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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 26, 1996
MESA INC.
(Exact name of registrant as specified in its charter)
TEXAS 1-10874 75-2394500
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BOULEVARD
IRVING, TEXAS 75039
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 214/444-9001
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ITEM 5. OTHER EVENTS
On April 26, 1996, MESA Inc. (the "Company") and DNR-MESA
Holdings, L.P., a Texas limited partnership ("DNR"), the sole general partner
of which is Rainwater, Inc. a Texas corporation owned by Richard E. Rainwater,
entered into a definitive agreement (the "Stock Purchase Agreement") pursuant
to which, among other things, DNR will (i) purchase $133 million of a new
series of convertible preferred stock of the Company, (ii) provide a standby
commitment for a $132 million rights offering of convertible preferred stock to
the Company's shareholders and (iii) assist the Company in the refinancing of
all of the Company's debt not repaid with proceeds from the stock issuance. A
copy of the press release regarding the Stock Purchase Agreement is attached
hereto as Exhibit 99. The description of the Stock Purchase Agreement included
herein does not purport to be complete and is qualified in its entirety by
reference to the terms of the Stock Purchase Agreement, a copy of which is
attached hereto as Exhibit 10 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
4. Form of Statement of Resolution Establishing
Series of Shares Designated Series A
Cumulative Convertible Preferred Stock and
Series B Cumulative Convertible Preferred
Stock
10. Stock Purchase Agreement, dated April 26,
1996, between the Company and DNR-MESA
Holdings, L.P.
99. Press Release dated April 29, 1996
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
MESA INC.
Date: April 29, 1996 By: /s/ Stephen K. Gardner
------------------------------------------
Stephen K. Gardner
Vice President and Chief Financial Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4. Form of Statement of Resolution Establishing Series of Shares
Designated Series A Cumulative Convertible Preferred Stock and Series
B Cumulative Convertible Preferred Stock
10. Stock Purchase Agreement, dated April 26, 1996, between the Company
and DNR-MESA Holdings, L.P.
99. Press Release dated April 29, 1996
</TABLE>
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EXHIBIT 4
[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,
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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).
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
____________________
(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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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.
"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 & Poors 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.
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"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.
"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
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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. 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
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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
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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
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
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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 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
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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 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
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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
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, 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: (i) 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
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<PAGE> 11
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 (ii) amend the Articles of
Incorporation to eliminate cumulative voting.
(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 or that would
adversely affect any rights, preferences, privileges 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).
(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 constituting the corporation's Board of
Directors shall automatically be
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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
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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 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. Nothing in clause (ii) or (iii) of this
subsection (i) 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
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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, non-
assessable 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 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
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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 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.
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(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 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
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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
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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 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
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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 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
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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 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.
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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 10
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
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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.
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<PAGE> 3
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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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;
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(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).
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"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.
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"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.
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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> 44
<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> 45
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> 1
EXHIBIT 99
[MESA NEWS RELEASE LETTERHEAD]
FOR IMMEDIATE RELEASE CONTACT: JAY ROSSER
APRIL 29, 1996 214-402-7019
MESA ANNOUNCES DEFINITIVE AGREEMENT FOR RECAPITALIZATION
Rainwater equity investment, refinancing will strengthen company's financial
____________________________________________________________________________
structure
_________
(IRVING, TEXAS) -- MESA Inc. today said it has signed a definitive
agreement with a partnership controlled by Rainwater, Inc., intended to
recapitalize the company with a $265 million equity infusion and a complete
refinancing of the company's remaining debt.
The proposed transaction will be submitted to a special meeting of
MESA stockholders in June. As previously announced, the two parties signed a
letter of intent in late February that outlined the proposed transaction.
Upon approval by MESA stockholders and completion, the transaction
will reduce MESA's annual interest expense by approximately $60 million by
repaying a portion of MESA's outstanding debt and refinancing the balance at
lower interest rates.
"Signing the definitive agreement brings us one step closer to a new
growth opportunity for MESA and its stockholders," said Chairman and CEO Boone
Pickens.
Terms of the definitive agreement are substantially the same as those
outlined in the letter of intent. Major provisions include:
* A partnership controlled by Rainwater, Inc., will purchase
$133 million of convertible preferred stock. MESA will also conduct a rights
offering in which stockholders will be entitled to purchase a total of $132
million of convertible preferred stock at $2.26 per
1
<PAGE> 2
share, the same price at which Rainwater will purchase the convertible stock.
Alternatively, stockholders will be entitled to sell their rights on the open
market. The Rainwater partnership will provide a standby commitment to
purchase any remaining convertible preferred stock not purchased by
stockholders in the rights offering.
Each preferred share will be convertible into one common share of MESA
at any time prior to mandatory redemption in 2008. The preferred stock will
receive an 8 percent pay-in-kind dividend for the first four years. In
subsequent years, MESA would, at its option, pay the 8 percent dividend in cash
or additional preferred shares, depending on certain financial tests.
* MESA will repay and/or refinance all of its outstanding
indebtedness (approximately $1.2 billion at December 31, 1995) and has secured
a commitment for a $500 million revolving credit facility from The Chase
Manhattan Bank, N.A., and Bankers Trust Company. MESA also has received a
"highly confident" letter regarding the sale of up to $525 million of
subordinated notes which are expected to be sold in an underwritten public
offering. Proceeds from the bank commitment and the subordinated notes, when
added to the $265 million equity investment and cash on hand, will provide MESA
with the necessary funding to repay or refinance all of its existing debt
obligations.
* Rainwater will have the right to elect a majority of MESA's
directors as long as certain minimum ownership requirements are met. Except for
voting rights to elect directors, the rights of preferred shares to be issued
in the rights offering will be substantially identical to those to be purchased
by Rainwater.
MESA has set its annual stockholder meeting for July 30, 1996.
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<PAGE> 3
MESA said that, in addition to the MESA/Rainwater transaction, the
company plans to submit for stockholder approval at the special meeting a
separate proposal for a one-for-four reverse stock split with respect to all
outstanding MESA stock, including the new preferred stock.
(Copies of MESA and MESA Environmental news releases issued during the
past 12 months are available for retrieval on MESA's Internet home page:
http://www.mesainc.com)
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