement of
limited partnership of Buyer, (ii) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, agreement, or other instrument or obligation to which Buyer
is a party or by which Buyer or any of its properties may be bound, (iii)
result in the creation or imposition of any Encumbrance upon the properties of
Buyer, or (iv) violate any Applicable Law binding upon Buyer, except, in the
case of clauses (ii), (iii), and (iv) above, for any such conflicts,
violations, defaults, terminations, cancellations, accelerations, or
Encumbrances which would not, individually or in the aggregate, have a material
adverse effect on the business, assets, results of operations, or financial
condition of Buyer or on the ability of Buyer to consummate the transactions
contemplated hereby.
4.4 Consents and Approvals. Other than (i) any HSR Act filing and
(ii) filings required by the Exchange Act, no consent, approval, order, or
authorization of, or declaration, filing, or registration with, any
Governmental Entity is required to be obtained or made by Buyer or any of its
partners in connection with the execution, delivery, or performance by Buyer of
this Agreement. No consent or approval of any person other than any
Governmental Entity is required to be obtained or made by Buyer or any of its
partners in connection with the execution, delivery or performance by Buyer of
this Agreement and the execution, delivery and, where applicable, performance
of the Ancillary Documents to which it is a party.
4.5 Purchase for Investment.
(a) Buyer and each of its partners has been furnished with all
information that it has requested for the purpose of evaluating the proposed
acquisition of the Shares pursuant hereto, and Buyer (and each of its partners)
has had an opportunity to ask questions of and receive answers from the Company
regarding the Company and its business, assets, results of operations,
financial condition and prospects and the terms and conditions of the issuance
of the Shares.
(b) Buyer is acquiring the Series B Preferred Stock solely by and
for its own account, for investment purposes only and not for the purpose of
resale or distribution; and neither Buyer nor any of its partners has any
contract, undertaking, agreement or arrangement with any person or entity to
sell, transfer or pledge to such person or anyone else any Series B Preferred
Stock; and neither Buyer nor any of its partners has any present plans or
intentions to enter into any such contract, undertaking or arrangement.
(c) Buyer and each of its partners acknowledges and understands
that (i) no registration statement relating to the Series B Preferred Stock (or
the Conversion Shares or the shares of Series
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A Preferred Stock into which the Series B Preferred Stock will be convertible)
has been or is to be filed with the SEC under the Securities Act or pursuant to
the securities laws of any state; (ii) the Series B Preferred Stock (and the
Conversion Shares or the shares of Series A Preferred Stock into which the
Series B Preferred Stock will be convertible) cannot be sold or transferred
without compliance with the registration provisions of the Securities Act or
compliance with exemptions, if any, available thereunder; (iii) the
certificates representing the Shares will include a legend thereon that refers
to the foregoing; and (iv) the Company has no obligation or intention to
register the Series B Preferred Stock (or the Conversion Shares or the shares
of Series A Preferred Stock into which the Series B Preferred Stock will be
convertible) under any federal or state securities act or law; except to the
extent in each case that the terms of the Registration Rights Agreement set
forth as Exhibit B hereto shall otherwise provide.
(d) Buyer and each of its partners (i) is an "accredited investor"
as defined in Rule 501 of the rules promulgated pursuant to the Securities Act;
(ii) has such knowledge and experience in financial and business matters in
general that it has the capacity to evaluate the merits and risks of an
investment in the Series B Preferred Stock and to protect its own interest in
connection with an investment in the Series B Preferred Stock; (iii) has such a
financial condition that it has no need for liquidity with respect to its
investment in the Series B Preferred Stock to satisfy any existing or
contemplated undertaking, obligation or indebtedness; and (iv) is able to bear
the economic risk of its investment in the Series B Preferred Stock for an
indefinite period of time.
(e) Buyer and each of its partners has relied upon its own
independent investigations of the business of the Company or upon its own
independent advisers in evaluating its investment in the Series B Preferred
Stock, provided that in conducting such investigations, they and their advisers
have relied upon the information furnished to them by the Company and the
representations and warranties herein contained.
(f) The agreement of limited partnership of Buyer requires that
each Partner make substantially the same representations and warranties as set
forth in this Section 4.5 in order to enable the Company to substantiate that
the sale of the Series B Preferred Stock to Buyer shall be exempt from the
registration provisions of the Securities Act.
(g) The acquisition of the Shares by Buyer at the First Closing
and the Second Closing, as applicable, shall constitute Buyer's confirmation of
the foregoing representations.
4.6 No Other Shares. Except for such rights as may be conferred
on Buyer by this Agreement and the Ancillary Documents, neither Buyer, any of
its partners nor any Affiliate of Buyer beneficially owns, directly or
indirectly, any shares of capital stock or other securities of the Company or
any of its Subsidiaries.
4.7 Financial Resources. The Partnership has the financial
resources available to it as are necessary to perform its obligations to
acquire the Shares pursuant to the terms of this Agreement.
4.8 Disclosure Documents. None of the written information
furnished by Buyer before or after the date hereof pursuant to Section 5.17 for
inclusion in either of the Registration Statements or the Proxy Statement will,
at the time each such Registration Statement becomes effective or the
prospectus included therein is first mailed to the Company's shareholders, or
at the time the Proxy Statement is filed with the SEC or is first mailed to the
Company's shareholders, contain any untrue statement of a material fact or omit
to state any material fact required to be
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stated therein or necessary in order to make the statements contained therein,
in light of the circumstances under which they are made, not misleading. The
representations and warranties contained in this Section 4.8 shall not apply to
statements or omissions in the information furnished pursuant to Section 5.17
to the extent such information is based upon information furnished to Buyer by
the Company.
4.9 Brokerage Fees. Buyer has not retained any financial advisor,
broker, agent, or finder or paid or agreed to pay any financial advisor,
broker, agent, or finder on account of the sale by the Company and the purchase
by Buyer of the Shares pursuant to this Agreement.
4.10 True and Complete Disclosure. Taken in the aggregate, all
factual information (excluding estimates) heretofore or contemporaneously
furnished by Buyer to the Company in writing for purposes of or in connection
with this Agreement or the Transaction has been true and accurate in all
material respects on the date as of which such information is dated and not
incomplete by omitting to state any material fact necessary to make the
statements of fact contained therein, in the light of the circumstances under
which they were made, not misleading at such date.
4.11 Governmental Regulation. Buyer is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Continuing Operations. From the date of this Agreement to
the earlier of (i) the First Closing Date, or (ii) the termination of this
Agreement in accordance with its terms (the "Interim Period"), the Company and
its Subsidiaries shall conduct their business in the ordinary and usual course,
and neither the Company nor any Subsidiary shall, without the prior consent of
Buyer (which consent may be obtained in writing or by discussions, in person or
by telephone, with an officer of the general partner of Buyer), except as
expressly contemplated hereby:
(a) amend its charter or bylaws; split (including any
reverse split), combine, or reclassify any shares of its capital
stock; adopt resolutions authorizing a liquidation, dissolution,
merger, consolidation, restructuring, recapitalization, or other
reorganization of the Company or any Subsidiary; or make any other
material changes in its capital structure;
(b) except in the ordinary course of business consistent
with past practice, (i) incur any liability or obligation, (ii) become
liable or responsible for the obligations of any other Person (other
than wholly-owned Subsidiaries) or (iii) pay, discharge, or satisfy
any claims, liabilities, or obligations (whether accrued, absolute,
contingent, unliquidated, or otherwise, and whether asserted or
unasserted), other than the payment, discharge, or satisfaction, in
the ordinary course of business consistent with past practice, of
liabilities reflected or reserved against in the financial statements;
provided that, in no event shall any of the Companies enter into any
settlement or compromise of any litigation or claims involving
liability in excess of $500,000, without the prior written approval of
Buyer;
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(c) incur any indebtedness for borrowed money, except for
borrowings under the Existing Credit Agreement;
(d) make any loans or advances to any person, other than
(i) advances to employees in the ordinary and usual course of business
and (ii) transactions among or between the Companies with respect to
cash management conducted in the ordinary and usual course of the
Companies' business;
(e) declare or pay any dividend or make any other
distribution with respect to its capital stock, other than dividends
paid by any Subsidiary to another of the Companies in the ordinary and
usual course of the Companies' business;
(f) issue, sell, or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights
to purchase, or otherwise) any of its capital stock or other
securities other than as contemplated herein or pursuant to stock
options issued and outstanding as of the date hereof or purchase or
otherwise acquire any of its capital stock, employee or director stock
options or debt securities;
(g) subject to Encumbrance any of its assets or
properties, other than those Encumbrances arising by operation of law
or in the ordinary and usual course of business and those Encumbrances
incurred to secure the Existing Indebtedness;
(h) other than in the ordinary course of business, sell,
lease, transfer, or otherwise dispose of, directly or indirectly, any
assets, or waive, release, grant, or transfer any rights of value;
(i) acquire (by merger, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership or other
business organization or division thereof; create or make any
investment in any subsidiary; or make any other investment or
expenditure of a capital nature, other than any capital expenditure
already included in the capital expenditure budget for the Companies
for the period from March 31, 1996 through July 31, 1996, as
previously provided to and approved by Buyer; provided that, the
amount and timing of such capital expenditure must not vary in any
material respect from that set forth in the approved budget;
(j) enter into, adopt, or (except as may be required by
law) amend or terminate any collective bargaining agreement or any
Benefit Plan; approve or implement any employee lay off or other
personnel reorganization plans; approve or implement any employment
severance arrangements (other than payments made under the Company's
severance policy in accordance with past practice) or retain or
discharge any officers and executive management personnel; authorize
or enter into any employment, severance, consulting services or other
agreement with any officers and executive management personnel; or
except as set forth in Section 5.1 of the Disclosure Schedule, change
the compensation or benefits provided to any director, officer, or
employee as of February 1, 1996;
(k) enter into any contract, agreement, lease or other
commitment which is material to the business, assets, properties, or
financial position of the Companies; or amend, modify, or change in
any material respect any of the agreements pertaining to the Existing
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Indebtedness or any other existing contract, agreement, lease or other
commitment which is material to the business, assets, properties, or
financial position of the Companies;
(l) enter into any speculative or commodity swaps, hedges
or other derivatives transactions or purchase any securities for
investment purposes, other than in connection with the Companies' cash
management;
(m) authorize, enter into or amend any contract,
agreement or other commitment with any director, officer, employee or
other Affiliate (other than the Companies) pursuant to which any such
person shall receive compensation, consideration or benefit of any
kind (whether cash or property) from any of the Companies;
(n) adopt, approve or implement any annual general and
administrative expense budget for the Companies for any period after
July 31, 1996, or modify any of the Companies' existing general and
administrative expense budgets in any material respect;
(o) enter into any contract not cancelable within 30 days
providing for the sale of production from the Companies' oil and gas
properties or obligating any of the Companies to pay for any services
with respect to the Company's oil and gas properties except as
contemplated by the capital budget for the Companies for the period
from March 31, 1996 through July 31, 1996 described in clause (i)
above; or
(p) grant any option or preferential right to purchase or
enter into any other agreements that could adversely affect the
marketability of any material asset of the Companies.
5.2 Press Releases. Except as may be required by Applicable Law
or by the rules of any national securities exchange, neither Buyer nor the
Company shall issue any press release with respect to this Agreement or the
Transaction without the prior consent of the other party (which consent shall
not be unreasonably withheld under the circumstances). Any such press release
required by Applicable Law or by the rules of any national securities exchange
shall only be made after reasonable notice to the other party.
5.3 Stock Exchange Listing. The Company shall use its reasonable
best efforts to cause the Series A Preferred Stock and the Conversion Shares to
be approved for listing on the New York Stock Exchange, subject to official
notice of issuance (and, in the case of the Series A Preferred Stock,
satisfactory distribution), prior to the Second Closing Date and to cause the
Rights to be approved for trading thereon prior to the commencement of the
Rights Offering.
5.4 Fees and Expenses.
(a) The Company shall be responsible for the payment of all
expenses incurred by the Company in connection with the proposed Transaction,
regardless of whether the Transaction closes, including, without limitation,
all fees and expenses incurred in connection with the Registration Statements
and the Proxy Statement and the fees and expenses of the Company's legal
counsel and all third party consultants engaged by the Company to assist in the
Transaction. Subject to receipt of appropriate documentation, the Company
shall also reimburse Buyer for all out of pocket expenses reasonably incurred
by Buyer in connection with the proposed Transaction (other than fees and
expenses related to the letter of credit to be provided pursuant to Section
5.7), including, without limitation, the fees and expenses of Buyer's legal
counsel and all third party consultants
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engaged by Buyer to assist in the Transaction, subject to the requirement that
any such third party consultants other than accountants, oil and gas or
environmental consultants, shall be subject to the approval of the Company,
which approval will not be unreasonably withheld. Such reimbursements to Buyer
shall be due at the Second Closing, or promptly following any earlier
termination of this Agreement for any reason (including, without limitation,
any termination of this Agreement by election of Buyer). Concurrently with the
execution of that certain letter of intent (and attached term sheet) by and
between the Company and Rainwater, Inc. dated February 28, 1996 (as amended by
letter dated April 1, 1996, the "Letter of Intent"), the Company paid to Buyer
the amount of $500,000 (the "Initial Payment"), which Initial Payment shall be
credited against the fees and expenses otherwise owed to Buyer upon termination
hereof or upon the Second Closing pursuant to this Section 5.4(a). To the
extent that such Initial Payment exceeds the total of all such fees and
expenses owed to Buyer following any termination hereof, such excess will be
refunded to the Company.
(b) The Company shall (i) at the First Closing pay Buyer the
amount of $4,655,000 (provided, however, that if funds are not reasonably
available at such time, then the Company shall pay such fee as promptly as
practicable thereafter, but in no event later than the Second Closing), which
amount constitutes 3.5% of the aggregate amount of Series B Preferred Stock
that Buyer is obligated to purchase at the First Closing pursuant to this
Agreement (i.e., 3.5% times $133,000,000); and (ii) at the Second Closing pay
Buyer the amount of $4,620,000, which amount constitutes 3.5% of the aggregate
amount of Series B Preferred Stock that Buyer could be obligated to purchase at
the Second Closing pursuant to this Agreement (i.e., 3.5% times $132,000,000),
less an amount, if any, by which the actual fees and expenses owed to Buyer by
the Company as of the Second Closing Date pursuant to Section 5.4(a) above are
less than the Initial Payment.
(c) For so long as the Minimum Ownership Condition (as such term
is defined in the Statement of Resolution) is satisfied, the Company shall pay
Buyer $400,000 annually, due quarterly in arrears beginning September 30, 1996
(adjusted pro-rata for any period which is less than a full quarter), and
reimburse Buyer annually (payable quarterly in arrears) for all fees and
expenses reasonably incurred by Buyer in connection with monitoring the
activities and operations of the Company (including, without limitation, those
incurred in connection with the Debt Refinancing), up to a maximum of $50,000
for any calendar year (adjusted pro-rata for any period which is less than a
full year), unless the Company shall have approved a greater amount. Buyer
agrees that its principals and its Affiliates shall provide continuing analysis
and assistance to the Company during the course of Buyer's investment, and it
is acknowledged by the parties that the annual fee payable to Buyer pursuant to
this Section 5.4(c) is in consideration of Buyer's obligations hereunder and
also compensates Buyer for the time that its representatives (including
executive officers of the general partner of Buyer) shall devote to Company
affairs rather than other aspects of the business of Buyer and its general
partner. Such amounts payable to Buyer pursuant to this Section 5.4(c) are in
lieu of any transaction or success fees that might otherwise typically be
charged for any such services performed in connection with specific
transactions in which the Company may participate in the future.
5.5 Brokers, etc. The Company shall be solely responsible for the
payment of any amounts owed to Lehman Brothers Inc. in connection with the sale
and purchase of the Shares as contemplated herein, and the Company shall be
solely responsible for the payment of any commission or other compensation
payable to any financial advisor, broker, agent, finder, or similar
intermediary retained by or acting on behalf of the Company in connection with
the consummation of the Debt Refinancing and the Rights Offering.
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5.6 Special Meeting; Proxy Statement.
(a) The Company shall take all action necessary in accordance with
Applicable Law and the Company's Articles of Incorporation and Bylaws to duly
call, give notice of, convene and hold a special meeting of its shareholders
(the "Special Meeting") as promptly as practicable after the date hereof to
consider and vote upon the adoption and approval of the Transaction (including,
without limitation, amendments to the Articles of Incorporation of the
Company), to the extent such shareholder approval is necessary with respect to
the effectuation of any part of the Transaction. The shareholder vote required
for the adoption and approval of the Transaction shall be the vote required by
Applicable Law, the Company's Articles of Incorporation, and the rules of the
New York Stock Exchange, as represented by the Company in Section 3.4. The
Board of Directors of the Company shall, subject to its fiduciary obligations
to the Company's shareholders under Applicable Law, taking into account the
advice of counsel, (i) recommend to the shareholders of the Company that they
vote in favor of the adoption and approval of all matters necessary to
effectuate the Transaction, (ii) use its reasonable best efforts to solicit
from the shareholders of the Company proxies in favor of such adoption and
approval, and (iii) take all other action reasonably necessary to secure a vote
of the shareholders of the Company in favor of such adoption and approval. The
Company shall also use its reasonable best efforts to obtain a statement from
all of its officers and directors that own voting stock of the Company that
such persons intend to vote all shares of voting stock of the Company owned by
such shareholders in favor of the Transaction at the Special Meeting.
(b) At the Special Meeting, the Board of Directors of the Company
shall submit the Reverse Stock Split for the adoption and approval of the
shareholders, and shall (i) recommend to the shareholders of the Company that
they vote in favor of the adoption and approval of the Reverse Stock Split,
(ii) use its reasonable best efforts to solicit from the shareholders of the
Company proxies in favor of such adoption and approval, and (iii) take all
other action reasonably necessary to secure a vote of the shareholders of the
Company in favor of such adoption and approval. The Company shall also use its
reasonable best efforts to obtain a statement from all of its officers and
directors that own voting stock of the Company that such persons intend to vote
all shares of voting stock of the Company owned by such shareholders in favor
of the Reverse Stock Split at the Special Meeting. The parties hereto
recognize that, although the Reverse Stock Split shall be submitted to a vote
of the shareholders of the Company at the Special Meeting, the Transaction is
not conditioned in any manner whatsoever on shareholder approval of the Reverse
Stock Split. In the event that the shareholders of the Company approve the
Reverse Stock Split, the Company shall take all actions necessary to implement
the Reverse Stock Split prior to the commencement of the Rights Offering.
(c) As promptly as practicable after the date hereof, the Company
shall prepare, shall file with the SEC under the Exchange Act, shall use all
reasonable best efforts to have cleared by the SEC, and promptly thereafter
shall mail to its shareholders, a proxy statement with respect to the Special
Meeting. The term "Proxy Statement", as used herein, means such proxy
statement and all related proxy materials and all amendments and supplements
thereto, if any. Except to the extent otherwise determined in good faith by
the Board of Directors of the Company in the exercise of its fiduciary duties,
taking into account the advice of counsel, the Proxy Statement shall contain
the recommendation of the Board that shareholders of the Company vote in favor
of the adoption and approval of all matters necessary to effectuate the
Transaction and the Reverse Stock Split. The Company shall notify Buyer
promptly of the receipt of any comments on, or any requests for amendments or
supplements to, the Proxy Statement by the SEC, and the Company shall supply
Buyer with copies of all correspondence between it and its representatives, on
the one hand, and the
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SEC or members of its staff, on the other, with respect to the Proxy Statement.
The Company, after consultation with Buyer, shall use its reasonable best
efforts to respond promptly to any comments made by the SEC with respect to the
Proxy Statement. The Company and Buyer shall cooperate with each other in
preparing the Proxy Statement, and the Company and Buyer shall each use its
reasonable best efforts to obtain and furnish the information required to be
included in the Proxy Statement. The Company and Buyer each agrees promptly to
correct any information provided by it for use in the Proxy Statement if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause the Proxy Statement as so corrected to be filed with the SEC and to be
disseminated promptly to holders of shares of the Common Stock, in each case as
and to the extent required by Applicable Law.
5.7 Debt Refinancing. The Company shall use its reasonable best
efforts to promptly negotiate and enter into the New Senior Credit Facility
together with one or more indentures for the New Notes, and such promissory
notes, mortgages, security agreements, underwriting agreements and other
definitive agreements and instruments required in connection with the Debt
Refinancing, all of which shall be in form and substance reasonably
satisfactory to Buyer (the "Debt Refinancing Documents") and to the extent the
terms thereof are reflected in the Registration Statement, the Buyer will
acknowledge that such terms as so reflected are satisfactory, subject to
pricing of the New Notes, prior to the filing of such statement. It is
acknowledged and agreed by the parties that for purposes hereof, the terms of
the New Notes shall not be considered to be satisfactory by Buyer if the per
annum rate of interest rate on the New Notes, on a weighted average basis, and
the material terms of the New Notes are materially less favorable to the
Company than the indicative terms set forth in the Sub-Debt Letter and in the
other materials provided to the Company and Buyer by the underwriters
contemplated to manage the offering of the New Notes during the course of the
Company's review and negotiation of commitments for the Debt Refinancing. The
Company shall use its reasonable best efforts to satisfy all requirements of
the Debt Refinancing Documents; provided, however, that nothing contained in
this Agreement shall be deemed to require any person to waive compliance with
such documents. The obligations contained in this Section are not intended,
nor shall they be construed, to benefit or confer any rights upon any person
other than the parties hereto. Concurrently with the First Closing, the
Company shall pay in full, through redemption, prepayment or defeasance, all
outstanding indebtedness under the Hugoton Notes, the 12 3/4% Notes and the
Existing Credit Agreement and such other portion of the Existing Indebtedness
as is mutually agreed by the Company and Buyer, from cash on hand and funds to
be received at the First Closing of the Transaction. In addition, Buyer agrees
to comply with and to cause its Affiliates to comply with any reasonable
requests of the lenders providing the New Senior Credit Facility with respect
to providing a letter of credit, in favor of the Company, to secure Buyer's
obligation to purchase Shares at the Second Closing.
5.8 Rights Offering. The Company shall promptly prepare and
submit to Buyer for review, a form of subscription agreement, subscription
certificate and all other documents and instruments required in connection with
the Rights Offering, all of which shall be in form and substance reasonably
satisfactory to Buyer (the "Rights Offering Documents"). The Rights Offering
Documents shall provide, among other things, that the Rights Offering shall be
generally conducted in the manner described in Section 1.3(b) of this
Agreement.
5.9 Registration Statements. As promptly as practicable after
the date hereof, the Company shall prepare and file with the SEC registration
statements on Form S-3 for the purpose of registering under the Securities Act
(i) the offering, sale, and delivery of the securities issuable in the Rights
Offering, and (ii) if required, the offering, sale and delivery of securities
issuable in
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connection with the Debt Refinancing, in each case as necessary to effectuate
the Transaction. The term "Registration Statements", as used herein, means
such registration statements and all amendments and supplements thereto, if
any. The Company shall use all reasonable best efforts to have the
Registration Statements declared effective under the Securities Act as promptly
as practicable after the Special Meeting. The Company shall notify Buyer
promptly of the receipt of any comments on, or any requests for amendments or
supplements to, the Registration Statements by the SEC, and the Company shall
supply Buyer with copies of all correspondence between it and its
representatives, on the one hand, and the SEC or members of its staff, on the
other, with respect to the Registration Statements. The Company, after
consultation with Buyer, shall use its reasonable best efforts to respond
promptly to any comments made by the SEC with respect to the Registration
Statements. The Company and Buyer each agrees promptly to correct any
information provided by it for use in the Registration Statement if and to the
extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all steps necessary to
cause each Registration Statement (or the prospectus contained therein) as so
corrected to be filed with the SEC and to be disseminated to the extent
required by Applicable Law. The Company shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified) reasonably required to be taken under any applicable state
securities laws in connection with the issuance of securities pursuant to the
Registration Statements.
5.10 Exclusivity Agreement.
(a) From the date of the Letter of Intent to the earlier of (i)
the First Closing Date, or (ii) the termination of this Agreement in accordance
with its terms (but not including upon or due to a breach of this Agreement by
the Company) (the "Exclusivity Period"), the Company will not, and will use its
reasonable best efforts to insure that its directors, officers, Affiliates and
representatives (collectively with the Company, the "Company Parties") do not,
directly or indirectly, solicit any offer from, initiate or engage in any
discussions or negotiations with, or provide any information to, any person or
group (other than Buyer and its Affiliates and their representatives and those
persons agreed upon by the Company and Buyer to effectuate the Rights Offering
and the Debt Refinancing as contemplated in this Agreement) concerning any
possible proposal regarding a sale by the Company of its equity securities, or
the issuance by the Company of debt and/or equity instruments in connection
with refinancing its existing indebtedness (other than any issuance in
connection with the restructuring of such indebtedness following a default in
payment thereof), or a merger, consolidation, liquidation, business
combination, sale of assets of the Company or other similar transaction
involving the Company or a substantial portion of the assets of the Company
(any of the foregoing is referred to herein as a "Company Transaction");
provided that, the Company Parties may:
(i) respond to any party that initiates discussions
regarding a potential Company Transaction, solely to notify such party
that it is engaged in the Transaction and will not engage in any
further communications while pursuing the Transaction, except as
permitted hereby;
(ii) respond to any unsolicited tender offer or exchange
offer made by a third party to the extent required by Rule 14e-2(a)
promulgated under the Exchange Act solely to recommend rejection of
such offer and make such disclosures in connection therewith as are
required by Rule 14d-9 promulgated under the Exchange Act; and
(iii) respond or take any other action with respect to any
unsolicited tender or exchange offer made by a third party, to the
extent required by Rules 14e-2(a) and 14d-9
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promulgated under the Exchange Act, in any manner other than as
permitted by the immediately preceding clause (ii), or respond to,
engage in discussions or negotiations with, otherwise communicate with
and provide information to a third party that initiates such
communication or requests such information regarding a potential
Company Transaction, but only if and to the extent that the Board of
Directors of the Company has determined in good faith, taking into
account the advice of its legal counsel and financial advisors, that
its fiduciary duties to the Company's shareholders require the Company
to respond to, communicate with or provide information to such third
party regarding a potential Company Transaction (collectively, the
"Exclusivity Exception").
(b) The Company shall promptly advise Buyer orally and in writing
of any inquiry or proposal by a third party regarding any Company Transaction.
Any breach by the Company of its agreement contained in this Section 5.10 is
herein referred to as an "Exclusivity Breach".
5.11 Use of Proceeds. The funds received by the Companies at the
First Closing and the closing of the Debt Refinancing, and the funds received
by the Companies at the Second Closing and the closing of the Rights Offering,
shall be applied at the First Closing and the Second Closing, respectively, to
pay in full all of the Existing Indebtedness of the Companies and to pay costs
and expenses of the Transaction, with the remaining funds to be used for
working capital purposes.
5.12 Notification and Amendment of Schedules. Each party hereto
agrees to give prompt notice to the other party of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty contained herein to be untrue or
inaccurate in any material respect at or prior to the First Closing and/or the
Second Closing, as applicable, and (ii) any material failure to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder. In addition, each party agrees to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered prior to the First Closing Date which, if existing or known at the
date of this Agreement, would have been required to be set forth or described
in the Schedules. For all purposes of this Agreement, including without
limitation for purposes of determining whether the conditions set forth in
Sections 6.1 and 7.1 have been fulfilled, the Schedules hereto shall be deemed
to include only that information contained therein on the date of this
Agreement and shall be deemed to exclude all information contained in any
supplement or amendment thereto; provided, however, that if the First Closing
and the Second Closing shall occur, then all matters disclosed pursuant to any
such supplement or amendment at or prior to the First Closing and the Second
Closing shall be waived and no party shall be entitled to make a claim thereon
pursuant to the terms of this Agreement.
5.13 Access to Information. During the Interim Period, the Company
(i) shall give Buyer and its authorized representatives reasonable access to
the Company's employees, offices and other facilities, and all books and
records of the Company and the Subsidiaries, (ii) shall permit Buyer and its
authorized representatives to make such inspections as they may reasonably
require to verify the accuracy of any representation or warranty contained in
Article III, and (iii) shall cause the Company's officers to furnish Buyer and
its authorized representatives with such financial and operating data and other
information with respect to the Company and the Subsidiaries as Buyer may from
time to time reasonably request; provided, however, that no investigation
pursuant to this Section shall affect any representation or warranty of the
Company contained in this Agreement or in any agreement, instrument, or
document delivered pursuant hereto or in connection herewith; and provided
further that the Company shall have the right to have a representative present
at all times.
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5.14 HSR Act Notification. To the extent it is determined that the
HSR Act will be applicable to the Transaction, each of the parties hereto shall
(i) file or cause to be filed, as promptly as practicable after the execution
and delivery of this Agreement and in no event later than ten Business Days
after the date of this Agreement, with the Federal Trade Commission and the
United States Department of Justice, all reports and other documents required
to be filed by such party under the HSR Act concerning the transactions
contemplated hereby and (ii) promptly comply with or cause to be complied with
any requests by the Federal Trade Commission or the United States Department of
Justice for additional information concerning the Transaction, in each case so
that the waiting period applicable to this Agreement and the Transaction
contemplated hereby under the HSR Act shall expire as soon as practicable after
the execution and delivery of this Agreement. Each party hereto agrees to
request, and to cooperate with the other party or parties in requesting, early
termination of any applicable waiting period under the HSR Act.
5.15 Indemnification of Directors and Officers; Insurance.
(a) For the period of six years from and after the First Closing
Date, the Company shall indemnify, defend, and hold harmless each person who is
now, or has been at any time prior to the date hereof, or who becomes on or
prior to the First Closing Date, an officer, director, or employee of the
Company or any of the Subsidiaries (the "Covered Parties") against all losses,
claims, damages, costs, expenses (including reasonable attorneys' fees),
liabilities, or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding, or
investigation based in whole or in part on acts or omissions, or alleged acts
or omissions by, such person in his capacity as a director, officer, or
employee of the Company or any of the Subsidiaries or as a prospective Series B
Director (as such term is defined in the Statement of Resolution), whether
pertaining to any matter existing or occurring at or prior to the First Closing
Date and whether reasserted or claimed prior to, or at or after, the First
Closing Date ("Covered Liabilities") and shall advance expenses and provide the
benefit of self insurance by the Company to the Covered Parties in connection
therewith, to the same extent that such Covered Party was entitled to
indemnification, advancement of expenses and the benefit of such self insurance
from the Company pursuant to Applicable Law, the Articles of Incorporation or
Bylaws of the Company or by contract on or prior to the First Closing Date,
provided that any Series B Director who is a Covered Party shall be entitled to
indemnification for Covered Liabilities to the same extent as if such Series B
Director had held office during the time that the Covered Liabilities arose.
(b) In the event that the Company shall amend its Articles of
Incorporation or Bylaws subsequent to the First Closing in any respect that
would limit the availability of indemnification to persons who are officers,
directors, or employees of the Company or any of the Subsidiaries, no such
amendments shall limit or otherwise have any effect on the contractual right of
the Covered Parties to receive indemnification pursuant to this Section 5.15.
In addition, no such amendment to the Articles of Incorporation or Bylaws of
the Company shall be made that would have an adverse effect on the Covered
Parties unless such amendment affects equally the Covered Parties and all
directors, officers and employees of the Company or any of the Subsidiaries who
hold office at the time such amendment is enacted.
(c) The Company shall, from and after the date of this Agreement
and for four years from the First Closing Date, maintain in effect the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Company may substitute therefor policies no less favorable
in terms and amounts of coverage so long as substitution does not result in
gaps or lapses in coverage) with respect to matters occurring prior to the
Second Closing Date; provided,
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however, that in no event shall the Company be required to expend pursuant to
this Section more than an amount per year equal to 150% of current annual
premiums paid by the Company for such insurance and, in the event the cost of
such coverage shall exceed that amount, the Company shall purchase as much
coverage as possible for such amount, and in any event the Company shall
provide the Covered Parties with the same terms and amounts of coverage as the
Company provides to those persons who are directors and officers of the Company
at the time such policies terminate.
(d) The Company shall amend its existing insurance coverage under
the Company's current policies of directors' and officers' liability insurance,
or obtain comparable replacement policies on terms no less favorable in terms
of coverage and amounts than those in effect on the date hereof, so that
Buyer's purchase of the Shares pursuant to this Agreement shall not constitute
a "change of control" of the Company or otherwise cause any of the Covered
Parties or any of persons who become officers, directors or employees of the
Company on or after the First Closing Date to be excluded from the coverage
provided by such insurance policies.
(e) In the event the Company or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Company shall assume the obligations set forth in
this Section 5.15. The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, the parties hereto and each person
entitled to indemnification or insurance coverage pursuant to this Section, his
heirs, and his representatives. The rights provided such persons under this
Section shall be in addition to, and not in lieu of, any rights to indemnity
that such persons may have under the Articles of Incorporation or Bylaws of the
Company or any other provisions herein or in other agreements.
(f) The defense of any claim, action, suit, proceeding, or
investigation forming the basis for the Covered Liabilities shall be conducted
by the Company. If the Company has failed to conduct such defense, the Covered
Parties may retain counsel satisfactory to them and the Company shall pay all
reasonable fees and expenses of such counsel for the Covered Parties promptly
as statements therefor are received. The party not conducting the defense will
use reasonable efforts to assist in the vigorous defense of any such matter,
provided that such party shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Covered Party wishing to claim indemnification
under this Section, upon learning of any such claim, action, suit, proceeding,
or investigation, shall notify the Company (but the failure of a party so to
notify the Company shall not relieve the Company from any liability which it
may have under this Section except to the extent such failure materially
prejudices the Company). If the Company is responsible for the attorneys' fees
of the Covered Parties, then the Covered Parties as a group may retain only one
law firm to represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Covered Parties.
(g) If any provision or provisions of this Section 5.15 shall be
held to be invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby; and, to the fullest extent possible,
the provisions of this Section 5.15 shall be construed so as to give effect to
the intent manifested by the provisions held invalid, illegal or unenforceable.
5.16 Reasonable Best Efforts. Except as contemplated by Section
5.10(a)(iii) and subject to the fiduciary obligations of the directors of the
Company to the shareholders of the Company
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under Applicable Law, each party hereto agrees that it will not voluntarily
undertake any course of action inconsistent with the provisions or intent of
this Agreement and will use its reasonable best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things reasonably
necessary, proper, or advisable under Applicable Laws to consummate the
Transaction.
5.17 Cooperation and Information. Buyer shall cooperate fully
with the Company in connection with the preparation and filing of the Proxy
Statement and the Registration Statements, and Buyer shall obtain and furnish
to the Company in writing the information regarding Buyer, its Affiliates and
the prospective Series B Directors required to be included (based upon the
advice of its counsel) in the Proxy Statement and each Registration Statement.
5.18 Agreement of Limited Partnership of Buyer. Within five days
from the date hereof, Buyer will furnish to the Company a true and correct
executed copy of the agreement of limited partnership of Buyer, substantially
in the form provided to the Company as of the date hereof, executed by the
partners of Buyer, which agreement shall provide that its partners are required
to collectively make capital contributions in amounts sufficient to satisfy the
obligations of Buyer to purchase the Shares at the First Closing and Second
Closing, subject to no conditions other than the satisfaction of the conditions
to closing set forth in Article VII hereof. After delivery of such agreement
to the Company, Buyer and its partners shall not consent to the admission of
any additional or substituted partners at any time prior to the consummation of
the Second Closing. Buyer shall promptly furnish to the Company any amendment
of such agreement of limited partnership. No such amendment to the agreement
of limited partnership shall have the effect of changing the amount or in any
material respect the timing of the capital contributions that the partners of
Buyer are required to make to Buyer, or of amending or adding to the conditions
to the obligations of the partners to make capital contributions; nor shall the
partners of Buyer agree to any waiver thereunder that would have such an
effect.
5.19 Equity Maintenance of General Partner of Buyer. During the
Interim Period and the period from the First Closing Date to the Second Closing
Date, Buyer and its general partner will enforce that certain Equity
Maintenance Agreement between the general partner and its sole shareholder, a
copy of which has been provided to Buyer, and will not permit the amendment,
waiver or termination of same, to the extent necessary in order to ensure that
the general partner of Buyer shall have sufficient financial resources to the
extent necessary to satisfy the obligations of Buyer to purchase the Shares at
the First Closing and the Second Closing, respectively.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
6.1 Conditions to First Closing. The obligations of the Company
to consummate the transactions contemplated by this Agreement to be consummated
at the First Closing shall be subject to the fulfillment on or prior to the
First Closing Date of each of the following conditions:
(a) Representations and Warranties True. All the representations
and warranties of Buyer contained in this Agreement shall be true and correct
on and as of the First Closing Date (except to the extent otherwise
contemplated by this Agreement or the Ancillary Documents); provided, however,
that (i) to the extent that any such representation or warranty is made as of a
specified date, such representation or warranty shall have been true and
correct as of such specified
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date, and (ii) with respect to each representation and warranty that is not
otherwise qualified by its terms by a materiality standard (such as a
qualification that a future condition have a Material Adverse Effect), this
condition shall be satisfied if such representation or warranty shall be true
and correct in all material respects.
(b) Covenants and Agreements Performed. Buyer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the First Closing Date.
(c) Opinion of Counsel. The Company shall have received an
opinion of legal counsel to Buyer, dated the First Closing Date, in form
reasonably satisfactory to the Company, covering those matters set forth in
Exhibit 6.1(c) attached hereto, subject to customary assumptions, limitations
and exclusions.
(d) HSR Act. To the extent that the HSR Act is applicable to the
Transaction, all waiting periods (and any extensions thereof) applicable to
this Agreement and the Transaction under the HSR Act shall have expired or been
terminated.
(e) Legal Proceedings. On the First Closing Date, other than
suits to enforce this Agreement, there shall not be (i) any effective
injunction, writ, or temporary restraining order or any other order of any
nature issued by a court or Governmental Entity of competent jurisdiction
directing that any aspect of the Transaction not be consummated, (ii) any
Proceeding pending or threatened in writing in which it is or may be sought to
prohibit, substantially delay, or rescind this Agreement, the Debt Refinancing
Documents, the Rights Offering Documents or any aspect of the Transaction or to
obtain an award of damages in connection with the Transaction and which, in the
good faith judgment of either of the parties, is material, or (iii) any
Proceedings pending against the Companies which, in the good faith judgment of
either of the parties, would be expected to have a Material Adverse Effect.
(f) Shareholder Approvals. The holders of the requisite number of
shares of outstanding capital stock of the Company shall have duly and validly
approved all items necessary to effectuate the Transaction to the extent that
shareholder approval is required.
(g) Stock Exchange Listing. The Series A Preferred Stock and the
Conversion Shares shall have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance (and, in the case of the
Series A Preferred Stock, satisfactory distribution). The Rights shall have
been approved for trading on the New York Stock Exchange, subject to official
notice of issuance.
(h) Completion of Debt Refinancing. All conditions precedent to
the closing of the Debt Refinancing, as outlined in the Senior Debt Commitment,
including the execution and delivery of the Debt Refinancing Documents, the
funding of the loans to be provided under the New Senior Credit Facility and
the issuance of the New Notes, shall have been satisfied or duly waived and
such closing shall occur simultaneously with the First Closing.
(i) Certificate. The Company shall have received a certificate
executed by a duly authorized person on behalf of Buyer dated the First Closing
Date, representing and certifying, in such detail as the Company may reasonably
request, that the conditions set forth in this Section 6.1 have been fulfilled.
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6.2 Conditions to Second Closing. The obligations of the Company
to consummate the transactions contemplated by this Agreement to be consummated
at the Second Closing shall be subject to the fulfillment on or prior to the
Second Closing Date of each of the following conditions:
(a) Consummation of First Closing. The First Closing shall have
occurred prior to the Second Closing Date.
(b) Completion of Rights Offering. Either (i) the Rights Offering
shall have commenced and expired and the number of Unsubscribed Shares shall
have been determined, or (ii) a period of not more than 120 days nor less than
60 days shall have elapsed since the First Closing Date, the length of such
period to be established in accordance with the requirement of the Debt
Refinancing Documents.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF BUYER
7.1 Conditions to First Closing. The obligations of Buyer to
consummate the transactions contemplated by this Agreement to be consummated at
the First Closing shall be subject to the fulfillment on or prior to the First
Closing Date of each of the following conditions:
(a) Representations and Warranties True. All the representations
and warranties of the Company contained in this Agreement shall be true and
correct on and as of the First Closing Date (except to the extent otherwise
contemplated by this Agreement or the Ancillary Documents); provided, however,
that (i) to the extent that any such representation or warranty is made as of a
specified date, such representation or warranty shall have been true and
correct as of such specified date, and (ii) with respect to each such
representation and warranty that is not otherwise qualified by its terms by a
materiality standard (such as a qualification that a future condition have a
Material Adverse Effect), this condition shall be satisfied if such
representation or warranty shall be true and correct in all material respects.
(b) Covenants and Agreements Performed. The Company shall have
performed and complied with the agreement contained in Section 5.1 at all times
during the Interim Period, and the Company shall have performed and complied in
all material respects with all other covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the First
Closing Date.
(c) Opinion of Counsel. Buyer shall have received an opinion of
legal counsel to the Company, dated the First Closing Date, in form reasonably
satisfactory to Buyer, covering those matters set forth in Exhibit 7.1(c)
attached hereto, subject to customary assumptions, limitations and exclusions.
(d) Legal Proceedings. On the First Closing Date, other than
suits to enforce this Agreement, there shall not be (i) any effective
injunction, writ, or temporary restraining order or any other order of any
nature issued by a court or Governmental Entity of competent jurisdiction
directing that any aspect of the Transaction not be consummated, (ii) any
Proceeding pending or threatened in writing in which it is or may be sought to
prohibit, substantially delay, or rescind this Agreement, the Debt Refinancing
Documents, the Rights Offering Documents or any aspect of the Transaction or to
obtain an award of damages in connection with the Transaction and which, in the
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good faith judgment of either of the parties, is material, or (iii) any
Proceedings pending against the Companies which, in the good faith judgment of
either of the parties, would be expected to have a Material Adverse Effect.
(e) HSR Act. To the extent that the HSR Act is applicable to the
Transaction, all waiting periods (and any extensions thereof) applicable to
this Agreement and the Transaction under the HSR Act shall have expired or been
terminated.
(f) Shareholder Approvals. The holders of the requisite number of
shares of outstanding capital stock of the Company shall have duly and validly
approved all items necessary to effectuate the Transaction to the extent that
shareholder approval is required.
(g) No Adverse Changes. Since the date of this Agreement, there
shall not have been any Material Adverse Effect, other than as a result of
changes in oil and gas prices, but specifically including, without limitation,
any material reduction (other than by production of reserves) in the aggregate
total of the proved oil and gas reserves of the Company, below the aggregate
reserve totals reflected in the Reserve Report which, in the good faith
judgment of Buyer, makes it inadvisable for Buyer to proceed with the
consummation of the Transaction; provided that it is understood and agreed for
all purposes of this Agreement that the receipt by the Company of any reserve
report prepared by persons other than the Company, containing estimates of
proved reserves less than the estimate thereof set forth in the Reserve Report,
shall not of itself be deemed to constitute such a material reduction, unless
such other reserve report contains a materially lower estimate of proved
reserves due to taking into account (A) a physical event occurring subsequent
to the date of the Reserve Report or (B) additional interpretative data from
that available at the time of the preparation of the Reserve Report that, in
the case of (A) or (B), in the opinion of the Company's petroleum engineers,
exercising their independent professional judgment, would cause such persons to
materially reduce the estimates of proved reserves contained in the Reserve
Report.
(h) Completion of Debt Refinancing. All conditions precedent to
the closing of the Debt Refinancing, as outlined in the Senior Debt Commitment,
including the execution and delivery of the Debt Refinancing Documents, the
funding of the loans to be provided under the New Senior Credit Facility and
issuance of the New Notes, shall have been satisfied or duly waived and such
closing shall occur simultaneously with the First Closing.
(i) Commencement of Rights Offering; Stock Exchange Listing. The
Rights Offering Documents shall have been substantially completed (other than
for such amendments to the Rights Offering Documents as are necessary to
reflect the consummation of the transactions contemplated at the First
Closing), and all other conditions precedent to the commencement of the Rights
Offering (other than the declaration by the SEC of effectiveness of the Rights
Offering Registration Statement) shall have been satisfied at the First Closing
so that the Rights Offering may be commenced as promptly as practicable
following the First Closing. The Series A Preferred Stock and the Conversion
Shares shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance (and, in the case of the Series A
Preferred Stock, satisfactory distribution). The Rights shall have been
approved for trading on the New York Stock Exchange, subject to official notice
of issuance.
(j) Resignations and Elections of Directors. All but three
members of the Company's current Board of Directors shall have submitted
written resignations to become effective at the First Closing Date so that
immediately upon Buyer's purchase of the Shares, Buyer may, by execution and
delivery of a written consent, elect four members of the Board of Directors
effective as of the
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First Closing Date. In addition, the current Board of Directors shall have
duly approved the nomination of such four persons designated by Buyer but only
to the extent such persons are not Richard Rainwater, Darla Moore, Kenneth
Hersh and Philip Smith.
(k) Amendment of Articles and Bylaws. The Articles of
Incorporation and/or Bylaws of the Company and each of its Subsidiaries will
have been amended on or prior to the First Closing Date in a form acceptable to
the Company and Buyer in order to effectuate the Transaction contemplated
herein, including, without limitation, such amendments to the Bylaws of the
Company as will establish the Board of Directors at seven members. None of the
provisions of the Articles of Incorporation or Bylaws of the Company shall
prohibit or restrict the authority of the Board of Directors, by action of a
majority of its members, from amending the Company's Bylaws, provided that the
Bylaws may provide (and may be amended after the date hereof to provide) that
(i) the number of directors shall not be less than seven (plus any directors
elected by the Series A Preferred Stock pursuant to the rights of the holders
of such stock to elect two directors in the event of certain dividend
arrearages), (ii) each committee of the Board of Directors shall be constituted
so as to provide that at least one member of each committee will be one of the
directors as to which the holders of Common Stock are entitled to vote (and
such directors shall be entitled to determine the identity of their
representative on such committee), (iii) any two directors shall be entitled to
call a special meeting of the Board of Directors and (iv) none of such
provisions shall be amended by action of the Board of Directors without the
unanimous vote or consent of all directors.
(l) Directors and Officers Insurance. Each of the representatives
of Buyer serving on the Board of Directors of the Company shall receive the
same insurance coverage under the Company's director and officer insurance
policies as the Company's directors receive as of the date hereof (including
coverage for liabilities arising before the date of taking office to the extent
arising from such person's status as a prospective director of the Company),
such policies shall be in full force and effect in accordance with their terms
in existence as of the date of this Agreement, except to the extent such
policies are required to be amended pursuant to Section 5.15(d) hereof, and the
Company shall have provided to Buyer a copy of such policies together with the
riders and schedules thereto which evidence compliance with this condition.
(m) Certificates. Buyer shall have received a certificate or
certificates representing the Shares purchased at the First Closing, in
definitive form representing the Shares, registered in the name of Buyer and
duly executed by the Company.
(n) Officer Certificate. Buyer shall have received a certificate
executed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company, dated the First Closing Date, representing
and certifying, in such detail as Buyer may reasonably request, that the
conditions set forth in this Section 7.1 have been fulfilled.
7.2 Conditions to Second Closing. The obligations of Buyer to
consummate the transactions contemplated by this Agreement to be consummated at
the Second Closing shall be subject to the fulfillment on or prior to the
Second Closing Date of each of the following conditions:
(a) Consummation of First Closing. The First Closing shall have
occurred prior to the Second Closing Date.
(b) Completion of Rights Offering. Either (i) the Rights Offering
shall have commenced and expired and the number of Unsubscribed Shares shall
have been determined, or (ii) a period of not more than 120 days nor less than
60 days shall have elapsed since the First Closing Date, the
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length of such period to be established in accordance with the requirements of
the Debt Refinancing Documents.
ARTICLE VIII
TERMINATION, AMENDMENT, AND WAIVER
8.1 Termination Prior to First Closing. This Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the First Closing in the following manner:
(a) by mutual written consent of the Company and Buyer; or
(b) by the Company or Buyer after November 30, 1996 if the First
Closing shall not have occurred by the close of business on such date, so long
as the failure to consummate the transactions contemplated to be consummated at
the First Closing on or before such date does not result from a breach of this
Agreement by the party seeking termination of this Agreement; or
(c) by the Company, if (i) any of the representations and
warranties of Buyer contained in this Agreement shall not be true and correct
when made or at any time prior to the First Closing as if made at and as of
such time, except (A) as contemplated hereby or (B) with respect to each
representation and warranty that is not otherwise qualified by its terms by a
materiality standard (such as a qualification that a future condition have a
Material Adverse Effect), such representation and warranty shall not be true
and correct in all material respects, or (ii) Buyer shall have failed to
fulfill any of its obligations in this Agreement in all material respects; and,
in the case of each of clauses (i) and (ii), such misrepresentation, breach of
warranty, or failure (provided it can be cured) has not been cured within five
days of actual knowledge thereof by Buyer; or
(d) by Buyer, if (i) any of the representations and warranties of
the Company contained in this Agreement shall not be true and correct when made
or at any time prior to the First Closing as if made at and as of such time,
except (A) as contemplated hereby or (B) with respect to each representation
and warranty that is not otherwise qualified by its terms by a materiality
standard (such as a qualification that a future condition have a Material
Adverse Effect), any such representation and warranty shall not be true and
correct in all material respects, (ii) the Company shall have failed to fulfill
any of its obligations under Section 5.1, or (iii) the Company shall have
failed to fulfill any of its obligations in this Agreement (other than those
obligations set forth in Section 5.1) in all material respects; and, in the
case of each of clauses (i), (ii) and (iii), such misrepresentation, breach of
warranty, or failure (provided it can be cured) has not been cured within five
days of actual knowledge thereof by the Company; or
(e) by Buyer at any time following (i) an Exclusivity Breach, or
(ii) the invoking by the Board of Directors of the Company of the Exclusivity
Exception;
(f) by Buyer at any time (i) following any breach of the
representation and warranty contained in Section 3.15 (regardless of whether
the breach of such representation and warranty is caused by the Company or a
WDB Party), or (ii) in the event that any WDB Party shall have (A) initiated,
prior to the Special Meeting, a "Solicitation Action" (as defined in the
Settlement Agreement) (other than giving notice to the Company pursuant to the
Company's Bylaws of an intention to nominate directors at the Company's 1996
annual meeting of stockholders together with
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any information with respect to such nominees as is required by the Bylaws), or
(B) breached the Settlement Agreement or taken any actions in the nature of
those which are restricted by Sections 4, 6(a), 6(c) or 7 of the Settlement
Agreement, which Solicitation Action, breach or other action described in
clause (A) or (B) is in Buyer's good faith judgment materially adverse to Buyer
or the Transaction (it being acknowledged by Buyer that letters to the Board of
Directors from Joel L. Reed and Dorn Parkinson, in form and substance similar
to the drafts thereof provided to Buyer on the date hereof, and any subsequent
inclusion of such letters in the Proxy Statement shall not give rise to any
right to terminate this Agreement pursuant to this subsection (f)); or
(g) by the Company, if at any time the Board of Directors of the
Company has determined in good faith that the Exclusivity Exception should be
invoked and that the Company should pursue a potential Company Transaction not
solicited by the Company and the Company shall have made the payment to Buyer
required by Section 8.3; or
(h) by the Company or Buyer, if the shareholders of the Company
shall have rejected at a meeting the matters contained in the Proxy Statement
that are necessary in order to adopt and approve the Transaction; or
(i) by Buyer or the Company, upon the occurrence of a Bankruptcy
Event;
(j) by Buyer, upon the occurrence of any default by the Company or
its Subsidiaries under the Existing Bank Debt or the 12 3/4% Notes if any
holder of any indebtedness pursuant to the Existing Bank Debt or the 12 3/4%
Notes, or any trustee or representative thereof, shall have taken any steps to
accelerate any such indebtedness or shall have commenced the exercise of any
remedies permitted pursuant to the agreements or other instruments creating
such indebtedness.
8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1 by the Company, on the one hand, or
Buyer, on the other, written notice thereof shall forthwith be given to the
other party specifying the provision hereof pursuant to which such termination
is made, and this Agreement shall become void and have no effect, except that
the provisions contained in this Article VIII, Article IX and in Sections 5.4
and 5.5 shall survive the termination hereof. Nothing contained in this
Section shall relieve any party from liability for any breach of this
Agreement.
8.3 Termination Fee; Break-Up Fee.
(a) The Company agrees that on the date of termination of this
Agreement by Buyer pursuant to Section 8.1(e)(ii) or Section 8.1(f) or on the
date of the termination of this Agreement by the Company pursuant to Section
8.1(g), (i) the Company will pay to Buyer a partial termination fee in the
amount of (A) $300,000 in cash, in the case of a termination pursuant to
Section 8.1(e)(ii) or Section 8.1(g), or (B) $500,000 in cash, in the case of a
termination pursuant to Section 8.1(f), which such fee is in addition to the
fees and expenses for which the Company is obligated to reimburse Buyer
pursuant to Section 5.4, and (ii) if the Company subsequently participates in
any Company Transaction within a one year period following the termination of
this Agreement, or in any Company Transaction with a third party with whom the
Company communicated during the Exclusivity Period as a result of invoking the
Exclusivity Exception (regardless of the date of the closing of such
transaction), the Company will pay a fee to Buyers at the time of the closing
of such transaction in the amount of $2,700,000 cash.
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(b) The parties acknowledge that it would be difficult to
establish the amount of actual damages that Buyer would incur as a result of
the occurrence of any Exclusivity Breach. Therefore, in addition to the fees
and expenses for which the Company is obligated to reimburse Buyer pursuant to
Section 5.4, the Company agrees that upon any termination of this Agreement
pursuant to Section 8.1(e)(i) as a result of an Exclusivity Breach (i) the
Company will on the date of such termination, pay as partial liquidated damages
to Buyer, the amount of $500,000 in cash, and (ii) if the Company shall
subsequently participate in any Company Transaction within a one year period
following the termination of this Agreement, or in any Company Transaction with
a third party with whom the Company communicated during the Exclusivity Period
in breach of Section 5.10 (regardless of the date of the closing of such
transaction), the Company will pay liquidated damages to Buyer at the time of
the closing of such transaction in the amount of $3,500,000 cash.
8.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed by or on behalf of all the parties hereto.
8.5 Waiver. No failure or delay by a party hereto in exercising
any right, power, or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
provisions of this Agreement may not be waived except by an instrument in
writing signed by or on behalf of the party against whom such waiver is sought
to be enforced.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION
9.1 Survival. The representations and warranties of the parties
hereto contained in Articles III and IV of this Agreement or in any certificate
delivered pursuant to Section 6.1(i) or 7.1(n) hereof shall survive the First
Closing and the Second Closing, respectively, regardless of any investigation
made by or on behalf of any party, until the second anniversary of the First
Closing Date (the "Survival Date".) No action may be brought with respect to a
breach of any representation after the Survival Date unless, prior to such
time, the party seeking to bring such an action has notified the other parties
of such claim, specifying in reasonable detail the nature of the loss suffered.
The provisions of this Section 9.1 shall have no effect upon any of the
covenants of the parties set forth in Article V or any of the other obligations
of the parties hereto under the Agreement, whether to be performed later, at or
after the First Closing or the Second Closing, as applicable.
9.2 Indemnification by Company.
(a) The Company shall indemnify, defend, and hold harmless Buyer,
Richard E. Rainwater, their respective Affiliates and each of their respective
directors, officers, employees and agents (collectively, the "Indemnified
Parties") from and against any and all Indemnified Liabilities, REGARDLESS OF
WHETHER SUCH INDEMNIFIED LIABILITIES ARE CAUSED BY THE NEGLIGENCE OF AN
INDEMNIFIED PARTY; provided however, that the Company shall not be obligated to
indemnify an Indemnified Party with respect to any Indemnified Liabilities to
the extent it is ultimately determined by a final non-appealable judgment of a
court of competent jurisdiction that such Indemnified Liabilities were caused
by the gross negligence, willful misconduct or material breach of this
Agreement of or by such Indemnified Party.
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(b) At the written request of an Indemnified Party, the Expenses
incurred by an Indemnified Party in connection with any Proceeding, other than
as provided in subparagraph (c), shall be paid by the Company as and when
incurred by the Indemnified Party in advance of the final disposition of such
Proceeding upon receipt by the Company of an undertaking by or on behalf of an
Indemnified Party to repay promptly such amount to the extent that it is
ultimately determined that an Indemnified Party is not entitled to be
indemnified by the Company (a "Repayment Undertaking"). The request for
advancement of Expenses by an Indemnified Party and the Repayment Undertaking
need not be secured. Any advancement of Expenses shall be made no later than
20 days after receipt by the Company of the Repayment Undertaking from the
Indemnified Party, and is required to be made notwithstanding any allegation by
the Company or any other person that an Indemnified Party is not entitled to
Indemnification pursuant to the exception set forth in subparagraph (a) hereof.
(c) Notwithstanding any other provisions herein, the Company shall
not be obligated hereunder to indemnify or advance Expenses to an Indemnified
Party with respect to any Proceeding, or any claim therein, brought or made
(i) by an Indemnified Party against the Company, other than a Proceeding, or a
claim therein, made by an Indemnified Party in connection with successfully
establishing or enforcing his right of indemnification or to receive
advancement of Expenses, in whole or in part, hereunder, or (ii) by the Company
against Buyer pursuant to Section 9.3 hereof.
(d) No indemnification shall be required to be made by the Company
pursuant to this Article IX with respect to any Indemnified Liabilities
exclusively arising out of or resulting from claims made by Buyer (and not any
third party claims for which an Indemnified Party seeks indemnity) based upon
the breach of the representations and warranties of the Company contained in
Article III hereof or the certificate delivered pursuant to Section 7.1(n)
hereof, unless each such Indemnified Liability equals or exceeds $50,000 and
except to the extent the aggregate amount of all such Indemnified Liabilities
incurred by the Indemnified Parties arising out of or resulting from such
breaches (whether asserted, resulting, imposed, or incurred before, on, or
after the First Closing Date) exceeds $500,000.
(e) (i) Promptly after receipt by an Indemnified Party of
notice of the commencement of any Proceeding against an Indemnified
Party with respect to which an Indemnified Party demands
indemnification or advancement of Expenses hereunder, such Indemnified
Party shall promptly notify the Company in writing of the commencement
thereof, provided that the failure to so notify the Company shall not
relieve it from any liability that it may have to an Indemnified
Party, except to the extent that such failure has materially
prejudiced the Company's ability to provide a defense in the
Proceeding. The Company shall have the right to assume the defense of
any such Proceeding, but the Indemnified Parties collectively shall
have the right, at the expense of the Company, to retain not more than
one counsel of their choice to represent the Indemnified Parties in
such Proceeding. The counsel for the Indemnified Parties may
participate in, but not control, the defense of such Proceeding.
(ii) The indemnity provided for herein shall cover the
amount of any settlements entered into by an Indemnified Party in
connection with any claim for which an Indemnified Party may be
indemnified hereunder; provided that, no settlement binding on an
Indemnified Party may be made without the consent of an Indemnified
Party and the Company (which consent shall not be reasonably
withheld).
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(iii) Any indemnification hereunder shall be made no later
than 45 days after receipt by the Company of the written request of
the Indemnified Party.
(f) If an Indemnified Party is entitled under any provision hereof
to indemnification or to receive advancement by the Company for some or a
portion of the Expenses, judgments, fines or amounts paid in settlement
actually and reasonably incurred by the Indemnified Party in the investigation,
defense, appeal, settlement or other disposition of any proceeding but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
the Indemnified Party for the portion thereof to which the Indemnified Party is
entitled.
(g) In the event of the Company's payment to an Indemnified Party
hereunder, the Company shall be subrogated to the extent of such payment to all
the rights of recovery of the Indemnified Party, who shall execute all papers
required and shall do everything that may be necessary to secure such rights,
including without limitation the execution of such documents as may be
necessary to enable the Company effectively to bring suit to enforce such
rights.
(h) If any provision or provisions of this Section 9.2 shall be
held to be invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby; and, to the fullest extent possible,
the provisions of this Section 9.2 shall be construed so as to give effect to
the intent manifested by the provisions held invalid, illegal or unenforceable.
(i) The rights of indemnification and to receive advancement of
Expenses as provided herein shall not be deemed exclusive of any other rights
to which an Indemnified Party may be entitled under applicable law.
9.3 Indemnification by Buyer.
(a) Buyer shall indemnify, defend, and hold harmless the Company
from and against any and all claims, actions, causes of action, demands,
assessments, losses, damages, liabilities, judgments, settlements, penalties,
costs and Expenses of any nature whatsoever asserted against, resulting to,
imposed upon, or incurred by the Company, directly or indirectly, by reason of
or resulting from any breach by Buyer of any of its representations,
warranties, covenants, or agreements contained in this Agreement or in any
certificate, instrument, or document delivered pursuant hereto.
(b) No indemnification shall be required to be made by Buyer
pursuant to this Article IX with respect to any Indemnified Liabilities
exclusively arising out of or resulting from claims made by the Company (and
not any third party claims for which the Company seeks indemnity) based upon
the breach of the representations and warranties of Buyer contained in Article
IV hereof or the certificate delivered pursuant to Section 6.1(i) hereof,
unless each such Indemnified Liability equals or exceeds $50,000 and except to
the extent the aggregate amount of all such Indemnified Liabilities incurred by
the Company arising out of or resulting from such breaches (whether asserted,
resulting, imposed, or incurred before, on, or after the First Closing Date)
exceeds $500,000.
(c) Promptly after receipt by the Company of notice of the
commencement of any Proceeding against the Company with respect to which the
Company demands indemnification hereunder, the Company shall promptly notify
Buyer in writing of the commencement thereof, provided that the failure to so
notify Buyer shall not relieve it from any liability that it may have to
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the Company, except to the extent that such failure has materially prejudiced
Buyer's ability to provide a defense in the Proceeding. Buyer shall have the
right to assume the defense of any such Proceeding, but the Company shall have
the right, at the expense of Buyer, to retain not more than one counsel of its
choice to represent the Company in such Proceeding. The counsel for the
Company may participate in, but not control, the defense of such Proceeding.
The indemnity provided for herein shall cover the amount of any settlements
entered into by the Company in connection with any claim for which the Company
may be indemnified hereunder; provided that, no settlement binding on the
Company may be made without the consent of the Company and Buyer (which consent
shall not be reasonably withheld). Any indemnification hereunder shall be made
no later than 45 days after receipt by Buyer of the written request of the
Company.
(d) If the Company is entitled under any provision of this Section
9.3 to indemnification by the Buyer for some or a portion of the Expenses,
judgments, fines or amounts paid in settlement actually and reasonably incurred
by the Indemnified Party in the investigation, defense, appeal, settlement or
other disposition of any proceeding but not, however, for the total amount
thereof, the Buyer shall nevertheless indemnify the Company for the portion
thereof to which the Company is entitled.
(e) In the event of Buyer's payment to the Company hereunder,
Buyer shall be subrogated to the extent of such payment to all the rights of
recovery of the Company, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including without
limitation the execution of such documents as may be necessary to enable Buyer
effectively to bring suit to enforce such rights.
(f) If any provision or provisions of this Section 9.3 shall be
held to be invalid, illegal or unenforceable for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby; and, to the fullest extent possible,
the provisions of this Section 9.3 shall be construed so as to give effect to
the intent manifested by the provisions held invalid, illegal or unenforceable.
(g) The rights of indemnification as provided herein shall not be
deemed exclusive of any other rights to which the Company may be entitled under
applicable law.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests, demands, and other
communications required or permitted to be given or made hereunder by any party
hereto shall be in writing and shall be deemed to have been duly given or made
if delivered personally, or transmitted by first class registered or certified
mail, postage prepaid, return receipt requested, or sent by prepaid overnight
delivery service, or sent by cable, telegram, or telefax, to the parties at the
addresses and telefax numbers set forth opposite their names on the signature
page hereof (or at such other addresses and telefax numbers as shall be
specified by the parties by like notice).
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10.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
between the parties and their Affiliates with respect to the subject matter
hereof, including, but not limited to, the Letter of Intent; provided that,
that certain Confidentiality Agreement between Rainwater, Inc. and the Company
dated February 21, 1996 shall remain in effect pending the First Closing of the
Transaction and shall terminate at the First Closing.
10.3 Binding Effect; Assignment; No Third Party Benefit. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as otherwise
expressly provided in this Agreement, neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party. Except as
provided in Section 5.15 (which is expressly intended for the benefit of the
"Covered Parties," as defined therein) and Article IX, nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this Agreement.
10.4 Severability. If any provision of this Agreement is held to
be unenforceable, then this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect
to the maximum extent permitted by Applicable Law; provided, however, that (i)
the provisions of Section 5.15(g) and Section 9.2(h) shall apply with respect
to the severability of the provisions pertaining to the right to
indemnification contained in Section 5.15 or Section 9.2, respectively, and
(ii) if any provision of this Agreement other than Section 9.2 is held
unenforceable, and the unenforceability of such provision would substantially
impair the rights and benefits and/or increase the duties and obligations of
either party contained in this Agreement, then this Agreement shall be
terminated at the election of any party whose rights and benefits are impaired
or duties and obligations increased, subject to the provisions of Article VIII
hereof.
10.5 Injunctive Relief. The parties hereto acknowledge and agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement, and shall be entitled to enforce specifically the provisions
of this Agreement, in any court of the United States or any state thereof
having jurisdiction, in addition to any other remedy to which the parties may
be entitled under this Agreement or at law or in equity.
10.6 Independent Determination. From and after the First Closing
Date, all decisions on behalf of the Company as to the payment of
indemnification pursuant hereto and otherwise regarding the Company's rights
and obligations pursuant to this Agreement shall be made by a committee of
directors consisting of all directors other than those elected by the holder(s)
of Series B Preferred Stock; provided, however, that nothing contained in this
Section 10.6 shall prevent any Indemnified Party from receiving indemnification
pursuant to some other source (such as, by way of example, the bylaws of the
Company in the event that such Indemnified Party is a director of the Company
and such director seeks indemnification due to circumstances that do not
pertain to an alleged breach of this Agreement), and the determination as to
whether indemnification pursuant to such other source is available shall be
made in accordance with the procedures applicable thereto.
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10.7 Approval of Series B Nominees. The execution and delivery of
this Agreement by the Company shall be deemed to constitute the approval by the
Board of Directors as constituted at the date hereof of Richard Rainwater,
Darla Moore, Kenneth Hersh and Philip Smith as the nominees of Buyer for
election as directors by Buyer as holder of the Series B Preferred Stock on
the First Closing Date.
10.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
10.9 Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
ARTICLE XI
DEFINITIONS
11.1 Certain Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Article:
"Affiliate" has the meaning specified in Rule 12b-2
promulgated under the Exchange Act.
"Ancillary Documents" means each agreement, instrument, and
document (other than this Agreement) executed or to be executed by the
Company or Buyer in connection with the sale and purchase of the
Shares as contemplated by this Agreement.
"Applicable Law" means any statute, law, rule, or regulation
or any judgment, order, writ, injunction, or decree of any
Governmental Entity to which a specified person or property is
subject.
"Bankruptcy Event" means the occurrence of any of the
following with respect to the Company or any of the Subsidiaries:
(i) making an assignment for the benefit of creditors;
(ii) filing a voluntary petition in bankruptcy;
(iii) being adjudicated a bankrupt or insolvent, or having
entered against it an order for relief in any
bankruptcy or insolvency proceeding;
(iv) filing a petition or answer seeking for itself any
reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar
relief under any statute, law, or regulation;
39
<PAGE> 41
(v) filing an answer or other pleading admitting to or
failing to contest the material allegations of a
petition filed against it in any proceeding of the
nature described in clause (iv) above; or
(vi) seeking, consenting to, or acquiescing in the
appointment of a trustee, receiver, or liquidator of
it or all or any substantial part of its properties.
"Benefit Plan" means any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase,
pension, retirement, deferred compensation, employment, severance, or
other employee benefit agreement, trust, plan, fund, or other
arrangement for the benefit or welfare of any director, officer, or
employee.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in Dallas, Texas are
authorized or obligated by law or executive order to close.
"Encumbrances" means liens, charges, pledges, options,
mortgages, deeds of trust, security interests, claims, restrictions
(whether on voting, sale, transfer, disposition, or otherwise),
easements, and other encumbrances of every type and description,
whether imposed by law, agreement, understanding, or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means that period of time during which
holders of Rights may exercise rights to subscribe for Series A
Preferred Stock of the Company.
"Existing Credit Agreement" means that certain Third Amended
and Restated Credit Agreement dated November 29, 1996 among the
Company, MESA Operating Co., Societe Generale and the banks named
therein, as amended prior to the date hereof.
"Existing Indebtedness" means all existing indebtedness of
the Companies in respect of borrowed money, including the outstanding
indebtedness under the Existing Credit Agreement and the Existing
Notes.
"Existing Notes" means the 12 3/4% Notes, the 13 1/2% Notes
and the Hugoton Notes.
"Expenses" shall mean any expenses incurred in connection with
a Proceeding, including, without limitation, all reasonable attorneys'
fees, retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees and all other
disbursements or expenses of the types customarily incurred in
connection with prosecuting, defending, preparing to prosecute or
defend, investigating, or being or preparing to be a witness in a
Proceeding.
"Governmental Entity" means any court or tribunal in any
jurisdiction (domestic or foreign) or any public, governmental, or
regulatory body, agency, department, commission, board, bureau, or
other authority or instrumentality (domestic or foreign).
40
<PAGE> 42
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hugoton Notes" means all outstanding notes issued by Hugoton
Capital Limited Partnership and Hugoton Capital Corporation pursuant
to the Indenture dated as of May 30, 1991 as amended, among the
issuers and Bankers Trust Company, as trustee.
"Indemnified Liabilities" mean any and all claims, actions,
causes of action, demands, losses, liabilities, obligations, losses,
damages, penalties and Expenses of any kind or nature whatsoever with
respect to or arising out of this Agreement, the Transaction
(including the Debt Refinancing and the Rights Offering), the actual
or proposed execution, delivery, enforcement and performance of this
Agreement or the Ancillary Documents, and/or otherwise arising
directly or indirectly, by reason of or resulting from any breach by
the Company prior to the First Closing of any of its representations,
warranties, covenants, or agreements contained in this Agreement or in
any certificate delivered pursuant hereto, regardless of whether
discovered prior to or after the First Closing.
"Material Adverse Effect" means any change, development, or
effect (individually or in the aggregate) which is, or is reasonably
likely to be, materially adverse (i) to the business, assets, results
of operations, condition (financial or otherwise), or prospects of the
Company and the Subsidiaries considered as a whole, other than as a
result of changes in oil and gas prices, or (ii) to the ability of the
Company to perform on a timely basis any material obligation of the
Company under this Agreement or any agreement, instrument, or document
entered into or delivered in connection herewith.
"Material Agreement" means (a) any written or oral agreement,
contract, lease, commitment, understanding, instrument or obligation
to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or any of their respective properties may be
bound involving total value or consideration or liability in excess of
$1,000,000, (b) any loan or credit agreement, bond, debenture, note,
mortgage or indenture by which the Company or any Subsidiary or any of
their respective properties may be bound, or (c) any agreement set
forth as an exhibit to the Company's Form 10-K for the fiscal year
ended December 31, 1995.
"Minimum Ownership Amount" shall have the meaning set forth in
the Statement of Resolution.
"New Notes" means unsecured notes of the Company and/or one
or more of its Subsidiaries, in an aggregate principal amount of at
least $500,000,000, subordinated to the indebtedness under the New
Senior Credit Facility, with terms not inconsistent with those
contained in the Sub-Debt Letter.
"New Senior Credit Facility" means the definitive agreements
providing for the extension of credit to the Companies substantially
in accordance with the terms set forth in the Senior Debt Commitment.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise,
unincorporated organization, or Governmental Entity.
41
<PAGE> 43
"Proceeding" means any action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or investigative, any
appeal in such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or proceeding.
"reasonable best efforts" means a party's best efforts in
accordance with reasonable commercial practice and without the
incurrence of unreasonable expense.
"Rights" means the rights to subscribe to purchase Series A
Preferred Stock issued by the Company pursuant to the Rights Offering.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt Commitment" means that certain Senior Secured
Credit Revolving Credit Facility Commitment Letter, dated March 31,
1996, and accompanying term sheet and that Senior Secured Revolving
Credit Facility Fee Letter dated March 31, 1996, each provided to the
Company by The Chase Manhattan Bank, N.A., Bankers Trust Company,
Chase Securities Inc. and BT Securities Corporation.
"Sub-Debt Letter" means that certain letter dated March 31,
1996 addressed to the Company from Chase Securities Inc. regarding the
sale of up to $525,000,000 of unsecured subordinated notes of the
Company and/or one or more of its Subsidiaries.
"Subsidiary" means any corporation, general partnership,
limited partnership, joint venture, or similar entity set forth as a
"Subsidiary" in Section 3.8 of the Disclosure Schedule.
"Taxes" means any income taxes or similar assessments or any
sales, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise, or other
tax imposed by any United States federal, state, or local (or any
foreign or provincial) taxing authority, including any interest,
penalties, or additions attributable thereto.
"Tax Return" means any return or report, including any related
or supporting information, with respect to Taxes.
"12 3/4% Notes" means those certain 12 3/4% Secured Discount
Notes due June 30, 1998, and the 12 3/4% Discount Notes due June 30,
1996, issued by the Company, MESA Operating Co., and MESA Capital
Corporation, pursuant to the Indenture dated as of May 1, 1993, as
amended, among the issuers and Harris Trust and Savings Bank, as
trustee, and the Indenture dated as of May 1, 1993, as amended, among
the issuers and American Stock Transfer & Trust Company, as trustee,
respectively.
"13 1/2% Notes" means the 13 1/2% Subordinated Notes due May
1, 1999 issued by the Company, MESA Operating Co., and MESA Capital
Corporation pursuant to the Indenture dated as of May 1, 1989, as
amended, among the issuers and Texas Commerce Bank National
Association, as trustee.
"Unsubscribed Shares" shall mean the number of shares of
Series A Preferred Stock for which the holders of rights shall not
have subscribed during the Exercise Period.
42
<PAGE> 44
11.2 Certain Additional Defined Terms. In addition to such terms
as are defined in the opening paragraph of and the recitals to this Agreement
and in Section 11.1, the following terms are used in this Agreement as defined
in the Sections set forth opposite such terms:
<TABLE>
<CAPTION>
Defined Term Section Reference
------------ -----------------
<S> <C>
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Company and Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Company Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
Company Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
Conversion Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Covered Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15(a)
Covered Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15(a)
Debt Refinancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Debt Refinancing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Exclusivity Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(b)
Exclusivity Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
Exclusivity Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
First Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article II
First Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article II
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(a)
Initial Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4(a)
Interim Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Letter of Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4(a)
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(b)
Oil and Gas Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.24
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6(c)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.21(a)
Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
Repayment Undertaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(b)
Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12
Reverse Stock Split . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(c)
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Rights Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Rights Offering Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Second Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article II
Second Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Article II
</TABLE>
43
<PAGE> 45
<TABLE>
<S> <C>
Series B Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statement of Resolution
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(b)
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Settlement Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6(a)
Statement of Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Survival Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
WDB Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
</TABLE>
44
<PAGE> 46
IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused this Agreement to be executed by their duly authorized representatives,
all as of the day and year first above written.
THE COMPANY:
MESA INC.
Address:
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039 By: /s/ STEPHEN K. GARDNER
Attention: Stephen K. Gardner ----------------------------------------
Fax: (214) 402-7028 Stephen K. Gardner, Vice President and
Chief Financial Officer
BUYER:
DNR-MESA HOLDINGS, L.P.
By: Rainwater, Inc., General Partner
777 Main Street
Suite 2700
Fort Worth, Texas 76102
Attention: Kenneth A. Hersh
Fax: (817) 820-6650 By: /s/ KENNETH A. HERSH
----------------------------------------
Kenneth A. Hersh, Vice President
45
<PAGE> 47
EXHIBIT A
[FORM OF]
STATEMENT OF RESOLUTION ESTABLISHING
SERIES OF SHARES
designated
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
and
SERIES B 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
of
MESA INC.
To the Secretary of State
of the State of Texas:
Pursuant to the provisions of Article 2.13D of the Texas Business
Corporation Act (the "TBCA"), and pursuant to Article IV of its Amended and
Restated Articles of Incorporation, the undersigned, MESA Inc., a corporation
organized and existing under the TBCA (the "corporation"), hereby submits the
following statement for the purpose of establishing and designating series of
its Preferred Stock, par value $.01, designated "Series A Cumulative Convertible
Preferred Stock" and "Series B Cumulative Convertible Preferred Stock" and
fixing and determining the relative rights and preferences thereof:
I. The name of the corporation is MESA Inc.
II. The following resolution establishing and designating series of shares
and fixing and determining the relative rights and preferences thereof, was duly
adopted by all necessary action on the part of the corporation, consisting of
due adoption by the Board of Directors of the corporation at a meeting held on
, 1996.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation ("Board of Directors") in accordance with
provisions of its Amended and Restated Articles of Incorporation (the
"Articles of Incorporation"), two series of Preferred Stock, par value $.01
per share, of the corporation are hereby created, and that the designation
and number of shares thereof and the preferences, limitations and relative
rights thereof are as follows:
SECTION 1. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES A
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series A 8% Cumulative Convertible
Preferred Stock" (hereinafter referred to as "Series A Preferred"), and the
number of shares constituting such series shall be , plus, at any
time, such number of shares of Series B Preferred as have been or are at such
time being converted to shares of Series A Preferred pursuant to Section 16
hereof. Such number of shares may be increased, but not decreased, by resolution
adopted by the majority of the full Board of Directors. The "Stated Value" per
share of the Series A Preferred shall be equal to $[2.26]1.
SECTION 2. DESIGNATION, NUMBER OF SHARES AND STATED VALUE OF SERIES B
PREFERRED STOCK. There is hereby authorized and established a series of
Preferred Stock that shall be designated as "Series B 8% Cumulative Convertible
Preferred Stock" (hereinafter referred to as "Series B Preferred"), and the
number of shares constituting such series shall be . Such number of
shares may be increased, but not decreased, by resolution adopted by the
majority of the full Board of Directors. The "Stated Value" per share of the
Series B Preferred shall be equal to $[2.26]1.
- ---------------
1 Subject to appropriate adjustment for any reverse stock split effectuated
before issuance of the Series A and B Preferred Stock.
1
<PAGE> 48
SECTION 3. DEFINITIONS. In addition to the definitions set forth elsewhere
herein, the following terms shall have the meanings indicated:
"Affiliate" means (i) with respect to any Person, any other Person that
directly or indirectly controls or manages, is controlled or managed by, or is
under common control or management with such Person, whether through the
ownership of equity interests, by contract or otherwise, and (ii) with respect
to any individual, in addition to any Persons specified in clause (i), the
spouse, any parent or any child of such individual and any trust for the benefit
of such individual, spouse, parent or child.
"Average Gas Equivalent Price" shall mean for any Rolling 4 Quarter Period,
the average price received by the corporation during such period from sales of
oil and gas production, expressed on a natural gas equivalent basis per thousand
cubic feet ("Mcf") using a factor of 6 Mcf of natural gas per 1 barrel of
liquids, to be calculated as follows:
(i) the aggregate revenues of the corporation and its consolidated
subsidiaries during such Rolling 4 Quarter Period from sales of natural
gas, natural gas liquids and oil and condensate produced (other than that
used for fuel and shrinkage) and sold by the corporation and its
consolidated subsidiaries, as reported in the corporation's consolidated
financial statements, divided by,
(ii) the sum of (A) the total volume, on an Mcf basis, of natural gas
produced (other than that used for fuel and shrinkage) and sold by the
corporation and its consolidated subsidiaries during such Rolling 4 Quarter
Period, plus (B) the product of 6 times the total number of barrels of
natural gas liquids, oil and condensate, produced (other than that used for
fuel and shrinkage) and sold by the corporation and its consolidated
subsidiaries during such Rolling 4 Quarter Period, as derived from the
corporation's consolidated financial statements.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in Dallas, Texas are authorized or obligated by law
or executive order to close.
"Closing Price" with respect to a particular security on any Trading Day
shall mean the last reported sales price, regular way, for such security on such
Trading Day, or, in case no sale takes place on such day, the average of the
closing bid and ask prices, regular way on such Trading Day, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such
security is listed or admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the Nasdaq Stock Market or such other
system then in use, or, if on any such date such security is not quoted by any
such organization, the average of the closing bid and ask prices on such Trading
Day as furnished by a professional market maker making a market in such security
selected by the Board of Directors of the corporation. If on any such date no
market maker is making a market in such security, the fair value of such shares
on such date as determined in good faith by the Board of Directors shall be
used.
"Common Stock" shall mean the common stock, par value $0.01 per share, of
the corporation.
"Consolidated EBITDA" for any period, shall mean the consolidated net
income or loss of the corporation for such period determined in accordance with
GAAP, but excluding gains and losses not arising from operations (including,
without limitation, interest income, gains and losses from investments, gains
and losses from dispositions of oil and gas properties or other assets,
collections and settlements of claims and litigation, adjustments of contingency
reserves and other extraordinary and/or non-recurring gains and losses), plus,
to the extent the following have been deducted in determining such net income or
loss, interest expense, income taxes, depreciation, depletion and amortization
expense and impairment expense.
2
<PAGE> 49
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Series A Preferred and Series B Preferred is convertible,
as such conversion price may be adjusted pursuant to Section 10 hereof. The
initial Conversion Price will be $[2.26]1.
"full Board of Directors" when used in reference to the corporation's Board
of Directors, means the total number of members of the Board of Directors as
fixed by, or in the manner provided in, the Articles of Incorporation and Bylaws
(without regard to any then existing vacancies), including, any members elected
by the holders of the Series B Preferred pursuant hereto.
"Fixed Charge Coverage Ratio" shall mean as of the end of any Rolling 4
Quarter Period, the ratio of (i) the sum of (A) the Consolidated EBITDA for such
Rolling 4 Quarter Period, plus (B) one-third of gross operating rents paid
before sublease income as defined by Standard & Poor's Corporation ("Gross
Rents") , if any, for such period to (ii) the sum for such Rolling 4 Quarter
Period of (A) interest expense, both expensed and capitalized, of the
corporation and its consolidated subsidiaries for such period, plus (B)
one-third of Gross Rents for such period, plus (C) scheduled principal
amortization of indebtedness (including borrowed money and capitalized leases)
of the corporation and its consolidated subsidiaries.
"GAAP" shall mean generally accepted accounting principles in the United
States of America from time to time.
"Initial Partnership Affiliates" shall mean the Partnership, the Persons
that are partners of the Partnership as of the Original Issue Date of the Series
B Preferred and any of their respective Affiliates so long as they remain
Affiliates of the Partnership or such Persons.
"Junior Securities" means the Common Stock or any other series of stock
issued by the corporation ranking junior as to the Series A Preferred and Series
B Preferred in payment of dividends or distributions or upon liquidation,
dissolution, or winding-up of the corporation.
"Market Price" per share of Common Stock as of any date shall mean the
average of the daily Closing Prices for a period of twenty Trading Days ending
on such date.
"Minimum Ownership Amount" shall mean at any time, ownership of (i) at
least [insert number equal to 58% of the shares of Series B Preferred to be
purchased by the Partnership at the first closing] shares of Series B Preferred
or (ii) such number of shares of Common Stock and Underlying Common Stock which
is at least equal to 15 percent of the total number of shares of Common Stock
and Underlying Common Stock outstanding at such time. For purposes of this
definition, ownership of shares of Series B Preferred shall be considered to be
ownership of the corresponding shares of Underlying Common Stock.
"Minimum Ownership Condition" shall be satisfied at any time if (i) the
Minimum Ownership Amount is owned in the aggregate at such time by one or more
of the Initial Partnership Affiliates, (ii) at least one half of the Minimum
Ownership Amount is owned and held in the aggregate at such time by one or more
of the Rainwater Affiliates, and (iii) the power to vote at least a majority of
the shares of Series B Preferred outstanding at such time is held by Rainwater
Affiliates, which shall be satisfied (A) with respect to any shares of Series B
Preferred owned by the Partnership if a Rainwater Affiliate is at such time the
sole general partner of the Partnership, (B) with respect to any shares owned by
a Rainwater Affiliate if at such time the right to vote such shares is not
shared with any Person who is not a Rainwater Affiliate, and (C) with respect to
any shares owned by a Person other than a Rainwater Affiliate, if at such time a
Rainwater Affiliate shall have the sole right to vote such shares pursuant to a
voting agreement, voting trust, irrevocable proxy or other similar agreement
with terms reasonably satisfactory to the corporation; provided that, the
corporation shall have been presented with appropriate certifications or other
documentation demonstrating that the foregoing requirements have been met.
- ---------------
1 Subject to appropriate adjustment for any reverse stock split effectuated
before issuance of the Series A and B Preferred Stock.
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<PAGE> 50
"Non-Series A and B Directors" shall mean the members of the Board of
Directors in whose election the holders of Common Stock are entitled to vote
(whether or not holders of shares of any other class or series are also entitled
to vote thereon).
"Original Issue Date" shall mean with respect to the Series A Preferred or
Series B Preferred, as the case may be, the date on which shares of such series
are first issued.
"Parity Security" means any class or series of stock issued by the
corporation ranking on a parity with the Series A Preferred and Series B
Preferred in payment of dividends or distributions or upon liquidation,
dissolution or winding-up of the corporation.
"Partnership" shall mean DNR-Mesa Holdings, L.P., a Texas limited
partnership.
"Partnership Affiliates" shall mean the Partnership, its partners and their
respective Affiliates for so long as they remain Affiliates of the Partnership
or such partners.
"Payable-in-Kind" or "Paid-in-Kind" when used in reference to any dividend
payable on the shares of Series A Preferred or Series B Preferred, means payment
of the dividend by issuance of that number of additional shares of Series A
Preferred or Series B Preferred, as the case may be, that has an aggregate
Stated Value equal to the dollar amount of such dividend then payable, rounded
to the nearest whole share (i.e. if less than .5 rounded down, and if .5 or more
rounded up). Shares of Series A Preferred or Series B Preferred issued as
dividends Payable-in-Kind shall be duly authorized, validly issued and
nonassessable and, upon issuance, shall have rights (including without
limitation, dividend, voting, conversion and redemption rights) identical to the
outstanding shares of Series A Preferred and Series B Preferred in respect of
which they are issued.
"Person" means any individual, corporation, association, partnership, joint
venture, limited liability company, trust, estate, or other entity or
organization.
"Rainwater Affiliates" shall mean, at any time, Richard E. Rainwater and
any of his Affiliates at such time. As of the date hereof, the Rainwater
Affiliates include, without limitation, Natural Gas Partners II, L.P. and
Natural Gas Partners III, L.P.
"Rolling 4 Quarter Period" means the most recently ended period of four
consecutive fiscal quarters of the corporation prior to the date of
determination.
"Senior Securities" means any class or series of stock issued by the
corporation ranking senior to the Series A Preferred and Series B Preferred in
payment of dividends or distributions or upon liquidation, dissolution, or
winding-up of the corporation.
"Trading Day" with respect to any security means (i) if such security is
listed or admitted for trading on any national securities exchange, a day on
which such national securities exchange is open for trading, or (ii) if such
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
"Transfer Agent" means American Stock Transfer & Trust Corporation, or such
other agent or agents of the corporation as may be designated by the Board of
Directors as the transfer agent or conversion agent for the Series A Preferred
and Series B Preferred.
"Underlying Common Stock" means at any time, with respect to any share of
Series A Preferred or Series B Preferred, the aggregate number of shares of
Common Stock into which such share is then convertible at such time pursuant to
Section 10 hereof.
SECTION 4. DIVIDENDS AND DISTRIBUTIONS.
(a) The holders of outstanding shares of Series A Preferred and Series
B Preferred shall be entitled to receive, as and when declared by the
corporation, out of funds of the corporation legally available for the
payment of dividends, preferential quarterly dividends at the times and at
the rates provided for in this Section 4. Dividends on shares of the Series
A Preferred and Series B Preferred shall be cumulative and shall accrue
from and including the date of issuance of such shares to and including the
date on which such shares shall have been converted into Common Stock or
redeemed pursuant to Section 7 hereof.
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Such dividends shall accrue whether or not there shall be (at the time such
dividend becomes payable or at any other time) profits, surplus or other
funds of the corporation legally available for the payment of dividends.
(b) Dividends shall accrue on each outstanding share of Series A
Preferred and Series B Preferred at the rate of eight percent (8%) per
annum of the Stated Value (the "Dividend Rate") of such share. Dividends
shall be payable quarterly, in arrears, as of the last Business Day of each
December, March, June and September, commencing on September 30, 1996
(each, a "Dividend Payment Date").
(c) During the period beginning on the Original Issue Date of the
Series B Preferred and ending on the first Dividend Payment Date on or
following the fourth anniversary thereof (the "Exclusive PIK Period"),
dividends on outstanding shares of Series A Preferred and Series B
Preferred shall be Payable-in-Kind. After the Exclusive PIK Period,
dividends on the shares of Series A Preferred and Series B Preferred shall
be Payable-in-Kind or, at the corporation's option, if the "Stock Price
Threshold" (as defined in subsection (d) below) or the "Coverage Ratio or
Gas Price Threshold" (as defined in subsection (e) below) is satisfied as
of the record date for such dividend, payable in cash.
(d) For purposes hereof, the "Stock Price Threshold" shall be
satisfied as of a record date for a Dividend Payment Date after the
Exclusive PIK Period if the average of the daily Closing Prices for the
Common Stock during a period of ninety (90) consecutive Trading Days
preceding the tenth day prior to such record date, was more than three
times the Conversion Price then in effect. Once the Stock Price Threshold
has been satisfied, it shall be deemed to remain satisfied on each
subsequent quarterly Dividend Payment Date regardless of any subsequent
changes in the price of the Common Stock.
(e) For purposes hereof, the "Coverage Ratio or Gas Price Threshold"
shall be satisfied as of a record date for a Dividend Payment Date if
either (i) the Fixed Charge Coverage Ratio as of the end of the then most
recently ended Rolling 4 Quarter Period is in excess of 2.5; or (ii) the
Average Gas Equivalent Price realized by the corporation during the then
most recently ended Rolling 4 Quarter Period is in excess of $2.95. As a
condition to the payment of cash dividends on any Dividend Payment Date,
the Coverage Ratio or Gas Price Threshold must be satisfied as of the
record date for such quarterly Dividend Payment Date (unless the Stock
Price Threshold has been satisfied, in which case satisfaction of the
Coverage Ratio or Gas Price Threshold shall not be required).
(f) The amount of dividends payable on each Dividend Payment Date
shall be determined by applying the Dividend Rate from but excluding the
immediately preceding Dividend Payment Date (or from but excluding the date
of issuance of shares of Series A Preferred or Series B Preferred, with
respect to the first dividend period) to and including the Dividend Payment
Date.
(g) Notwithstanding the foregoing or anything else herein to the
contrary, however, (i) dividends payable on any Redemption Date (as defined
in Section 7 below), shall be payable in cash or in Common Stock in
accordance with Section 7 hereof, and (ii) dividends payable on any final
distribution date relating to a dissolution, liquidation or winding up of
the corporation, shall be payable in cash only. If the payment date does
not occur on a regular Dividend Payment Date, dividends shall be calculated
on the basis of the actual number of days elapsed from but excluding the
immediately preceding Dividend Payment Date to and including the Redemption
Date or such final distribution date. Dividends payable on the shares of
Series A Preferred and Series B Preferred for any period of less than a
full quarterly dividend period shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
(h) To the extent dividends are not paid in cash or Paid-in-Kind on a
Dividend Payment Date, all dividends which shall have accrued on each share
of Series A Preferred and Series B Preferred outstanding as of such
Dividend Payment Date shall be added to the Stated Value of such share of
Series A Preferred and Series B Preferred and shall remain a part thereof
until paid, and dividends shall accrue at the Dividend Rate and be paid on
such share of Series A Preferred and Series B Preferred on the basis of the
Stated Value, as so adjusted.
(i) Dividends payable on each Dividend Payment Date shall be paid to
record holders of the shares of Series A Preferred and Series B Preferred
as they appear on the books of the corporation at the close of
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<PAGE> 52
business on the tenth Business Day immediately preceding the respective
Dividend Payment Date or on such other record date as may be fixed by the
Board of Directors of the corporation in advance of a Dividend Payment
Date, provided that no such record date shall be less than ten nor more
than sixty calendar days preceding such Dividend Payment Date.
(j) So long as any shares of Series A Preferred or Series B Preferred
are outstanding;
(i) No dividend or other distribution shall be declared or paid, or
set apart for payment on or in respect of, any Junior Securities (other
than dividends or distributions payable in shares of Junior Securities
or in rights to purchase Junior Securities), nor shall any Junior
Securities be redeemed, purchased or otherwise acquired for any
consideration (or any money be paid to a sinking fund or otherwise set
apart for the purchase or redemption of any such Junior Securities).
(ii) No dividend or other distribution, except as described in the
next succeeding sentence, shall be declared or paid, or set apart for
payment on or in respect of, Series A Preferred or Series B Preferred or
any Parity Securities for any period unless full cumulative dividends on
all outstanding shares of Series A Preferred and Series B Preferred and
any Parity Securities have been or contemporaneously are declared and
paid for all dividend periods terminating on or prior to the date set
for payment of such dividend. When dividends are not paid in full, as
aforesaid, on the shares of Series A Preferred and Series B Preferred
and any Parity Securities, all dividends declared upon such Parity
Securities shall be declared and paid pro rata so that the amounts of
dividends per share declared and paid on the shares of Series A
Preferred and Series B Preferred and such Parity Securities shall in all
cases bear to each other the same ratio that unpaid dividends per share
on the Series A Preferred and Series B Preferred and on such Parity
Securities bear to each other.
(iii) No shares of Series A Preferred or Series B Preferred or any
Parity Securities shall be redeemed, purchased or otherwise acquired for
any consideration (or any money be paid to a sinking fund or otherwise
set apart for the purchase or redemption of any such Parity Security) by
the corporation unless the full cumulative dividends on all outstanding
shares of Series A Preferred and Series B Preferred shall have been or
contemporaneously are declared and paid for all dividend periods
terminating on or prior to the date on which such redemption, purchase
or other payment is to occur.
SECTION 5. CERTAIN COVENANTS AND RESTRICTIONS. So long as any shares of
Series A Preferred or Series B Preferred are outstanding;
(a) The corporation shall at all times reserve and keep available for
issuance upon the conversion of the shares of Series A Preferred and Series
B Preferred as provided in Section 7 and Section 10, respectively, such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the conversion of all outstanding shares of Series A
Preferred and Series B Preferred and all other securities and instruments
convertible into shares of Common Stock, and shall take all reasonable
action within its power required to increase the authorized number of
shares of Common Stock necessary to permit the conversion of all
outstanding shares of Series A Preferred and Series B Preferred and all
such other securities and instruments convertible into shares of Common
Stock.
(b) The corporation covenants and agrees that all shares of Common
Stock that may be issued as payment of the Redemption Price or upon
exercise of the conversion rights of shares of Series A Preferred and
Series B Preferred will, upon issuance, be fully-paid and nonassessable.
(c) The corporation will endeavor to make the shares of stock that may
be issued as payment of the Redemption Price or upon exercise of the
conversion rights of shares of Series A Preferred and Series B Preferred
eligible for trading upon any national securities exchange, or any
automated quotation system of a registered securities association, upon or
through which the Common Stock shall then be traded prior to such delivery.
(d) Prior to the delivery of any securities which the corporation
shall be obligated to deliver upon redemption or conversion of the Series A
Preferred or Series B Preferred, the corporation will endeavor to comply
with all federal and state securities laws and regulations thereunder
requiring the registration of
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such securities with, or any approval of or consent to the delivery of such
securities by, any governmental authority.
(e) The corporation shall pay all taxes and other governmental charges
(other than any income or franchise taxes) that may be imposed with respect
to the issue or delivery of shares of Common Stock upon conversion or
redemption of Series A Preferred or Series B Preferred as provided herein.
The corporation shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Common Stock in any name other than that of the
registered holder of the shares of the Series A Preferred or Series B
Preferred surrendered in connection with the conversion or redemption
thereof, or involved in the issue of any certificate for shares of Series A
Preferred in exchange for shares of Series B Preferred, and in such case
the corporation shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid, or it has been
established to the corporation's satisfaction that no tax or other charge
is due.
SECTION 6. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution, or winding-up of the
corporation (in connection with the bankruptcy or insolvency of the
corporation or otherwise), whether voluntary or involuntary, before any
payment or distribution of the assets of the corporation (whether capital
or surplus) shall be made to or set apart for the holders of shares of any
Junior Securities, the holders of the shares of Series A Preferred and
Series B Preferred shall be entitled to receive an amount per share equal
to the Stated Value per share held by them, plus an amount in cash equal to
the full cumulative dividends accrued and unpaid thereon, to the date of
such payment, whether or not declared. No payment on account of any such
liquidation, dissolution or winding-up of the corporation shall be paid to
the holders of the shares of Series A Preferred or Series B Preferred or
the holders of any Parity Securities unless there shall be paid at the same
time to the holders of the shares of Series A Preferred and Series B
Preferred and the holders of any Parity Securities proportionate amounts
determined ratably in proportion to the full amounts to which the holders
of all outstanding shares of Series A Preferred and Series B Preferred and
the holders of all such outstanding Parity Securities are respectively
entitled with respect to such distribution. For purposes of this Section 6,
neither a consolidation or merger of the corporation with one or more
partnerships, corporations or other entities nor a sale, lease, exchange or
transfer of all or any substantial part of the corporation's assets for
cash, securities or other property shall be deemed to be a liquidation,
dissolution or winding-up of the corporation, whether voluntary or
involuntary.
(b) After payment of the full amount of the liquidation preference to
which the holders of shares of Series A Preferred and Series B Preferred
are entitled, such holders will not be entitled to any further
participation in any distribution of assets of the corporation.
(c) Written notice of any liquidation, dissolution or winding-up of
the corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not less than
15 days prior to any payment date stated therein, to the holders of record
of the shares of Series A Preferred and Series B Preferred at their
respective addresses as the same shall appear in the records of the
corporation.
SECTION 7. REDEMPTION. The outstanding shares of Series A Preferred and
Series B Preferred are subject to redemption in accordance with the following
provisions:
(a) Subject to the terms hereof, the corporation may at its option
elect to redeem outstanding shares of Series A Preferred and Series B
Preferred, in whole or in part (pro-rata or by lot among the outstanding
shares of both series), on any Dividend Payment Date after the thirtieth
(30th) day following the tenth (10th) anniversary of the Original Issue
Date of the Series B Preferred Stock.
(b) On June 30, 2008, the corporation shall redeem all of the shares
of Series A Preferred and Series B Preferred outstanding on such date.
(c) The redemption price per share for Series A Preferred and Series B
Preferred redeemed on any optional or mandatory redemption date (the
"Redemption Price") shall be equal to the Stated Value per
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share of the shares to be redeemed plus an amount equal to the aggregate
dollar amount of all accrued and unpaid dividends through the redemption
date that have not been added to the Stated Value of such shares. The
Redemption Price shall be paid in cash from any source of funds legally
available therefor, unless the corporation shall publicly announce at least
30 days prior to the redemption date that it has elected to make payment of
the Redemption Price in Common Stock, in which case the Redemption Price
shall be payable in Common Stock. If the corporation elects to pay the
Redemption Price in shares of Common Stock, the number (or fraction) of
shares to be issued in payment of the Redemption Price shall be calculated
based on the Market Price per share of Common Stock as of the fifth Trading
Day before the redemption date.
(d) Not less than thirty nor more than sixty days prior the redemption
date, a notice specifying the time and place of such redemption shall be
given by first class mail, postage prepaid, to the holders of record of the
shares of Series A Preferred and Series B Preferred to be redeemed at their
respective addresses as the same shall appear on the books of the
corporation (but no failure to mail such notice or any defect therein shall
affect the validity of the proceedings for redemption except as to the
holder to whom the corporation has failed to mail such notice or except as
to the holder whose notice was defective), calling upon each such holder of
record to surrender to the corporation on the redemption date at the place
designated in such notice such holder's certificate or certificates
representing the then outstanding shares of Series A Preferred or Series B
Preferred held by such holder. On or after the Redemption Date, each holder
of shares of Series A Preferred and Series B Preferred called for
redemption shall surrender his certificate or certificates for such shares
to the corporation at the place designated in the redemption notice and
shall thereupon be entitled to receive payment of the Redemption Price in
the manner set forth in Section 7(a) above. If the redemption is delayed
for any reason, dividends shall continue to accrue on the shares of Series
A Preferred and Series B Preferred outstanding, and shall be added to and
become a part of the Redemption Price of such shares, until the Redemption
Price, as so adjusted, for such shares is paid in full.
(e) If a holder of shares of Series A Preferred or Series B Preferred
called for redemption shall have elected, in accordance with the provisions
of Section 10(b), to convert such shares into Common Stock, such shares of
Series A Preferred or Series B Preferred which are to be converted into
Common Stock shall no longer be subject to redemption, and conversion of
same shall occur in accordance with the terms of Section 10.
SECTION 8. SHARES TO BE RETIRED. All shares of Series A Preferred and
Series B Preferred repurchased, redeemed, converted or otherwise acquired by the
corporation shall be retired and cancelled and shall be restored to the status
of authorized but unissued shares of Preferred Stock, without designation as to
series, and may thereafter be reissued.
SECTION 9. VOTING RIGHTS.
(a) Except as otherwise provided in this Section 9 or required by law
or any provision of the Articles of Incorporation of the corporation, the
holders of the shares of Series A Preferred and Series B Preferred shall
vote together with the shares of Common Stock as a single class at any
annual or special meeting of shareholders of the corporation upon the
following basis: each holder of shares of Series A Preferred and Series B
Preferred shall be entitled to such number of votes for the shares of
Series A Preferred and Series B Preferred held by such holder on the record
date fixed for such meeting as shall be equal to the whole number of shares
of Underlying Common Stock for such shares of Series A Preferred and Series
B Preferred immediately after the close of business on the record date
fixed for such meeting.
(b) With respect to any matter for which the affirmative vote of the
holders of separate classes or series of the corporation's capital stock is
required by the TBCA, the holders of Series A Preferred and Series B
Preferred shall, except as provided in this Section 9 or required by law,
vote together as a single class with respect to such matter and the holders
of the shares of Series A Preferred and Series B Preferred shall not be
entitled to vote as a separate class or series apart from each other,
including, without limitation, any vote on a proposal to approve or adopt
(i) any plan of merger, consolidation or
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share exchange for which the TBCA requires a shareholder vote; (ii) any
disposition of assets for which the TBCA requires a shareholder vote; and
(iii) any dissolution of the corporation for which the TBCA requires a
shareholder vote.
(c) For so long as any shares of Series A Preferred or Series B
Preferred remain outstanding, the corporation shall not: (i) without the
affirmative vote or consent of the holders of a majority of the shares of
Series A Preferred and Series B Preferred voting together as a single
class: (x) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of stock of Senior Securities or Parity
Securities, or any security convertible into or exchangeable for Senior
Securities or Parity Securities or reclassify or modify any Junior
Securities so as to become Parity Securities or Senior Securities; provided
that if the Series A Preferred and Series B Preferred are affected
differently by such action, the holders of each series will vote as a
separate class; or (y) amend the Articles of Incorporation to eliminate
cumulative voting; or (ii) without the affirmative vote or consent of the
holders of two-thirds of the shares of Series A Preferred voting as a
separate class, adopt any amendment to the Articles of Incorporation or the
bylaws that would materially affect the terms of the Series A Preferred; or
(iii) without the affirmative vote or consent of the holders of at least a
majority of the shares of Series B Preferred voting as a separate class,
adopt any amendment to the Articles of Incorporation or the bylaws that
would materially affect the terms of the Series B Preferred.
(d) For so long as any shares of Series B Preferred remain
outstanding, the affirmative vote or consent of the holders of at least a
majority of the shares of Series B Preferred outstanding at the time shall
be necessary to permit, affect or validate the amendment, alteration or
repeal by the shareholders of any provisions of the Articles of
Incorporation (including the Statement of Resolution relating to the Series
A Preferred and Series B Preferred) or Bylaws of the corporation that would
limit the authority of the Board of Directors to amend or repeal any
provision of the corporation's Bylaws.
(e) For so long as any shares of Series B Preferred remain outstanding
and the Minimum Ownership Condition is met, the holders of the Series B
Preferred shall have, in addition to the other voting rights required by
law or set forth herein or in the corporation's Articles of Incorporation,
the exclusive right, voting separately as a single class, to elect the
minimum number of directors (such directors are referred to herein as the
"Series B Directors") necessary to constitute a majority of the full Board
of Directors of the corporation (excluding in any such calculation any
Series A Directors). As of the Original Issue Date for the Series B
Preferred, the holders of the Series B Preferred shall have the right to
elect four of the seven members of the corporation's Board of Directors.
The right to elect the Series B Directors pursuant hereto may be exercised
by written consent in accordance with subsection (j) of this Section 9 or
by vote at any annual or special meeting of shareholders held for the
purpose of electing directors. At elections for the Series B Directors,
each holder of Series B Preferred shall be entitled to one vote for each
share held.
(f) The Series B Directors elected as provided herein shall serve
until the next annual meeting or until their respective successors shall be
elected and shall qualify. Any Series B Director may be removed with or
without cause by, and shall not be removed other than by, the vote of the
holders of a majority of the outstanding shares of Series B Preferred,
voting separately as a class, at a meeting called for such purpose or by
written consent in accordance with subsection (j) hereof. If the office of
any Series B Director becomes vacant by reason of death, resignation,
retirement, disqualification or removal from office or otherwise, the
remaining Series B Directors, by majority vote, may elect a successor, or,
alternatively, the holders of a majority of the outstanding shares of
Series B Preferred, voting separately as a class, at a meeting called for
such purpose or by written consent in accordance with subsection (k) hereof
may elect a successor. Any such successor shall hold office for the
unexpired term in respect of which such vacancy occurred. Upon any
termination of the right of the holders of Series B Preferred to vote for
and elect Series B Directors as herein provided (i) the Series B Directors
then serving on the Board of Directors may continue to hold their office
for the remainder of their term, subject to the right of the majority of
the Non-Series A and B Directors to request their prior resignation, in
which case the Series B Directors shall resign upon such request, and (ii)
upon the expiration of the term of office or earlier resignation of each
Series B Director pursuant to this sentence, the number of members
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constituting the corporation's Board of Directors shall automatically be
reduced accordingly unless a majority of the directors other than the
Series B Directors by resolution determine otherwise and elect additional
directors to fill any resulting vacancies.
(g) The following special voting provisions shall be applicable to the
Series A Preferred Stock:
(i) if the corporation shall be in arrears in the payment of
dividends (whether Payable-in-Kind or in cash) on the shares of Series A
Preferred and Series B Preferred for a total of six quarterly Divided
Payment Dates, then the number of members of the Board of Directors
shall automatically be increased by two additional directors and the
holders of the Series A Preferred, voting as a separate class, shall
have the exclusive right to elect two directors ("Series A Directors")
immediately, and at the next and every subsequent annual meeting of
shareholders called for the election of directors, at which the term of
office of the Series A Directors expire;
(ii) the right of the holders of Series A Preferred to elect the
Series A Directors as aforesaid shall continue until such time as
dividends accumulated on the Series A Preferred shall have been paid in
full, whether Payable-in-Kind or in cash, at which time the office of
the Series A Directors shall be eliminated and the special right of the
holders of Series A Preferred so to vote separately as a class for the
election of the Series A Directors shall terminate, subject to revesting
at such time as the corporation shall be in arrears in the payment of
dividends on the outstanding shares of Series A Preferred as set forth
in clause (i) above;
(iii) each Series A Director shall agree, prior to his election to
office, to resign immediately upon any termination of the right of the
holders of Series A Preferred to vote as a separate class for directors
as herein provided, and upon any such termination, each Series A
Director shall forthwith resign and the size of the Board of Directors
shall automatically be reduced accordingly;
(iv) unless otherwise required to resign as aforesaid, the term of
office of each Series A Director shall terminate upon the election of a
successor Series A Director at any meeting of the shareholders held for
the purpose of electing directors; and
(v) in any case in which the holders of Series A Preferred shall be
entitled to vote pursuant to this Section 9(g), each holder of Series A
Preferred shall be entitled to one vote for each share of Series A
Preferred held.
(h) During any period in which the holders of Series A Preferred shall
be entitled to elect directors pursuant to subsection (g) of this Section
9, or the holders of Series B Preferred shall be entitled to elect
directors pursuant to subsection (e) of this Section 9 the following shall
be applicable:
(i) if the annual meeting of shareholders of the corporation is
not, for any reason, held within the time fixed in the Bylaws of the
corporation, or if a vacancy shall exist in the office of a Series A
Director or a Series B Director, a proper officer of the corporation,
upon the written request of the holders of record of at least ten
percent (10%) of the shares of the Series A Preferred or Series B
Preferred then outstanding, as applicable, addressed to the Secretary of
the corporation, shall call a special meeting in lieu of the annual
meeting of shareholders, or in the event of a vacancy, a special meeting
of the holders of Series A Preferred or Series B Preferred, as
applicable, for the purpose of electing Series A Directors or Series B
Directors, as applicable, and any such meeting shall be held at the
earliest practicable date at such time and place as shall be determined
by the corporation;
(ii) if such meeting shall not be called by the proper officer of
the corporation within twenty (20) days after personal service of said
written request upon the Secretary of the corporation, or within (20)
days after mailing the same within the United States by certified mail,
addressed to the Secretary of the corporation at its principal executive
offices, then the holders of record of at least ten percent (10%) of the
outstanding shares of the Series A Preferred or Series B Preferred, as
applicable, may designate in writing one of their number to call such
meeting at the expense of the corporation, and such meeting may be
called by the person so designated upon the notice required for the
annual meetings of shareholders of the corporation and shall be held at
the principal
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executive offices of the corporation. Any holder of Series A Preferred
or Series B Preferred, as applicable, so designated shall have access to
the lists of Series A Preferred or Series B Preferred shareholders to be
called pursuant to the provisions hereof; and
(iii) at any meeting held for the purpose of electing a director at
which the holders of Series A Preferred or Series B Preferred shall have
the right, voting as a separate class, to elect the Series A Director or
Series B Director pursuant to this Section 9, the presence in person or
by proxy of the holders of at least one-third ( 1/3) of the outstanding
Series A Preferred or Series B Preferred, as applicable, shall be
required to constitute a quorum of such Series A Preferred or Series B
Preferred, as applicable.
(i) During any period in which the holders of Series B Preferred shall
be entitled to elect directors pursuant to subsection (e) of this Section
9, (i) the holders of Series B Preferred shall not have the right or
otherwise be entitled to vote in the election of any directors other than
the Series B Directors, (ii) no Series B Director shall have the right to
vote in the election of any person to fill any vacancy created by the
death, resignation, retirement, disqualification or removal from office or
otherwise of any director other than a Series B Director and all such
rights with respect to the Non-Series A and B Directors shall be exercised
for and on behalf of the Board of Directors by a majority of the Non-Series
A and B Directors, and (iii) only the Non-Series A and B Directors shall
have right to vote in any action by or on behalf of the Board of Directors
with respect to nominating persons to serve as Non-Series A and B Directors
to be elected at any meeting of shareholders that is held after the first
meeting of shareholders at which Non-Series A and B Directors are elected
that is held after the Original Issue Date of the Series B Preferred. The
persons to be nominated by or on behalf of the Board of Directors for
election as Non-Series A and B Directors at such first meeting of
shareholders to be held after such Original Issue Date shall be such
persons as shall have most recently been designated as such nominees by
action of the Board of Directors prior to such Original Issue Date (or, if
any of such nominees shall be unable or unwilling to serve, such other
person or persons as shall be designated by the other such nominee or
nominees), unless otherwise agreed after such date by the unanimous vote of
all Non-Series A and B Directors then in office. Nothing in clause (ii) or
(iii) above of this subsection (i), or in the immediately preceding
sentence, shall limit or restrict the right of holders of shares of Common
Stock and Series A Preferred to nominate and to elect, subject to and in
accordance with applicable law, the other provisions of the Articles of
Incorporation and the bylaws, persons to serve as Non-Series A and B
Directors. This subsection (i) and the defined terms used herein may not be
amended without (x) the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock and (y) the affirmative vote of the
holders of a majority of the outstanding shares of Series A Preferred
Stock.
(j) Pursuant to Article 9.10A of the TBCA, any action of the holders
of the Series B Preferred, voting as a separate class, which is required by
the TBCA to be taken at any annual or special meeting of the holders of the
Series B Preferred, or is otherwise permitted to be taken by the holders of
Series B Preferred at any annual or special meeting pursuant to the TBCA,
the Articles of Incorporation (including the Statement of Resolution
relating to the Series A Preferred and Series B Preferred) or the
corporation's bylaws, may be taken without a meeting, without prior notice,
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holder or holders of shares of
Series B Preferred having not less than the minimum number of votes that
would be necessary to take such action at a meeting at which the holders of
all shares of Series B Preferred were present and voted.
SECTION 10. CONVERSION RIGHTS. Holders of shares of Series A Preferred and
Series B Preferred shall have the right to convert all or a portion of such
shares into shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section
10, each share of Series A Preferred and Series B Preferred shall be
convertible at the option of the holder thereof into fully paid,
nonassessable shares of Common Stock. The number (or fraction) of shares of
Common Stock deliverable upon conversion of one share of Series A Preferred
or Series B Preferred shall be determined by dividing the Stated Value of
such share of Series A Preferred or Series B Preferred by the Conversion
Price then in effect. For purpose of such determination, the Stated Value
of each share of Series A
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Preferred or Series B Preferred shall be increased by the amount of accrued
and unpaid dividends for all quarterly dividend payment periods ending on
or prior to the date such shares are surrendered to the corporation for
conversion and for the partial dividend period beginning on the date
immediately following the most recent Dividend Payment Date through and
including the date on which such shares are surrendered for conversion.
Notwithstanding the foregoing, holders of shares of Series A Preferred and
Series B Preferred surrendered for conversion shall have the right to
require the corporation to make payment in cash of all such accrued and
unpaid dividends, in lieu of such adjustment to the Stated Value to the
extent funds are legally available therefor.
(b) The conversion of any share of Series A Preferred or Series B
Preferred may be effected by the holder thereof by the surrender of the
certificate for such share to the corporation at the principal office of
the Transfer Agent or to such other agent or agents of the corporation as
may be designated by the Board of Directors. If any shares of Series A
Preferred or Series B Preferred are called for redemption pursuant to
Section 7 hereof, such right of conversion shall cease and terminate as to
the shares called for redemption at the close of business on the Business
Day immediately preceding the redemption date, unless the corporation shall
default in the payment of the Redemption Price, in which event such
conversion right shall remain in effect until full payment of the
Redemption Price has been made.
(c) As promptly as practicable after the surrender of shares of Series
A Preferred and Series B Preferred for conversion, the corporation shall
issue and deliver or cause to be issued and delivered to the holder of such
shares certificates representing the number (or fraction) of fully paid and
non-assessable shares of Common Stock into which such shares of Series A
Preferred and Series B Preferred have been converted in accordance with the
provisions of this Section 10. Subject to the following provisions of this
Section 10, such conversion shall be deemed to have been made as of the
close of business on the date on which the shares of Series A Preferred and
Series B Preferred shall have been surrendered for conversion in the manner
herein provided, so that the rights of the holder of the shares of Series A
Preferred and Series B Preferred so surrendered shall cease at such time,
and the person or persons entitled to receive the shares of Common Stock
upon conversion thereof shall be treated for all purposes as having become
the record holder or holders of such shares of Common Stock at such time;
provided, however, that any such surrender on any date when the stock
transfer books of the corporation are closed shall be deemed to have been
made, and shall be effective to terminate the rights of the holder or
holders of the shares of Series A Preferred and Series B Preferred so
surrendered for conversion and to constitute the person or persons entitled
to receive such shares of Common Stock as the record holder or holders
thereof for all purposes, at the opening of business on the next succeeding
day on which such transfer books are open and such conversion shall be at
the Conversion Price in effect at such time.
(d) Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the shares of Series A Preferred and Series
B Preferred, the corporation will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the corporation may
validly and legally issue fully paid and non-assessable shares of Common
Stock at such adjusted Conversion Price.
(e) The Conversion Price shall be subject to adjustment from time to
time as follows:
(i) In case at any time the corporation shall (A) subdivide the
outstanding shares of Common Stock into a greater number of shares, or
(B) combine the outstanding shares of Common Stock into a smaller number
of shares, the Conversion Price in effect immediately prior thereto
shall be adjusted proportionately so that the adjusted Conversion Price
shall bear the same relation to the Conversion Price in effect
immediately prior to such event as the total number of shares of Common
Stock outstanding immediately prior to such event shall bear to the
total number of shares of Common Stock outstanding immediately after
such event. Such adjustment shall become effective immediately after the
effective date of a subdivision or combination.
(ii) In case at any time the corporation shall declare, order, pay
or make any dividend or other distribution to holders of the Common
Stock payable in Common Stock, then in each such case, subject to
Section 10(e)(v) hereof, the Conversion Price in effect immediately
prior to the close of
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business on the record date fixed for determination of holders of any
class of securities entitled to receive such dividend or distribution
shall be reduced to a price (calculated to the nearest .001 of cent)
determined by multiplying such Conversion Price by a fraction:
(A) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such dividend or
distribution; and
(B) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such dividend or
distribution.
Shares of Common Stock owned by or held for the account of the
corporation shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made on the date such dividend is
paid or such distribution is made and shall become effective retroactive
to the record date for the determination of shareholders entitled to
receive such dividend or distribution.
(iii) In case at any time the corporation shall declare, order, pay
or make any dividend or other distribution to all holders of the Common
Stock, other than a dividend payable in shares of Common Stock
(including, without limitation, dividends or distributions payable in
cash, evidences of indebtedness, rights, options or warrants to
subscribe or purchase any Common Stock or other securities, or any other
securities or other property, but excluding any rights to purchase any
stock or other securities if such rights are not separable from the
Common Stock except upon the occurrence of a contingency beyond the
control of the corporation), then, and in each such case, subject to
Section 10(e)(v) hereof, the Conversion Price in effect immediately
prior to the close of business on the record date fixed for the
determination of holders of Common Stock entitled to receive such
dividend or distribution shall be reduced to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Conversion Price
by a fraction:
(A) the numerator of which shall be the Market Price per share
of Common Stock in effect as of such record date or, if the Common
Stock trades on an ex-dividend basis, on the Trading Day immediately
prior to the date of commencement of ex-dividend trading, less the
value of such dividend or distribution (as determined in good faith
by the Board of Directors of the corporation) applicable to one share
of Common Stock, and
(B) the denominator of which shall be such Market Price per
share of Common Stock as of such record date or, if the Capital Stock
trades on an ex-dividend basis, on the Trading Day immediately prior
to the date of commencement of ex-dividend trading.
Such adjustment shall be made on the date such dividend is paid or such
distribution is made and shall become effective retroactive to the
record date for the determination of shareholders entitled to receive
such dividend or distribution.
(iv) In case at any time the corporation issues or sells any shares
of Common Stock or any rights, options or warrants to subscribe for or
purchase shares of Common Stock or shares having the same rights,
privileges and preferences as the Common Stock ("equivalent common
stock") or securities convertible into Common Stock or equivalent common
stock, at a price per share of Common Stock or equivalent common stock
(or having a conversion price per share, if a security is convertible
into shares of Common Stock or equivalent common stock) less than the
Market Price of the Common Stock as of the date of such issue or sale,
then upon such issue or sale the Conversion Price shall be reduced to
such Conversion Price determined by multiplying the Conversion Price in
effect immediately prior to such issue or sale by a fraction, (x) the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus the
number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock and/or equivalent common
stock so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such
Market Price and (y) the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior to such
issue or sale plus the number of additional shares of Common Stock
and/or equivalent common stock to be offered for subscription
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or purchase (or into which the convertible securities so to be offered
are initially convertible). In case such subscription price may be paid
in a consideration part of or all of which shall be in a form other than
cash, the value of such consideration shall be determined in good faith
by the Board of Directors of the corporation. Shares of Common Stock
owned by or held for the account of the corporation shall not be deemed
outstanding for the purpose of any such computation. Such issue or sale
adjustment shall be made successively upon the issuance or sale of
shares of Common Stock or equivalent common stock or any rights, options
or warrants to subscribe for or purchase Common Stock or equivalent
common stock or securities convertible into common stock or equivalent
common stock. Notwithstanding the foregoing, no adjustment of the
Conversion Price pursuant to this Section 10(e)(iv) shall be made upon
(A) the conversion or redemption of shares of Series A Preferred or
Series B Preferred; (B) the payment of any stock dividend on the Series
A Preferred or Series B Preferred; (C) the issuance of options to
officers, directors and employees of the corporation and its
subsidiaries, to purchase shares of Common Stock, including any such
options as are issued and outstanding as of the Original Issue of the
Series B Preferred; (D) the issuance and sale of Common Stock upon
exercise of any rights, options or warrants referenced in the
immediately preceding clause (C) or in Section 10(e)(iii); or (E) the
issuance and sale of Common Stock in an underwritten public offering at
a price to the public of not less than 95% of the Closing Price of the
Common Stock on the date of the pricing of such offering.
(v) If the amount of any adjustment of the Conversion Price
required pursuant to this Paragraph 10 would be less than 1% of the
Conversion Price in effect at the time such adjustment is otherwise so
required to be made, such amount shall be carried forward and an
adjustment with respect thereto made at the time of and together with
any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least 1% of
such Conversion Price. All calculations under this Section 10 shall be
made to the nearest .001 of a cent.
(vi) Except as herein otherwise expressly provided, for all
purposes of this Section 10(e) the term "Common Stock" shall mean the
Common Stock and any shares of stock or other class of capital stock of
the corporation which is not preferred as to dividends or assets over
any other class of capital stock of the corporation and which is not
subject to redemption, or which is issued to the holders of shares of
Common Stock upon any reclassification thereof.
(f) In case at any time after the Original Issuance Date, the
corporation shall be a party to any transaction (including without
limitation, a merger, consolidation, statutory share exchange, sale of all
or substantially all of the corporation's assets or recapitalization of the
Common Stock), in each case as a result of which shares of Common Stock (or
any other securities of the corporation then issuable upon conversion of
the Series A Preferred or Series B Preferred) shall be converted to the
right to receive stock, securities or other property (including cash or any
combination thereof) (each of the foregoing transactions being referred to
as a "Fundamental Change Transaction"), then the shares of Series A
Preferred and Series B Preferred remaining outstanding will thereafter no
longer be subject to conversion into Common Stock (or such other
securities) pursuant to this Section 10, but instead each share shall be
convertible into the kind and amount of stock and other securities and
property receivable (including cash) upon the consummation of such
Fundamental Change Transaction by a holder of that number of shares or
fraction thereof of Common Stock (or such other securities) into which one
share of Series A Preferred or Series B Preferred was convertible
immediately prior to such Fundamental Change Transaction assuming such
holder of Common Stock failed to exercise any right of election as to the
kind of consideration to be received in such Fundamental Change
Transaction. The corporation shall not be a party to any Fundamental Change
Transaction after which shares of the Series A Preferred and Series B
Preferred shall remain outstanding unless the terms of such Fundamental
Change Transaction are consistent with the provisions of this Section
10(f), and it shall not consent or agree to the occurrence of any such
Fundamental Change Transaction until the corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the shares of Series A Preferred and Series B
Preferred which will contain provisions enabling the holders of shares of
the
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Series A Preferred and Series B Preferred which remain outstanding after
such Fundamental Change Transaction to convert such shares into the
consideration received by holders of Common Stock (or any other securities
of the corporation then issuable upon conversion of the Series A Preferred
or Series B Preferred) at the Conversion Price immediately after such
Fundamental Change Transaction. In the event that at any time, as a result
of an adjustment made pursuant to this Section 10, the Series A Preferred
and Series B Preferred shall become subject to conversion into any
securities other than shares of Common Stock, thereafter the number of such
other securities so issuable upon conversion of the shares of Series A
Preferred and Series B Preferred shall be subject to adjustment from time
to time in a manner and on terms nearly equivalent as practicable to the
provisions with respect to the shares of Series A Preferred and Series B
Preferred contained in this Section 10. The provisions of this Section
10(f) shall similarly apply to successive Fundamental Change Transactions.
(g) Upon the occurrence of any event requiring an adjustment of the
Conversion Price, then and in any such case the corporation shall promptly
deliver to the holders of shares of Series A Preferred and Series B
Preferred, a notice stating the Conversion Price resulting from such
adjustment, the method of calculation thereof, and setting forth a brief
statement of the facts requiring such adjustment and upon which such
adjustment is based.
(h) In case at any time:
(i) the corporation shall declare or pay to all holders of Common
Stock any dividend (whether payable in Common Stock, cash, securities or
other property);
(ii) there shall be any capital reorganization, or reclassification
of the Common Stock of the corporation or consolidation or merger of the
corporation with, or sale of all or substantially all of its assets to,
another corporation or other entity;
(iii) there shall be a voluntary or involuntary dissolution,
liquidation, or winding-up of the corporation; or
(iv) there shall be any other Fundamental Change Transaction;
then, in any one or more of such cases, the corporation shall give to the
holder of shares of Series A Preferred and Series B Preferred (A) at least
15 days prior to any event referred to in clause (i) above and at least 30
days prior to any event referred to in clause (ii), (iii) or (iv) above,
written notice of the date on which the books of the corporation shall
close or records shall be taken for such dividend or distribution or for
determining rights to vote in respect of any such organization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, or Fundamental Change Transaction and (B) in the case of any
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, winding-up, or Fundamental Change Transaction
known to the corporation, at least 30 days prior written notice of the
date, or if not then known, a reasonable approximation thereof by the
corporation) when the same shall take place. Such notice in accordance with
the foregoing clause (A) shall also specify, in the case of any such
dividend or distribution, the date on which such holders of Common Stock
shall be entitled thereto, and such notice in accordance with the foregoing
clause (B) shall also specify the date on which such holders of Common
Stock shall be entitled to exchange their Common Stock securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, winding-up, or
Fundamental Change Transaction, as the case may be.
(i) All shares of Common Stock issuable upon the conversion set forth
in this Section 10 shall be validly issued, fully-paid and non-assessable.
SECTION 11. RANKING.
(a) The Series A Preferred and the Series B Preferred shall rank on a
parity with each other as to payment of dividends and distributions and
upon liquidation, dissolution or winding-up of the corporation. In the
event the corporation is a party to any merger, consolidation or share
exchange in which the
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Series A Preferred or Series B Preferred is converted or exchanged into any
other securities, property, cash or other consideration, the securities,
property, cash or other consideration into which the Series A Preferred and
Series B Preferred, respectively, may be converted or exchanged shall be
identical in kind and amount per share as that into which the Series B
Preferred or Series A Preferred, as the case may be, may be converted or
exchanged, and no shares of Series A Preferred or Series B Preferred shall
be converted or exchanged therein into any securities, property, cash or
other consideration unless all shares of Series A Preferred and Series B
Preferred may be converted or exchanged into the same kind and amount per
share of securities, property, cash or other consideration.
(b) Without limiting the definition of Junior Securities, the
following securities and obligations of the corporation shall rank junior
to the Series A Preferred and Series B Preferred with respect to the
payments required or permitted to be made to the holders thereof pursuant
to their respective governing instruments and payments required to be made
to the holders of the Series A Preferred and Series B Preferred pursuant
hereto: the shares of Common Stock and Series A Junior Participating
Preferred Stock, par value $.01 per share.
SECTION 12. RECORD HOLDERS. The corporation and the Transfer Agent may deem
and treat the record holder of any shares of Series A Preferred and Series B
Preferred as the true and lawful owner thereof for all purposes, and neither the
corporation nor Transfer Agent shall be affected by any notice to the contrary.
SECTION 13. NOTICE. Except as may otherwise be provided by law or provided
for herein, all notices referred to herein shall be in writing, and all notices
hereunder shall be deemed to have been given upon receipt, in the case of a
notice of conversion given to the corporation as contemplated in Section 10(b)
hereof, or, in all other cases, upon the earlier of receipt of such notice or
three Business Days after the mailing of such notices sent by Registered Mail
(unless first-class mail shall be specifically permitted for such notice under
the terms hereof) with postage prepaid, addressed: If to the corporation, to its
principal executive offices (Attention: Corporate Secretary) or to any agent of
the corporation designated as permitted hereby; or if to a holder of the Series
A Preferred and Series B Preferred, to such holder at the address of such holder
of the Series A Preferred and Series B Preferred as listed in the stock record
books of the corporation (which shall include the records of the Transfer
Agent), or to such other address as the corporation or holder, as the case may
be, shall have designated by notice similarly given.
SECTION 14. AUTHORIZATION BY NON-SERIES A AND B DIRECTORS. A majority of
the Non-Series A and B Directors shall make (and no Series B Director shall be
entitled to vote on) any determination required or permitted to be made by the
Board of Directors on behalf of the corporation (i) pursuant to Section 7(c)
hereof, as to whether to make payment of the Redemption Price of the Series A
Preferred and Series B Preferred in cash or in kind, (ii) pursuant to Section
7(a) hereof, as to whether to exercise the corporation's option to redeem
outstanding shares of Series A Preferred or Series B Preferred, or (iii)
pursuant to Section 4(c) hereof, as to whether to make payment of any dividends
declared by the Board of Directors on the Series A Preferred and Series B
Preferred in cash or in kind; provided that, the Non-Series A and B Directors
shall not be entitled to make any determination to pay cash dividends unless the
corporation shall have sufficient cash legally available to make such payment in
full.
SECTION 15. SUCCESSORS AND TRANSFEREES. The provisions applicable to shares
of Series A Preferred and Series B Preferred shall bind and inure to the benefit
of and be enforceable by the corporation, the respective successors to the
corporation, and by any record holder of shares of Series A Preferred and Series
B Preferred.
SECTION 16. CONVERSION OF SERIES B TO SERIES A SHARES. Upon any transfer of
shares of Series B Preferred (or any transfer of beneficial ownership of such
shares) to any Person other than to any Partnership Affiliate, such shares shall
be automatically converted to shares of Series A Preferred on a one for one
basis, and as a condition to the registration of the transfer of such shares,
the certificate for the shares of Series B Preferred to be transferred shall be
surrendered to the Transfer Agent in exchange for the issuance of a certificate
for the same number of shares of Series A Preferred registered in the name of
the transferee. In addition, at such time as the Minimum Ownership Condition is
no longer met, all shares of Series B Preferred remaining outstanding shall be
automatically converted to shares of Series A Preferred on a one for one basis
and each holder of
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shares of Series B Preferred shall surrender to the Transfer Agent the
certificates for such shares in exchange for certificates for the same number of
shares of Series A Preferred registered in the name of such holder.
RESOLVED FURTHER, that the appropriate officers of the corporation, be, and
they are hereby, authorized and directed from time to time to execute such
certificates, instruments or other documents and do all such things as may be
necessary or advisable in their discretion in order to carry out the terms
hereof, including the filing with the Secretary of State for the State of Texas
of a copy of the foregoing resolution executed by an officer of the corporation.
Dated: , 1996.
MESA INC.
By:
---------------------------------
Name:
Title:
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
this __________ day of _______________, 1996 among MESA INC., a Texas
corporation ("Company"), and DNR-MESA HOLDINGS, L.P. ("Shareholder").
RECITALS:
WHEREAS, pursuant to the Purchase Agreement (as such term and certain
other capitalized terms used in this Agreement are defined in Section 1
hereof), the Shareholder has agreed to acquire certain shares of Series B
Preferred Stock, subject to satisfaction of the conditions set forth therein;
WHEREAS, the execution and delivery of this Agreement is a condition
to the consummation of the Shareholder's purchase of the shares of Series B
Preferred Stock pursuant to the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereby agree as follows:
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"best efforts" means a Person's best efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are authorized or required by law to be
closed in New York, New York or Dallas, Texas.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act and the Exchange
Act.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"PIK Dividends" means the dividends payable in kind on the shares of
Series A Preferred Stock or Series B Preferred Stock pursuant to the Statement
of Resolution.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization or government or agency or political subdivision
thereof.
"Registrable Series A Preferred Stock" means Series A Preferred Stock
issued or issuable in exchange for Series B Preferred Stock pursuant to the
Statement of Resolution.
"Series A Preferred Stock" means the Series A 8% Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company.
"Series B Preferred Stock" means the Series B 8% Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company.
<PAGE> 65
"Preferred Stock" means the Registrable Series A Preferred Stock and
the Series B Preferred Stock.
"Purchase Agreement" means the Stock Purchase Agreement, dated as of
April __, 1996, by and between the Company and DNR-MESA Holdings, L.P., a Texas
limited partnership.
"register," "registered" and "registration" refer to a registration of
securities effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act (as defined below), and the
declaration or ordering of effectiveness of such registration statement or
document.
"Registrable Securities" means (i) the shares of Registrable Series A
Preferred Stock, (ii) the shares of Common Stock issuable upon conversion or
redemption of shares of Preferred Stock, and (iii) any securities issued or
issuable in respect of any such shares of Preferred Stock or Common Stock by
way of any stock split or stock dividend (including, without limitation, the
PIK Dividends) or in connection with any combination of shares,
recapitalization, merger, consolidation, reorganization or otherwise. As to
any particular Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (a) a registration statement with respect to
the sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
registration statement, (b) such securities shall have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) such securities are eligible to be distributed to the public pursuant
to Rule 144(k) (or any successor provision) under the Securities Act, (d) such
securities shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by the
Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, or (e) such securities shall have ceased to be outstanding.
"Requesting Holders" means the holders of Registrable Securities who
have requested that such securities be registered pursuant to Section 2 or
Section 3 of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Statement of Resolution" means that Statement of Resolution
Establishing and Designating the Series A Cumulative Convertible Preferred
Stock and the Preferred Stock, as filed with the Secretary of State of the
State of Texas on ____________________, 1996.
"Taxes" means any income taxes or similar assessments or other tax
imposed by any United States federal, state or local taxing authority,
including any interest, penalties or additions thereto.
"Underwriter" means each person (other than the Company and its
officers, directors, agents and advisors) that participates in the offering of
the Registrable Securities, whether pursuant to an underwritten public offering
or otherwise.
2. Demand Registration Rights.
(a) If the Company shall have received a written request submitted
by the holders of at least a majority of the Registrable Securities outstanding
at the time of such request ("Requisite Holders") that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities,
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then within thirty days of the Company's receipt of such written request, the
Company shall (subject to the limitations of Sections 2(c) and 7 hereof)
commence the actions required by Section 4 hereof in order to register the
Registrable Securities requested to be registered by means of a "shelf"
registration statement on any appropriate form for an offering to be made on a
continuous basis under the Securities Act. The Company agrees to use its best
efforts to keep such shelf registration statement continuously effective for a
period of six months following the date on which such shelf registration
statement is declared effective (plus the number of days of any discontinuance
or delay of sales thereunder, as described in Sections 4 and 10 hereof).
(b) If the Requisite Holders intend to distribute the Registrable
Securities covered by the request pursuant to this Section 2 by means of an
underwriting, the Requisite Holders shall so advise the Company as a part of
the request made pursuant to this Section 2 and provide the name of the
managing Underwriter or Underwriters that the Requisite Holders propose to
employ in connection with the public offering proposed to be made pursuant to
the registration requested.
(c) The Company is obligated to effect three registrations
pursuant to this Section 2; provided, however, that at the request of the
Requisite Holders, the Company shall effect additional registrations not more
frequently than once during each fiscal year so as to permit the sale of such
number of Registrable Securities as is necessary to provide net proceeds in an
amount equal to the Taxes imposed on the holders of the Preferred Stock with
respect to PIK Dividends, but only to the extent that the shares requested to
be so registered are not eligible to be distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act. A registration
shall not be deemed to have been effected (i) unless it has become effective
and remained effective for the period specified in Section 2(a) or until the
Registrable Securities registered under such registration statement have been
sold, (ii) if, after it has become effective, such registration is terminated
by a stop order, injunction or other order of the Commission or other
governmental agency or court, or (iii) if the conditions to closing specified
in any purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied for any reason, other than as a result
of the voluntary termination of such offering by the Requisite Holders.
3. Piggyback Registrations. Whenever the Company proposes to
register an offering of any of its capital stock under the Securities Act
(including for this purpose a registration effected by the Company for any
stockholders other than the holders of Registrable Securities), other than a
registration (i) under employee compensation or benefit programs or otherwise
on Form S-8 or an equivalent form, or (ii) of an exchange offer or an offering
of securities solely to the existing shareholders or employees of the Company
or to the existing shareholders of another company in connection with a merger
or acquisition or otherwise on Form S-4 or an equivalent form, the Company will
give prompt written notice (which, in any event, shall be given no less than 15
days prior to the filing of a registration statement with respect to such
offering) to all holders of the Registrable Securities of its intention to
effect such a registration and upon the written request of any holders of the
Registrable Securities sent within 15 days after the effective date of the
Company's notice, the Company will (subject to the limitations of Sections 4
and 7 hereof) use its best efforts to cause all Registrable Securities for
which registration is requested, to be registered under the Securities Act, all
to the extent necessary to permit the sale in such offering of such Registrable
Securities on behalf of the Requesting Holders on the same terms and conditions
as are provided for therein for persons other than holders of Registrable
Securities. The Company shall use its best efforts to cause the managing
Underwriters of a proposed underwritten offering to permit the Registrable
Securities which have been requested to be included in the registration
statement (or registration statements) for such offering to be included therein
and in the prospectus used in connection therewith on the same terms and
conditions as are provided for therein for persons other than holders of
Registrable Securities. Notwithstanding the foregoing, if the proposed
registration includes securities to
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be offered by the Company for its own account and if the managing Underwriters
of such offering inform the Company in writing of their belief that marketing
factors require a limitation of the number of shares to be underwritten, the
Company may limit the number of Registrable Securities to be included in the
registration and underwriting to such amount as in the reasonable opinion of
the managing Underwriters of such offering would not adversely affect the
marketability or offering price of all of the securities to be offered by the
Company in such offering, such limitation to be on a pro rata basis among the
holders of the Registrable Securities requested to be included in such
registration; provided, however, that securities to be included in the
registration statement (or registration statements) for any person other than
the holders of the Registrable Securities shall be first reduced prior to any
such pro rata reduction among the holders of Registrable Securities; provided
further however, that no such reduction shall reduce the securities being
offered by the Company for its own account.
4. Registration Procedures. Upon the receipt of a request for
registration of any Registrable Securities pursuant to Section 2 or Section 3
of this Agreement, the Company will use its best efforts to effect the
registration of the Registrable Securities in accordance with the intended
method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) Prepare and file with the Commission a registration statement
on an appropriate form under the Securities Act and use its best efforts to
cause such registration statement to become effective; provided, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of any registration statement, the Company will promptly furnish to such
Requesting Holders and the Underwriters, if any, copies of all such documents
proposed to be filed, which documents will be subject to the review of such
Requesting Holders and the Underwriters, and the Company will not file any
registration statement or amendment thereto, or any prospectus or any
supplement thereto (including such documents incorporated by reference) to
which such Requesting Holders or the Underwriters, if any, shall reasonably
object in the light of the requirements of the Securities Act and any other
applicable laws and regulations.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to a registration statement as may be necessary to
keep such registration statement effective for the applicable period; cause the
related prospectus to be filed pursuant to Rule 424(b) (or any successor
provision) under the Securities Act; cause such prospectus to be supplemented
by any required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424(b) (or any successor provision) under the Securities Act;
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during the
applicable period in accordance with the intended methods of disposition set
forth in such registration statement or supplement to such prospectus.
(c) Notify the Requesting Holders and the managing Underwriters,
if any, promptly, and (if requested by any such Person) confirm such advice in
writing, (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceeding for that purpose,
(iv) if at any time the representations and warranties of the Company
contemplated by Section 4(l) cease to be true and correct, (v) of the receipt
by the Company of any notification with respect to the suspension or
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation of any proceeding for such purpose, (vi) of the happening of
any event which requires the making of any changes in a registration statement
or related prospectus so that such documents will not contain any untrue
statement of a material
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fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (vii) of the
Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate or that there exist circumstances
not yet disclosed to the public which make further sales under such
registration statement in advisable pending such disclosures and post-effective
amendment.
(d) Make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale
in any jurisdiction, at the earliest possible moment.
(e) If requested by the managing Underwriters or such Requesting
Holders in connection with an underwritten offering, immediately incorporate in
a prospectus supplement or post effective amendment such information as the
managing Underwriters and such Requesting Holders agree should be included
therein relating to such sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of shares
of Registrable Securities being sold to such Underwriters and the purchase
price being paid therefor by such Underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required filings
of such prospectus supplement or post- effective amendment as soon as notified
of the matters to be incorporated in such prospectus supplement or post-
effective amendment; and supplement or make amendments to any registration
statement if requested by such Requesting Holders or any Underwriter of such
Registrable Securities.
(f) Furnish to such Requesting Holders and each managing
Underwriter, if any, without charge, at least one signed copy of the
registration statement, any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference).
(g) Deliver without charge to such Requesting Holders and the
Underwriters, if any, as many copies of the prospectus or prospectuses
(including each preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by such Requesting
Holders and the Underwriters, if any, in connection with the offer and sale of
the Registrable Securities covered by such prospectus or any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities,
register or qualify or cooperate with such Requesting Holders, the
Underwriters, if any, and respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as such Requesting
Holders or an Underwriter reasonably requests in writing; keep each such
registration or qualification effective during the period such registration
statement is required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions
of the Registrable Securities covered by the applicable registration statement;
provided, however, that the Company will not be required in connection
therewith or as a condition thereto to qualify generally to do business or
subject itself to general service of process in any such jurisdiction where it
is not then so subject.
(i) Cooperate with such Requesting Holders and the managing
Underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to be issued in
such denominations and registered in such names as the managing Underwriters
may request at least two business days prior to any sale of Registrable
Securities to the Underwriters.
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(j) Use its best efforts to cause the Registrable Securities
covered by the applicable registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary, if any, to consummate the disposition of such Registrable
Securities.
(k) Upon the occurrence of any event contemplated by Section
4(c)(ii) - (vii) above, prepare, to the extent required, a supplement or
post-effective amendment to the applicable registration statement or related
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchaser of the
Registrable Securities being sold thereunder, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading.
(l) Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the Registrable Securities to be covered by such registration
are to be offered in an underwritten offering: (i) make such representations
and warranties to such Requesting Holders to the registration statement,
prospectus and documents incorporated by reference, if any, in form, substance
and scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof with respect to the registration
statement and the prospectus in the form, scope and substance which are
customarily delivered in underwritten offerings; (iii) in the case of an
underwritten offering, enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
Underwriters and such Requesting Holders) addressed to such Requesting Holders
and the Underwriters, if any, covering the matters customarily covered in
opinions delivered in underwritten offerings and such other matters as may be
reasonably requested by such Requesting Holders and such Underwriters; (iv)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to such Requesting Holders
and the Underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters by
accountants in connection with underwritten offerings; (v) if any underwriting
agreement is entered into, the same shall set forth in full the indemnification
provisions and procedures customarily included in underwriting agreements in
underwritten offerings; and (vi) the Company shall deliver such documents and
certificates as may be requested by such Requesting Holders and the managing
Underwriters, if any, to evidence compliance with clause (i) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company. The above shall be done at each closing under
such underwriting or similar agreement or as and to the extent required
thereunder.
(m) Make available for inspection by a representative of such
Requesting Holders, any Underwriter participating in any disposition pursuant
to such registration, and any attorney or accountant retained by such
Requesting Holders or such Underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors and employees to supply all information
reasonably requested by any such representative, Underwriter, attorney or
accountant in connection with such registration; provided that any records,
information or documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons unless disclosures of
such records, information or documents is required by court or administrative
order.
(n) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to its
security holders earning statements satisfying the provisions of Section 11(a)
of the Securities Act, no later than 90 days after the end of any 12-month
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period (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to Underwriters in a firm or best efforts underwritten
offering and (ii) beginning with the first day of the Company's first fiscal
quarter next succeeding each sale of Registrable Securities after the effective
date of a registration statement, which statements shall cover said 12-month
periods.
(o) If the Company, in the exercise of its reasonable judgment,
objects to any change reasonably requested by the Requesting Holders or the
Underwriters, if any, to any registration statement or prospectus or any
amendments or supplements thereto (including documents incorporated or to be
incorporated therein by reference) as provided for in this Section 4, the
Company shall not be obligated to make any such change and such Requesting
Holders may withdraw their Registrable Securities from such registration, in
which event (i) the Company shall pay all registration expenses (including its
counsel fees and expenses) incurred in connection with such registration
statement or amendment thereto or prospectus or supplement thereto, and (ii) in
the case of a registration being effected pursuant to Section 2, such
registration shall not count as one of the registrations the Company is
obligated to effect pursuant to Section 2 hereof.
In connection with any registration of Registrable Securities, the
Requesting Holders shall furnish to the Company such information regarding
themselves and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each Requesting Holder agrees by acquisition of Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(c)(ii)-(vii) hereof, such Requesting Holder
will forthwith discontinue disposition of Registrable Securities covered by
such registration statement or prospectus until such Requesting Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 4(c)(i) hereof, or until it is advised in writing by the Company that
the use of the applicable prospectus may be resumed, and has received copies of
any additional or supplemental filings which are incorporated by reference in
such prospectus, and, if so directed by the Company, such Requesting Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Requesting Holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. In the event the Company shall give any such notice, the time
period mentioned in Section 2(a) shall be extended by the number of days during
the time period from and including the date of the giving of such notice
pursuant to Section 4(c) hereof to and including the date when such Requesting
Holder shall have received the copies of the supplemented or amended prospectus
contemplated by Section 4(c) hereof.
5. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing and engraving expenses, messenger
and delivery expenses and fees and disbursements of counsel for the Company and
all independent certified public accountants, Underwriters (excluding
underwriting discounts and any selling commissions) and any Persons retained by
the Company (all such expenses being herein called "Registration Expenses"),
will be paid by the Company. The underwriting discounts or commissions and any
selling commissions attributable to sales of Registrable Securities will be
paid by the Requesting Holders pro rata based upon the number of shares of
Registrable Securities held by them.
6. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Requesting Holder, the officers and directors of each
Requesting Holder, each underwriter of Registrable
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Securities and each other Person, if any, who controls the Requesting Holder or
such underwriter within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages, liabilities or expenses, joint or several,
to which any such Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act pursuant hereto, or any post-effective amendment
thereof, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, if used prior to the
effective date of the registration statement and not corrected in the final
prospectus, or contained in the final prospectus (as amended or supplemented,
if the Company shall have filed with the Commission any amendment thereof or
supplement thereto), or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse any such Person for any legal or
other expenses reasonably incurred by such Person in connection with
investigating or defending any such loss, claim, damage, liability or expense;
provided, however, that the indemnity agreement contained in this Section 6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld); and provided
further that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon any such untrue statement or omission or alleged untrue statement or
omission which has been made in said registration statement, preliminary
prospectus, prospectus or amendment or supplement or omitted therefrom in
reliance upon and in conformity with information furnished in writing to the
Company by the Requesting Holder or such underwriter specifically for use in
the preparation thereof.
(b) To the extent permitted by law, each Requesting Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
each underwriter and each Person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages, liabilities or expenses, joint or several, to which the Company or any
such Person, may become subject under the Securities Act or otherwise, and will
reimburse the Company or any such Person for any legal or other expenses
reasonably incurred by the Company or such Person in connection with
investigating or defending any such loss, claim, damage, liability or expense,
but only insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or omission or alleged untrue statement or omission of a material fact referred
to in clause (i) or (ii) of Section 6(a) hereof, in each case to the extent
(and only to the extent) that such untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
information furnished in writing by or on behalf of the Requesting Holder
specifically for use in connection with such registration; provided, however,
that the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
expense if such settlement is effected without the consent of the Requesting
Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 6,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel if representation of such
indemnified party by the counsel retained by
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the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding, and the fees and expenses of
not more than one firm which acts in such capacity for all indemnified parties
shall be paid by the Company. The failure so to notify an indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 6, but the omission
so to notify the indemnifying party will not relieve it of any liability that
it may have to any indemnified party otherwise than under this Section 6.
(d) If the indemnification provided for in this Section 6 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6 hereof, any legal or
other fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
7. Participation in Underwritten Registrations. No Requesting
Holder may participate in any registration hereunder which relates to an
underwritten offering unless such Requesting Holder (a) agrees to sell such
Requesting Holder's securities on the basis provided in any underwriting
arrangements approved by the Requesting Holders owning a majority of the
Registrable Securities to be included in such registration, or by a Person
appointed by such holders to act on their behalf to approve such arrangements,
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements; provided that no Requesting
Holder included in any underwritten registration shall be required to make any
representations or warranties to the Company or the Underwriters on account of
the registration of shares owned by such Requesting Holder other than
representations and warranties regarding such Requesting Holder, the securities
of the Company owned by such Requesting Holder and such Requesting Holder's
intended method of distribution.
8. Sales Under Rule 144. With a view to making available to the
Requesting Holders the benefits of Rule 144 promulgated under the Securities
Act and any other similar rule or regulation of the Commission that may at any
time permit the Requesting Holders to sell the Registerable Securities without
registration, the Company agrees to:
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(a) make and keep public information available, as those terms are
understood and defined in Rule 144 (or any successor provision);
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act;
(c) furnish to the Requesting Holders forthwith upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 (or any successor provision), the Securities Act and
the Exchange Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company under
the Securities Act and the Exchange Act and (iii) such other information as may
be reasonably requested by the Requesting Holders in availing itself of any
rule or regulation of the Commission which permits the selling of any such
securities without registration; and
(d) after any sale of Registrable Securities pursuant to Rule 144,
to the extent allowed by law, cause any restrictive legends to be removed and
any transfer restrictions to be rescinded with respect to such Registrable
Securities.
9. Limitations on Subsequent Registration Rights. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Requesting Holder, enter into any agreement with any holder or
prospective holder of any securities of the Company which grants registration
rights under the Securities Act on terms and conditions which are more
favorable in any material respect than the rights granted to the Requesting
Holder in this Agreement. The Company is not a party to any currently
subsisting agreement with respect to its securities granting any registration
rights to any Person.
10. Hold-Back Agreements; Delay of Sales.
(a) If a registration statement is filed pursuant to Section 2 or
3 hereof, a Requesting Holder agrees not to effect any public sale or
distribution of the issue being registered or similar security of the Company
including a sale pursuant to Rule 144 or Rule 145 (or any successor provisions)
under the Securities Act (except as part of such underwritten registration),
during the 14-day period prior to, and during the 90-day period beginning on,
the closing date of each underwritten offering made pursuant to such
registration statement, to the extent timely notified in writing by the Company
or the managing Underwriters.
(b) During any period in which the Company is maintaining the
effectiveness of a registration statement for the Registrable Securities
pursuant to Section 2, the Company shall have the right, upon giving written
notice to the holders of the Registrable Securities (a "Delay Notice"), to
require such holders not to sell any Registrable Securities pursuant to such
registration statement for a period of time the Company deems reasonably
necessary, which time shall be specified in such notice but in no event longer
than a period of 90 days, if (i) the Company is engaged in an offering of
securities for its own account which is otherwise permitted under Section 10(c)
or the Company proposes to engage in discussions or negotiations with respect
to, or has proposed or taken a substantial step to commence, or there otherwise
is pending, any merger, acquisition, other form of business combination,
divestiture, tender offer, financing or other transaction, or there is an event
or state of facts relating to the Company, in each case which is material to
the Company (any of the foregoing being herein called a "Material Activity"),
(ii) such Material Activity would, in the opinion of counsel for the Company,
require disclosure so as to permit the Registrable Securities to be sold in
compliance with applicable law, and (iii) such disclosure would, in the
Company's reasonable judgment, be adverse to its interests; provided that, the
Company's
10
<PAGE> 74
rights under this subsection (c) may be exercised only once during each 12
month period and no Delay Notice may be provided to the holders of the
Registrable Securities earlier than 12 months after the date of the immediately
preceding Delay Notice.
(c) The Company agrees (i) not to effect any public sale or
distribution of any securities similar to those being registered during the
14-day period prior to, and during the 90-day period beginning on, the
effective date of a registration statement filed pursuant to Section 2 or 3
hereof (except as part of such underwritten registration or in connection with
(A) employee or non-employee director compensation or benefit programs, (B) an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company, (C) an acquisition, merger or other business
combination using a registration statement on Form S-4 or any successor or
other appropriate form) and (ii) to use its best efforts to include in any
agreement granting registration rights to any holders of any privately placed
securities purchased from the Company at any time on and after the date of this
Agreement (A) an agreement by such holders not to effect any public sale or
distribution of any such securities during the period specified in clause (i),
including a sale pursuant to Rule 144 (or any successor provision) under the
Securities Act (except as part of such underwritten registration, if
permitted), and (B) a provision regarding delays of sales of securities
pursuant to demand registration rights granted to such holders, which is not
less favorable to the Company than that set forth in subsection (b) of this
Section 10.
11. Miscellaneous.
(a) No Inconsistent Agreements. From and after the date of this
Agreement, the Company will not, without the prior written consent of the
holders of a majority of the number of Registrable Securities then outstanding,
enter into any agreement with respect to its securities which violates the
rights granted to the Requesting Holders in this Agreement.
(b) Undertakings of the Holders of Registrable Securities.
(i) If any Registrable Securities are being registered
in any registration pursuant to this Agreement, the Requesting Holders with
respect to such securities thereof will comply with all anti-stabilization,
manipulation and similar provisions of Section 10 of the Exchange Act, as
amended, and any rules promulgated thereunder by the Commission.
(ii) At the end of the period during which the Company
is obligated to keep a registration statement current and effective as
described herein, the Requesting Holders whose Registrable Securities are
included in the registration statement shall discontinue sales thereof pursuant
to such registration statement.
(c) GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
(d) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto whether so expressed or not.
(e) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter herein contained. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration
11
<PAGE> 75
rights granted by the Company to the holders of the Registrable Securities.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(f) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
or sent by reputable express courier service (charges prepaid), or mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid, or sent by telefax, to the parties at the following address
(or to such other address or to the attention of such other Person as the
recipient party has specified by prior like notice to the sending party):
If to the Company:
MESA Inc.
1400 Williams Square West
5705 North O'Connor Boulevard
Irving, Texas 75039
Attention: Steven K. Gardener
Telefax: (214) 402-7028
If to the Shareholder or any Requesting Holders:
Rainwater, Inc.
777 Main Street, Suite 2700
Fort Worth, Texas 76102
Attention: Kenneth A. Hersh
Telefax: (817) 820-6600
(g) Severability. If any provision of this Agreement is held to
be unenforceable, this Agreement shall be considered divisible and such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and in all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
(h) Counterparts. This Agreement may be executed by the parties
hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
[remainder of this page intentionally left blank]
12
<PAGE> 76
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
MESA INC.
By:
---------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
SHAREHOLDER:
DNR-MESA HOLDINGS, L.P.
By: Rainwater, Inc., general partner
By:
----------------------------------------
Kenneth A. Hersh, Vice President
13
<PAGE> 77
AMENDMENT
DATED MAY 22, 1996
TO EXHIBIT A
(STATEMENT OF RESOLUTION)
TO STOCK PURCHASE AGREEMENT
This Amendment, dated May 22, 1996, between MESA Inc., a Texas
corporation (the "Company"), and DNR-MESA Holdings, L.P., a Texas limited
partnership ("Buyer"), amending that certain Stock Purchase Agreement (the
"Agreement") dated April 26, 1996 between the Company and Buyer.
1. AMENDMENT TO SECTION 9(c) OF STATEMENT OF RESOLUTION.
The Company and Buyer hereby agree that Section 9(c) to Exhibit A (Statement of
Resolution) to the Agreement shall be amended and restated in its entirety as
follows:
(c) For so long as any shares of Series A Preferred or
Series B Preferred remain outstanding, the
corporation shall not, (i) without the affirmative
vote or consent of the holders of a majority of the
shares of Series A Preferred and Series B Preferred
voting together as a single class: (x) authorize,
create or issue, or increase the authorized or issued
amount of, any class or series of stock of Senior
Securities or Parity Securities, or any security
convertible into or exchangeable for Senior
Securities or Parity Securities or reclassify or
modify any Junior Securities so as to become Parity
Securities or Senior Securities; provided that if the
Series A Preferred and Series B Preferred are
affected differently by such action, the holders of
each series will vote as a separate class; or (y)
amend the Articles of Incorporation to eliminate
cumulative voting; or (ii) without the affirmative
vote or consent of the holders of two-thirds of the
shares of Series A Preferred voting as a separate
class, adopt any amendment to the Articles of
Incorporation or the bylaws that would materially
affect the terms of the Series A Preferred; or (iii)
without the affirmative vote or consent of the
holders of at least a majority of the shares of
Series B Preferred voting as a separate class, adopt
any amendment to the Articles of Incorporation or the
bylaws that would materially affect the terms of the
Series B Preferred.
2. AMENDMENT TO SECTION 9(d) OF STATEMENT OF RESOLUTION.
The Company and Buyer hereby agree that Section 9(d) to Exhibit A (Statement of
Resolution) to the Agreement shall be amended by deleting the following phrase
from the end of such provision:
"or that would adversely affect any rights,
preferences or voting power of the Series B Preferred
differently from the rights, preferences, privileges
or voting power of the Series A Preferred (to the
extent such rights, preferences, privileges or voting
power of such two series are the same prior to such
amendment)."
<PAGE> 78
3. AMENDMENT TO SECTION 9(I) OF STATEMENT OF
RESOLUTION. The Company and Buyer hereby agree that Section 9(i) to Exhibit A
(Statement of Resolution) to the Agreement shall be amended and restated in its
entirety as follows:
(i) During any period in which the holders of Series B
Preferred shall be entitled to elect directors
pursuant to subsection (e) of this Section 9, (i) the
holders of Series B Preferred shall not have the
right or otherwise be entitled to vote in the
election of any directors other than the Series B
Directors, (ii) no Series B Director shall have the
right to vote in the election of any person to fill
any vacancy created by the death, resignation,
retirement, disqualification or removal from office
or otherwise of any director other than a Series B
Director and all such rights with respect to the
Non-Series A and B Directors shall be exercised for
and on behalf of the Board of Directors by a majority
of the Non-Series A and B Directors, and (iii) only
the Non-Series A and B Directors shall have rights to
vote in any action by or on behalf of the Board of
Directors with respect to nominating persons to serve
as Non-Series A and B Directors to be elected at any
meeting of shareholders that is held after the first
meeting of shareholders at which Non-Series A and B
Directors are elected that is held after the Original
Issue Date of the Series B Preferred. The persons to
be nominated by or on behalf of the Board of
Directors for election as Non-Series A and B
Directors at such first meeting of shareholders to be
held after such Original Issue Date shall be such
persons as shall have most recently been designated
as such nominees by action of the Board of Directors
prior to such Original Issue Date (or, if any of such
nominees shall be unable or unwilling to serve, such
other person or persons as shall be designated by the
other such nominee or nominees), unless otherwise
agreed after such date by the unanimous vote of all
Non-Series A and B Directors then in office.
Nothing in clause (ii) or (iii) above of this
subsection (i), or in the immediately preceding
sentence, shall limit or restrict the right of
holders of shares of Common Stock and Series A
Preferred to nominate and to elect, subject to and in
accordance with applicable law, the other provisions
of the Articles of Incorporation and the bylaws,
persons to serve as Non-Series A and B Directors.
This subsection (i) and the defined terms used herein
may not be amended without (x) the affirmative vote
of the holders of a majority of the outstanding
shares of Common Stock and (y) the affirmative vote
of the holders of a majority of the outstanding
shares of Series A Preferred Stock.
4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
5. COUNTERPARTS. This Amendment may be executed by the
parties hereto in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same agreement. Each
counterpart may consist of a number of copies hereof each signed by less than
all, but together signed by all, the parties hereto.
2
<PAGE> 79
IN WITNESS WHEREOF, the parties have executed this Amendment,
or caused this Amendment to be executed by their duly authorized
representatives, all as of the day and year first above written.
THE COMPANY:
MESA INC.
By: /s/ Stephen K. Gardner
---------------------------------------------
Stephen K. Gardner, Vice President and
Chief Financial Officer
BUYER:
DNR-MESA HOLDINGS, L.P.
By: Rainwater, Inc., General Partner
---------------------------------------------
By: /s/ Kenneth A. Hersh
---------------------------------------------
Kenneth A. Hersh, Vice President
3
<PAGE> 1
EXHIBIT 10.2
Agreement of Limited Partnership of
DNR-MESA Holdings, L.P. dated as of April 25, 1996
<PAGE> 2
EXHIBIT 10.2
- --------------------------------------------------------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
------------------------------------
DNR-MESA HOLDINGS, L.P.
------------------------------------
Dated as of April 25, 1996
- --------------------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. WITHOUT REGISTRATION, THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED AT ANY TIME WHATSOEVER,
EXCEPT ON DELIVERY TO THE PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO
THE GENERAL PARTNER OF THE PARTNERSHIP TO THE EFFECT THAT ANY TRANSFER WILL NOT
BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
ADDITIONALLY, ANY SALE OR OTHER TRANSFER OF THESE SECURITIES IS SUBJECT TO
CERTAIN RESTRICTIONS THAT ARE SET FORTH IN THIS AGREEMENT.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
Formation of Partnership . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4. Places of Business; Registered Agent; Names and Addresses of
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Title to Partnership Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Definitions and References . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1. Capital Contributions of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2. Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Failure to Make Additional Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4. Return of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
Allocations and Distributions . . . . . . . . . . . . . . . . . . . . 9
Section 4.1. Allocations of Profits and Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V
Management . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.1. Power and Authority of General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.2. Duties and Services of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3. Liability of Partners and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.4. Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.5. Reimbursement of General Partner; Success Fee . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.7. Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.8. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.9. Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.10. Withdrawal by the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.11. Certain Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI
Rights of Limited Partners . . . . . . . . . . . . . . . . . . . . . 18
Section 6.1. Rights of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.2. Limitations on Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.3. Liability of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.4. Withdrawal and Return of Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
Books, Reports and Meetings . . . . . . . . . . . . . . . . . . . . . 19
Section 7.1. Capital Accounts, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.2. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.3. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 7.4. General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII
Dissolution, Liquidation and Termination . . . . . . . . . . . . . . . . . . 21
Section 8.1. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.2. Reconstitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.3. Liquidation and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX
Assignments of Interests . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.1. Assignment by Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE X
Representations and Warranties; Power of Attorney . . . . . . . . . . . . . . . 25
Section 10.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.2. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE XI
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.2. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
-ii-
<PAGE> 5
<TABLE>
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<S> <C>
Section 11.3. Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.5. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.6. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.7. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
-iii-
<PAGE> 6
AGREEMENT OF LIMITED PARTNERSHIP
DNR-MESA HOLDINGS, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") dated as of
April 25, 1996, is made by and among Rainwater, Inc., a Texas corporation, as
the general partner (the "General Partner"), and the persons set forth on the
signature pages and Exhibit A to this Agreement as the limited partners
(individually a "Limited Partner" and collectively, the "Limited Partners").
ARTICLE I
Formation of Partnership
Section 1.1. Formation. Subject to the provisions of this Agreement,
the parties do hereby form a Partnership which shall be considered and
construed as a limited partnership pursuant to the provisions of the Texas
Revised Limited Partnership Act, Article 6132a-1, Vernon's Texas Civil Statutes
(the "Act").
Section 1.2. Name. The name of the Partnership shall be DNR-MESA
Holdings, L.P. Subject to all applicable laws, the business of the Partnership
shall be conducted in the name of the Partnership unless under the law of some
jurisdiction in which the Partnership does business such business must be
conducted under another name or unless the General Partner determines that it
is advisable to conduct Partnership business under another name. In such a
case, the business of the Partnership in such jurisdiction or in connection
with such determination may be conducted under such other name or names as the
General Partner shall determine to be necessary. The General Partner shall
cause to be filed on behalf of the Partnership such partnership or assumed or
fictitious name certificate or certificates or similar instruments as may from
time to time be required by law.
Section 1.3. Business. The business of the Partnership shall be (a)
to enter into the Stock Purchase Agreement, (b) to purchase or otherwise
acquire, and to sell or otherwise dispose of, the Preferred Stock, the Common
Stock and/or other Securities of MESA, including each and every kind of
security, whether recourse or nonrecourse to MESA and without regard to whether
such Securities are publicly traded, readily marketable or restricted as to
transfer or resale, (c) to exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to, the Securities of MESA
held or owned by the Partnership, including but not limited to the conversion
of the Preferred Stock, and to carry Securities of MESA in the name of the
Partnership or the name of a nominee, (d) to provide continuing analysis and
consulting assistance to MESA during the course of the Partnership's
investment, and (e) to do all other acts and things necessary, incidental or
convenient to carry on the Partnership business as contemplated by this
Agreement.
<PAGE> 7
Section 1.4. Places of Business; Registered Agent; Names and Addresses
of Partners.
(a) The address of the principal United States office and place of
business of the Partnership and its street address shall be 777 Main Street,
Suite 2700, Fort Worth, Texas 76102. The General Partner, at any time and from
time to time, may change the location of the Partnership's principal place of
business and may establish such additional place or places of business of the
Partnership as the General Partner shall determine to be necessary or
desirable.
(b) The registered office of the Partnership in the State of Texas
shall be 777 Main Street, Suite 2700, Fort Worth, Texas 76102, and the
registered agent for service of process on the Partnership shall be Kenneth A.
Hersh, whose business address is the same as the Partnership's registered
office. The General Partner, at any time and from time to time, may change the
Partnership's registered office or registered agent or both by complying with
the applicable provisions of the Act, and may establish, appoint and change
additional registered offices and registered agents of the Partnership in such
other states as the General Partner shall determine to be necessary or
advisable.
(c) The General Partner is the sole general partner of the
Partnership. The General Partner's mailing address and the street address of
the General Partner's business is 777 Main Street, Suite 2700, Fort Worth,
Texas 76102.
(d) The mailing address and street address of each of the Limited
Partners are set forth below the signature of each Limited Partner on their
respective signature pages to this Agreement.
Section 1.5. Term. The Partnership shall be formed and commence upon
the completion of filing for record an initial certificate of limited
partnership of the Partnership with the Secretary of State of the State of
Texas and shall continue until terminated in accordance with Article VIII.
Section 1.6. Filings. Upon the request of the General Partner, the
Limited Partners shall promptly execute and deliver all such certificates and
other instruments conforming hereto as shall be necessary for the General
Partner to accomplish all filing, recording, publishing and other acts
appropriate to comply with all requirements for the formation and operation of
a limited partnership under the laws of the State of Texas and for the
qualification and operation of a limited partnership (or a partnership in which
the Limited Partners have limited liability) in all other jurisdictions where
the Partnership shall propose to conduct business. Prior to conducting
business in any jurisdiction, the General Partner shall use its reasonable good
faith efforts to cause the Partnership to comply with all requirements for the
qualification of the Partnership to conduct business as a limited partnership
(or a partnership in which the Limited Partners have limited liability) in such
jurisdiction.
Section 1.7. Title to Partnership Property. All property owned by
the Partnership, whether real or personal, tangible or intangible, shall be
deemed to be owned by the Partnership
-2-
<PAGE> 8
as an entity, and no Partner, individually, shall have any ownership of such
property. The Partnership may hold its property in its own name or in the name
of a nominee which may be the General Partner or any of its affiliates or any
trustee or agent designated by it.
ARTICLE II
Definitions and References
Section 2.1. Defined Terms. When used in this Agreement, the
following terms shall have the respective meanings set forth below:
"Act" shall have the meaning assigned to such term in Section 1.1.
"Adjusted Capital Account" shall mean the capital account maintained
for each Partner as provided in Section 7.1(b), (a) increased by (i) the amount
of any unpaid Capital Contributions agreed to be contributed by such Partner
under Article III, if any, (ii) an amount equal to such Partner's allocable
share of Minimum Gain as computed on the last day of the fiscal year in
accordance with the applicable Treasury Regulations, and (iii) the amount of
Partnership liabilities allocable to such Partner under Section 752 of the
Internal Revenue Code with respect to which such Partner bears the economic
risk of loss to the extent such liabilities do not constitute Partner
Nonrecourse Debt, and (b) reduced by (i) the amount of all losses and
deductions reasonably expected to be allocated to such Partner in subsequent
years under Sections 704(e) (2) and 706(d) of the Internal Revenue Code and
Treasury Regulation Section 1.751- 1(b)(2)(ii)(d), and (ii) the amount of all
distributions reasonably expected to be made to such Partner to the extent they
exceed offsetting increases to such Partner's capital account that are
reasonably expected to occur during (or prior to) the year in which such
distributions are reasonably expected to be made.
"Annual Fee" shall mean that certain annual fee in the amount of
$400,000 payable by MESA to the Partnership for so long as the Minimum
Ownership Condition is satisfied, which fee is due quarterly in arrears
beginning September 30, 1996 (adjusted pro-rata for any period which is less
than a full quarter).
"Capital Contributions" shall mean for any Partner at the particular
time in question the aggregate of the dollar amounts of any cash contributed to
the capital of the Partnership, or, if the context in which such term is used
so indicates, the dollar amounts of cash agreed to be contributed by such
Partner to the capital of the Partnership.
"Closing Fee" shall mean a fee payable by MESA to the Partnership at
the time of the First Closing and the Second Closing in the aggregate amount of
$9,275,000.
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"Common Stock" shall mean shares of common stock, par value $.01 per
share, of MESA owned or to be acquired by the Partnership in the event that the
Partnership shall convert shares of the Preferred Stock.
"Fair Market Value" as of any date shall be determined by using the
following method:
(a) Securities for which market quotations are available
shall be valued at their closing sale price on such date (or, if on
such date securities markets were closed, then the last preceding
business day on which they were open).
(b) Securities traded on the over-the-counter market for
which no sales quotations are available generally shall be valued at
the closing bid price if held long or closing ask price if held short
on such date (or the last preceding business day if securities markets
were closed on such date).
(c) Securities generally traded on an established
securities market but for which no recorded sales information or
quotations of bid and asked prices are available on such date (or, if
applicable, the last preceding business day) shall be valued by the
General Partner in good faith with reference to (i) the most recently
reported sales or bid and asked prices, (ii) bid and asked price
information as of such date not generally reported but secured from a
reputable broker or investment banker, and (iii) such other
information as the General Partner believes in good faith is relevant.
(d) Any other Securities not listed or traded on any
exchange or on the over-the-counter market shall be considered as
having no ascertainable market value and shall be valued at the higher
of cost or fair value based on information available to the General
Partner regarding the value or worthlessness of such Securities.
(e) For purposes of this definition, sales and bid and
asked prices reported in newspapers of general circulation published
in New York, New York, or in standard financial periodicals or in the
records of securities exchanges or other markets, any one or more of
which may be selected by the General Partner and noted in its records,
shall be accepted as evidence of the price of a Security.
(f) A Security purchased, and awaiting payment against
delivery, shall be included for valuation purposes as a security held,
and the cash account shall be adjusted by the deduction of the
purchase price, including brokers' commissions or other expenses of
the purchase.
(g) A Security sold but not delivered pending receipt of
proceeds shall be valued at the net sales price.
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(h) For the purpose of valuation of a Security, except a
Security sold but not delivered, it shall be unnecessary to deduct,
from the value determined above, brokers' commissions or other
expenses that would be incurred upon a sale thereof.
"First Closing" shall mean the Partnership's first closing of its
purchase of Preferred Stock pursuant to the Stock Purchase Agreement.
"General Partner" shall mean Rainwater, Inc., a Texas corporation, and
any person who becomes a substituted general partner of the Partnership
pursuant to the terms hereof.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor statute or statutes.
"Limited Partners" shall mean the persons set forth on the signature
pages and Exhibit A to this Agreement as the Limited Partners, and any person
who becomes an additional or a substituted limited partner of the Partnership
pursuant to the terms hereof.
"Majority Interest" of the Limited Partners, as to any agreement,
election, vote or other action of the Limited Partners, shall mean one or more
Limited Partners whose combined Sharing Ratios exceed the combined Sharing
Ratios of all other Limited Partners.
"MESA" shall mean MESA Inc., a Texas corporation.
"Minimum Gain" shall mean (i) with respect to Partnership Nonrecourse
Liabilities, the amount of gain that would be realized by the Partnership if it
disposed of (in a taxable transaction) all Partnership properties that are
subject to Partnership Nonrecourse Liabilities in full satisfaction of
Partnership Nonrecourse Liabilities, computed in accordance with applicable
Treasury Regulations, or (ii) with respect to each Partner Nonrecourse Debt,
the amount of gain that would be realized by the Partnership if it disposed of
(in a taxable transaction) the Partnership property that is subject to such
Partner Nonrecourse Debt in full satisfaction of such Partner Nonrecourse Debt,
computed in accordance with applicable Treasury Regulations.
"Minimum Ownership Condition" shall have the meaning set forth in the
Statement of Resolution pursuant to which MESA shall establish and designate
the Preferred Stock.
"Partner Nonrecourse Debt" shall mean any nonrecourse debt of the
Partnership for which any Partner bears the economic risk of loss.
"Partners" shall mean the General Partner and the Limited Partners.
"Partnership" shall mean DNR-MESA Holdings, L.P., a Texas limited
partnership.
"Partner Nonrecourse Deductions" shall mean the amount of deductions,
losses and expenses equal to the net increase during the year in Minimum Gain
attributable to a Partner
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Nonrecourse Debt, reduced (but not below zero) by proceeds of such Partner
Nonrecourse Debt distributed during the year to the Partners who bear the
economic risk of loss for such debt, as determined in accordance with
applicable Treasury regulations.
"Partnership Nonrecourse Liabilities" shall mean nonrecourse
liabilities (or portions thereof) of the Partnership for which no Partner bears
the economic risk of loss.
"Permitted Transfer" shall mean an assignment or other transfer of the
Partnership interest of a Limited Partner to (i) any person in the "immediate
family" of such Partner, (ii) any trust the sole beneficiaries of which are
members of the "immediate family" of such Partner, (iii) the settlor or
beneficiary of any trust that is a Limited Partner, (iv) any other trust that
has the same settlor as such Partner, (v) those persons that are the partners
of a Limited Partner that is a partnership in connection with the withdrawal of
a person from such partnership or the liquidation and dissolution of such
partnership, or (vi) those persons that are the members of a Limited Partner
that is a limited liability company in connection with the withdrawal of a
person from such limited liability company or the liquidation and dissolution
of such limited liability company. For the purposes of the immediately
preceding sentence, the term "immediate family" shall mean the spouse, parents,
children, grandchildren, brothers, sisters, nieces or nephews of such Limited
Partner or such Limited Partner's spouse.
"Preferred Stock" shall mean shares of Series B 8% Cumulative
Convertible Preferred Stock, par value $.01 per share, of MESA owned or to be
acquired by the Partnership, or in the event that the Minimum Ownership
Condition is no longer satisfied, the shares of Series A 8% Cumulative
Convertible Preferred Stock, par value $.01 per share, of MESA into which all
shares shall be automatically converted.
"Second Closing" shall mean the Partnership's second closing of its
purchase of Preferred Stock pursuant to the Stock Purchase Agreement.
"Securities" has the same meaning as set forth in Section 2(1) of the
Securities Act of 1933, as amended.
"Sharing Ratio" shall mean the percentage set forth opposite each
Partner's name on Exhibit A to this Agreement.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement to be entered into by and between MESA and the Partnership, and any
amendments thereof, pursuant to which the Partnership shall acquire the
Preferred Stock.
"Success Fee" shall have the meaning assigned to such term in Section
5.5(b).
"Super Majority Interest" of the Limited Partners, as to any
agreement, election, vote or other action of the Limited Partners, shall mean
one or more Limited Partners whose combined Sharing Ratios equal or exceed 80%.
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"Termination Fee" shall mean those certain amounts payable by MESA to
the Partnership pursuant to Section 8.3 of the Stock Purchase Agreement in the
event that the Stock Purchase Agreement is terminated for the specified reasons
set forth therein, regardless of whether such amounts are payable at the time
of the termination of the Stock Purchase Agreement or within one year of the
termination of the Stock Purchase Agreement.
Section 2.2. References and Titles. All references in this Agreement
to articles, sections, subsections and other subdivisions refer to
corresponding articles, sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any of such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained in such subdivisions. The words "this Agreement," "herein,"
"hereof," "hereby," "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. Pronouns in masculine, feminine and neuter genders shall be construed
to include any other gender, and words in the singular form shall be construed
to include the plural and vice versa, unless the context otherwise requires.
ARTICLE III
Capitalization
Section 3.1. Capital Contributions of Partners.
(a) Each Partner shall have the obligation to make Capital
Contributions to the Partnership not to exceed the aggregate amount set forth
opposite such Partner's name on Exhibit A, which Capital Contributions shall be
used exclusively for the payment of the Partnership's purchase price for the
Preferred Stock purchased by the Partnership at the First Closing and the
Second Closing, respectively, pursuant to the Stock Purchase Agreement. The
requirement that the Partners make the Capital Contributions to the Partnership
with respect to the First Closing and the Second Closing, respectively, shall
be subject to no conditions other than the satisfaction or waiver of the
conditions to the closing of the Partnership's obligations as set forth in
Article VII of the Stock Purchase Agreement. The Stock Purchase Agreement
provides that the aggregate purchase price for the Preferred Stock to be
purchased by the Partnership shall be an amount equal to $133,000,000 at the
First Closing, and less than or equal to approximately $132,000,000 at the
Second Closing. In the event that the Partnership expends less than
$132,000,000 to purchase the Preferred Stock in connection with the Second
Closing, each Partner shall be released from its obligation to pay Capital
Contributions by an amount equal to such Partner's Sharing Ratio times the
difference between (i) $132,000,000 and (ii) the amount actually expended by
the Partnership to purchase the Preferred Stock in connection with the Second
Closing; provided, however, that Natural Gas Partners II, L.P. ("NGP II") and
Natural Gas Partners III, L.P. ("NGP III") shall not be released
proportionately from their respective obligations to pay Capital Contributions
to the Partnership in connection with the Second Closing except to the extent
that the Partnership expends less than $28,097,414.
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(b) Notwithstanding any provision in this Agreement to the
contrary, in the event that the Partnership's obligation to purchase Preferred
Stock at the Second Closing shall exceed $28,097,414, and as a consequence, the
obligations of NGP II and NGP III to pay their Capital Contributions to the
Partnership in connection with the Second Closing would have exceeded
$1,744,126 and $2,481,049, respectively, Richard E. Rainwater shall pay the
amount of Capital Contributions in excess of such amounts (the "Excess
Contributions"). Neither NGP II nor NGP III shall have any obligation to pay
any Excess Contributions. In the event that Richard E. Rainwater shall pay the
Excess Contributions, the General Partner shall make a downward adjustment to
the Sharing Ratio of each of NGP II and NGP III, and the General Partner shall
make a concomitant upward adjustment to the Sharing Ratio of Richard E.
Rainwater. The General Partner shall amend Exhibit A subsequent to the Second
Closing to reflect the adjustment in the Sharing Ratios of such Limited
Partners if required pursuant to the immediately preceding sentence.
(c) Within five days from the date of the Partners' receipt of
notice from the General Partner that the Partners' Capital Contributions are
due and payable to the Partnership in connection with the First Closing or the
Second Closing, as applicable (or, in the sole discretion of the General
Partner, such time period in excess of five days as the General Partner shall
specify in such notice), each Partner shall pay its share of the amount of the
Capital Contributions set forth in such notice to the Partners; provided,
however, that the General Partner shall not require that the Partners pay such
Capital Contributions more than five days prior to the scheduled date of the
First Closing or the Second Closing, as applicable.
(d) All Capital Contributions required to be paid pursuant to this
Section 3.1 shall be used by the Partnership to purchase the Preferred Stock
pursuant to the Stock Purchase Agreement. In consideration for each Partner's
Capital Contributions, such Partner shall receive a Partnership interest equal
to its Sharing Ratio. Notwithstanding anything to the contrary contained
herein, the aggregate amount set forth opposite each Partner's name on Exhibit
A shall be the maximum contribution to the Partnership that such Partner shall
be required to make (unless such Partner otherwise elects as provided in
Section 3.2).
Section 3.2. Additional Capital Contributions. At any time after the
expenditure or commitment of the Capital Contributions referred to in Section
3.1 at the Second Closing, the General Partner may request each Partner to make
additional Capital Contributions to the Partnership in accordance with each
Partner's Sharing Ratio for the purpose of (i) paying expenses of the
Partnership in the event that Partnership income is not sufficient to pay such
expenses or (ii) reimbursing the General Partner in the event that the General
Partner made additional Capital Contributions to the Partnership in connection
with the Second Closing in order that the Partnership would have sufficient
funds to pay up to an additional $500,000 to acquire additional Preferred Stock
in the event that the Partnership is required to expend more than $132,000,000
due to the possible rounding of the rights issuable to existing holders of
MESA's Common Stock in connection with MESA's rights offering (it being
recognized that the Stock Purchase Agreement provides that such rounding shall
not cause the total purchase price payable for the Preferred Stock at the
Second Closing to exceed $132,500,000). Other than the
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General Partner's obligation to make additional Capital Contributions to the
Partnership to cause the Partnership to fulfill its obligations at the Second
Closing as described in the immediately preceding sentence, no Partner shall be
obligated to make any such additional Capital Contributions unless and until
such time as each Partner agrees to make such additional Capital Contributions.
Section 3.3. Failure to Make Additional Capital Contributions. In
the event that a Partner shall fail to make all or any portion of the
additional Capital Contributions requested at any time pursuant to Section 3.2,
the General Partner may elect to take any of the following actions:
(a) The General Partner may borrow funds in the name of the
Partnership for expenditure for such purposes; or
(b) The Partners electing to make such additional Capital
Contributions may pay their pro rata share of all of the additional Capital
Contributions which a Partner shall decline to make, and the General Partner
shall adjust the Sharing Ratios of the Partners so that subsequent to the
payment of each Partner's Capital Contributions, the Sharing Ratio of each
Partner shall equal the Capital Contributions made to the Partnership from
inception to date divided by the total of all Capital Contributions from
inception to date made by all of the Partners of the Partnership; or
(c) The General Partner may cause the Partnership and/or the
Partners to take such other actions upon which a Super Majority Interest of the
Limited Partners shall agree.
Section 3.4. Return of Contributions. No interest shall accrue on
any contributions to the capital of the Partnership and no Partner shall have
the right to withdraw or to be repaid any capital contributed by such Partner
except as otherwise specifically provided in this Agreement.
ARTICLE IV
Allocations and Distributions
Section 4.1. Allocations of Profits and Losses.
(a) Except as otherwise provided in Section 4.1(b) through (f),
each Partner shall share Partnership profits and losses and all related items
of income, gain, loss, deduction and credit allocated, charged or credited to
the Partners in accordance with the Sharing Ratio of such Partner.
(b) All Partnership items of income and gain arising from the
Termination Fee shall be allocated 7.94% to the General Partner and 92.06% to
the Limited Partners in accordance with the respective Sharing Ratios of the
Limited Partners.
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(c) All Partnership items of income and gain arising from the
Closing Fee shall be allocated 7.94% to the General Partner and 92.06% to the
Limited Partners; provided that (i) the Closing Fee payable to the Partnership
at the First Closing shall be allocated among the Limited Partners in the
proportion that the respective maximum amounts that each Limited Partner is
required to pay to the Partnership with respect to the First Closing bears to
the aggregate of the maximum amounts of all Capital Contributions required to
be paid by all of the Limited Partners at the First Closing, and (ii) the
Closing Fee payable to the Partnership at the Second Closing shall be allocated
among the Limited Partners in the proportion that the respective maximum
amounts that each Limited Partner has committed to pay to the Partnership with
respect to the Second Closing bears to the aggregate of the maximum amounts of
all Capital Contributions that all of the Limited Partners have committed to
pay at the Second Closing (assuming for purposes of this calculation only that
the Partnership is required to pay $132,000,000 to purchase Preferred Stock at
the Second Closing).
(d) All Partnership items of income and gain arising from the
Annual Fee shall be allocated 100% to the General Partner.
(e) Notwithstanding any of the foregoing provisions of this
Section 4.1 to the contrary:
(i) If during any fiscal year of the Partnership there is a
net increase in Minimum Gain attributable to a Partner Nonrecourse
Debt that gives rise to Partner Nonrecourse Deductions, each Partner
bearing the economic risk of loss for such Partner Nonrecourse Debt
shall be allocated items of Partnership deductions and losses for such
year (consisting first of cost recovery or depreciation deductions
with respect to property that is subject to such Partner Nonrecourse
Debt and then, if necessary, a pro rata portion of the Partnership's
other items of deductions and losses, with any remainder being treated
as an increase in Minimum Gain attributable to Partner Nonrecourse
Debt in the subsequent year) equal to such Partner's share of Partner
Nonrecourse Deductions, as determined in accordance with applicable
Treasury regulations.
(ii) If for any fiscal year of the Partnership there is a net
decrease in Minimum Gain attributable to Partnership Nonrecourse
Liabilities, each Partner shall be allocated items of Partnership
income and gain for such year (consisting first of gain recognized
from the disposition of Partnership property subject to one or more
Partnership Nonrecourse Liabilities and then, if necessary, for
subsequent years) equal to such Partner's share of such net decrease
(except to the extent such Partner's share of such net decrease is
caused by a change in debt structure with such Partner commencing to
bear the economic risk of loss as to all or part of any Partnership
Nonrecourse Liability or by such Partner contributing capital to the
Partnership that the Partnership uses to repay a Partnership
Nonrecourse Liability), as determined in accordance with applicable
Treasury regulations.
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(iii) If for any fiscal year of the Partnership there is a
net decrease in Minimum Gain attributable to a Partner Nonrecourse
Debt, each Partner shall be allocated items of Partnership income and
gain for such year (consisting first of gain recognized from the
disposition of Partnership property subject to Partner Nonrecourse
Debt, and then if necessary, a pro rata portion of the Partnership's
other items of income and gain, and if necessary, for subsequent
years) equal to such Partner's share of such net decrease (except to
the extent such Partner's share of such net decrease is caused by a
change in debt structure or by the Partnership's use of capital
contributed by such Partner to repay the Partner's Nonrecourse Debt)
as determined in accordance with applicable Treasury regulations.
(f) If for any fiscal year of the Partnership the allocation of
any loss or deduction (net of any income or gain) to any Partner would cause or
increase a negative balance in such Partner's Adjusted Capital Account as of
the end of such fiscal year (a "Deficit Partner") after taking into account the
provisions of subsection (e) of this Section 4.1, only the amount of such loss
or deduction that reduces the balance to zero shall be allocated to such
Deficit Partner and the remaining loss or deduction shall be allocated to the
Partners whose Adjusted Capital Accounts have a positive balance remaining at
such time (the "Positive Partners") in proportion to such positive balances.
After any such allocation, any Partnership income or gain that would otherwise
be allocated to the Deficit Partner shall be allocated instead to the Positive
Partners up to an amount equal to the Partnership loss or deduction allocated
to the Positive Partners under the preceding sentence; provided, however, that
no allocation of income or gain shall be made under this sentence if the effect
of such allocation would be to cause the Adjusted Capital Account of a Deficit
Partner to be less than zero. If, after taking into account the allocation in
the first sentence of this Section 4.1(f), the Adjusted Capital Account balance
of a Deficit Partner remains less than zero at the end of a fiscal year, a pro
rata portion of each item of Partnership income or gain otherwise allocable to
the Positive Partners for such fiscal year (or if there is no such income or
gain allocable to the Positive Partners for such fiscal year, all such income
or gain so allocable in the succeeding fiscal year or years) shall be allocated
to the Deficit Partner in an amount necessary to cause its Adjusted Capital
Account balance to equal zero; provided that no allocation under this sentence
shall have the effect of causing any Positive Partner's Adjusted Capital
Account to be less than zero. After any such allocation, any Partnership gain
resulting from the sale or other disposition of Partnership property that would
otherwise be allocated to a Deficit Partner for any fiscal year under this
Section 4.1 shall be allocated instead to the Positive Partners until the
amount of gain so allocated equals the amount of gain previously allocated to
such Deficit Partner under the preceding sentence of this Section 4.1(f);
provided, however, that no allocation of gain shall be made under this sentence
if the effect of such allocation would be to cause the Adjusted Capital Account
of a Deficit Partner to be less than zero.
Section 4.2. Distributions. The General Partner shall distribute to
the Partners all cash funds of the Partnership (other than Capital
Contributions) which the General Partner reasonably determines in its sole
discretion are not needed for the payment of existing or foreseeable
Partnership obligations and expenditures; provided that the General Partner
shall endeavor to
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make distributions of cash (in the event that the Partnership has available
cash) to the Partners prior to April 15 of each year in such amounts as are
sufficient to satisfy each Partner's projected deemed income tax liability with
respect to such Partner's ownership interest in the Partnership (calculated
based upon the highest marginal federal income tax rate and the highest state
and/or local income tax rates applicable to any Partner, in each case utilizing
the respective rates for individuals relative to ordinary income or capital
gains, depending on the characterization of the Partnership's income, as such
rates are in effect at such time). In addition, the General Partner may make
distributions of Securities owned by the Partnership to the Partners at such
times and in such amounts as the General Partner, in its sole discretion,
determines to be appropriate. All distributions made pursuant to this Section
4.2 (whether in cash or in-kind), shall be made in accordance with the
allocations set forth in Section 4.1(a), Section 4.1(b) or Section 4.1(c),
depending upon the source of such distributions; provided, however, that all
tax distributions shall be made in accordance with the allocations set forth in
Section 4.1(a). Notwithstanding the preceding provisions of this Section 4.2,
any in-kind distribution of all or substantially all of the Securities then
owned by the Partnership may only be conducted in accordance with Article VIII
of this Agreement.
ARTICLE V
Management
Section 5.1. Power and Authority of General Partner.
(a) The General Partner shall conduct, direct and exercise full
control over all activities of the Partnership. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership shall be exclusively vested in the General Partner, and the
Limited Partners shall have no right of control over the business and affairs
of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under the Act or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner shall have full power and authority to do all things deemed necessary
or desirable by it to conduct the business of the Partnership in the name of
the Partnership, including, without limitation, (i) entering into the Stock
Purchase Agreement and/or any amendments thereof with MESA; (ii) entering into
any agreement in the name and on behalf of the Partnership pursuant to which
the Partnership will acquire the Preferred Stock and/or other Securities of
MESA; (iii) the making of any expenditures and the incurring of any obligations
it deems necessary or advisable for the conduct of the business activities of
the Partnership; (iv) the disposition, mortgage, pledge, encumbrance,
hypothecation, or exchange of any or all of the Securities of the Partnership,
provided, however, that the General Partner shall not cause the Partnership to
incur any indebtedness of amounts in excess of 15% of the Fair Market Value of
the Partnership's Securities (calculated at the time the Partnership incurs
such indebtedness) unless the General Partner shall have received the prior
consent of a Super Majority Interest of the Limited Partners; (v) the exercise
of all rights, powers, privileges and other incidents of ownership or
possession with respect to Securities held
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or owned by the Partnership, including but not limited to the exercise of all
voting rights with respect to such Securities; (vi) the conversion of the
Preferred Stock (including the decision whether to convert and the timing of
any such conversion) into Common Stock; (vii) the negotiation and execution on
terms deemed desirable to the Partnership in its sole discretion and the
performance of any contracts or other instruments that it considers useful or
necessary to the conduct of Partnership business activities or the
implementation of its powers under this Agreement; (viii) the distribution of
Partnership cash or Securities (consistent with Section 4.2 or Article VIII, as
applicable); (ix) the selection and dismissal of employees and outside
attorneys, accountants, consultants and contractors and the determination of
their compensation and other terms of employment or hiring; (x) the appointing
of attorneys-in-fact and officers who will act on behalf of the Partnership;
(xi) the admission of substituted or additional Limited Partners upon such
terms and subject to such conditions as the General Partner shall determine in
its sole discretion; (xii) the provision of continuing analysis and consulting
assistance to MESA during such time as the Minimum Ownership Condition is
satisfied; and (xiii) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of any litigation and the
incurring of legal expenses and the settlement of claims and litigation.
(b) Each Limited Partner hereby consents and agrees that the
General Partner is authorized to execute, deliver and perform the agreements,
acts, transactions and matters described in this Agreement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Partnership (unless any other provision of this Agreement provides otherwise),
including without limitation, the execution of the Stock Purchase Agreement,
the closing of the transactions contemplated by the Stock Purchase Agreement,
the acquisition of Securities, the conversion of any such Securities, the sale
or other disposition of Partnership property and despite the fact that the
specific terms and conditions of any such conversion, sale or disposition are
not presently known by such Partner. The participation by the General Partner
in any agreement or action authorized or permitted under this Agreement shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners under this Agreement or
under applicable law.
(c) In accomplishing all of the foregoing and in fulfilling its
obligations pursuant to this Agreement, the General Partner may, in its sole
discretion, retain or use any affiliates' personnel, properties and equipment
or the General Partner may hire or rent those of third parties and may employ
on a temporary or continuing basis outside accountants, attorneys, consultants
and others on such terms as the General Partner deems advisable. No person,
firm or corporation dealing with the Partnership shall be required to inquire
into the authority of the General Partner to take any action or make any
decision.
Section 5.2. Duties and Services of the General Partner. The General
Partner shall comply in all respects with the terms of this Agreement. In the
conduct of the business and operations of the Partnership, the General Partner
shall (a) use its reasonable good faith efforts to cause the Partnership (i) to
comply with the terms and provisions of all agreements to which the Partnership
is a party or to which its properties are subject, (ii) to comply with all
applicable laws, ordinances or governmental rules and regulations to which the
Partnership is subject and
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(iii) to obtain and maintain all licenses, permits, franchises and other
governmental authorizations necessary with respect to the ownership of
Partnership properties and the conduct of the Partnership's business and
operations and (b) attend to other day-to-day affairs of the Partnership in a
manner which is in the best interests of the Partnership. During the existence
of the Partnership, the General Partner shall devote such time and effort to
the Partnership's business as may be necessary to promote adequately the
interests of the Partnership and the mutual interests of the Partners; however,
it is specifically understood and agreed that the General Partner shall not be
required to devote full time to the Partnership's business, and it is
understood that the General Partner currently engages in other business
ventures and possesses interests in other business ventures, and it is agreed
that the General Partner may continue to engage in other business ventures and
possess interests in other business ventures, of any and every type and
description, independently or with others, including, without limitation, the
ownership, of Securities, and neither the Partnership, nor any other Partner
shall by virtue of this Agreement have any right, title or interest in or to
such present or future independent ventures. The General Partner shall be
obligated to perform the duties, responsibilities and obligations of the
General Partner hereunder only to the extent that funds of the Partnership are
available therefor.
Section 5.3. Liability of Partners and Indemnification.
(a) The General Partner, the Limited Partners and their
affiliates, and their partners, officers, directors, employees and agents,
shall not be liable, responsible or accountable in damages or otherwise to the
Partnership or the other Partners for any acts or omissions that do not
constitute gross negligence, willful misconduct or breach of fiduciary duty and
the Partnership shall indemnify to the maximum extent permitted under the Act
and save harmless the General Partner and the Partners and their partners,
officers, directors, employees and agents (individually, "Indemnitee") from all
liabilities for which indemnification is permitted under the Act. Any act or
omission performed or omitted by an Indemnitee on advice of independent legal
counsel or a qualified and experienced independent consultant who has been
employed or retained by the Partnership shall be presumed to have been
performed or omitted in good faith without gross negligence, willful misconduct
or breach of fiduciary duty. THE PARTIES RECOGNIZE THAT THIS PROVISION SHALL
RELIEVE ANY SUCH INDEMNITEE FROM ANY AND ALL LIABILITIES, AND PERMIT
INDEMNIFICATION OF ANY SUCH INDEMNITEE WITH RESPECT TO ANY SUCH LIABILITIES,
ARISING OR TO ARISE OUT OF ANY NEGLIGENCE BY ANY SUCH INDEMNITEE, AND SUCH
INDEMNITEE SHALL BE ENTITLED TO INDEMNIFICATION FROM ACTS OR OMISSIONS THAT MAY
GIVE RISE TO NEGLIGENCE.
(b) The Partnership shall, to the maximum extent permitted under
the Act, pay or reimburse expenses incurred by an Indemnitee in connection with
the Indemnitee's appearance as a witness or other participation in a proceeding
involving or affecting the Partnership at a time when the Indemnitee is not a
named defendant or respondent in the proceeding.
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(c) The General Partner shall have the right to require that any
contract entered into by the Partnership provide that the General Partner shall
have no personal liability for the obligations of the Partnership thereunder.
(d) The indemnification provided by this Section 5.3 shall be in
addition to any other rights to which each Indemnitee may be entitled under any
agreement or vote of the Partners, as a matter of law or otherwise, both as to
action in the Indemnitee's capacity as a Partner or an officer, director,
employee or agent of a Partner or as a person serving at the request of the
Partnership as set forth above and to action in another capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns, administrators and
personal representatives of the Indemnitees.
(e) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of this indemnification provision.
(f) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 5.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
Section 5.4. Contracts with Affiliates. The Partnership may enter
into contracts and agreements with the General Partner and any of its
affiliates for the rendering of services and the sale and lease of supplies and
equipment on such arms-length terms that are no less favorable to the
Partnership than those available from unrelated third parties.
Section 5.5. Reimbursement of General Partner; Success Fee.
(a) The Partnership shall pay or reimburse to the General Partner,
as a Partnership expense, all reasonable direct and indirect costs and expenses
incurred by the General Partner in organizing the Partnership and in managing
and conducting the business and affairs of the Partnership, including without
limitation, (i) all costs and expenses incurred in any business of the
Partnership, (ii) secretarial, telephone, office rent and other office
expenses, (iii) salaries and other compensation expenses of employees, officers
and directors, (iv) other administrative expenses, (v) travel expenses, (vi)
legal and accounting costs and expenses and (vii) expenses incurred in
providing or obtaining such other professional, technical, administrative
services and advice as the General Partner may deem necessary or desirable.
The General Partner may utilize the services of any of its affiliates in the
course of conducting the business and affairs of the Partnership, and the
Partnership may pay, and any such entity shall be entitled to receive, a
reasonable fee for any services conducted at the request of the General Partner
for the Partnership. The General Partner shall determine which expenses are
allocable to the Partnership in a manner which is fair and reasonable to the
General Partner and the Partnership, and if such allocation is made by the
General Partner in good faith it shall be conclusive in the absence of manifest
error. Notwithstanding the reimbursement of costs and expenses described in
the immediately preceding sentences of this Section 5.5(a), in the event that
the Partnership
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shall separately receive reimbursement for any such costs and expenses incurred
by the General Partner from MESA pursuant to the Stock Purchase Agreement, the
General Partner shall not receive a duplicate reimbursement of such amounts
payable by MESA from the Partnership. In addition, the General Partner shall
not be entitled to receive reimbursement from the Partnership during any
calendar year until such time as the amounts of such costs and expenses exceeds
the Annual Fee to be paid to the Partnership for such year, and the General
Partner shall be entitled to receive reimbursement for its costs and expenses
only to the extent of such excess.
(b) The General Partner may cause the Partnership to pay any
person (including, without limitation, any Partner or affiliate of the General
Partner) a fee (herein called the "Success Fee") for services rendered to the
Partnership if the payment of the Success Fee is approved in writing by a Super
Majority Interest of the Limited Partners. The Success Fee shall be payable at
the time distributions are made to the Partners in accordance with Section 4.2
or Section 8.3 of this Agreement and shall not exceed an amount equal to the
difference between (a) minus (b) below, where (a) is two percent (2%) of (i)
the Fair Market Value of Securities and any cash or cash equivalents of the
Partnership at such time, plus (ii) the cumulative amount of the aggregate
distributions made to the Partners pursuant to Section 4.2 (other than
distributions made to the General Partner of the Annual Fee specially allocated
to the General Partner pursuant to Section 4.1(c)) or Section 8.3 from
inception to such date, minus (iii) the aggregate Capital Contributions of the
Partners, and (b) is the amount of the Success Fee, if any, previously paid by
the Partnership.
Section 5.6. Insurance. The General Partner shall acquire and
maintain for the Partnership at its expense insurance covering such risks and
in such amounts as the General Partner shall from time to time determine to be
necessary or appropriate.
Section 5.7. Tax Elections. The General Partner shall make such tax
elections on behalf of the Partnership as it shall deem appropriate in its sole
discretion.
Section 5.8. Tax Returns. The General Partner shall prepare or cause
to be prepared and timely file all federal, state and local income and other
tax returns and reports as may be required as a result of the business of the
Partnership.
Section 5.9. Tax Matters Partner. The General Partner shall be
designated the tax matters partner under Section 6231 of the Internal Revenue
Code. The General Partner is authorized to take such actions and to execute
and file all statements and forms on behalf of the Partnership which may be
permitted or required by the applicable provisions of the Internal Revenue Code
or Treasury regulations issued thereunder. The General Partner shall have full
and exclusive power and authority on behalf of the Partnership to represent the
Partnership (at the Partnership's expense) in connection with all examinations
of the Partnership's affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith. Such power and authority
shall include, without limitation, the power and authority to extend the
statute of limitations, file a
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request for administrative adjustment, file suit concerning any Partnership tax
matter, and to enter into a settlement agreement relating to any Partnership
tax matter.
Section 5.10. Withdrawal by the General Partner. The General Partner
may voluntarily withdraw from the Partnership upon seventy five (75) days
written notice to the Partners. Such notice requirement may be shortened or
waived by a Super Majority Interest of the Limited Partners, in their sole
discretion. Upon the withdrawal of the General Partner, the General Partner
shall not be deemed to be liable with respect to any debts or liabilities that
the Partnership incurs subsequent to the date of withdrawal, provided that such
withdrawal shall not diminish or in any way affect any liabilities that the
Partnership incurred prior to such date.
Section 5.11. Certain Decisions. (a) Unless otherwise expressly
provided in this Agreement (i) whenever a conflict of interest exists or arises
between the General Partner, on the one hand, and the Partnership or the
Limited Partners, on the other hand, or (ii) whenever this Agreement provides
that the General Partner shall act in a manner which is fair and reasonable to
the Partnership or the Limited Partners, the General Partner shall resolve such
conflict of interest or take such action considering, in each case, the
relative interests of each party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally accepted
accounting practices or principles, and in the absence of bad faith by the
General Partner, the resolution, action so made, taken or provided by the
General Partner shall not constitute a breach of this Agreement or a breach of
any standard of care or duty imposed herein or under the Act or any other
applicable law, rule or regulation. Unless otherwise expressly provided in
this Agreement, any provision contained herein shall control to the fullest
extent possible if it is in conflict with such standard of care or duty, the
Act or any other applicable law, rule or regulation; and each Partner hereby
waives such standard of care or duty under the Act and such applicable law,
rule or regulation and agrees that the same shall be modified and/or waived to
the extent necessary to permit the General Partner to act as described above
and to give effect to the foregoing provisions of this Section 5.11.
(b) Whenever in this Agreement the General Partner is permitted or
required to make a decision (i) in its "sole discretion" or under a grant of
similar authority or latitude, the General Partner shall be entitled to
consider only such interests and factors as it desires or (ii) in "good faith"
or under another express standard, the General Partner shall act under such
express standard and shall not be subject to any other or different standards
imposed by this Agreement or under the Act or any other applicable law, rule or
regulation.
(c) No transaction between the General Partner, on the one hand,
and the Partnership or the Limited Partners, on the other hand, or any actions
taken by the General Partner with respect to the Partnership, will be void or
voidable solely for this reason and/or under the Act or any other applicable
law, rule or regulation, and no person having an interest in any such
transaction shall have any liability to the Partnership or any Partner solely
by virtue of such relationship or conflict, if the material facts as to the
relationship and transaction are disclosed or are known to the Limited Partners
and the transaction is approved by a Super Majority
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Interest of the Limited Partners; provided, however, that this Section 5.11(c)
shall not create any duty or obligation upon the General Partner to seek or
obtain any such approval in the event of compliance with the provisions
contained in Section 5.4 hereof.
ARTICLE VI
Rights of Limited Partners
Section 6.1. Rights of Limited Partners. The Limited Partners shall
have the right to: (a) have the Partnership books and records (including,
without limitation, those required under the Act) kept at the principal United
States office of the Partnership and at all reasonable times to inspect and
copy any of them at the sole expense of such Partner; (b) have on demand true
and full information of all things affecting the Partnership and a formal
account of Partnership affairs whenever circumstances render it just and
reasonable; (c) have dissolution and winding up by decree of court as provided
for in the Act; and (d) exercise all rights of a limited partner under the Act
(except to the extent otherwise specifically provided herein). Notwithstanding
the foregoing, the Limited Partners shall not have the right to receive data
pertaining to the properties of the Partnership if the General Partner is
subject to a valid agreement prohibiting the distribution of such data or if
the General Partner shall otherwise determine that such data is confidential.
Section 6.2. Limitations on Limited Partners. The Limited Partners
shall not: (a) be permitted to take part in the business or control of the
business or affairs of the Partnership; (b) have any voice in the management or
operation of any Partnership property; or (c) have the authority or power to
act as agent for or on behalf of the Partnership or any other Partner, to do
any act which would be binding on the Partnership or any other Partner, or to
incur any expenditures on behalf of or with respect to the Partnership. No
Partner shall hold out or represent to any third party that the Limited
Partners have any such power or right or that the Limited Partners are anything
other than "limited partners" in the Partnership.
Section 6.3. Liability of Limited Partners. The Limited Partners
shall not be liable for the debts, liabilities, contracts or other obligations
of the Partnership except for any unpaid Capital Contributions agreed to be
made by a Partner, except to the extent of the Limited Partners' share of the
assets (including undistributed revenues) of the Partnership and except as
otherwise provided in the Act.
Section 6.4. Withdrawal and Return of Capital Contributions. No
Limited Partner shall be entitled to (a) withdraw from the Partnership except
upon the assignment by such Limited Partner of all of his or her interest in
the Partnership in accordance with Section 9.1, or (b) the return of his or her
Capital Contributions except to the extent that distributions, if any, made
pursuant to the express terms of this Agreement may be considered as such by
law or upon dissolution and liquidation of the Partnership, and then only to
the extent expressly provided for in this Agreement and as permitted by law.
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ARTICLE VII
Books, Reports and Meetings
Section 7.1. Capital Accounts, Books and Records.
(a) The General Partner shall keep books of account for the
Partnership in accordance with the terms of this Agreement. Such books shall
be maintained at the principal office of the Partnership.
(b) An individual capital account shall be maintained by the
Partnership for each Partner as provided below:
(i) Each Partner's Capital Contributions when made shall
be credited to such Partner's capital account. The capital account of
each Partner shall, except as otherwise provided herein, be (A)
credited with the amount of cash contributed to the Partnership by
such Partner; (B) credited with the fair market value of any property
contributed to the Partnership by such Partner (net of liabilities
secured by such contributed property that the Partnership is
considered to assume or take subject to under Section 752 of the
Internal Revenue Code); (C) credited with the amount of any item of
taxable income or gain and the amount of any item of income or gain
exempt from tax allocated to such Partner for federal income tax
purposes; (D) debited by the amount of any item of deduction or loss
allocated to such Partner; (E) debited by such Partner's allocable
share of expenditures of the Partnership not deductible in computing
the Partnership's taxable income and not properly chargeable as
capital expenditures, including any nondeductible book amortizations
of capitalized costs; and (F) debited by the amount of cash or the
Fair Market Value of any property distributed to such Partner (net of
liabilities secured by such distributed property that such Partner is
considered to assume or take subject to under Section 752 of the
Internal Revenue Code). Immediately prior to any distribution of
property by the Partnership that is not pursuant to a liquidation of
the Partnership, the Partners' capital accounts shall be adjusted by
assuming that the distributed assets were sold by the Partnership for
cash at their respective Fair Market Values (as determined by the
General Partner) as of the date of distribution by the Partnership,
and crediting or debiting each Partner's capital account with its
respective share of the hypothetical gains or losses resulting from
such assumed sales in the same manner as gains or losses on actual
sales of such properties would be credited or debited to such
Partner's capital account.
(ii) Any adjustments of basis of Partnership property
provided for under Sections 734 and 743 of the Internal Revenue Code
and comparable provisions of state law (resulting from an election
under Section 754 of the Internal Revenue Code or comparable
provisions of state law) shall not affect the capital accounts of the
Partners except to the extent required by Treasury Regulation Section
1.704-1(b)(2)(iv)(m), and the
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Partners' capital accounts shall be debited or credited pursuant to
the terms of this Section 7.1 as if no such election had been made.
(iii) Capital accounts shall be adjusted, in a manner
consistent with this Section 7.1, to reflect any adjustments in items
of Partnership income, gain, loss or deduction that result from
amended returns filed by the Partnership or pursuant to an agreement
by the Partnership with the Internal Revenue Service or a final court
decision.
(iv) In the case of property contributed to the
Partnership by a Partner, the Partners' capital accounts shall be
debited and credited for items of depreciation, cost recovery,
amortization and gain or loss with respect to such property computed
in the same manner as such items would be computed if the adjusted tax
basis of such property were equal to its fair market value on the date
of its contribution to the Partnership, in lieu of the capital account
adjustments provided above for such items, all in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(v) It is the intention of the Partners that the capital
accounts of each Partner be kept in the manner required under Treasury
Regulation Section 1.704-1(b)(2)(iv). To the extent any additional
adjustment to the capital accounts is required by such regulation, the
General Partner is hereby authorized to make such adjustment after
notice to the Limited Partners.
Section 7.2. Bank Accounts. The General Partner shall cause one or
more accounts to be maintained in a bank (or banks) or one or more financial
institutions, which accounts shall be used in connection with the business of
the Partnership, and in which shall be deposited any and all receipts of the
Partnership. The General Partner shall determine the number of and the persons
who will be authorized as signatories on each such bank account. The General
Partner may invest the Partnership funds in money market accounts or other
similar accounts with such banks or financial institutions as the General
Partner shall determine to be necessary or appropriate.
Section 7.3. Reports. The Partnership shall deliver to the Partners
(i) annually, within 120 days after the end of each fiscal year of the
Partnership, unaudited financial statements as of the end of and for such
fiscal year (which shall set forth the profits and losses of the Partnership
and the balance of such Partner's capital account), and (ii) such other reports
and financial statements as are provided to the Partnership by MESA as the
General Partner shall determine from time to time.
Section 7.4. General Information. The General Partner shall keep the
Partners informed generally of its transactions on behalf of the Partnership
and shall furnish to the Partners from time to time information regarding the
activities and business of the Partnership. The General Partner at its
election may separately inform and consult with the Limited Partners for the
above purposes without the necessity of calling and/or holding a meeting of the
Limited Partners. Notwithstanding the foregoing provisions of this Section
7.4, the Limited Partners
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shall not be permitted to take part in the business or control of the business
of the Partnership; it being the intention of the parties that the General
Partner shall have full and exclusive power and authority on behalf of the
Partnership to acquire, manage, control and administer the assets, business and
affairs of the Partnership in accordance with Section 5.1 of this Agreement and
the other applicable provisions of this Agreement.
ARTICLE VIII
Dissolution, Liquidation and Termination
Section 8.1. Dissolution. The Partnership shall be dissolved upon
the occurrence of any of the following:
(a) December 31, 2008.
(b) The sale, disposition or termination of all or substantially
all of the property then owned by the Partnership.
(c) An event of withdrawal from the Partnership by the General
Partner as provided for in the Act.
(d) The determination of the General Partner in its sole
discretion at any time subsequent to January 1, 1997.
(e) At any time from the date of this Agreement to and including
June 30, 2001, the consent of the General Partner and a Super Majority Interest
of the Limited Partners, and at any time from and after July 1, 2001, the
consent of the General Partner and a Majority Interest of the Limited Partners.
(f) In the event that the Minimum Ownership Condition is no longer
satisfied.
(g) In the event both of the following shall occur: (i) the death
of Richard E. Rainwater or the inability of Richard E. Rainwater to perform his
duties to the General Partner on a full time basis for 180 consecutive days as
a result of his physical or mental incapacity and (ii) Darla D. Moore and
Kenneth A. Hersh no longer constitute a majority of the Board of Directors of
the General Partner.
(h) Any event which, under the Act, causes the dissolution of a
limited partnership.
Section 8.2. Reconstitution. Upon the dissolution of the Partnership
as a result of an event described in Section 8.1(c) or, to the extent permitted
under the Act, Section 8.1(h), a Super Majority Interest of the Limited
Partners acting at a duly held meeting or by means of a written consent, within
ninety (90) days following the receipt of notice of the occurrence of such
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event from the General Partner, shall be entitled to reconstitute the
Partnership and continue its business and to elect and substitute a new
successor General Partner. Upon the election and substitution of a new
successor General Partner, the Partnership interest of the prior General
Partner shall be converted hereunder to an interest of a Limited Partner and as
such shall have all the rights and obligations associated therewith. Upon any
such election by the required Limited Partners, all Partners shall be bound
thereby and shall be deemed to have approved the elections to reconstitute the
Partnership and continue its business and to substitute a new successor General
Partner, and the successor General Partner shall be permitted to use the power
of attorney provided for in Section 10.2 to evidence the deemed approval of
such elections by each Limited Partner notwithstanding any previous abstention
or negative vote with respect to such elections by such Limited Partner.
Section 8.3. Liquidation and Termination. Upon dissolution of the
Partnership, unless reconstituted under Section 8.2, the General Partner or, if
the withdrawal of the General Partner caused the dissolution of the
Partnership, a person selected by a Super Majority Interest of the Limited
Partners, shall act as liquidator or shall appoint one or more liquidators who
shall have full authority to wind up the affairs of the Partnership and make
final distribution as provided herein. The liquidator shall continue to
operate the Partnership properties with all of the power and authority of the
General Partner (including without limitation the power to sell all or
substantially all of the assets of the Partnership as provided in Section 5.1).
The steps to be accomplished by the liquidator are as follows:
(a) As promptly as possible after dissolution and again after
final liquidation, the liquidator, if requested by any Partner, shall cause a
proper accounting to be made by the Partnership's independent accountants of
the Partnership's assets, liabilities and operations through the last day of
the month in which the dissolution occurs or the final liquidation is
completed, as appropriate.
(b) The liquidator shall pay all of the debts and liabilities of
the Partnership (including all expenses incurred in liquidation) or otherwise
make adequate provision therefor (including without limitation the
establishment of a cash escrow fund for contingent liabilities in such amount
and for such term as the liquidator may reasonably determine or the payment of
the Success Fee in the event the Success Fee is approved pursuant to Section
5.5(b)). After making payment or provision for all debts and liabilities of
the Partnership, the Partners' capital accounts shall then be adjusted by (i)
assuming the sale of all remaining assets of the Partnership for cash at their
respective Fair Market Values as of the date of termination of the Partnership,
and (ii) debiting or crediting each Partner's capital account with its
respective share of the hypothetical gains or losses resulting from such
assumed sales in the same manner as each such capital account would be debited
or credited with gains or losses on actual sales of such assets. The
liquidator shall then by payment of cash or property (valued as of the date of
termination of the Partnership at its Fair Market Value) distribute to the
Partners such amounts as are required to pay the positive balances of their
respective capital accounts. Such a distribution shall be in cash or in kind
as determined by the liquidator, provided that in the event of a distribution
in kind of the Securities of the Partnership, the liquidator shall assign to
the Partners
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the respective rights and benefits that may exist under any contracts of the
Partnership that may be of value to any of the Partners. Any distribution to
the Partners in liquidation of the Partnership shall be made by the later of
either the end of the taxable year in which the liquidation occurs or 90 days
after the date of such liquidation. For purposes of the preceding sentence,
the term "liquidation" shall have the same meaning as set forth in Treasury
Regulation Section 1.704-1(b)(2)(ii) as in effect at such time. Each Partner
shall have the right to designate another person to receive any property which
otherwise would be distributed in kind to that Partner pursuant to this Section
8.3.
(c) Except as expressly provided herein, the liquidator shall
comply with any applicable requirements of the Act and all other applicable
laws pertaining to the winding up of the affairs of the Partnership and the
final distribution of its assets.
(d) Notwithstanding any provision in this Agreement to the
contrary, no Partner shall be obligated to restore a deficit balance in its
capital account at any time.
The distribution of all Partnership cash and/or property to the
Partners in accordance with the provisions of this Section 8.3 shall constitute
a complete return to the Partners of their Capital Contributions and a complete
distribution to the Partners of their interest in the Partnership and all
Partnership property.
ARTICLE IX
Assignments of Interests
Section 9.1. Assignment by Partners.
(a) No Partner's interest in the Partnership shall be assigned,
mortgaged, pledged, subjected to a security interest or otherwise encumbered,
as a whole or in part, unless (i) such Partner makes an assignment pursuant to
a Permitted Transfer, (ii) if such assigning Partner is the General Partner or
Richard E. Rainwater, such Partner obtains the prior written consent of a Super
Majority Interest of the Limited Partners, or (iii) if such assigning Partner
is a Limited Partner other than Richard E. Rainwater, such Partner obtains the
prior written consent of the General Partner, and any attempt by a Partner to
assign its interest other than pursuant to a Permitted Transfer or obtaining
the requisite consent required pursuant to subsection (ii) or (iii), as
applicable, shall be void ab initio.
(b) Except in any instance in which Richard E. Rainwater shall
make a Permitted Transfer or in any instance in which Richard E. Rainwater
assigns a Partnership interest consisting of a Sharing Ratio of less than two
percent in one transaction or in a series of transactions, Richard E. Rainwater
hereby covenants and agrees with the other Partners that after December 31,
1996, he will not make an assignment of his interest in the Partnership unless
he and the General Partner shall allow each other Limited Partner the right to
assign up to the same
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proportion of such Limited Partner's interest upon the same terms and
conditions. In the event that Richard E. Rainwater desires to make any such
assignment other than pursuant to a Permitted Transfer, he shall provide each
Limited Partner with notice of the terms of such assignment, including the
identity of the assignee, the Partnership interest that he desires to assign,
and the consideration for such assignment. Within ten days after each Limited
Partner's receipt of such notice, each Limited Partner shall notify Richard E.
Rainwater in writing of its election to assign such portion of its Partnership
interest. If any Limited Partner makes such election, such Limited Partner
shall assign its pro rata portion of its interest in the Partnership on the
same terms and conditions described in the original notice provided by Richard
E. Rainwater. If Richard E. Rainwater does not receive any Limited Partner's
notice of such election within the above-described time period, or, if any
Limited Partner notifies Richard E. Rainwater in writing that such Limited
Partner will not make such election to participate in such assignment, Richard
E. Rainwater shall have the right to make such assignment on the terms
specified in his original notice to the Limited Partners without any obligation
to offer to such Limited Partner the right to participate in such assignment on
a pro rata basis.
(c) Unless an assignee becomes a substituted Partner in accordance
with the provisions set forth below, such assignee shall not be entitled to any
of the rights granted to a Partner hereunder, other than the right to receive
allocations of income, gain, loss, deduction, credit and similar items and
distributions to which the assignor would otherwise be entitled, to the extent
such items are assigned.
(d) An assignee of the interest of a Partner, or any portion
thereof, shall become a substituted Partner entitled to all of the rights of a
Partner if, and only if (i) the assignor gives the assignee such right, (ii) if
such assigning Partner is the General Partner or Richard E. Rainwater, a Super
Majority Interest of the Limited Partners consent to such substitution, the
granting or denying of which shall be in each such Partner's sole discretion,
or if such assigning Partner is a Limited Partner other than Richard E.
Rainwater, the General Partner consents to such substitution, the granting or
denying of which shall be in the General Partner's sole discretion, and (iii)
the assignee executes and delivers such instruments, in form and substance
satisfactory to the General Partner (if the assignee is the assignee of a
Limited Partner other than Richard E. Rainwater) or a Super Majority Interest
of the Limited Partners (if the assignee is the assignee of the General Partner
or Richard E. Rainwater), as the General Partner or a Super Majority Interest
of the Limited Partners, as applicable, may deem necessary or desirable to
effect such substitution and to confirm the agreement of the assignee to be
bound by all of the terms and provisions of this Agreement. Without limitation
of the foregoing, each person that acquires all or any portion of the
Partnership interest of Richard E. Rainwater pursuant to a Permitted Transfer
shall also be required to confirm such person's covenant to provide each other
Limited Partner the right to participate in any future transfer of such
Partnership interest pursuant to Section 9.1(b) hereof. Upon the satisfaction
of such requirements, the General Partner shall concurrently (or as of such
later date as shall be provided for in any applicable written instruments
furnished to the General Partner) admit any such assignee as a substituted
Partner of the Partnership and reflect such admission and the date thereof in
the records of the Partnership. Without limitation of the foregoing, the
General Partner is hereby authorized,
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without the joinder of any other Partner, to do all things and execute all
documents for and on behalf of the Partnership to effect the admission of any
substituted or additional Limited Partner, including the amendment of Exhibit A
in order to reflect such admission.
(e) The Partnership and the General Partner shall be entitled to
treat the record owner of any Partnership interest as the absolute owner
thereof in all respects and shall incur no liability for distributions of cash
or other property made in good faith to such owner until such time as a written
assignment of such interest that complies with the terms of this Agreement has
been received by the General Partner.
ARTICLE X
Representations and Warranties; Power of Attorney
Section 10.1. Representations and Warranties. Each Partner
acknowledges and agrees that its interest in the Partnership (the "Partnership
Interest") is being purchased for such Partner's own account as part of a
private offering, exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act") and all applicable state securities or blue sky
laws, for investment only and not with a view to the distribution nor other
sale thereof and that an exemption from registration under the Securities Act
or any applicable state securities laws under the Securities Act or any
applicable state securities laws may not be available if the Partnership
Interest is acquired by such Partner with a view to resale or distribution
thereof under any conditions or circumstances as would constitute a
distribution of such Partnership Interest within the meaning and purview of the
Securities Act or the applicable state securities laws. In addition, each
Partner represents and warrants to the General Partner, the Partnership and all
other interested parties that:
(a) Such Partner has been furnished with all information that it
has requested for the purpose of evaluating the proposed acquisition of its
Partnership Interest, including all information relative to MESA and the
Preferred Stock, and such Partner has had an opportunity to ask questions of
and receive answers regarding the Partnership, MESA and MESA's business,
assets, results of operations, financial condition and prospects and the terms
and conditions of the Preferred Stock.
(b) Such Partner is acquiring its Partnership Interest solely by
and for its own account, for investment purposes only and not for the purpose
of resale or distribution; such Partner does not have any contract,
undertaking, agreement or arrangement with any person or entity to sell,
transfer or pledge to such person or anyone else any interest in the
Partnership; and such Partner does not have any present plans or intentions to
enter into any such contract, undertaking or arrangement.
(c) Such Partner acknowledges and understands that (i) no
registration statement relating to its Partnership Interest, the Preferred
Stock or the Common Stock into which the Preferred Stock will be convertible
has been or is to be filed with the Securities and Exchange
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<PAGE> 31
Commission under the Securities Act, or pursuant to the securities laws of any
state; (ii) the Partnership Interest, the Preferred Stock and the Common Stock
into which the Preferred Stock will be convertible cannot be sold or
transferred without compliance with the registration provisions of the
Securities Act, or compliance with exemptions, if any, available thereunder;
(iii) any certificates representing the Partnership Interests and all
certificates representing the Preferred Stock will include a legend thereon
that refers to the foregoing; and (iv) neither the Partnership nor MESA has any
obligation or intention to register the Partnership Interests, the Preferred
Stock or the Common Stock into which the Preferred Stock will be convertible
under any federal or state securities act or law.
(d) Such Partner (i) is an "accredited investor" as defined in
Rule 501 of the rules promulgated pursuant to the Securities Act; (ii) has such
knowledge and experience in financial and business matters in general that it
has the capacity to evaluate the merits and risks of an investment in the
Partnership and the Partnership's purchase of the Preferred Stock and to
protect its own interest in connection with its investment in the Partnership
and the Partnership's investment in the Preferred Stock; (iii) has such a
financial condition that it has no need for liquidity with respect to its
investment in the Partnership or the Partnership's investment in the Preferred
Stock to satisfy any existing or contemplated undertaking, obligation or
indebtedness; and (iv) is able to bear the economic risk of its investment in
the Partnership for an indefinite period of time.
(e) Such Partner has relied upon its own independent
investigations of the business of the Partnership and MESA or upon its own
independent advisers in evaluating its investment in the Partnership and the
Partnership's purchase of the Preferred Stock.
(f) The acquisition of the Preferred Stock by the Partnership at
the closings pursuant to the Stock Purchase Agreement shall constitute such
Partner's confirmation of the foregoing representations.
(g) Other than pursuant to its Partnership Interest, neither such
Partner nor any of its Affiliates owns, directly or indirectly, any shares of
capital stock or other securities of MESA or any of its subsidiaries.
Section 10.2. Power of Attorney. Each Limited Partner hereby
irrevocably constitutes and appoints the General Partner as its true and lawful
agent and attorney-in-fact, with full power of substitution, in its name, place
and stead, to make, execute and acknowledge, swear to, record, publish and
file:
(a) Any agreement, document or instrument pertaining to the sale,
transfer, conveyance or encumbrance of all or any portion of the property of
the Partnership in accordance with the terms of this Agreement;
(b) Any document or instrument with respect to the Partnership
that may be required or permitted to be filed under the laws of any state or of
the United States, or which the General
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<PAGE> 32
Partner shall deem necessary, desirable or advisable to file, including,
without limitation, filings made pursuant to the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, or the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
(c) A counterpart of any amendment to this Agreement for the
purpose of admitting any substituted General Partner or additional Limited
Partner or substituted Limited Partner or effecting any amendment of this
Agreement permitted to be made solely by the General Partner hereunder; and
(d) Any document that might be required to effectuate the
dissolution, termination and liquidation of the Partnership or any document
that might be required to reconstitute the Partnership pursuant to Section 8.2
hereof.
The foregoing power of attorney is coupled with an interest, shall be
irrevocable and shall survive the death, incompetency, dissolution, merger,
consolidation, bankruptcy or insolvency of each of the Partners. The Partners
shall execute and deliver to the General Partner, within five (5) days after
receipt of the General Partner's request therefor, such further designations,
powers of attorney and other instruments as the General Partner reasonably
deems necessary to carry out the purposes of this Agreement.
ARTICLE XI
Miscellaneous
Section 11.1. Notices. All notices, elections, demands or other
communications required or permitted to be made or given pursuant to this
Agreement shall be in writing and shall be considered as properly given or made
if given by (a) personal delivery, (b) United States mail, (c) expedited
delivery service with proof of delivery, or (d) facsimile transmission,
addressed to the respective addressee(s). Any Partner may change its address
by giving notice in writing to the other Partners of his or her new address.
Section 11.2. Amendment. This Agreement may be changed, modified or
amended only by an instrument in writing agreed upon by the General Partner and
a Super Majority Interest of the Limited Partners; provided, however, that no
such amendment that would have a material adverse economic effect on a
particular Partner will be binding on such Partner without the agreement of
such Partner. Notwithstanding the immediately preceding sentence, amendments
to this Agreement that, in the judgment of the General Partner, (i) are of an
inconsequential nature and do not adversely affect any Limited Partner in any
material respect, (ii) are necessary or desirable to comply with any applicable
law or governmental regulation, including but not limited to federal income tax
requirements, such as qualified income offsets, minimum gain chargebacks, or
otherwise, (iii) are necessary or desirable in the opinion of counsel to the
Partnership to ensure that the Partnership will not be treated as an
association taxable as a corporation for federal income tax purposes, or (iv)
are otherwise required or contemplated by this Agreement, including but not
limited to amendments of Exhibit A in order
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<PAGE> 33
to reflect the admission of a substituted or additional Limited Partner, may be
made by the General Partner without the written consent of the Limited
Partners. The General Partner shall notify all Partners upon final adoption of
any proposed amendment.
Section 11.3. Partition. Each of the Partners hereby irrevocably
waives for the term of the Partnership any right that such Partner may have to
maintain any action for partition with respect to the Partnership property.
Section 11.4. Entire Agreement. This Agreement constitutes the full
and complete agreement of the parties hereto with respect to the subject matter
hereof.
Section 11.5. Severability. Every provision in this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remainder of this Agreement.
Section 11.6. No Waiver. The failure of any Partner to insist upon
strict performance of a covenant hereunder or of any obligation hereunder,
irrespective of the length of time for which such failure continues, shall not
be a waiver of such Partner's right to demand strict compliance in the future.
No consent or waiver, express or implied, to or of any breach or default in the
performance of any obligation hereunder shall constitute a consent or waiver to
or of any other breach or default in the performance of the same or any other
obligation hereunder.
Section 11.7. Applicable Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Texas.
Section 11.8. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that no Partner may sell, assign, transfer or otherwise dispose of all
or any part of its rights or interest in the Partnership or under this
Agreement except in accordance with Section 9.1.
Section 11.9. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which shall
constitute but one and the same document.
* * * * *
SIGNATURE PAGES OF PARTNERS ATTACHED
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GENERAL PARTNER:
RAINWATER, INC.
By:/s/ KENNETH A. HERSH
---------------------------
Kenneth A. Hersh,
Vice President
<PAGE> 35
LIMITED PARTNER:
/s/ RICHARD E. RAINWATER
-------------------------------
RICHARD E. RAINWATER
The address of the Limited Partner on this Signature Page is as follows:
777 Main Street
Suite 2700
Fort Worth, Texas 76102
<PAGE> 36
LIMITED PARTNERS:
COURTNEY E. RAINWATER TRUST
By:/s/ MARK L. HART, JR., TRUSTEE
---------------------------------------
Mark L. Hart, Jr., Trustee
RICHARD TODD RAINWATER TRUST
By:/s/ MARK L. HART, JR., TRUSTEE
---------------------------------------
Mark L. Hart, Jr., Trustee
MATTHEW J. RAINWATER TRUST
By:/s/ MARK L. HART, JR., TRUSTEE
---------------------------------------
Mark L. Hart, Jr., Trustee
The address of each such Limited Partner on this Signature Page is as follows:
777 Main Street
Suite 2700
Fort Worth, Texas 76102
<PAGE> 37
LIMITED PARTNER:
NATURAL GAS PARTNERS II, L.P.
By: GFW ENERGY II, L.P., its general partner
By: GFW II, L.L.C., its general partner
By:/s/ JOHN S. FOSTER
----------------------------------------
Name: John S. Foster
Title: Authorized Member
The address of the Limited Partner on this Signature Page is as follows:
777 Main Street
Suite 2700
Fort Worth, Texas 76102
with a copy to:
115 E. Putnam Avenue
Greenwich, Connecticut 06830
<PAGE> 38
LIMITED PARTNER:
NATURAL GAS PARTNERS III, L.P.
By: RAINWATER ENERGY INVESTORS, L.P.,
its general partner
By: GFW III, L.L.C., its general partner
By:/s/ JOHN S. FOSTER
------------------------------------
Name: John S. Foster
Title: Authorized Member
The address of the Limited Partner on this Signature Page is as follows:
777 Main Street
Suite 2700
Fort Worth, Texas 76102
with a copy to:
115 E. Putnam Avenue
Greenwich, Connecticut 06830
<PAGE> 39
LIMITED PARTNER:
VAN BEUREN ENTERPRISES, LLC
By: /s/ DAVID J. ROY
-----------------------------------------
Name: David J. Roy
------------------------------------
Title: Voting Manager
The address of the Limited Partner on this Signature Page is as follows:
330 South Street
P. O. Box 1975
Morristown, New Jersey 07962-1975
Attention: Donald R. Smith
with a copy to:
David J. Roy
1334 Park View, Suite 320
Manhattan Beach, California 90266
<PAGE> 40
EXHIBIT A
<TABLE>
<CAPTION>
Name of Partner Maximum Capital Contributions Sharing Ratio
--------------- ----------------------------- -------------
<S> <C> <C>
Rainwater, Inc. $2,650,000 1.0%
(General Partner)
Richard E. Rainwater $160,418,058 54.6390%
Courtney E. Rainwater Trust $3,984,962 1.5038%
Richard Todd Rainwater Trust $3,984,962 1.5038%
Matthew J. Rainwater Trust $3,984,962 1.5038%
Natural Gas Partners II, L.P. $10,000,000 6.2074%
Natural Gas Partners III, L.P. $14,225,175 8.8302%
Van Beuren Enterprises, LLC $65,751,880 24.8120%
</TABLE>
<PAGE> 1
EXHIBIT 10.3
Credit Agreement dated June 1, 1995 between
Richard E. Rainwater and NationsBank of Texas, N.A.
<PAGE> 2
EXHIBIT 10.3
NATIONSBANK OF TEXAS, N.A.
500 West Seventh Street
Fort Worth, Texas 76113-2260
Facsimile No. (817) 390-6271
June 1, 1995
Mr. Richard E. Rainwater
Suite 2700
777 Main Street
Fort Worth, Texas 76102
Facsimile No. (817) 332-3923
Re: Credit Agreement
Dear Mr. Rainwater
Subject to this agreement, NationsBank of Texas, N.A.
("Lender"), agrees to extend credit to Richard E. Rainwater ("Borrower") from
time to time on or after the date of this agreement and before the Termination
Date -- up to $75,000,000 principal exposure at any time -- on a revolving
credit basis, to be used by Borrower for investment purposes, which may
include, but are not limited to, the purchase or carrying of margin stock.
Accordingly, in consideration of the mutual covenants in the Loan Papers,
Borrower and Lender agree as follows:
1. Definitions. As used in this agreement:
Acceptable Additional Collateral means additional Collateral
under this agreement, which may be:
o Before the Termination Date: Additional shares of
Columbia/HCA Stock, subject to (i) the limitations of
the proviso in the definition of the term
"Loan-to-Collateral Ratio" and Paragraph 5(d) and
(ii) the then-fair-market value of those additional
shares being at least $25 per share (as adjusted for
stock splits, stock dividends, recapitalizations,
reclassifications and similar events), and
o Before, on, or after the Termination Date: (i) Cash,
(ii) investments in obligations issued or
unconditionally guaranteed by the United States
government or issued by any of its agencies and
backed by the full faith and credit of the United
States of America, (iii) certificates of deposit that
are issued by Lender, or (iv) other collateral
satisfactory in form and substance to Lender in its
sole discretion.
Advance means any amount disbursed by Lender to Borrower under the
Loan Papers -- as an original disbursement of funds, or the continuation of an
amount outstanding.
Advance Notice is defined in Paragraph 2.
Advance Ratio means at any time a Loan-to-Collateral Ratio of (a) 100%
or less for Collateral that is cash or certificates of deposit that are issued
by Lender, (b) 90% or less for Collateral that is investments in obligations
issued or unconditionally guaranteed by the United States government or issued
by any of its agencies and backed
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<PAGE> 3
by the full faith and credit of the United States of America, and (c) 50% or
less for all other Collateral. With any combination of different kinds of
Collateral, the combined percentage will be adjusted appropriately.
Base Rate means, for any day, the annual interest rate most recently
announced by Lender as its prime rate -- which is not necessarily the lowest or
best rate actually charged to any customer -- in effect at its principal office
in Fort Worth, automatically fluctuating upward and downward as specified in
each such announcement without special notice to any Person.
Business Day means (a) for all purposes, any day other than Saturday,
Sunday, and any other day that commercial banks are authorized by law to be
closed in Texas and (b) for purposes of any Advance at the LIBOR Rate, a day
when commercial banks are open for international business in London.
Collateral is defined in Paragraph 5.
Columbia/HCA means Columbia/HCA Healthcare Corporation, a Delaware
corporation.
Columbia/HCA Stock means Common Stock par value $0.01 issued by
Columbia/HCA that is pledged from time to time to secure payment of the
Obligation.
Consequential Loss means any loss or expense which Lender may incur as
a consequence of (a) any failure or refusal of Borrower (for any reasons
whatsoever other than Lender's default) to take any Advance at the LIBOR Rate
after Borrower has requested it under this agreement, or (b) any prepayment, or
payment of an Advance at the LIBOR Rate before the last day of the Interest
Period for it.
Conversion Notice is defined in Paragraph 3(i).
Default is defined in Paragraph 10.
Default Rate means, for any day, the lesser of (a) the Maximum Rate
and (b) the Base Rate plus 4%.
HCA Registration Rights Agreement means the Registration Rights
Agreement dated as of March 16, 1989, among HCA-Hospital Corporation of America
(predecessor-in-interest to Columbia/HCA) and certain of its stockholders, as
amended.
Interest Period means, for each Advance at the:
(a) Base Rate, the period beginning with the date it
is borrowed or converted to the Base Rate, and ending on the date
when all or a portion of that Advance is next paid or converted
to an Advance at the LIBOR Rate; and
(b) LIBOR Rate, a 1-, 2-, 3- or 6-month period, as
designated in accordance with this agreement.
LIBOR Rate means, for each Advance at the LIBOR Rate, the per annum
rate of interest (rounded upward, if necessary, to the nearest 1/16th%) equal
to the sum of (a) the quotient of (i) the rate of interest determined by Lender
to be the average rate (rounded upward, if necessary, to the nearest 0.01%) at
which deposits in United States dollars are offered by Lender (or, at Lender's
discretion, its affiliate) in the London interbank market at approximately
11:00 a.m. London time two Business Days prior to the first day of the
applicable Interest Period for delivery on the first day of that Interest
Period for the number of days comprised therein and in an amount comparable to
the amount of that Advance, divided by (ii) one minus the Reserve Requirements
(stated as a decimal), plus (b) 0.75%, so long as the Loan-to-Collateral Ratio
is less than or equal to 60%, but if on any date the Loan-to-
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<PAGE> 4
Collateral Ratio is greater than 60%, then 0.85%, commencing on such date and
continuing until the end of the applicable Interest Period.
Loan Papers means this agreement, any and all notes, security
agreements, financing statements, guaranties, and other agreements, documents,
and instruments ever delivered in connection with this agreement and all future
renewals, extensions, or restatements of, or amendments, modifications, or
supplements to, all or any part of the foregoing.
Loan-to-Collateral Ratio means, at any time, the quotient -- stated as
a percentage -- of the (a) Principal Debt divided by (b) the fair-market value
- -- or, for any Collateral that has no readily obtainable fair-market value, the
loan value attributable to it by Lender -- of the Collateral provided that, for
purposes of this definition only, (a) if the Columbia/HCA Stock ever has a per
share market value of less than $25 (as adjusted for stock splits, stock
dividends, recapitalizations, reclassifications and similar events), then the
value of that stock may not be included in determining the Advance Ratio, and
(b) no Collateral that is securities may constitute, in Lender's reasonable
judgment (i) "restricted securities," as defined in Rule 144 under the
Securities Act of 1933, as amended ("Rule 144"), or (ii) securities held by an
"affiliate," as defined in Rule 144. The "fair market value" of Columbia/HCA
Stock means, for any day, the product of (a) the number of shares of such stock
times (b) the last sale price per share of such stock on the previous trading
day as reported in the Wall Street Journal on such day.
Margin Ratio means at any time a Loan-to-Collateral Ratio of (a) 100%
for Collateral that is cash or certificates of deposit that are issued by
Lender, (b) more than 95% for Collateral that is investments in obligations
issued or unconditionally guaranteed by the United States government or issued
by any of its agencies and backed by the full faith and credit of the United
States of America, (c) for all other Collateral, more than 70%. With any
combination of different kinds of Collateral, the combined percentage will be
adjusted appropriately.
Material Adverse Event means any set of one or more circumstances or
events which, individually or collectively, would reasonably be expected to
result in any (a) impairment of Borrower's ability to perform any of his
payment or other material obligations under the Loan Papers or the ability of
Lender to enforce any such obligations or any of its rights under the Loan
Papers, (b) adverse effect upon the validity or enforceability of any Loan
Paper, (c) material adverse effect upon Borrower's financial condition, as
represented to Lender in Borrower's financial statements that were most
recently furnished to Lender as of the date of this agreement, or (d) Potential
Default or Default.
Maximum Amount and Maximum Rate respectively mean the maximum
non-usurious amount and the maximum non-usurious rate of interest that, under
applicable law, that Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
Note is defined in Paragraph 4(a).
Obligation means all present and future indebtedness, obligations, and
liabilities, and all renewals, extensions, and modifications thereof, now or
hereafter owed to Lender by Borrower, arising from, by virtue of, or pursuant
to any Loan Paper, together with all interest accruing thereon and costs,
expenses, and attorneys' fees incurred in the enforcement or collection
thereof.
Potential Default is defined in Paragraph 10.
Principal Debt means the unpaid principal balance of all Advances.
Reserve Requirements means the then-stated maximum rate of all reserve
requirements under regulations issued by the Board of Governors of the Federal
Reserve System (including, without limitation, any margin,
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<PAGE> 5
emergency, supplemental, special or other reserves required in respect of
Eurocurrency liabilities for a member of the Federal Reserve System having
deposits in excess of $1,000,000,000).
Revolving Commitment means $75,000,000.
Termination Date means the earlier of (a) June 1, 1997, and (b) the
effective date that Lender's commitment to extend credit under this agreement
is otherwise cancelled or terminated in accordance with this agreement.
2. Commitment. Upon Borrower's prior notice -- in substantially
the form of the attached Exhibit B-1 (an "Advance Notice"), Lender agrees to
extend to Borrower prior to the Termination Date in the form of Advances so
long as, immediately after an Advance is made (i) the Principal Debt does not
exceed the Revolving Commitment and (ii) the Advance Ratio is met. The Advance
Notice must be received by Lender at least three Business Days before an
Advance. Each such Advance may only be borrowed on a Business Day and must be
an integral multiple of $100,000 and a minimum of $500,000.
3. Interest Rates and Protections. Except as otherwise stated,
the Principal Debt shall bear interest at a rate per annum equal to the lesser
of (a) the Maximum Rate and (b) the LIBOR Rate (or, in certain circumstances,
the Base Rate, as provided in this agreement). Each change in the Base Rate and
Maximum Rate, subject to the terms of this agreement, will become effective,
without notice to Borrower or any other Person, upon the effective date of that
change.
(a) Advance Notice. Borrower must designate the date,
amount, and Interest Period of each requested Advance in the Advance Notice for
it.
(b) Interest Periods. At the time Borrower gives any
Advance Notice (or Conversion Notice pursuant to Paragraph 3(i)) in respect of
the making of an Advance at the LIBOR Rate, Borrower must elect the Interest
Period applicable thereto, provided that (i) the initial Interest Period for an
Advance at the LIBOR Rate shall commence on the date of that Advance (including
the date of any conversion thereto), and each Interest Period occurring
thereafter in respect of that Advance shall commence on the day on which the
next preceding Interest Period applicable thereto expires, (ii) if any Interest
Period for an Advance at the LIBOR Rate begins on a day for which there is no
numerically corresponding Business Day in the calendar month at the end of such
Interest Period, that Interest Period shall end on the last Business Day of
such calendar month, (iii) no Interest Period may be chosen with respect to any
portion of the Principal Debt which would extend beyond the scheduled repayment
date for such portion of the Principal Debt, and (iv) no more than an aggregate
of twenty LIBOR Rate Interest Periods shall be in effect at one time.
(c) Rate Estimates. Borrower or Borrower's
representatives may call Lender on or before the date on which an Advance
Notice (or Conversion Notice pursuant to Paragraph 3(i)) is to be delivered by
Borrower in order to receive an indication of the rates then in effect, but
that such projection shall neither be binding upon Lender nor affect the rate
of interest which thereafter is actually in effect when the Advance Notice or
Conversion Notice is given.
(d) Default Rate. At Lender's option and to the extent
permitted by law, all past-due Principal Debt and accrued interest thereon
shall bear interest from the date due and payable (stated or by acceleration)
at the Default Rate until paid, regardless whether such payment is made before
or after entry of a judgment.
(e) Recapture. If the Base Rate, LIBOR Rate, or Default
Rate (the "contract rate") ever applicable to any Advance exceeds the Maximum
Rate, the rate of interest on that Advance shall be limited to the Maximum
Rate, but any subsequent reductions in the contract rate shall not reduce the
rate of interest thereon below the Maximum Rate until the total amount of
interest accrued thereon equals the amount of interest which would have
-4-
<PAGE> 6
accrued thereon if the contract rate had at all times been in effect. In the
event that at maturity (stated or by acceleration), or at final payment of any
Note, the total amount of interest paid or accrued is less than the amount of
interest which would have accrued if the applicable contract rates had at all
times been in effect, then, at such time and to the extent permitted by law,
Borrower shall pay an amount equal to the difference between (a) the lesser of
the amount of interest which would have accrued if those contract rates had at
all times been in effect and the amount of interest which would have accrued if
the Maximum Rate had at all times been in effect, and (b) the amount of interest
actually paid or accrued on that Note.
(f) Calculations. All payments of interest shall be
calculated on the basis of actual number of days (including the first day but
excluding the last day) elapsed but computed as if each calendar year consisted
of 360 days in the case of an Advance at the LIBOR Rate (unless such
calculation would result in the interest on the Advances exceeding the Maximum
Rate in which event such interest shall be calculated on the basis of a year of
365 or 366 days, as the case may be) and 365 or 366 days, as the case may be,
in the case of an Advance at the Base Rate. All interest rate determinations
and calculations by Lender shall be conclusive and binding absent manifest
error. Interest calculations may be made ten (or less) days prior to any due
date. If the interest rate is adjusted in accordance with the terms herein
during any period for which interest is payable, then, subject to Paragraph
3(g), the interest payable for the succeeding period will be adjusted
appropriately.
(g) Maximum Rate. Regardless of any provision contained
in any of the Loan Papers, Lender shall never be entitled to contract for,
charge, take, reserve, receive, or apply, as interest on the Obligation, or any
part thereof, any amount in excess of the Maximum Rate, and, in the event
Lender ever contracts for, charges, takes, reserves, receives, or applies as
interest any such excess, it shall be deemed a partial prepayment of principal
and treated hereunder as such and any remaining excess shall be refunded to
Borrower. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the Maximum Rate, Borrower and Lender shall, to
the maximum extent permitted under applicable law, (a) treat all Advances as
but a single extension of credit (and Lender and Borrower agree that such is
the case and that provision herein for multiple Advances is for convenience
only), (b) characterize any nonprincipal payment as an expense, fee, or premium
rather than as interest, (c) exclude voluntary prepayments and the effects
thereof, and (d) "spread" the total amount of interest throughout the entire
contemplated term of the Obligation; provided that, if the Obligation is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds
the Maximum Amount, Lender shall refund such excess, and, in such event, Lender
shall not to the extent permitted by law, be subject to any penalties provided
by any laws for contracting for, charging, taking, reserving, or receiving
interest in excess of the Maximum Amount. To the extent the laws of the State
of Texas are applicable for purposes of determining the "Maximum Rate" or the
"Maximum Amount", such term shall mean the "indicated rate ceiling" from time
to time in effect under Article 1.04, Title 79, Revised Civil Statutes of
Texas, as amended. Pursuant to Article 15.10(b) of Chapter 15, Subtitle 79,
Revised Civil Statutes of Texas, 1925, as amended, Borrower agrees that such
Chapter 15 (which regulates certain revolving credit loan accounts and
revolving triparty accounts) shall not govern or in any manner apply to the
Obligation.
(h) Offices. To the extent permitted by law, Lender may
make, carry, or transfer its part of any Advance at, to, or for the account of
any of its branch offices or the office of any of its affiliates.
(i) Basis Unavailable or Inadequate. If, on or before any
date on which a LIBOR Rate is to be determined for an Advance, Lender
determines that the basis for determining any such rate is not available or
that the resulting rate does not accurately reflect the cost to Lender of
making, maintaining, or converting Advances at such rate for the applicable
Interest Period, then Lender shall promptly give notice of such determination
to Borrower (and such determination shall be conclusive and binding on
Borrower) and such Advance shall bear interest at the Base Rate. Until Lender
notifies Borrower that the circumstances giving rise to such condition no
longer exist, Lender's commitments hereunder to make or maintain, or to convert
to, Advances at the LIBOR Rate shall be suspended and such Advance shall be
made or maintained at the Base Rate. When the circumstances giving rise to such
condition no longer exist, Borrower may convert such Advance or Advances into
an Advance at the LIBOR
-5-
<PAGE> 7
Rate, provided that each such conversion must be effected by Borrower giving
Lender irrevocable notice in the form of the attached Exhibit B-2 (a
"Conversion Notice") which must be received by Lender no later than 10:00 a.m.
Fort Worth time on the third Business Day preceding the date of the requested
conversion for conversion of an Advance to the LIBOR Rate. Each Conversion
Notice must specify the date of conversion, the Advances to be converted, and
the Interest Period to be applicable thereto.
(j) Additional Cost/Reductions.
(i) If, in respect of all or any portion of any
Advance at the LIBOR Rate (A) any present or future law shall impose, modify,
or deem applicable, or compliance by Lender with any requirement (whether or
nor having the force of law) of any central bank or governmental agency shall
result, in any requirement that any reserves (including, without limitation,
any marginal, emergency, supplemental, special, or other reserves) be maintained
- -- other than the Reserve Requirements already taken into effect in the
calculation of the LIBOR Rate -- and (B) any of the same results in a reduction
in any sums receivable by Lender hereunder or an increase in the costs incurred
by Lender in advancing or maintaining any portion of any Advance at the LIBOR
Rate, then (C) Lender shall give notice to Borrower upon becoming aware of same
and deliver to Borrower a certificate setting forth in reasonable detail the
amount necessary to compensate Lender for such reduction or such increase (which
certificate shall be conclusive and binding as to such amount, absent manifest
error), and (D) Borrower shall either, at Borrower's election, pay such amount
to Lender within ten days after demand therefor or, before the Termination Date
and subject to all other conditions to an Advance under this agreement, add such
amount to the Principal Debt.
(ii) If with respect to all or any portion of any
Advance, any present or future law regarding capital adequacy or compliance by
Lender with any request, directive, or requirement now existing or hereafter
imposed by any central bank or governmental agency regarding capital adequacy
(whether or not having the force of law) shall result in a reduction in the rate
of return on Lender's capital as a consequence of Lender's obligations under
this agreement to a level below that which Lender otherwise could have achieved
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by Lender to be material (and Lender may, in determining such
amount, utilize such assumptions and allocations of costs and expenses as Lender
shall deem reasonable and may use any reasonable averaging or attribution
method), then (unless the effect of such event is already reflected in the rate
of interest then applicable hereunder) Lender shall notify Borrower and deliver
to Borrower a certificate setting forth in reasonable detail the calculation of
the amount necessary to compensate Lender therefor, which certificate shall be
conclusive and binding absent manifest error, and Borrower shall either, at
Borrower's election, pay such amount to such Lender within ten days after demand
therefor or, before the Termination Date and subject to all other conditions to
an Advance under this agreement, add such amount to the Principal Debt.
(k) Unlawfulness. If at any time any law shall make it
unlawful for Lender to make or maintain any Advance at the LIBOR Rate, then
Lender shall promptly notify Borrower, and (a) in respect of undisbursed funds,
Lender shall not be obligated to make any requested Advance which would be
unlawful, and (b) in respect of any outstanding Advance (i) if maintaining such
Advance until the last day of the Interest Period applicable thereto is
unlawful, such Advance shall be converted to the Base Rate as of the date of
such notice, and Borrower shall pay any related Consequential Loss, or (ii) if
not so prohibited by law, such Advance shall be converted to the Base Rate as
of the last day of the Interest Period then applicable thereto, or (iii) if any
such conversion will not resolve such unlawfulness, Borrower shall prepay
promptly that Advance, without penalty, but with any related Consequential
Loss.
(l) Consequential Loss. Borrower shall indemnify Lender
against, and shall pay to Lender within ten days after demand, any
Consequential Loss of Lender. When Lender demands that Borrower pay any
Consequential Loss, Lender shall deliver to Borrower a certificate setting
forth in reasonable detail the basis for imposing such Consequential Loss, the
calculation of such amount thereof, which calculation shall be conclusive and
binding absent manifest error.
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<PAGE> 8
4. Terms of Payment.
(a) Note. The indebtedness arising under this agreement
shall be evidenced by, and payable in accordance with the terms of, a
promissory note (as renewed, extended, amended, or replaced, the "Note"),
executed by Borrower and in the stated principal amount of $75,000,000 and
substantially in the form of the attached Exhibit A.
(b) Prepayments. If Borrower fails to deliver Acceptable
Additional Collateral whenever required under this agreement within the five
Business Days herein provided, then Borrower must, upon demand and without
further notice, mandatorily prepay the Obligation -- together with any related
Consequential Loss -- until the Advance Ratio is met. Subject to this agreement,
any Principal Debt repaid before the Termination Date may be reborrowed.
(c) Order of Application. Except as otherwise provided,
payments and prepayments of the Obligation shall be applied in the following
order: (i) expenses then owed to Lender; (ii) fees then due and payable to
Lender; (iii) accrued interest on the Obligation that is then due and payable;
(iv) Principal Debt; and (v) to the remaining Obligation in the order and manner
as Lender may select. Applications under clause (v) will be made in an order
that will minimize the related Consequential Loss.
(d) Fees. Borrower agrees to pay to Lender a facility
fee, payable on the date on which the initial Advance is made hereunder equal
to 0.25% of the Revolving Commitment, which -- except as otherwise provided by
law and to the extent not in excess of the Maximum Rate -- does not constitute
compensation for the use, detention, or forbearance of money, is in addition
to, and not in lieu of, interest and expenses otherwise described in this
agreement, is non-refundable, bears interest at the Default Rate from the date
due until paid, and is calculated on the basis of actual number of days over a
360-day year.
5. Collateral.
(a) Advance Ratio. On and after the date of this
agreement, Borrower shall from time to time pledge and deliver to Lender
Columbia/HCA Stock (together with any additional collateral under clauses (b)
or (c) below and proceeds, the "Collateral") with a fair-market value
sufficient to enable Borrower to borrow Advances under Paragraph 2.
(b) Margin Ratio. If the Margin Ratio exists, then
Borrower shall, within five Business Days of receipt by Borrower, Borrower's
office, or Borrower's attorney of request from Lender, pledge and deliver to
Lender Acceptable Additional Collateral until the Advance Ratio is met.
(c) Release of Collateral. If the Loan-to-Collateral
Ratio is ever less than 40% for more than 30 consecutive Business Days, then
Lender shall -- upon receipt of written request from Borrower -- as soon as
reasonably practical return to Borrower Columbia/HCA Stock, or other
Collateral, in Lender's sole discretion, and release Lender's security interest
therein until the Loan-to-Collateral value is 45%, so long as the release of
such stock to Borrower does not violate Regulation U of the Board of Governors
of the Federal Reserve System, as amended. In addition, upon Borrower's written
request, and if Borrower delivers to Lender Acceptable Additional Collateral,
and such security instruments as Lender requests in order to give Lender a
first priority perfected security interest in such substitute collateral,
Lender shall return to Borrower all such shares of Columbia/HCA Stock as
Borrower may request, so long as the Loan-to-Collateral Ratio will be less than
or equal to 45% upon the return of such shares.
(d) Volume Limitations. In no event however, may the
Collateral include Columbia/HCA Stock in excess of 5% of the issued and
outstanding shares of the Common Stock par value $0.01 issued by Columbia/HCA.
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<PAGE> 9
6. Certain Representations and Warranties. Borrower represents
and warrants to Lender that: (a) Borrower has requisite legal capacity and
power to conduct his businesses and to execute, deliver, and comply with the
terms of the Loan Papers for which no approval or consent of any person, entity
or governmental authority of any nature is required; (b) the execution,
delivery, and performance of the Loan Papers will not cause Borrower to be in
violation of any applicable law or regulation (to the extent such violation is
a Material Adverse Event) or of any material agreement, instrument, or contract
to which Borrower is a party or by which any of Borrower's assets are bound;
(c) Borrower is not involved in or aware of the threat of any litigation which,
if determined adversely to Borrower, would be a Material Adverse Event; (d)
there are no outstanding or unpaid judgments against Borrower; (e) all financial
statements and related information delivered to Lender by Borrower were true
and correct in all material respects as of the date thereof, were (in the case
of financial statements) prepared in accordance with accounting principles
acceptable to Lender, and fairly present Borrower's financial condition,
material liabilities, there having been no material adverse changes in the
financial condition of, and no (except as contemplated herein) material
obligations (direct, indirect, contingent, or liquidated) incurred by, Borrower
between the date of such financial statements and the date hereof; and (f)
credit extended under this agreement is for the purposes stated in the first
paragraph of this agreement.
7. Conditions Precedent. Lender shall not be obligated to make
the initial or any subsequent Advance hereunder unless and until it shall have
received (a) the notice therefor in substantially the form of the attached
Exhibit B-1 and all statements made therein are true and correct, and (b)
agreements, documents, instruments, certificates, opinions, evidences, and
other items listed on the attached Schedule I, in each case in such number of
counterparts and in form as may be reasonably acceptable to Lender.
8. Certain Affirmative Covenants. Until the Obligation has been
paid and performed in full, Borrower covenants with Lender that it shall: (a)
deliver to Lender financial statements and other information from time to time
and at any time as Lender may reasonably request, containing such information
as Lender may deem necessary or appropriate, in its sole discretion, including,
without limitation, (i) as soon as available, but no later than 90 days after
the end of each calendar year, annual financial statements (including a balance
sheet, cash flow statement, and statement of contingent liabilities) executed by
Borrower and prepared in accordance with accounting principles acceptable to
Lender and showing Borrower's financial condition and material liabilities, and
(ii) as soon as available, but no later than 60 days after the end of each
quarter of each calendar year, quarterly financial statements (including a
balance sheet, cash flow statement, and statement of contingent liabilities)
executed by Borrower and prepared in accordance with accounting principles
acceptable to Lender and showing Borrower's financial condition and material
liabilities; (b) take such action and execute such additional pledge
agreements, stock powers, Federal Reserve Form U-1 Statements of Purpose, and
other agreements, documents, and instruments as may be reasonably required by
Lender relating to the Collateral; (c) transfer to Lender significant deposit
accounts that now exist at other institutions; and (d) pay the out-of-pocket
costs, including, without limitation, filing fees and reasonable attorneys'
fees, costs, expenses and disbursements incurred by Lender in the preparation,
negotiation, execution, and, if appropriate, recordation of the Loan Papers and
any amendments thereto or waivers thereunder.
9. Certain Negative Covenants. Until the Obligation has been paid
and performed in full, Borrower covenants and agrees with Lender that Borrower
will not directly or indirectly, without prior written consent of Lender: (a)
permit the Columbia/HCA Stock, or any other Collateral ever to become subject
to any contractual or consensual transfer restrictions which would be
applicable to Lender or any transferee of Lender, except restrictions under the
HCA Registration Rights Agreement; (b) assign or attempt to assign any of
Borrower's rights or obligations under any Loan Paper; (c) sell "Registrable
Securities," as defined in the HCA Registration Rights Agreement, in any
registration effected pursuant to the HCA Registration Rights Agreement; or (d)
create, assume, incur, permit to exist, guarantee or in any manner become
liable, contingently or otherwise, in respect of any indebtedness, other than
the indebtedness of the Borrower under the Loan Papers, in an aggregate amount
outstanding in excess of $50,000,000.
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<PAGE> 10
10. Default. As used herein, "Default" means the occurrence of any
one or more of the following (and the term "Potential Default" means the
occurrence of any event which, with notice or lapse of time or both, could
become a Default): (a) Borrower's failure or refusal to pay any of the
Obligation when due (and, in respect of interest payments only, the same is not
paid within five days of such due date); (b) Borrower's failure to punctually
and properly perform, observe, and comply with any other covenant, agreement, or
condition contained in Paragraph 5; (c) Borrower's failure to punctually and
properly perform, observe, and comply in any material respect with any other
covenant, agreement, or condition contained in any Loan Paper and such failure
is not corrected to Lender's satisfaction within five Business Days following
notice thereof given to Borrower by Lender; (d) Borrower shall be insolvent,
shall generally fail to pay Borrower's debts as they become due, or shall become
a party to (other than as a claimant or creditor) or is made the subject of any
proceeding provided by any bankruptcy, liquidation, conservatorship, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar law from
time to time in effect and affecting the rights of creditors generally (unless,
in the event such proceeding is involuntary, the petition instituting same is
dismissed within 60 days after its filing); (e) Borrower fails to have
discharged, within a period of 30 days after final entry of any judgment,
warrant of attachment, sequestration, or similar proceeding against its assets
with a value, individually or collectively, in excess of $1,000,000; (f) the
occurrence and continuance of an event of default in respect of any other debt
of Borrower, individually or collectively, in excess of $1,000,000 (unless
Borrower is diligently contesting the amount or validity of such debt or such
event of default by appropriate proceedings and the obligee in respect thereof
is not pursuing the exercise of remedies against Borrower or Borrower's assets
at such time); (g) any representation or warranty made by Borrower in this
agreement or in any other writing delivered by Borrower to Lender in connection
with this agreement was false, misleading, or erroneous in any material respect
at the time it was made; and (h) any other "event of default" or "default"
under, or as such terms are defined in any Loan Paper.
11. Remedies and Rights. Upon the occurrence and continuance of a
Default, Lender may exercise any and all legal and equitable rights and
remedies afforded by the Loan Papers, applicable laws, or otherwise, including,
without limitation, declaring all of the Obligation immediately due and payable
and terminating its commitment to make Advances under this agreement. All rights
available to Lender under the Loan Papers shall be cumulative of and in
addition to all other rights granted to Lender at law or in equity, whether or
not the Obligation be due and payable and whether or not Lender has instituted
any suit for collection or other action in connection with the Loan Papers. Any
sums spent by Lender pursuant to the exercise of any right provided herein
shall become part of the Obligation and shall bear interest from the date spent
until the date repaid by Borrower at the Default Rate, and the obligations of
Borrower and the rights of Lender under the Loan Papers shall continue in full
force and effect until the Obligation and all other indebtedness under the Loan
Papers has been paid and performed in full.
12. Indemnification. Borrower shall indemnify, protect, and hold
Lender and its parents, subsidiaries, directors, officers, employees,
representatives, agents, successors, assigns, and attorneys (collectively, the
"Indemnified parties") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims, and
proceedings and all reasonable and necessary costs, expenses (including,
without limitation, all reasonable attorneys' fees and legal expenses whether
or nor suit is brought) and disbursements of any kind or nature whatsoever (the
"Indemnified liabilities") which may at any time be imposed on, incurred by, or
asserted against the indemnified parties, in any way relating to or arising out
of any Loan Paper, or any of the transactions contemplated therein to the
extent that any of the indemnified liabilities results, directly or indirectly,
from any litigation or proceeding commenced by or on behalf Of any person or
entity other than the indemnified parties (provided that, although each
indemnified party shall be indemnified for such party's ordinary negligence
hereunder, no indemnified party shall have the right to be indemnified
hereunder for its own fraud, gross negligence, or willful misconduct).
13. Waivers. Borrower and all endorsers, sureties and guarantors
of the Obligation, or any part thereof, hereby severally waive (a) presentment,
demand and protest, (b) notice of default, dishonor, demand, non-payment and
protest, (c) notice of intent to accelerate all or any
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<PAGE> 11
part of the Obligation, (d) notice of acceleration of all or any part of the
Obligation, (e) diligence in collecting any payment of all or any part of the
Obligation, (f) the bringing of any suit against any Person, (g) notice of
release, subordination, substitution or modification of any security for all or
any part of the Obligation, (h) any delay, indulgence, waiver or other act of
or by Lender, (i) the release of any party primarily or secondarily liable for
all or any part of the Obligation, and (j) notice of any other kind.
14. Miscellaneous. Where appropriate, words of any number shall
include the plural and singular or of any gender shall include each other
gender. Unless specifically otherwise provided, any approval, consent, demand,
notice, request, or other communication under the Loan Papers to any party
under this agreement must be in writing (which may be by facsimile transmission
if a facsimile number is provided herein for such party and if, without
affecting the date such facsimile transmission was actually made, subsequently
confirmed by delivery or mailing in accordance with this paragraph) to be
effective and shall be deemed to have been given on the day actually delivered
or, if mailed, on the third Business Day after it is enclosed in an envelope,
addressed to the party to be notified, properly stamped, sealed, and deposited
in the appropriate postal service. Until changed by notice pursuant hereto, the
address (and facsimile number, if any) for each party it set forth below its
name on the first page of this agreement. All covenants, agreements,
undertakings, representations, and warranties made in any Loan Paper shall
survive all closings under the Loan Papers and shall not be affected by any
investigation made by any party. Representations, warranties, covenants,
defaults, remedies, or other provisions of any Loan Paper shall not limit or
abrogate the provisions of any other Loan Paper even if of a similar nature, and
all provisions of all Loan Papers shall be binding and enforceable upon the
parties thereto. Any conflict or ambiguity between the terms and provisions of
one Loan Paper and terms and provisions in any other Loan Paper shall be
controlled by the terms and provisions that are the most restrictive upon
Borrower. The laws of the State of Texas and the United States shall govern the
rights and duties of the parties hereto and the validity, construction,
enforcement, and interpretation of the Loan Papers. If any provision in any Loan
Paper is held to be illegal, invalid, or unenforceable, such provision shall be
fully severable; the appropriate Loan Paper shall be construed and enforced as
if such provision had never comprised a part thereof; and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by such provision or by its severance therefrom. The Loan Papers may be
amended or the provisions thereof waived only by an instrument in writing
executed jointly by Borrower and Lender, and supplemented only by documents
delivered or to be delivered in accordance with the express terms thereof. This
agreement may be executed in a number of identical counterparts, each of which
shall be deemed an original for all purposes and all of which constitute,
collectively, one agreement; but, in making proof of this agreement, it shall
not be necessary to produce or account for more than one such counterpart. THE
LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS
BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
15. Acceptance; Parties Bound. If the foregoing is acceptable to
Borrower, Borrower should execute one or more copies hereof in the spaces
provided below, whereupon this letter will become an agreement binding upon and
inuring to the benefit of Lender and Borrower, and the respective heirs,
personal representatives, successors, and assigns of each; provided that
Borrower may not, without the prior written consent of Lender, assign any rights
or obligations hereunder, and any purported assignment without such consent
shall be void ab initio.
[Remainder of page intentionally left blank.]
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<PAGE> 12
Very truly yours,
NATIONSBANK OF TEXAS, N.A., Lender
By: /s/ Cary C. Conwell
--------------------------------
Cary C. Conwell, Vice President
The foregoing is accepted and agreed to in all respects on
June 1, 1995, to be effective as of the date first above written.
/s/ Richard E. Rainwater
-----------------------------------
RICHARD E. RAINWATER, Borrower
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