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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 6, 1997
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: 972/444-9001
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ITEM 5. OTHER EVENTS
On April 6, 1997, MESA Inc. ("Mesa") issued a press release (the
"Press Release") announcing that it and Parker & Parsley Petroleum Company, a
Delaware corporation ("Parker & Parsley"), had entered into an Agreement and
Plan of Merger ("Merger Agreement") to merge and create Pioneer Natural
Resources Company, a Delaware corporation. The consummation of the transactions
contemplated in the Merger Agreement is subject to the approval of the
shareholders of each of Mesa and Parker & Parsley. For additional information
regarding the transactions contemplated in the Merger Agreement, reference is
made to the Press Release, the Merger Agreement and certain other documents
entered into in connection with the Merger Agreement, copies of which are
attached hereto as exhibits and incorporated herein by reference.
The following tables set forth certain summary pro forma condensed
consolidated financial, operating and reserve information of Mesa and Parker &
Parsley as of and for the year ended December 31, 1996. Such information does
not give effect to the transactions contemplated in the Merger Agreement. The
unaudited pro forma consolidated information of Mesa gives effect to the 1996
recapitalization of Mesa's balance sheet, the acquisition of all of the
outstanding equity of Greenhill Petroleum Corporation and additional borrowings
to finance such acquisition. Such information should be read in conjunction
with Mesa's Current Report on Form 8-K dated February 7, 1997 and the
Consolidated Financial Statements of Mesa (and the related notes) included in
Mesa's Annual Report on Form 10-K for the year ended December 31, 1996.
The unaudited pro forma consolidated information of Parker & Parsley gives
effect to (i) the sale of certain wholly-owned Australian subsidiaries to
Santos Ltd. in March 1996, (ii) the sale of Bridge Oil Timor Sea, Inc. to
Phillips Petroleum International Investment Company in June 1996 and (iii) the
aggregate effect of the sales of certain nonstrategic domestic oil and gas
properties, gas plants, contract rights and related assets sold during the
period from January 2, 1996 to December 31, 1996. Such information should be
read in conjunction with Parker & Parsley's Form 8-K dated April 3, 1997 and
the Consolidated Financial Statements of Parker & Parsley (and the related
notes) included in Parker & Parsley's Annual Report on Form 10-K for the year
ended December 31, 1996.
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MESA
SUMMARY PRO FORMA CONDENSED FINANCIAL OPERATING INFORMATION
(in thousands except per share data)
<TABLE>
<CAPTION>
<S> <C>
Revenues:
Natural gas $201,689
Natural gas liquids 97,561
Oil and condensate 72,030
Other 11,075
--------
382,355
--------
Costs and expenses:
Lease operating 72,233
Production and other taxes 25,384
Exploration charges 12,772
General and administrative 31,743
Depreciation, depletion and
amortization 135,289
--------
277,421
--------
Operating income 104,934
Net interest expense (97,062)
Other income 24,626
--------
Income from continuing operations
before income taxes 32,498
--------
Income from continuing operations 32,498
Dividends on preferred stock (21,880)
--------
Net income from continuing
operations attributable to
common $ 10,618
========
Net income per
common share $0.16
=====
Common shares 65,129
========
EBITDAEX(1) $277,621
========
</TABLE>
(1) EBITDAEX represents net income from continuing operations plus net
interest expense, depreciation, depletion and amortization expense and
exploration charges. EBITDAEX is not presented as an indicator of
operating performance or as a measure of liquidity.
<TABLE>
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BALANCE SHEET DATA
Cash and investments $ 23,485
Total Assets 1,494,527
Long-term, debt, including current
maturities 1,078,577
Stockholders' equity 265,494
SUMMARY PRO FORMA RESERVE AND
PRODUCTION DATA
ESTIMATED PROVED RESERVES:
Natural gas (Bcf) 1,079.6
Natural gas liquids(MMBbls) 88.1
Oil and condensate (MMBbls) 30.3
Present Value of future net cash
flows, before income taxes,
discounted at 10% (in millions) $ 2,135.9
PRODUCATION DATA:
Natural gas (Bcf) 90.0
Natural gas liquids (MMBbls) 6.5
Oil and condensate (MMBbls) 3.4
</TABLE>
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PARKER & PARSLEY
SUMMARY PRO FORMA CONDENSED FINANCIAL AND OPERATING INFORMATION
(in thousands, except per share data)
<TABLE>
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Revenues:
Oil and gas $ 374,560
Natural gas processing 23,184
Interest and Other 17,328
-----------
415,072
-----------
Costs and expenses:
Oil and gas production 101,545
Natural gas processing 11,949
Depletion, depreciation and
amortization 104,629
Exploration and abandonments 20,187
General and administrative 26,631
Interest 40,720
Other 2,451
-----------
308,112
-----------
Income from continuing
operations before income taxes 106,960
Income tax provision (37,400)
-----------
Income from continuing operations $ 69,560
===========
Income from continuing operations
per share:
Primary $ 2.16
===========
Fully diluted $ 1.81
===========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
COMMON 35,734
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EBITDA(a) $ 272,496
===========
(a) EBITDA represents income from continuing operations plus interest
expense, income tax expense, exploration and abandonment charges, and
depletion, depreciation and amortization expense. EBITDA is not
presented as an indicator of operating performance or as a measure of
liquidity.
BALANCE SHEET DATA
Cash and investments $ 18,711
Total assets 1,199,865
Long-term debt, including current
maturities 326,289
Preferred stock of subsidiary 188,820
Stockholders' equity 530,296
SUMMARY PRO FORMA RESERVE AND
PRODUCTION DATA
ESTIMATED PROVED RESERVES:
Natural gas (Bcf) 829.4
Oil and condensate (MMBbls) 163.9
Present value of future net cash
flows, before income taxes,
discounted at 10% (in millions) $ 2,345.4
PRODUCTION DATA:
Natural gas (Bcf) 70.7
Oil and condensate (MMBbls) 10.7
</TABLE>
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On Friday, April 4, 1997, MESA had outstanding 64,279,568, 61,651,163
and 62,424,436 shares of common stock, Series A 8% Cumulative Convertible
Preferred Stock ("Series A Preferred Stock") and Series B 8% Cumulative
Convertible Preferred Stock ("Series B Preferred Stock"), respectively. The New
York Stock Exchange closing prices per share of MESA's common stock and Series
A Preferred Stock on such date were $5.75 and $7.25, respectively. MESA's
Series B Preferred Stock is not listed on an exchange. On the same date, Parker
& Parsley had 35,047,050 shares of common stock outstanding, and its New York
Stock Exchange closing price was $29.875 per share.
The Current Report on Form 8-K includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such forward-looking statements
include, without limitation, estimates with respect to reserves and production
levels. Although MESA and Parker & Parsley believe that the expectations
reflected in such forward-looking statements are reasonable, Mesa
can give no assurance that such expectations will prove to have been correct.
Forward-looking statements are qualified as may be provided in Mesa's and
Parker & Parsley's annual, quarterly and current reports and registration
statements filed with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of April 6,
1997 among MESA Inc., MESA Operating Co., MXP
Reincorporation Corp., and Parker & Parsley
Petroleum Company.
2.2 Shareholders Agreement dated as of April 6, 1997 by
and between MESA Inc. and DNR-MESA Holdings, L.P.
2.3 Letter Agreement dated April 6, 1997 between Parker
& Parsley Petroleum Company and DNR-MESA Holdings,
L.P.
2.4 Shareholder Agreement dated as of April 6, 1997 by
and between Boone Pickens and Parker & Parsley
Petroleum Company.
99 Press release issued on April 6, 1997 relating to
the Merger Agreement.
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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 7, 1997 By: /s/ STEPHEN K. GARDNER
--------------------------------
Stephen K. Gardner
Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBIT
EXHIBITS TITLE
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2.1 Agreement and Plan of Merger dated as of April 6,
1997 among MESA Inc., MESA Operating Co., MXP
Reincorporation Corp., and Parker & Parsley
Petroleum Company
2.2 Shareholders Agreement dated as of April 6, 1997 by
and between MESA Inc. and DNR-MESA Holdings, L.P.
2.3 Letter Agreement dated April 6, 1997 between Parker
& Parsley Petroleum Company and DNR-MESA Holdings,
L.P.
2.4 Shareholders Agreement dated as of April 6, 1997 by
and between Boone Pickens and Parker & Parsley
Petroleum Company.
99 Press release issued on April 6, 1997 relating to
the Merger Agreement.
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AGREEMENT AND PLAN OF MERGER
AMONG
MESA INC.
MESA OPERATING CO.
MXP REINCORPORATION CORP.
AND
PARKER & PARSLEY PETROLEUM COMPANY
DATED AS OF APRIL 6, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Times of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.3 Effects of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE SM
CONSTITUENT CORPORATIONS AND THE RM CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of Spice Merger on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
(a) Capital Stock of Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
(b) Cancellation of Spice Treasury Stock and MXP-Owned Spice Stock . . . . . . . . . . . . . . -3-
(c) Exchange Ratio for Spice Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(d) Treatment of Spice Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.2 Effect of Reincorporation Merger on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(a) Capital Stock of Reincorporation Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(b) Cancellation of MXP Treasury Stock and Spice-Owned MXP Stock . . . . . . . . . . . . . . . -4-
(c) Exchange Ratio for MXP Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
(d) Treatment of MXP Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(b) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
(c) Distributions with Respect to Unexchanged Shares . . . . . . . . . . . . . . . . . . . . . -6-
(d) No Further Ownership Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
(e) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
(f) Termination of Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
(g) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(h) Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.4 Exchange Procedures for MXP Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(a) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
(b) Procedure for Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
(c) Revocation of Election; Return of Certificates . . . . . . . . . . . . . . . . . . . . . . -10-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Spice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
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(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
(c) Authority; No Violations; Consents and Approvals . . . . . . . . . . . . . . . . . . . . -12-
(d) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
(f) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
(g) No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(h) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(i) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
(l) Pension and Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
(n) Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
(o) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
(q) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
(r) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
(s) Beneficial Ownership of MXP Common Stock . . . . . . . . . . . . . . . . . . . . . . . . -29-
(t) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
(u) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
3.2 Representations and Warranties of MXP, Reincorporation Sub and Merger
Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
(c) Authority; No Violations, Consents and Approvals . . . . . . . . . . . . . . . . . . . . -32-
(d) SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
(f) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
(g) No Undisclosed Material Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(h) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(i) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
(j) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(k) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
(l) Pension and Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
(m) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
(n) Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
(o) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
(q) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
(r) Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
(s) Beneficial Ownership of Spice Common Stock . . . . . . . . . . . . . . . . . . . . . . . -47-
(t) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
(u) Interim Operations of Reincorporation Sub and Merger Sub . . . . . . . . . . . . . . . . -47-
</TABLE>
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(v) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by Spice and MXP Pending the Merger . . . . . . . . . . . . . . . . . . . . . -47-
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(g) No Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(h) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(i) Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
(j) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
(l) Certain Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
(m) Indebtedness; Leases; Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . -50-
(n) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
4.2 No Solicitation by Spice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
4.3 No Solicitation by MXP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . -53-
5.2 Letter of Spice's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
5.3 Letter of MXP's Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
5.4 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
5.5 Stockholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
5.6 HSR and Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(a) HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
(b) Other Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
5.7 Agreements of Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
5.8 Authorization for Shares and Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . -56-
5.9 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
5.10 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
5.11 Indemnification; Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . . -58-
5.12 Agreement to Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.13 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.14 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.15 Advice of Changes; SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
5.16 Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
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<TABLE>
<S> <C> <C>
5.17 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
5.18 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
5.19 Chairman and CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
5.20 Charter Amendments; Name and Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.21 Employee and Director Incentive Indemnification and Severance Plans . . . . . . . . . . . . . . . -63-
5.22 Subsequent Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.23 MIPS Assumption Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.24 Indenture Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
5.25 New Bank Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
5.26 DNR Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
5.27 Pickens Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
5.28 MIPS Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Mergers . . . . . . . . . . . . . . . . . . . -64-
(a) Spice Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
(b) MXP Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
(c) NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
(d) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
(e) S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
(f) No Injunctions or Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
6.2 Conditions of Obligations of MXP, Reincorporation Sub and Merger Sub . . . . . . . . . . . . . . . -65-
(a) Representations and Warranties of Spice . . . . . . . . . . . . . . . . . . . . . . . . . -65-
(b) Performance of Obligations of Spice . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
(d) Letters from Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
6.3 Conditions of Obligations of Spice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
(a) Representations and Warranties of MXP, Reincorporation Sub and Merger Sub . . . . . . . . -66-
(b) Performance of Obligations of MXP . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
(d) Letters from Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
7.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
7.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
8.2 Nonsurvival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . -72-
8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
8.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.6 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.8 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.10 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
8.10 Schedule Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -75-
</TABLE>
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EXHIBITS:
<TABLE>
<S> <C>
Exhibit A Post SM Effective Time Board of Directors
</TABLE>
DISCLOSURE SCHEDULES:
SPICE DISCLOSURE SCHEDULE:
- --------------------------
Schedule 3.1(a) Spice Significant Subsidiaries
Schedule 3.1(b) Spice Subsidiary Ownership
Schedule 3.1(c) Spice Conflicts
Schedule 3.1(j) Spice Litigation
Schedule 3.1(k) Spice Tax Information
Schedule 3.1(l) Spice Pension and Benefit Plan and Related Information
Schedule 3.1(m) Spice Labor Matters
Schedule 3.1(o) Spice Environmental Matters
Schedule 3.1(p) Spice Insurance
Schedule 3.1(u) Spice Tax Certificate
Schedule 4.1(e) Spice Acquisition
MXP DISCLOSURE SCHEDULE:
- -----------------------
Schedule 3.2(a) MXP Significant Subsidiaries
Schedule 3.2(b) MXP Subsidiary Ownership
Schedule 3.2(c) MXP Conflicts
Schedule 3.2(j) MXP Litigation
Schedule 3.2(k) MXP Tax Information
Schedule 3.2(l) MXP Pension and Benefit Plan and Related Information
Schedule 3.2(m) MXP Labor Matters
Schedule 3.2(o) MXP Environmental Matters
Schedule 3.2(p) MXP Insurance
Schedule 3.2(v) MXP Tax Certificate
-vi-
<PAGE> 8
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Antitrust Division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6(a)
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Average Trading Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(j)
Benefit Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(xi)
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Election Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(A)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)
Excess Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(e)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(a)
Form of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(b)
Fractional Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(e)
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6(a)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(B)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Initial Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
Injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1(f)
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)(ii)
Joint Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(i)
Letter of Transmittal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
MIPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
MXP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
MXP Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(c)
</TABLE>
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<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
MXP Common Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
MXP Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
MXP Conversion Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
MXP Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
MXP Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(iv)
MXP ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(i)
MXP Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11(b)
MXP Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11(b)
MXP Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(n)
MXP Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j)
MXP Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
MXP Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(j)
MXP Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(l)(i)
MXP Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(i)
MXP Preferred Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
MXP Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
MXP Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
MXP SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(d)
MXP Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
MXP Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
MXP Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
MXP Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(b)
New Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
New Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
Non-Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3(e)
Non-Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
Non-Election Series A Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
Non-Election Series B Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4(a)
Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(iii)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(c)(iii)
Reincorporation Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Reincorporation Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(C)
Remedial Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(o)(D)
Reportable Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(ii)
RM Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
RM Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
RM Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(e)
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
Defined Term Defined in Section
- ------------ ------------------
<S> <C>
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Series A Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(r)
Series B Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(r)
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(a)
SM Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
SM Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
SM Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(a)
Spice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Spice Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(e)
Spice Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Spice Conversion Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(c)
Spice Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Spice Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(iv)
Spice ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)
Spice Indemnified Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11(a)
Spice Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.11(a)
Spice Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(n)
Spice Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Spice LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Spice Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Spice Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(j)
Spice Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(l)(i)
Spice Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(i)
Spice Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Spice Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2(a)
Spice Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(v)
Spice Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(v)
Spice SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(d)
Spice Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Spice Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10(a)
Spice Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b)
Tax and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(k)
TBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Trading Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(j)
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1(b)
</TABLE>
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<PAGE> 11
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 6, 1997 (this
"Agreement"), among MESA Inc., a Texas corporation ("MXP"), MESA Operating Co.,
a Delaware corporation and a direct wholly owned subsidiary of MXP ("Merger
Sub"), MXP Reincorporation Corp., a Delaware corporation and a direct wholly
owned subsidiary of MXP ("Reincorporation Sub"), and Parker & Parsley Petroleum
Company, a Delaware corporation ("Spice").
WHEREAS, MXP and Spice have determined to engage in a
strategic business combination;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of Merger Sub and Spice have approved this Agreement and the merger
of Spice with and into Merger Sub, with Merger Sub being the surviving
corporation (the "Spice Merger");
WHEREAS, in furtherance thereof, the respective Boards of
Directors of MXP and Reincorporation Sub have approved this Agreement and the
merger of MXP with and into Reincorporation Sub, with Reincorporation Sub being
the surviving corporation (the "Reincorporation Merger" and, together with the
Spice Merger, the "Mergers");
WHEREAS, the respective Boards of Directors of MXP, Merger
Sub, Reincorporation Sub and Spice have determined that it is in the best
interests of their respective stockholders for the Mergers to be effected upon
the terms and subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that
each of the Mergers shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and this Agreement is intended to be and is adopted as a plan of reorganization
within the meaning of Treasury Regulation Section 1.368-1(c); and
WHEREAS, MXP, Merger Sub, Reincorporation Sub and Spice desire
to make certain representations, warranties, covenants and agreements in
connection with the Mergers and also to prescribe various conditions to the
Mergers;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties to this Agreement agree as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Times of the Mergers. Upon the terms
and subject to the conditions of this Agreement, (i) at the RM Effective Time
(as hereinafter defined), MXP shall be merged with and into Reincorporation Sub
in accordance with the Delaware General Corporation Law (the "DGCL") and the
Texas Business Corporation Act (the "TBCA"); and (ii) at the SM
<PAGE> 12
Effective Time (as hereinafter defined) Spice shall be merged with and into
Merger Sub in accordance with the DGCL. As soon as practicable at or after the
closing of the Mergers (the "Closing"), a certificate of merger, prepared and
executed in accordance with the relevant provisions of the DGCL, with respect
to each of the Mergers (each, a "Certificate of Merger") shall be filed with
the Delaware Secretary of State and articles of merger, prepared and executed
in accordance with the relevant provisions of the TBCA, with respect to the
Reincorporation Merger (the "Articles of Merger") shall be filed with the Texas
Secretary of State. The Reincorporation Merger shall become effective at such
time as is provided in the Certificate of Merger for the Reincorporation Merger
and in the Articles of Merger, which time shall be at 10:00 a.m., Dallas,
Texas, time on the day of the Closing (the "RM Effective Time"). The Spice
Merger shall become effective at such time as is provided in the Certificate of
Merger for the Spice Merger, which time shall be at 10:01 a.m., Dallas, Texas,
time on the day of the Closing (the "SM Effective Time").
1.2 Closing. The Closing shall take place at 9:30 a.m., Dallas,
Texas, time on a date to be specified by the parties, which shall be no later
than the fifth business day after satisfaction (or waiver in accordance with
this Agreement) of the latest to occur of the conditions set forth in Article
VI (the "Closing Date"), at the offices of Baker & Botts, L.L.P., 2001 Ross
Avenue, Dallas, Texas 75201, unless another date or place is agreed to in
writing by the parties.
1.3 Effects of the Mergers.
(a) At the RM Effective Time: (i) MXP shall be merged with
and into Reincorporation Sub, the separate existence of MXP shall cease and
Reincorporation Sub shall continue as the surviving corporation
(Reincorporation Sub and MXP are sometimes referred to herein as "RM
Constituent Corporations" and Reincorporation Sub is sometimes referred to
herein as "RM Surviving Corporation"); (ii) the Certificate of Incorporation of
Reincorporation Sub as in effect immediately prior to the RM Effective Time
shall be the Certificate of Incorporation of RM Surviving Corporation; and
(iii) the Bylaws of Reincorporation Sub as in effect immediately prior to the
RM Effective Time shall be the Bylaws of RM Surviving Corporation. At the SM
Effective Time: (i) Spice shall be merged with and into Merger Sub, the
separate existence of Spice shall cease and Merger Sub shall continue as the
surviving corporation (Merger Sub and Spice are sometimes referred to herein as
"SM Constituent Corporations" and Merger Sub is sometimes referred to herein as
"SM Surviving Corporation"); (ii) the Certificate of Incorporation of Merger
Sub as in effect immediately prior to the SM Effective Time shall be the
Certificate of Incorporation of SM Surviving Corporation; and (iii) the Bylaws
of Merger Sub as in effect immediately prior to the SM Effective Time shall be
the Bylaws of SM Surviving Corporation.
(b) The directors and officers designated in accordance
with Section 5.19 shall, from and after the SM Effective Time, be the initial
directors and officers of SM Surviving Corporation, and such directors and
officers shall serve until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in
accordance with SM Surviving Corporation's Certificate of Incorporation and
Bylaws.
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<PAGE> 13
(c) From and after the RM Effective Time, the initial
directors of RM Surviving Corporation shall be the individuals identified as
Class I, II or III Directors on Exhibit A hereto and the officers designated in
accordance with Section 5.19 shall, from and after the RM Effective Time, be
the initial officers of RM Surviving Corporation (provided that such directors
and officers who at such time were directors or officers of Spice shall not
assume office until the SM Effective Time), and such directors and officers
shall serve until their successors have been duly elected or appointed and
qualified or until their death, resignation or removal in accordance with RM
Surviving Corporation's Certificate of Incorporation and Bylaws.
(d) The Spice Merger shall have the effects set forth in
this Section 1.3 and the applicable provisions of the DGCL. The
Reincorporation Merger shall have the effects set forth in this Section 1.3 and
the applicable provisions of the DGCL and the TBCA.
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE SM
CONSTITUENT CORPORATIONS AND THE RM CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of Spice Merger on Capital Stock. At the SM Effective
Time, by virtue of the Spice Merger and without any action on the part of the
holder of any shares of common stock, par value $.01 per share, of Spice
("Spice Common Stock"), or capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and
outstanding share of the capital stock of Merger Sub shall not be converted or
otherwise affected by the Spice Merger and shall remain outstanding after the
Spice Merger as one fully paid and nonassessable share of common stock, par
value $0.01 per share, of SM Surviving Corporation.
(b) Cancellation of Spice Treasury Stock and MXP-Owned
Spice Stock. Each share of Spice Common Stock and all other shares of capital
stock of Spice that are owned by Spice as treasury stock and any shares of
Spice Common Stock and all other shares of capital stock of Spice owned by MXP,
Merger Sub, Reincorporation Sub or any other wholly owned Subsidiary (as
hereinafter defined) of MXP or Spice shall be canceled and retired and shall
cease to exist and no stock of RM Surviving Corporation or other consideration
shall be delivered or deliverable in exchange therefor. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which: (i) such party or any other Subsidiary of such party is a general
partner; or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is, directly or indirectly, owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and any one or more of its Subsidiaries.
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<PAGE> 14
(c) Exchange Ratio for Spice Common Stock. Subject to the
provisions of Section 2.3(e) hereof, each share of Spice Common Stock issued
and outstanding immediately prior to the SM Effective Time (other than shares
to be canceled in accordance with Section 2.1(b)) shall be converted into a
right to receive one (1) share of common stock, par value $.01 per share ("New
Common Stock"), of RM Surviving Corporation (the "Spice Conversion Number").
All such shares of Spice Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
shares of New Common Stock and cash in lieu of fractional shares of New Common
Stock, as contemplated by Section 2.3(e), to be issued or paid in consideration
therefor upon the surrender of such certificate in accordance with Section 2.3,
without interest.
(d) Treatment of Spice Stock Options. Each outstanding
Spice Stock Option (as defined in Section 5.10) shall be assumed by RM
Surviving Corporation as provided in Section 5.10.
2.2 Effect of Reincorporation Merger on Capital Stock. At the RM
Effective Time, by virtue of the Reincorporation Merger and without any action
on the part of the holder of any shares of common stock, par value $.01 per
share, of MXP ("MXP Common Stock"), Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share, of MXP ("MXP Series A Preferred
Stock"), Series B 8% Cumulative Preferred Stock, par value $.01 per share, of
MXP ("MXP Series B Preferred Stock"), or capital stock of Reincorporation Sub:
(a) Capital Stock of Reincorporation Sub. Each issued and
outstanding share of the capital stock of Reincorporation Sub shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered or deliverable in exchange therefor.
(b) Cancellation of MXP Treasury Stock and Spice-Owned MXP
Stock. Each share of MXP Common Stock, MXP Series A Preferred Stock, MXP
Series B Preferred Stock and all other shares of capital stock of MXP that are
owned by MXP as treasury stock and any shares of MXP Common Stock, MXP Series A
Preferred Stock, MXP Series B Preferred Stock and all other shares of capital
stock of MXP owned by Spice or any wholly owned Subsidiary of Spice or MXP
shall be cancelled and retired and shall cease to exist and no stock of RM
Surviving Corporation or other consideration shall be delivered or deliverable
in exchange therefor.
(c) Exchange Ratio for MXP Capital Stock. Subject to the
provisions of Section 2.3(e) hereof, (i) each seven shares of MXP Common Stock
issued and outstanding immediately prior to the RM Effective Time (other than
shares to be cancelled in accordance with Section 2.2(b)) shall be converted
into a right to receive one (1) share of New Common Stock (the "MXP Conversion
Number"); and (ii) each seven (7) shares of MXP Series A Preferred Stock and
each seven (7) shares of MXP Series B Preferred Stock issued and outstanding
immediately prior to the RM Effective Time (other than shares to be cancelled
in accordance with Section 2.2(b)) shall be converted into a right to receive
(x) one and one-quarter (1.25) shares of New Common Stock (the "MXP Common
Consideration") or (y) one (1) share of Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share ("New Series A Preferred Stock"), of
RM Surviving
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<PAGE> 15
Corporation (the "MXP Preferred Consideration"), in each case as the holder
thereof shall have elected or be deemed to have elected, in accordance with
Section 2.4 (collectively, the "MXP Merger Consideration"); provided, however,
that if (A) the Series A Approval is obtained (as defined in Section 3.2(r)),
each such seven (7) shares of MXP Series A Preferred Stock shall be converted
into a right to receive only the MXP Common Consideration, and (B) the Series B
Approval is obtained (as defined in Section 3.2(r)), each such seven (7) shares
of MXP Series B Preferred Stock shall be converted into a right to receive only
the MXP Common Consideration. All such shares of MXP Common Stock, MXP Series
A Preferred Stock and MXP Series B Preferred Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to
receive the New Common Stock, the MXP Common Consideration or the MXP Preferred
Consideration, as applicable, and cash in lieu of fractional shares of New
Common Stock or New Series A Preferred Stock, as contemplated by Section
2.3(f), to be issued or paid in consideration therefor upon the surrender of
such certificates in accordance with Section 2.3, without interest. The rights
and preferences of the New Series A Preferred Stock shall be substantially
identical to the rights and preferences of the MXP Series A Preferred Stock,
with such adjustments as are necessary to reflect the effect of the MXP
Conversion Number.
(d) Treatment of MXP Stock Options. Each outstanding MXP
Stock Option (as defined in Section 5.10) shall be assumed by RM Surviving
Corporation as provided in Section 5.10.
2.3 Exchange of Certificates
(a) Exchange Agent. As of the SM Effective Time and RM
Effective Time, as applicable, RM Surviving Corporation shall deposit with
American Stock Transfer & Trust Company or such other bank or trust company
designated by MXP and reasonably acceptable to Spice (the "Exchange Agent"),
for the benefit of the holders of shares of Spice Common Stock, and for the
benefit of the holders of shares of MXP Common Stock, MXP Series A Preferred
Stock and MXP Series B Preferred Stock, as applicable, for exchange in
accordance with this Article II, through the Exchange Agent, certificates
representing the shares of New Common Stock and shares of New Series A
Preferred Stock, if any (such shares of New Common Stock and New Series A
Preferred Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund"), issuable
pursuant to Sections 2.1 and 2.2 in exchange for outstanding shares of Spice
Common Stock, MXP Common Stock, MXP Series A Preferred Stock and MXP Series B
Preferred Stock. The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the New Common Stock and New Series A Preferred Stock
contemplated to be issued pursuant to Sections 2.1 and 2.2 out of the Exchange
Fund. The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably
practicable after the SM Effective Time and RM Effective Time, as applicable,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which, immediately prior to the SM Effective Time and RM Effective
Time, as applicable, represented outstanding shares of Spice Common Stock, MXP
Common Stock, MXP Series A Preferred Stock and MXP Series B Preferred Stock
(each, a
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<PAGE> 16
"Certificate"), which holder's shares of Spice Common Stock, MXP Common Stock,
MXP Series A Preferred Stock and MXP Series B Preferred Stock were converted
into the right to receive shares of New Common Stock or shares of New Series A
Preferred Stock, as the case may be, pursuant to Sections 2.1 or 2.2: (i) a
letter of transmittal ("Letter of Transmittal") which shall specify that
delivery shall be effected and risk of loss and title to the Certificates shall
pass only upon delivery of the Certificates to the Exchange Agent, and shall be
in such form and have such other provisions as RM Surviving Corporation may
reasonably specify; and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of New Common
Stock or shares of New Series A Preferred Stock, as the case may be. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by RM Surviving Corporation, together
with the Letter of Transmittal, duly executed, and any other documents
reasonably required by RM Surviving Corporation or the Exchange Agent, (A) the
holder of a Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of New Common Stock or New
Series A Preferred Stock, as the case may be, which such holder has the right
to receive pursuant to the provisions of this Article II, cash in lieu of
fractional shares of New Common Stock or New Series A Preferred Stock, as the
case may be, as contemplated by Section 2.3(e), and any unpaid dividends and
distributions that such holder has the right to receive pursuant to Section
2.3(c); and (B) the Certificate so surrendered shall forthwith be canceled.
Certificates representing fewer than seven (7) shares of MXP Common Stock, MXP
Series A Preferred Stock or MXP Series B Preferred Stock surrendered to the
Exchange Agent shall receive, subject to Section 2.3(e), a proportionate amount
of the applicable consideration to which such shares are entitled pursuant to
Section 2.2(c). In the event of a transfer of ownership of Spice Common Stock
which is not registered in the transfer records of Spice, or in the event of a
transfer of ownership of MXP Common Stock, MXP Series A Preferred Stock or MXP
Series B Preferred Stock, which is not registered in the transfer records of
MXP, a certificate representing the appropriate number of shares of New Common
Stock or New Series A Preferred Stock, as the case may be, may be issued to a
transferee if the Certificate representing such Spice Common Stock, MXP Common
Stock, MXP Series A Preferred Stock or MXP Series B Preferred Stock is
presented to the Exchange Agent accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.3, each Certificate shall be deemed at any time after the applicable
SM or RM Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of New Common Stock or New Series
A Preferred Stock, as the case may be, cash in lieu of any fractional shares of
New Common Stock or New Series A Preferred Stock, as the case may be, as
contemplated by this Section 2.3 and any unpaid dividends and distributions
that such holder has the right to receive pursuant to Section 2.3(c). The
Exchange Agent shall not be entitled to vote or exercise any rights of
ownership with respect to the New Common Stock or New Series A Preferred Stock,
as the case may be, held by it from time to time hereunder, except that it
shall receive and hold all dividends or other distributions paid or distributed
with respect thereto for the account of persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to New Common Stock or New Series
A Preferred Stock, as the case may be, declared or made after the applicable SM
or RM Effective Time with a record date after the
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<PAGE> 17
applicable SM or RM Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the right to receive shares of New
Common Stock or New Series A Preferred Stock, as the case may be, represented
thereby and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.3(e) until the holder of such Certificate
shall surrender such Certificate. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
thereof, without interest: (i) at the time of such surrender, the amount of any
cash payable in lieu of a fractional share of New Common Stock or New Series A
Preferred Stock, as the case may be, to which such holder is entitled pursuant
to Section 2.3(e) and the amount of dividends or other distributions with a
record date after the applicable SM or RM Effective Time theretofore paid with
respect to such whole shares of New Common Stock or New Series A Preferred
Stock, as the case may be; and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the applicable SM
or RM Effective Time but prior to such surrender and a payment date subsequent
to such surrender payable with respect to such whole shares of New Common Stock
or New Series A Preferred Stock, as the case may be.
(d) No Further Ownership Rights. All shares of New Common
Stock issued upon the surrender for exchange of shares of Spice Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.3(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Spice Common Stock subject, however, to SM
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the SM Effective Time that may have
been declared or made by Spice on such shares of Spice Common Stock in
accordance with the terms of this Agreement or prior to the date hereof and
which remain unpaid at the SM Effective Time, and after the SM Effective Time
there shall be no further registration of transfers on the stock transfer books
of SM Surviving Corporation of the shares of Spice Common Stock that were
outstanding immediately prior to the SM Effective Time. If, after the SM
Effective Time, Certificates are presented to SM Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article II.
All shares of New Common Stock or New Series A Preferred Stock, as the case may
be, issued upon the surrender for exchange of shares of MXP Common Stock, MXP
Series A Preferred Stock and MXP Series B Preferred Stock in accordance with
the terms hereof (including any cash paid pursuant to Section 2.3(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of MXP Common Stock, MXP Series A Preferred Stock and MXP Series B
Preferred Stock subject, however, to RM Surviving Corporation's obligation to
pay any dividends or make any other distributions with a record date prior to
the RM Effective Time that may have been declared or made by MXP on such shares
of MXP Common Stock, MXP Series A Preferred Stock and MXP Series B Preferred
Stock in accordance with the terms of this Agreement or prior to the date
hereof and which remain unpaid at the RM Effective Time, and after the RM
Effective Time there shall be no further registration of transfers on the stock
transfer books of RM Surviving Corporation of the shares of MXP Common Stock,
MXP Series A Preferred Stock or MXP Series B Preferred Stock that were
outstanding immediately prior to the RM Effective Time. If, after the RM
Effective Time, Certificates are presented to RM Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article II.
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<PAGE> 18
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of New Common Stock or New Series A Preferred
Stock, as the case may be, shall be issued upon the surrender for exchange of
Certificates pursuant to this Article II, and, except as provided in this
Section 2.3(e), no dividend or other distribution, stock split or interest
shall relate to any such fractional security, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a security
holder of RM Surviving Corporation. In lieu of any fractional security, each
holder of shares of Spice Common Stock, MXP Common Stock, MXP Series A
Preferred Stock or MXP Series B Preferred Stock who would otherwise have been
entitled to a fraction of a share of New Common Stock or New Series A Preferred
Stock, as the case may be, upon surrender of Certificates for exchange pursuant
to this Article II will be paid an amount in cash (without interest) equal to
such holder's proportionate interest in the sum of (i) the gross proceeds from
the sale or sales by the Exchange Agent in accordance with the provisions of
this Section 2.3(e), on behalf of all such holders of the aggregate fractional
shares of New Common Stock or New Series A Preferred Stock, as the case may be,
issued pursuant to this Article II and (ii) the aggregate dividends or other
distributions that are payable to such holders with respect to such shares of
New Common Stock or New Series A Preferred Stock, as the case may be, pursuant
to Section 2.3(c) (such dividends and distributions being herein called the
"Fractional Dividends"). As soon as practicable following the SM Effective
Time, the Exchange Agent shall determine the excess of the aggregate of (x) the
number of full shares of New Common Stock delivered to the Exchange Agent by RM
Surviving Corporation pursuant to Section 2.3(a) over the aggregate number of
full shares of New Common Stock to be distributed to holders of Spice Common
Stock, MXP Common Stock, MXP Series A Preferred Stock and MXP Series B
Preferred Stock pursuant to Section 2.3(b) and (y) the number of full shares of
New Series A Preferred Stock, if any, delivered to the Exchange Agent by RM
Surviving Corporation pursuant to Section 2.3(a) over the aggregate number of
full shares of New Series A Preferred Stock, if any, to be distributed to
holders of MXP Series A Preferred Stock and MXP Series B Preferred Stock
pursuant to Section 2.3(b) (such excess being herein called the "Excess
Securities"), and the Exchange Agent, as agent for the former holders of Spice
Common Stock, MXP Common Stock, MXP Series A Preferred Stock and MXP Series B
Preferred Stock, shall sell the Excess Securities at the prevailing prices on
the New York Stock Exchange ("NYSE"). The sale of the Excess Securities by the
Exchange Agent shall be executed on the NYSE through one or more member firms
of the NYSE. RM Surviving Corporation shall pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with such sale of
Excess Securities. Until the gross proceeds of such sale of Excess Securities
and the Fractional Dividends have been distributed to the former stockholders
of Spice and MXP, the Exchange Agent will hold such proceeds and dividends in
trust for such former stockholders. As soon as practicable after the
determination of the amount of cash to be paid to former stockholders of Spice
and MXP in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Agreement such amounts to such former
stockholders.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of New Common Stock or
New Series A Preferred Stock, as the case may be, made available to the
Exchange Agent that remain undistributed to the former stockholders of Spice or
MXP on the first anniversary of the SM Effective Time shall be delivered to RM
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<PAGE> 19
Surviving Corporation, upon demand, and any stockholders of Spice or MXP who
have not theretofore received the New Common Stock or New Series A Preferred
Stock, as the case may be, and cash and other dividends or distributions to
which they are entitled under this Article II shall thereafter look only to RM
Surviving Corporation for payment of their claim for New Common Stock or New
Series A Preferred Stock, as the case may be, any cash in lieu of fractional
shares of New Common Stock or New Series A Preferred Stock, as the case may be,
and any dividends or distributions with respect to New Common Stock or New
Series A Preferred Stock, as the case may be.
(g) No Liability. None of MXP, Spice, Reincorporation Sub
or Merger Sub shall be liable to any holder of shares of MXP Common Stock, MXP
Series A Preferred Stock, MXP Series B Preferred Stock or Spice Common Stock,
as the case may be, for such shares (or dividends or distributions with respect
thereto) or cash in lieu of fractional shares of New Common Stock or New Series
A Preferred Stock, as the case may be, delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by holders of any such shares at such date as is
immediately prior to the time at which such amounts would otherwise escheat to
or become property of any governmental entity shall, to the extent permitted by
applicable law, become the property of RM Surviving Corporation, free and clear
of any claims or interest of any such holders or their successors, assigns or
personal representatives previously entitled thereto.
(h) Lost, Stolen, or Destroyed Certificates. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by RM Surviving Corporation, the posting
by such person of a bond in such reasonable amount as RM Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificate the certificate representing that
number of whole shares of New Common Stock or New Series A Preferred Stock, as
the case may be, which such holder has the right to receive pursuant to the
provisions of this Article II, cash in lieu of fractional shares of New Common
Stock or New Series A Preferred Stock, as the case may be, as contemplated by
Section 2.3(e), and any unpaid dividends and distributions that such holder has
the right to receive pursuant to Section 2.3(c).
2.4 Exchange Procedures for MXP Preferred Stock.
(a) Election. Subject to Section 2.2(c), each record
holder of shares of MXP Series A Preferred Stock and MXP Series B Preferred
Stock issued and outstanding immediately prior to the Election Deadline (as
defined in Section 2.4(b)) shall be entitled to elect to receive in respect of
each such share (i) the MXP Common Consideration or (ii) the MXP Preferred
Consideration or to indicate that such record holder has no preference as to
the receipt of MXP Common Consideration or MXP Preferred Consideration (a
"Non-Election"). Shares of MXP Series A Preferred Stock and MXP Series B
Preferred Stock in respect of which a Non-Election is made (collectively,
"Non-Election Series A Shares" and "Non-Election Series B Shares,"
respectively)
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<PAGE> 20
shall be deemed to be shares in respect of which elections for MXP Preferred
Consideration have been made.
(b) Procedure for Elections. Elections pursuant to
Section 2.4(a) shall be made on a form to be mutually agreed upon by MXP and
Spice (a "Form of Election") to be provided by the Exchange Agent for that
purpose to holders of record of MXP Series A Preferred Stock and MXP Series B
Preferred Stock, together with appropriate transmittal materials, at the time
of mailing to holders of record of MXP Series A Preferred Stock and MXP Series
B Preferred Stock of the Joint Proxy Statement (as defined in Section
3.1(c)(iii)). Elections shall be made by mailing to the Exchange Agent a duly
completed Form of Election. To be effective, a Form of Election must be (i)
properly completed, signed and submitted to the Exchange Agent at its
designated office by 5:00 p.m., New York City time, on the business day that is
the Trading Day (as defined in Section 7.1(j)) immediately prior to the Closing
Date (which date shall be publicly announced by MXP as soon as practicable but
in no event less than five Trading Days prior to the Closing Date) (the
"Election Deadline") and (ii), in the case of shares that are not recorded and
traded in book entry form, accompanied by the Certificates as to which the
election is being made (or by an appropriate guarantee of delivery of such
Certificates by a commercial bank or trust company in the United States or a
member of a registered national security exchange or of the National
Association of Securities Dealers, Inc., provided such Certificates are in fact
delivered to the Exchange Agent within eight Trading Days after the date of
execution of such guarantee of delivery). For shares of MXP Series B Preferred
Stock that are recorded and traded in book entry form, then MXP shall establish
procedures for the delivery of such shares, which procedures shall be
acceptable to Spice. MXP shall use its reasonable best efforts to make a Form
of Election available to all persons who become holders of record of MXP Series
A Preferred Stock and MXP Series B Preferred Stock between the date of mailing
described in the first sentence of this Section 2.4(b) and the Election
Deadline. MXP or RM Surviving Corporation shall determine, in its sole and
absolute discretion, which authority it may delegate in whole or in part to the
Exchange Agent, whether Forms of Election have been properly completed, signed
and submitted or revoked. The decision of MXP or RM Surviving Corporation (or
the Exchange Agent, as the case may be) in such matters shall be conclusive and
binding. Neither MXP or RM Surviving Corporation nor the Exchange Agent will
be under any obligation to notify any person of any defect in a Form of
Election submitted to the Exchange Agent. A holder of shares of MXP Series A
Preferred Stock and MXP Series B Preferred Stock that does not submit an
effective Form of Election prior to the Election Deadline shall be deemed to
have made a Non-Election.
(c) Revocation of Election; Return of Certificates. An
election may be revoked, but only by written notice received by the Exchange
Agent prior to the Election Deadline. Any certificate(s) representing shares
of MXP Series A Preferred Stock or MXP Series B Preferred Stock which have been
submitted to the Exchange Agent in connection with an election shall be
returned without charge to the holder thereof in the event such election is
revoked as aforesaid and such holder requests in writing the return of such
certificate(s). Upon any such revocation, unless a duly completed Form of
Election is thereafter submitted in accordance with Section 2.4(b), such shares
shall be Non-Election Series A Shares or Non-Election Series B Shares, as the
case may be. In the event that this Agreement is terminated pursuant to the
provisions hereof and any shares of MXP
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Series A Preferred Stock and MXP Series B Preferred Stock have been transmitted
to the Exchange Agent pursuant to the provisions hereof, such shares shall
promptly be returned without charge to the person submitting the same.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Spice. Spice represents and
warrants to MXP, Reincorporation Sub and Merger Sub as follows (in each case as
qualified by matters reflected on the disclosure schedule dated as of the date
of this Agreement and delivered by Spice to MXP on or prior to the date of this
Agreement (the "Spice Disclosure Schedule") and made a part hereof by
reference, each such matter qualifying each representation and warranty, as
applicable, notwithstanding any specific Section or Schedule reference or lack
thereof):
(a) Organization, Standing and Power. Each of Spice and
its Significant Subsidiaries (as defined below) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
state of incorporation or organization, has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not have
a Material Adverse Effect (as defined below) on Spice. Spice has heretofore
delivered to MXP complete and correct copies of its Restated Certificate of
Incorporation and Restated Bylaws, each as amended to date. All Significant
Subsidiaries of Spice and their respective jurisdictions of incorporation or
organization are identified on Schedule 3.1(a) of the Spice Disclosure
Schedule. As used in this Agreement: (i) a "Significant Subsidiary" means any
Subsidiary of Spice or MXP, as the case may be, that would constitute a
Significant Subsidiary of such party within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC"); and (ii)
a "Material Adverse Effect" or "Material Adverse Change" shall mean, in respect
of Spice or MXP, as the case may be, any effect or change that is or, as far as
can be reasonably determined, may be materially adverse to the business,
operations, assets, condition (financial or otherwise) or results of operations
of such party and its Subsidiaries taken as a whole.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of Spice consists of 180,000,000 shares of Spice
Common Stock and 20,000,000 shares of preferred stock, par value $.01 per share
("Spice Preferred Stock"). At the close of business on December 31, 1996: (i)
35,066,235 shares of Spice Common Stock were issued and outstanding; (ii)
82,458 and 105,155 shares of Spice Common Stock were reserved for issuance
pursuant to Spice's Non-Employee Director Equity Compensation Plan and Spice's
Long-Term Incentive Plan (collectively, the "Spice Stock Plans"), respectively;
(iii) 6,713,684 shares of Spice Common Stock were reserved for issuance upon
conversion of the Spice Series A Preferred Stock (as defined below) or upon
exchange of MIPS (as defined below), in each case in accordance with their
respective terms; (iv) 1,362,629
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<PAGE> 22
shares of Spice Common Stock were subject to issuance under outstanding options
or awards under the Spice Stock Plans; (v) 1,833,383 shares of Spice Common
Stock were held by Spice in its treasury; (vi) 3,776,400 shares of Spice
Preferred Stock were designated as Series A Convertible Preferred Stock ("Spice
Series A Preferred Stock") and reserved for issuance upon exchange of the
3,776,400 shares of 6 1/4% Cumulative Guaranteed Monthly Income Convertible
Preferred Shares (the "MIPS") issued by Parker & Parsley Capital LLC, a limited
life company organized under the laws of the Turks and Caicos Islands and a
subsidiary of Spice ("Spice LLC"); (vii) no shares of Spice Preferred Stock
were issued and outstanding; and (viii) no Voting Debt (as defined below) was
issued and outstanding. The term "Voting Debt" means bonds, debentures, notes
or other indebtedness having the right to vote (or convertible into securities
having the right to vote) on any matters on which stockholders of Spice or MXP,
as the case may be, may vote. All outstanding shares of Spice Common Stock are
validly issued, fully paid and nonassessable and are not subject to preemptive
rights. Except as set forth on Schedule 3.1(b) of the Spice Disclosure
Schedule, all outstanding shares of capital stock of the Subsidiaries of Spice
are owned by Spice, or a direct or indirect wholly owned Subsidiary of Spice,
free and clear of all liens, charges, encumbrances, claims and options of any
nature. Except as set forth in this Section 3.1(b) or on Schedule 3.1(b) of
the Spice Disclosure Schedule, and except for changes since December 31, 1996
resulting from the grant or exercise of stock options granted prior to the date
hereof pursuant to, or from issuances or purchases under, the Spice Stock
Plans, or as contemplated by this Agreement, there are outstanding: (i) no
shares of capital stock, Voting Debt or other voting securities of Spice; (ii)
no securities of Spice or any Subsidiary of Spice (other than the MIPS)
convertible into or exchangeable for shares of capital stock, Voting Debt or
other voting securities of Spice or any Subsidiary of Spice, and the MIPS are
exchangeable for an aggregate of 3,776,400 shares of Spice Series A Preferred
Stock, which Spice Series A Preferred Stock, if and when issued, will be
convertible into an aggregate of 6,713,684 shares of Spice Common Stock; and
(iii) no options, warrants, calls, rights (including preemptive rights),
commitments or agreements to which Spice or any Subsidiary of Spice is a party
or by which it is bound in any case obligating Spice or any Subsidiary of Spice
to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of capital
stock or any Voting Debt or other voting securities of Spice or of any
Subsidiary of Spice, or obligating Spice or any Subsidiary of Spice to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. There are not as of the date hereof and there will not be at the SM
Effective Time any stockholder agreements, voting trusts or other agreements or
understandings to which Spice is a party or by which it is bound relating to
the voting of any shares of the capital stock of Spice that will limit in any
way the solicitation of proxies by or on behalf of Spice from, or the casting
of votes by, the stockholders of Spice with respect to the Spice Merger. There
are no restrictions on Spice to vote the stock of any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of Spice has approved
the Spice Merger and this Agreement, and declared the Spice Merger and
this Agreement to be in the best interests of the stockholders of
Spice. The directors of Spice have advised Spice and MXP that they
intend to vote or cause to be voted all of the shares of Spice Common
Stock beneficially owned by them and their affiliates in favor of
approval of the Spice Merger and this
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<PAGE> 23
Agreement. Spice has all requisite corporate power and authority to
enter into this Agreement and, subject, with respect to consummation of
the Spice Merger, to approval of this Agreement and the Spice Merger by
the stockholders of Spice in accordance with the DGCL and the Restated
Certificate of Incorporation and Restated Bylaws of Spice, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Spice, subject, with respect to
consummation of the Spice Merger, to approval of this Agreement and the
Spice Merger by the stockholders of Spice in accordance with the DGCL
and the Restated Certificate of Incorporation and Restated Bylaws of
Spice. This Agreement has been duly executed and delivered by Spice
and, subject, with respect to consummation of the Spice Merger, to
approval of this Agreement and the Spice Merger by the stockholders of
Spice in accordance with the DGCL and the Restated Certificate of
Incorporation and Restated Bylaws of Spice, and assuming this Agreement
constitutes the valid and binding obligation of MXP, Reincorporation
Sub and Merger Sub, constitutes a valid and binding obligation of Spice
enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) Except as set forth on Schedule 3.1(c) of the
Spice Disclosure Schedule, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to the loss
of a material benefit under, or give rise to a right of purchase under,
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Spice or any of its
Subsidiaries under, or otherwise result in a material detriment to
Spice or any of its Subsidiaries under, any provision of (i) the
Restated Certificate of Incorporation or Restated Bylaws of Spice or
any provision of the comparable charter or organizational documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Spice or any of its
Subsidiaries, (iii) any joint venture or other ownership arrangement or
(iv) assuming the consents, approvals, authorizations or permits and
filings or notifications referred to in Section 3.1(c)(iii) are duly
and timely obtained or made and the approval of the Spice Merger and
this Agreement by the stockholders of Spice has been obtained, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Spice or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights, liens,
security interests, charges, encumbrances or detriments that,
individually or in the aggregate, would not have a Material Adverse
Effect on Spice, materially impair the ability of Spice to perform its
obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
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<PAGE> 24
(iii) No consent, approval, order or
authorization of, or registration, declaration or filing with,
or permit from any court, governmental, regulatory or
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to
Spice or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by Spice or the
consummation by Spice of the transactions contemplated hereby,
as to which the failure to obtain or make would have a
Material Adverse Effect on Spice, except for: (A) the filing
of a premerger notification report by Spice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the expiration or termination of
the applicable waiting period with respect thereto; (B) the
filing with the SEC of (x) a proxy statement in preliminary
and definitive form relating to the meetings of the
stockholders of Spice and of MXP to be held in connection with
the Mergers (the "Joint Proxy Statement") and (y) such reports
under Section 13(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and such other compliance with
the Exchange Act and the rules and regulations thereunder, as
may be required in connection with this Agreement and the
transactions contemplated hereby; (C) the filing of the
Certificate of Merger for the Spice Merger with the Delaware
Secretary of State; (D) filings with, and approval of, the
NYSE; (E) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, or
environmental laws; (F) such filings and approvals as may be
required by any foreign premerger notification, securities,
corporate or other law, rule or regulation; and (G) any such
consent, approval, order, authorization, registration,
declaration, filing, or permit that the failure to obtain or
make would not, individually or in the aggregate, have a
Material Adverse Effect on Spice, materially impair the
ability of Spice to perform its obligations hereunder or
prevent the consummation of any of the transactions
contemplated hereby.
(d) SEC Documents. Spice has made available to MXP a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Spice with the SEC since December 31, 1995
and prior to or on the date of this Agreement (the "Spice SEC Documents"),
which are all the documents (other than preliminary material) that Spice was
required to file with the SEC between December 31, 1995 and the date of this
Agreement. As of their respective dates, the Spice SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Spice SEC
Documents, and none of the Spice SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Spice included in the Spice SEC Documents complied as to form in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present in accordance with applicable requirements of GAAP (subject,
in the case of the unaudited statements, to normal, recurring adjustments, none
of which are material) the consolidated financial
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<PAGE> 25
position of Spice and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the
consolidated cash flows of Spice and its consolidated Subsidiaries for
the periods presented therein. Except as disclosed in the Spice SEC
Documents, there are no agreements, arrangements or understandings
between Spice and any party who is at the date of this Agreement or was
at any time prior to the date hereof but after December 31, 1995 an
Affiliate (as defined in Section 4.1(k)) of Spice that are required to
be disclosed in the Spice SEC Documents.
(e) Information Supplied. None of the information
supplied or to be supplied by Spice for inclusion or incorporation by reference
in the Registration Statement on Form S-4 to be filed with the SEC by
Reincorporation Sub in connection with the issuance of shares of New Common
Stock and New Series A Preferred Stock, if any, in the Mergers (the "S-4")
will, at the time the S-4 becomes effective under the Securities Act or at the
SM Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and none of the information supplied or to
be supplied by Spice and included or incorporated by reference in the Joint
Proxy Statement will, at the date mailed to stockholders of Spice and at the
date mailed to stockholders of MXP or at the time of the meeting of such
stockholders to be held in connection with the Mergers or at the SM Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the SM Effective Time any event with
respect to Spice or any of its Subsidiaries, or with respect to other
information supplied by Spice for inclusion in the Joint Proxy Statement or
S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the S-4 or the Joint Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of Spice. The
Joint Proxy Statement, insofar as it relates to Spice or its Subsidiaries or
other information supplied by Spice for inclusion therein, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included in, the Spice
SEC Documents, or except as contemplated by this Agreement, since December 31,
1996, there has not been: (i) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of Spice's or Spice Capital LLC's capital stock, other than the
declaration and payment of (x) regular cash dividends with respect to Spice's
first and third fiscal quarters not in excess of $.05 per share of Spice Common
Stock, with usual record and payment dates, and (y) regular monthly cash
dividends on the MIPS paid in accordance with their terms; (ii) any amendment
of any material term of any outstanding equity security of Spice or any
Significant Subsidiary of Spice; (iii) any repurchase, redemption or other
acquisition by Spice or any Subsidiary of Spice of any outstanding shares of
capital stock or other equity securities of, or other ownership interests in,
Spice or any Subsidiary of Spice, except as contemplated by the Spice Stock
Plans or no more than 100,000 additional shares of Spice Common Stock; (iv) any
material change in any method of accounting or accounting practice or any tax
method, practice or election by Spice or any Significant Subsidiary of Spice;
or (v) any other transaction, commitment, dispute or other event or condition
(financial or
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<PAGE> 26
otherwise) of any character (whether or not in the ordinary course of business)
that is reasonably likely to have a Material Adverse Effect on Spice, except
for general economic changes and changes that may affect the industries of
Spice or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. Except as
disclosed in the Spice SEC Documents, as of the date hereof, there are no
liabilities of Spice or any of its Subsidiaries of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, that are
reasonably likely to have a Material Adverse Effect on Spice, other than: (i)
liabilities adequately provided for on the balance sheet of Spice dated as of
December 31, 1996 (including the notes thereto) contained in Spice's Annual
Report on Form 10-K for the year ended December 31, 1996; (ii) liabilities
incurred in the ordinary course of business subsequent to December 31, 1996;
and (iii) liabilities under this Agreement.
(h) No Default. Neither Spice nor any of its Subsidiaries
is in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (i) the Restated Certificate of Incorporation or
Restated Bylaws of Spice or the comparable charter or organizational documents
of any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license to which Spice or any of its Subsidiaries is now a party
or by which Spice or any of its Subsidiaries or any of their respective
properties or assets is bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to Spice or any of its Subsidiaries,
except in the case of (ii) and (iii) for defaults or violations which in the
aggregate would not have a Material Adverse Effect on Spice.
(i) Compliance with Applicable Laws. Spice and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Spice Permits"), except where the
failure so to hold would not have a Material Adverse Effect on Spice. Spice
and its Subsidiaries are in compliance with the terms of the Spice Permits,
except where the failure so to comply would not have a Material Adverse Effect
on Spice. Except as disclosed in the Spice SEC Documents, the businesses of
Spice and its Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations which would not have a Material Adverse Effect on Spice. As of the
date of this Agreement, no investigation or review by any Governmental Entity
with respect to Spice or any of its Subsidiaries is pending and of which Spice
has knowledge or, to the knowledge (as hereinafter defined) of Spice as of the
date hereof, threatened, other than those the outcome of which would not have a
Material Adverse Effect on Spice. For purposes of this Agreement "knowledge"
means the actual knowledge of the officers, directors or senior managers of MXP
or Spice, as the case may be, after reasonable inquiry.
(j) Litigation. Except as disclosed in the Spice SEC
Documents or Schedule 3.1(j) of the Spice Disclosure Schedule, as of the date
of this Agreement there is no suit, action or proceeding pending, or, to the
knowledge of Spice, threatened against or affecting Spice or any Subsidiary of
Spice ("Spice Litigation"), and Spice and its Subsidiaries have no knowledge of
any facts that are likely to give rise to any Spice Litigation, that (in any
case) is reasonably likely to have
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<PAGE> 27
a Material Adverse Effect on Spice, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against Spice or any Subsidiary of Spice ("Spice Order") that is reasonably
likely to have a Material Adverse Effect on Spice or its ability to consummate
the transactions contemplated by this Agreement. Schedule 3.1(j) of the Spice
Disclosure Schedule contains an accurate and complete list of all suits,
actions and proceedings pending or, to the knowledge of Spice, threatened
against or affecting Spice or any of its Subsidiaries as of the date hereof.
(k) Taxes. Except as set forth on Schedule 3.1(k) of the
Spice Disclosure Schedule:
(i) Each of Spice, each of its Subsidiaries and
any affiliated, consolidated, combined, unitary or similar group of
which Spice or any of its Subsidiaries is or was a member has (A) duly
filed on a timely basis (taking into account any extensions) all U.S.
federal income Tax Returns (as hereinafter defined), and all other
material Tax Returns, required to be filed or sent by or with respect
to it, (B) duly paid or deposited on a timely basis all Taxes (as
hereinafter defined) that are shown to be due and payable on or with
respect to such Tax Returns, and all material Taxes that are otherwise
due and payable (except for audit adjustments not material in the
aggregate or to the extent that liability therefor is reserved for in
Spice's most recent audited financial statements) for which Spice or
any of its Subsidiaries may be liable, (C) established reserves that
are adequate for the payment of all material Taxes not yet due and
payable with respect to the results of operations of Spice and its
Subsidiaries through the date hereof, and (D) complied in all material
respects with all applicable laws, rules and regulations relating to
the reporting, payment and withholding of Taxes that are required to be
withheld from payments to employees, independent contractors,
creditors, stockholders or any other third party and has in all
material respects timely withheld from employee wages and paid over to
the proper governmental authorities all amounts required to be so
withheld and paid over.
(ii) Schedule 3.1(k) of the Spice Disclosure
Schedule sets forth (A) the last taxable period through which the
federal income Tax Returns of Spice and any of its Subsidiaries have
been examined by the Internal Revenue Service ("IRS") or for which the
statute of limitations for assessment has otherwise closed and (B) any
affiliated, consolidated, combined, unitary or similar group or Tax
Return in which Spice or any of its Subsidiaries is or has been a
member or joins or has joined in the filing. Except to the extent
being contested in good faith, all material deficiencies asserted as a
result of such examinations and any examination by any applicable
taxing authority have been paid, fully settled or adequately provided
for in Spice's most recent audited financial statements. Except as
disclosed in or adequately provided for in the Spice SEC Documents or
disclosed in Schedule 3.1(k) of the Spice Disclosure Schedule, no
audits or other administrative proceedings or court proceedings are
presently pending, or to the knowledge of Spice, threatened, with
regard to any Taxes for which Spice or any of its Subsidiaries would be
liable, and no material deficiency for any Taxes has been proposed,
asserted or assessed (whether by examination report or prior to
completion of examination by means of notices
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<PAGE> 28
of proposed adjustment or other similar requests or notices) pursuant
to such examination against Spice or any of its Subsidiaries by any
taxing authority with respect to any period.
(iii) Neither Spice nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on the
Closing Date will execute or enter into) with the IRS or any taxing
authority (A) any agreement or other document extending or having the
effect of extending the period for assessment or collection of any
income or franchise Taxes for which Spice or any of its Subsidiaries
would be liable or (B) a closing agreement pursuant to Section 7121 of
the Code or any similar provision of state, local, foreign or other
income tax law, which will require any increase in taxable income or
alternative minimum taxable income, or any reduction in tax credits,
for Spice or any of its Subsidiaries for any taxable period ending
after the Closing Date.
(iv) Except as set forth in the Spice SEC
Documents and in the severance agreements with each officer of Spice
(true and complete copies of which have been delivered to MXP by
Spice), neither Spice nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount that would
constitute a "parachute payment" within the meaning of Section 280G of
the Code or that would constitute compensation whose deductibility is
limited under Section 162(m) of the Code.
(v) Except as set forth in the Spice SEC
Documents, neither Spice nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation
agreement or similar agreement or arrangement.
(vi) There are no requests for rulings or
outstanding subpoenas from any taxing authority for information with
respect to Taxes of Spice or any of its Subsidiaries and, to the
knowledge of Spice, no material reassessments (for property or ad
valorem Tax purposes) of any assets or any property owned or leased by
Spice or any of its Subsidiaries have been proposed in written form.
(vii) Neither Spice nor any of its Subsidiaries has
agreed to make any adjustment pursuant to section 481(a) of the Code
(or any predecessor provision) by reason of any change in any
accounting method of Spice or any of its Subsidiaries, and neither
Spice nor any of its Subsidiaries has any application pending with any
taxing authority requesting permission for any changes in any
accounting method of Spice or any of its Subsidiaries. To the
knowledge of Spice, neither the IRS nor any other taxing authority has
proposed in writing, and neither Spice nor any of its Subsidiaries is
otherwise required to make, any such adjustment or change in accounting
method.
(viii) There are no material excess loss accounts or
deferred intercompany transactions between Spice and/or any of its
Subsidiaries within the meaning of Treas. Reg. Section 1.1502-13 or
1.1502-19, respectively.
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For purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid by Spice or any of its
Subsidiaries (or MXP or any of its Subsidiaries, as applicable), payroll,
employment, excise, production, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest and/or any penalty, addition to tax or additional
amount imposed by any taxing authority, (ii) any liability of Spice or any of
its Subsidiaries (or MXP or any of its Subsidiaries, as applicable) for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated or consolidated group, or arrangement whereby liability
of Spice or any of its Subsidiaries (or MXP or any of its Subsidiaries, as
applicable) for payment of such amounts was determined or taken into account
with reference to the liability of any other person for any period and (iii)
liability of Spice or any of its Subsidiaries (or MXP or any of its
Subsidiaries, as applicable) with respect to the payment of any amounts of the
type described in (i) or (ii) as a result of any express or implied obligation
to indemnify any other Person.
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to be filed by or with
respect to Spice or any of its Subsidiaries (or MXP or any of its Subsidiaries,
as applicable) in respect of any Taxes, including, without limitation, (i) any
consolidated Federal Income Tax return in which Spice or any of its
Subsidiaries (or MXP or any of its Subsidiaries, as applicable) is included and
(ii) any state, local or foreign Income Tax returns filed on a consolidated,
combined or unitary basis (for purposes of determining tax liability) in which
Spice or any of its Subsidiaries (or MXP or any of its Subsidiaries, as
applicable) is included.
(l) Pension and Benefit Plans; ERISA. Except as set forth
on Schedule 3.1(l) of the Spice Disclosure Schedule or in the Spice SEC
Documents:
(i) All "employee pension benefit plans," as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), maintained by Spice or any of its
Subsidiaries or any trade or business (whether or not incorporated)
which is under common control, or which is treated as a single
employer, with Spice under Section 414(b), (c), (m) or (o) of the Code
("Spice ERISA Affiliate") or to which Spice or any of its Subsidiaries
or any Spice ERISA Affiliate contributed or is obligated to contribute
thereunder within six years prior to the SM Effective Time (the "Spice
Pension Plans") intended to qualify under Section 401 of the Code so
qualify and the trusts maintained pursuant thereto have been determined
by the IRS to be exempt from federal income taxation under Section 501
of the Code and, to the knowledge of Spice as of the date hereof,
nothing has occurred with respect to the operation of the Spice Pension
Plans that could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(ii) There has been no "reportable event" as that
term is defined in Section 4043 of ERISA and the regulations thereunder
with respect to the Spice Pension Plans
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<PAGE> 30
subject to Title IV of ERISA that would require the giving of notice or
any material event requiring disclosure under Section 4041(c)(3)(C) or
4063(a) of ERISA.
(iii) As to the Spice Pension Plans subject to
Title IV of ERISA, there has been no event or condition which presents
the material risk of termination, no notice of intent to terminate has
been given under Section 4041 of ERISA and no proceeding has been
instituted under Section 4042 of ERISA to terminate, such that would
result in a material liability to Spice, its Subsidiaries, or Spice
ERISA Affiliates; no material liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred; no material accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Section 412 of the Code has been incurred; and the assets of
each Spice Pension Plan equal or exceed the actuarial present value of
the benefit liabilities, within the meaning of Section 4041 of ERISA,
under such Spice Pension Plan, based upon reasonable actuarial
assumptions and the asset valuation principles established by the PBGC.
(iv) There is no material violation of ERISA with
respect to the filing of applicable reports, documents, and notices
regarding all the "employee benefit plans," as defined in Section 3(3)
of the ERISA and all other material employee compensation and benefit
arrangements or payroll practices, including, without limitation,
severance pay, sick leave, vacation pay, salary continuation for
disability, consulting or other compensation agreements, retirement,
deferred compensation, bonus, long-term incentive, stock option, stock
purchase, hospitalization, medical insurance, life insurance and
scholarship programs maintained by Spice or any of its Subsidiaries or
to which Spice or any of its Subsidiaries contributed or is obligated
to contribute thereunder (all such plans, other than the Spice Pension
Plans, being hereinafter referred to as the "Spice Employee Benefit
Plans") or the Spice Pension Plans with the Secretary of Labor and the
Secretary of the Treasury or the furnishing of such documents to the
participants or beneficiaries of the Spice Employee Benefit Plans or
Spice Pension Plans, which violation is reasonably likely to have a
Material Adverse Effect on Spice.
(v) The Spice Employee Benefit Plans and Spice
Pension Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including
rules and regulations thereunder) and other applicable Federal and
state law, there is no material liability for breaches of fiduciary
duty in connection with the Spice Employee Benefit Plans and Spice
Pension Plans, and neither Spice nor any of its Subsidiaries or any
"party in interest" or "disqualified person" with respect to the Spice
Employee Benefit Plans and Spice Pension Plans has engaged in a
material "prohibited transaction" within the meaning of Section 4975 of
the Code or Section 406 of ERISA.
(vi) There are no material actions, suits or
claims pending (other than routine claims for benefits) or, to the
knowledge of Spice, threatened against, or with respect to, the Spice
Employee Benefit Plans or Spice Pension Plans or their assets.
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<PAGE> 31
(vii) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (A) result in any payment becoming due to any employee or group of
employees of Spice or any of its Subsidiaries; (B) increase any
benefits otherwise payable under any Spice Employee Benefit Plan or
Spice Pension Plan; or (C) result in the acceleration of the time of
payment or vesting of any such benefits. Except as set forth on
Schedule 3.1(l)(vii) of the Spice Disclosure Schedule, there are no
severance agreements or employment agreements between Spice or any of
its Subsidiaries and any employee of Spice or such Subsidiary. True
and complete copies of all such severance agreements and employment
agreements have been provided to MXP.
(viii) Neither Spice nor any of its Subsidiaries has
any consulting agreement or arrangement with any person involving
compensation in excess of $200,000, except as are terminable upon one
month's notice or less.
(ix) Neither Spice nor any of its Subsidiaries nor
any Spice ERISA Affiliate contributes to, or has an obligation to
contribute to, and has not within six years prior to the SM Effective
Time contributed to, or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(x) No stock or other security issued by Spice or
any of its Subsidiaries forms or has formed a material part of the
assets of any Spice Employee Benefit Plan or Spice Pension Plan.
(xi) Concerning each Spice Pension Plan that is or
has been subject to the funding requirements of Title I, Subtitle B,
Part 3 of ERISA, the funding method used in connection with such plan
is, and at all times has been, acceptable under ERISA, each of the
actuarial assumptions employed in connection with determining the
funding of each such plan is, and at all times has been, reasonable and
satisfies the requirements of Section 412(c)(3) of the Code and Section
302(c)(3) of ERISA, and Schedule 3.1(l)(xi) of the Spice Disclosure
Schedule sets forth as of December 31, 1996, (A) the actuarially
determined present value of all benefit liabilities within the meaning
of Section 4001(a)(16) of ERISA ("Benefit Liabilities") determined on
an ongoing plan basis, employing in making such determination the same
actuarial assumptions as were used in determining plan fundings for the
most recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (B) the actuarially determined present value of
all Benefit Liabilities under each such Spice Pension Plan employing in
such determination the same actuarial assumptions, except turnover
assumptions, as were used in determining plan funding for the most
recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (C) the fair market value of the assets held to
fund each such Spice Pension Plan, (D) the funding method used in
connection with each such Spice Pension Plan, (E) identification of the
amount and related plan with respect to which there is or has been any
"accumulated funding deficiency," as defined in Section 302(a)(2) of
ERISA, (F) the estimated amount of, together with calculations showing
how such amounts
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<PAGE> 32
were determined, any premiums due to the PBGC for the most recently
completed and following five years, (G) a demonstration showing how any
minimum or maximum contributions, including any contributions required
by reason of a liquidity shortfall within the meaning of Section
412(m)(5) of the Code or Section 302(e)(5) of ERISA, to any such plans
were arrived at for the most recently completed year, together with an
estimate for the following five years based upon present law and
actuarial assumptions and methodologies, except where such assumptions
or methodologies are required by law to be changed with respect to a
particular year, and (H) the date of any change of any assumptions used
to determine current liability of any such plan, together with a
demonstration that such change either (x) received appropriate
approvals under Section 412(c)(5) of the Code and Section 302(c)(5) of
ERISA or (y) that such approval was not necessary by law; Schedule
3.1(l)(xi) of the Spice Disclosure Schedule sets forth a reasonable
good faith estimate of material changes between December 31, 1996 and
the date hereof in the value of benefits or plan assets described in
the preceding clause (A), (B) or (C); Schedule 3.1(l)(xi) of the Spice
Disclosure Schedule sets forth the information described in Clauses
(A), (B), (C), (D), (F), (G) and (H) as of December 31, 1996, including
a separate statement of liabilities attributable to unpredictable
contingent event benefits within the meaning of Section
412(l)(7)(B)(ii) of the Code and Section 302(d)(7)(B)(ii) of ERISA; the
sum of the amount of unfunded Benefit Liabilities under all Spice
Pension Plans (excluding each such plan with an amount of unfunded
Benefit Liabilities of zero or less) is not more than $5,000,000; all
contributions required to be made by Section 515 of ERISA by the
Company or any affiliate to Spice Pension Plans have been timely made;
with respect to any such Spice Pension Plan and concerning each Spice
Pension Plan which is in whole or in part an "individual account plan"
(as defined in Section 3(34) of ERISA), there is set forth in Schedule
3.1(l)(xi) of the Spice Disclosure Schedule (A) the amount of any Spice
liability for contributions due or to become due with respect to each
such Spice Pension Plan for periods up to the date hereof, and the date
any such amounts were paid and (B) the amount of any contribution
accrued or paid or expected to be accrued or paid with respect to such
Spice Pension Plan for the plan year in which the Closing Date occurs;
with respect to any such Spice Pension Plan, no such plan has been
terminated or subject to a "spin-off" or "spin-off termination" or
partial termination and no assets of any such plan have been used or
employed in a manner so as to subject them to an excise tax imposed
under Section 4980 of the Code; each such Spice Pension Plan permits
termination thereof, and distribution of any assets in excess of those
required to pay Benefit Liabilities may be distributed to or for the
benefit of Spice or its Affiliates and Section 4044(d) of ERISA would
not prevent such reversion; with respect to any such Spice Pension
Plan, any reduction in benefits was preceded by an adequate and
appropriate notice to the parties described in and as required by
Section 204(h) of ERISA; there are no former employees or participants
who are entitled to earn additional pension benefits by reason of "grow
in" or other rights with respect to service or time periods after such
employees have been terminated from employment with Seller.
(xii) None of Spice nor any of its Affiliates has
incurred, by reason of the transaction contemplated by this Agreement,
or will incur, any liability under Section
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<PAGE> 33
4062(e) of ERISA. Neither Spice nor any of its Affiliates is a
participant in any plan to which Sections 4063 or 4064 of ERISA apply.
(xiii) Neither Spice nor any of its Affiliates has
engaged in any transaction described under Section 4069 of ERISA nor
can any lien be imposed on any of Spice, its Affiliates or any of their
respective assets under Section 4068 of ERISA.
(xiv) PBGC and Other Liabilities. Spice and its
Affiliates have complied in all material respects with all requirements
for premium payments, including any interest and penalty charges for
late payment, due the PBGC with respect to each Spice Pension Plan and
each separate plan year for which any premiums are required. Except as
set forth in Schedule 3.1(l)(xiv) of the Spice Disclosure Schedule, and
except for transactions required by this Agreement, from the period
commencing January 1, 1990 through the Closing Date there has been no
"reportable event" (within the meaning of Section 4043(b) or (c) of
ERISA and regulations promulgated by the PBGC thereunder, Section
4062(e) of ERISA or Section 4063(a) of ERISA) with respect to any Spice
Pension Plan subject to Title IV of ERISA for which notice to the PBGC
has not, by rule or regulations, been waived. There is not any
unsatisfied material liability to the PBGC which has been incurred by
Spice or any Affiliate on account of any Spice Pension Plan subject to
Title IV of ERISA. From the period commencing January 1, 1990 through
the Closing Date, no filing has been or will be made by Spice or any
Affiliate with the PBGC to terminate, nor has any proceeding been
commenced by the PBGC to terminate, any Spice Pension Plan subject to
Title IV of ERISA which was maintained, or wholly or partially funded,
by Spice or any Affiliate. Concerning both Spice and any Affiliate (A)
there has been no cessation of operations at a facility so as to become
subject to the provisions of Section 4062(e) of ERISA, (B) there has
been no withdrawal of a substantial employer from any Spice Pension
Plan so as to become subject to the provisions of Section 4063 of
ERISA, (C) there has been no cessation of contributions on or before
the Closing Date to any Spice Pension Plan subject to Section 4064(a)
of ERISA to which Spice or any Affiliate has made contributions during
the five calendar years prior to the Closing Date, (D) there has been
no complete or partial withdrawal from a multiemployer plan (as defined
in either Section 3(37) or Section 4001(a)(3) of ERISA) so as to incur
any material withdrawal liability as defined in Section 4201 of ERISA
(without regard to any subsequent reduction or waiver of such liability
under Section 4207 or 4208 of ERISA), (E) no employee pension benefit
plan which is a multiemployer plan (as defined in either Section 3(37)
or Section 4001(a)(3) of ERISA) which Spice or any Affiliate maintains
or contributes to is in "reorganization" (as defined in Section 4241 of
ERISA) or "insolvent" (as defined in Section 4245 of ERISA), (F) there
is not now, nor can there ever be, any liability under Section 4064 of
ERISA to any of MXP, RM Surviving Corporation or Spice by reason of
participation in any Spice Pension Plan by Spice or any Affiliate on or
prior to the Closing Date, (G) there has been no amendment to any Spice
Pension Plan that would require the furnishing of security under
Section 401(a)(29) of the Code and (H) there has been no event or
circumstance and there can be no event or circumstance which has or may
result in any liability being asserted by any Spice Pension Plan, the
PBGC or any other person or entity under Title IV of ERISA against
Spice or any Spice Affiliate or MXP or RM
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<PAGE> 34
Surviving Corporation. Neither Spice nor any of its Affiliates has any
liability to any employee benefit plan for contributions under Section
412(m) of the Code or Section 302(e) of ERISA, nor has any lien been
imposed under Section 412(n) of the Code or Section 302(f) of ERISA nor
is there any liability for excise taxes imposed under Section 4971 of
the Code, and all liabilities arising under Section 412(c)(11) of the
Code with respect to contributions to any employee benefit plan have
been set forth in Schedule 3.1(l)(xiv) of the Spice Disclosure
Schedule; any notices to the PBGC under Section 412(n) of the Code or
Section 302(f) of ERISA have heretofore been delivered to MXP; and
copies of any notices required to be given to participants under either
Section 101(d) or Section 4011 of ERISA have previously been delivered
to MXP. Except as described in Schedule 3.1(l)(xiv) of the Spice
Disclosure Schedule, the PBGC has not communicated with Spice, its
Affiliates or any of its agents or representatives concerning the
transactions contemplated by the Agreement, nor any other transactions
implemented or contemplated by Spice or any of its Affiliates within
the preceding five calendar years.
(xv) Excess Assets or Benefits. Since January 1,
1990, Spice has not taken any action to vest any overfunded benefits in
any employee benefit plan in any of the participants thereunder. Upon
the termination of any Spice Pension Plans, any excess assets (defined
as the excess of plan assets over the amounts required to fund all
liabilities of the plan) will be distributed to or for the benefit of
the sponsor of the plan.
(xvi) Health Care Continuation Coverage. Spice and
its Affiliates have materially complied with the requirements of
Section 4980B of the Code and Sections 601-608 of ERISA regarding
continuation of health care coverage notices and provision of
appropriate health care coverage under the Spice Employee Benefit
Plans.
(xvii) No Contribution to Multiemployer Plan. From
and after the Closing Date, neither Spice nor MXP nor RM Surviving
Corporation will be liable for contributions to any Spice Pension Plan
that is a multiemployer plan within the meaning of either Section 3(37)
or Section 4001(a)(3) of ERISA except to the extent that Spice or MXP
or RM Surviving Corporation subsequently affirmatively determines to
undertake such contribution obligations.
(xviii) WARN Notices. Any notice under the Workers
Adjustment Retirement Act that has been required with respect to Spice
employees or former employees or will be required by the transactions
contemplated by this Agreement has been, or will be, as the case may
be, properly and timely given by Spice.
(xix) Certain Pension Deductions. RM Surviving
Corporation will be entitled to deduct on its Tax Returns for periods
commencing on or after the Closing Date any contributions to a Spice
Pension Plan or Spice Employee Benefit Plan made by Spice on or before
the Closing Date.
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<PAGE> 35
(xx) Worker's Compensation. Spice and its
Affiliates have maintained worker's compensation coverage as required
by applicable state law through purchase of insurance and not by
self-insurance or otherwise except as disclosed to MXP on Schedule
3.1(l)(xx) of the Spice Disclosure Schedule.
(xxi) Section 162(m) Deduction Limitations. No
amount has been paid by Spice or any of its Affiliates, and no amount
is expected to be paid by the Spice or any of its Affiliates, which
would be subject to the provisions of 162(m) of the Code such that all
or a part of such payments would not be deductible by the payor.
(m) Labor Matters. Except as set forth on Schedule 3.1(m)
of the Spice Disclosure Schedule or in the Spice SEC Documents:
(i) neither Spice nor any of its Subsidiaries is
a party to any collective bargaining agreement or other current labor
agreement with any labor union or organization, and there is no current
union representation question involving employees of Spice or any of
its Subsidiaries, nor does Spice or any of its Subsidiaries know of any
activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any
such employees;
(ii) as of the date hereof, there is no unfair
labor practice charge or grievance arising out of a collective
bargaining agreement or other grievance procedure against Spice or any
of its Subsidiaries pending, or, to the knowledge or Spice or any of
its Subsidiaries, threatened, that has, or is reasonably likely to
have, a Material Adverse Effect on Spice;
(iii) as of the date hereof, there is no complaint,
lawsuit or proceeding in any forum by or on behalf of any present or
former employee, any applicant for employment or any classes of the
foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship against Spice or
any of its Subsidiaries pending, or, to the knowledge of Spice or any
of its Subsidiaries, threatened, that has, or is reasonably likely to
have, a Material Adverse Effect on Spice;
(iv) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of Spice or any of
its Subsidiaries, threatened, against or involving Spice or any of its
Subsidiaries that has, or is reasonably likely to have, a Material
Adverse Effect on Spice;
(v) Spice and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours
of work and occupational safety and health, except for
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<PAGE> 36
non-compliance that does not have, and is not reasonably likely to
have, a Material Adverse Effect on Spice; and
(vi) as of the date hereof, there is no
proceeding, claim, suit, action or governmental investigation pending
or, to the knowledge of Spice or any of its Subsidiaries, threatened,
in respect to which any current or former director, officer, employee
or agent of Spice or any of its Subsidiaries is or may be entitled to
claim indemnification from Spice or any of its Subsidiaries pursuant to
the Restated Certificate of Incorporation or Restated Bylaws of Spice
or any provision of the comparable charter or organizational documents
of any of its Subsidiaries, as provided in any indemnification
agreement to which Spice or any Subsidiary of Spice is a party or
pursuant to applicable law that has, or is reasonably likely to have, a
Material Adverse Effect on Spice.
(n) Intangible Property. Spice and its Subsidiaries
possess or have adequate rights to use all material trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of Spice and its Subsidiaries (collectively, the "Spice Intangible
Property"), except where the failure to possess or have adequate rights to use
such properties would not reasonably be expected to have a Material Adverse
Effect on Spice. All of the Spice Intangible Property is owned or licensed by
Spice or its Subsidiaries free and clear of any and all liens, claims or
encumbrances, except those that are not reasonably likely to have a Material
Adverse Effect on Spice, and neither Spice nor any such Subsidiary has
forfeited or otherwise relinquished any Spice Intangible Property which
forfeiture would result in a Material Adverse Effect on Spice. To the
knowledge of Spice, the use of the Spice Intangible Property by Spice or its
Subsidiaries does not, in any material respect, conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title,
interest or goodwill, including, without limitation, any intellectual property
right, trademark, trade name, patent, service mark, brand mark, brand name,
computer program, database, industrial design, copyright or any pending
application therefor of any other person and there have been no claims made and
neither Spice nor any of its Subsidiaries has received any notice of any claim
or otherwise knows that any of the Spice Intangible Property is invalid or
conflicts with the asserted rights of any other person or has not been used or
enforced or has failed to have been used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the Spice
Intangible Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that would not reasonably be expected to have a Material Adverse Effect on
Spice.
(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Laws" means all federal, state
and local laws (including common laws), rules, regulations, ordinances,
orders, decrees of any Governmental Entity, whether now in existence or
hereafter enacted and in effect at the time of Closing, relating to
pollution or the protection of human health, safety or the environment
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<PAGE> 37
of any jurisdiction in which the applicable party hereto owns or
operates assets or conducts business or owned or operated assets or
conducted business (whether or not through a predecessor entity)
(including, without limitation, ambient air, surface water,
groundwater, land surface, subsurface strata, natural resources or
wildlife), including, without limitation, laws and regulations relating
to Releases or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of solid waste or Hazardous
Materials, and any similar laws, rules, regulations, ordinances, orders
and decrees of any foreign jurisdiction in which the applicable party
hereto owns or operates assets or conducts business;
(B) "Hazardous Materials" means (x) any petroleum
or petroleum products, radioactive materials (including naturally
occurring radioactive materials), asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, polychlorinated
biphenyls or transformers or other equipment that contain dielectric
fluid containing polychlorinated biphenyls, (y) any chemicals,
materials or substances which are now defined as or included in the
definition of "solid wastes," "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous substances,"
"restricted hazardous wastes," "toxic substances" or "toxic
pollutants," or words of similar import, under any Environmental Law
and (z) any other chemical, material, substance or waste, exposure to
which is now prohibited, limited or regulated under any Environmental
Law in a jurisdiction in which Spice or any of its Subsidiaries
operates (for purposes of Section 3.1(o)) or in which MXP or any of its
Subsidiaries operates (for purposes of Section 3.2(n)).
(C) "Release" means any spill, effluent,
emission, leaking, pumping, pouring, emptying, escaping, dumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, or into or out of any
property owned, operated or leased by the applicable party or its
Subsidiaries; and
(D) "Remedial Action" means all actions,
including, without limitation, any capital expenditures, required by a
Governmental Entity or required under any Environmental Law, or
voluntarily undertaken to (I) clean up, remove, treat, or in any other
way ameliorate or address any Hazardous Materials or other substance in
the indoor or outdoor environment; (II) prevent the Release or threat
of Release, or minimize the further Release of any Hazardous Material
so it does not endanger or threaten to endanger the public or employee
health or welfare of the indoor or outdoor environment; (III) perform
pre-remedial studies and investigations or post-remedial monitoring and
care pertaining or relating to a Release; or (IV) bring the applicable
party into compliance with any Environmental Law.
Except as disclosed on Schedule 3.1(o) of the Spice Disclosure
Schedule:
(i) The operations of Spice and its
Subsidiaries have been conducted, are and, as of the Closing Date, will
be, in compliance with all Environmental
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<PAGE> 38
Laws, except where the failure to so comply would not reasonably be
expected to have a Material Adverse Effect on Spice;
(ii) Spice and its Subsidiaries have
obtained and will maintain all permits, licenses and registrations, or
applications relating thereto, and have made and will make all filings,
reports and notices required under applicable Environmental Laws for
the continued operations of their respective businesses, except such
matters the lack or failure of which would not reasonably be expected
to lead to a Material Adverse Effect on Spice;
(iii) Spice and its Subsidiaries are not
subject to any outstanding written orders issued by, or contracts with,
any Governmental Entity or other person respecting (A) Environmental
Laws, (B) Remedial Action, (C) any Release or threatened Release of a
Hazardous Material or (D) an assumption of responsibility for
environmental liabilities of another person, except such orders or
contracts the compliance with which would not reasonably be expected to
have a Material Adverse Effect on Spice;
(iv) Spice and its Subsidiaries have not
received any written communication alleging, with respect to any such
party, the violation of or liability under any Environmental Law, which
violation or liability would reasonably be expected to have a Material
Adverse Effect on Spice;
(v) Neither Spice nor any of its
Subsidiaries has any contingent liability in connection with the
Release of any Hazardous Material into the indoor or outdoor
environment (whether on-site or off-site) or employee or third party
exposure to Hazardous Materials that would reasonably be expected to
lead to a Material Adverse Effect on Spice;
(vi) The operations of Spice or its
Subsidiaries involving the generation, transportation, treatment,
storage or disposal of hazardous or solid waste, as defined and
regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of
this Agreement) or any applicable state equivalent, are in compliance
with applicable Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Material Adverse
Effect on Spice; and
(vii) To the knowledge of Spice, there is
not now on or in any property of Spice or its Subsidiaries or any
property for which Spice or its Subsidiaries is potentially liable any
of the following: (A) any underground storage tanks or surface
impoundments or (B) any on-site disposal of Hazardous Material, any of
which ((A) or (B) preceding) could reasonably be expected to have a
Material Adverse Effect on Spice.
(p) Insurance. Schedule 3.1(p) of the Spice Disclosure
Schedule sets forth an insurance schedule of Spice's and each of its
Subsidiaries' directors' and officers' liability insurance, primary and excess
casualty insurance policies, providing coverage for bodily injury and property
damage to third parties, including products liability and completed operations
coverage, and worker's compensation, in effect as of the date hereof. Spice
maintains insurance in such amounts and
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covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to those of Spice and each of its
Subsidiaries (taking into account the cost and availability of such insurance).
(q) Opinion of Financial Advisor. The Board of Directors
of Spice has received the opinion of Goldman, Sachs & Co. addressed to such
Board (a copy of which has been provided to MXP for information purposes only)
to the effect that, as of the date hereof, the Spice Conversion Number fixing
the shares of New Common Stock to be received by the holders of Spice Common
Stock pursuant to this Agreement is fair from a financial point of view to such
holders. MXP acknowledges and agrees that it may not, and is not entitled to,
rely on the opinion of Goldman, Sachs & Co. delivered to the Spice Board of
Directors.
(r) Vote Required. The affirmative vote of the holders of
at least a majority of the outstanding shares of Spice Common Stock is the only
vote of the holders of any class or series of Spice capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
(s) Beneficial Ownership of MXP Common Stock. As of the
date hereof, neither Spice nor its Subsidiaries "beneficially owns" (as defined
in Rule 13d-3 under the Exchange Act) any of the outstanding MXP Common Stock,
MXP Series A Preferred Stock or any of MXP's outstanding debt securities.
(t) Brokers. Except for the fees and expenses payable to
Goldman, Sachs & Co., which fees are reflected in its engagement letter with
Spice (a copy of which has been delivered to MXP), no broker, investment
banker, or other person is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Spice.
(u) Tax Matters. The representations set forth in the
form of Officer's Certificate of Spice included as Schedule 3.1(u) of the Spice
Disclosure Schedule are true and correct, assuming for purposes of this
representation and warranty that the Merger had been consummated on the date
and in accordance with the terms hereof.
(v) Amendment to Spice Rights Agreement.
(i) The Board of Directors of Spice has taken, or
will take, all necessary action to amend the Rights Agreement of Spice
dated as of February 19, 1991, as amended by a First Amendment to
Rights Agreement dated as of March 18, 1994 (as so amended, the "Spice
Rights Agreement") so that none of the execution and delivery of this
Agreement, the conversion of shares of Spice Common Stock into the
right to receive MXP Common Stock in accordance with Article II of this
Agreement, and the consummation of the Mergers or any other transaction
contemplated hereby will cause (i) the Rights issued pursuant to the
Spice Rights Agreement (the "Spice Rights") to become exercisable under
the Spice Rights Agreement, (ii) Reincorporation Sub, MXP or any of
their respective Subsidiaries to be
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deemed an "Acquiring Person" (as defined in the Spice Rights
Agreement), (iii) any such event to be deemed a "Triggering Event" (as
defined in the Spice Rights Agreement) or (iv) the "Stock Acquisition
Date" (as defined in the Spice Rights Agreement) to occur upon any such
event.
(ii) The Board of Directors of Spice has taken, or
will take, all necessary action to amend the Spice Rights Agreement so
that Section 13 thereof will not apply to the Mergers.
(iii) As of the date of this Agreement, the Spice
Rights have not separated from the Spice Common Stock and no
distribution of Rights Certificates (as defined in the Spice Rights
Agreement) will occur as a result of the execution of this Agreement or
the consummation of the transactions contemplated hereby.
3.2 Representations and Warranties of MXP, Reincorporation Sub and
Merger Sub. MXP, Reincorporation Sub and Merger Sub jointly and severally
represent and warrant to Spice as follows (in each case as qualified by matters
reflected on the disclosure schedule dated as of the date of this Agreement and
delivered by MXP to Spice on or prior to the date of this Agreement (the "MXP
Disclosure Schedule") and made a part hereof by reference, each such matter
qualifying each representation and warranty, as applicable, notwithstanding any
specific Section or Schedule reference or lack thereof):
(a) Organization, Standing and Power. Each of MXP,
Reincorporation Sub, Merger Sub and MXP's Significant Subsidiaries is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified and in good
standing to do business in each jurisdiction in which the business it is
conducting, or the operation, ownership or leasing of its properties, makes
such qualification necessary, other than in such jurisdictions where the
failure so to qualify would not have a Material Adverse Effect on MXP. All
Significant Subsidiaries of MXP and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.2(a) of the MXP
Disclosure Schedule. MXP has heretofore delivered to Spice complete and
correct copies of its Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws, each as amended to date.
(b) Capital Structure. As of the date hereof, the
authorized capital stock of MXP consists of 600,000,000 shares of MXP Common
Stock and 500,000,000 shares of preferred stock, par value $.01 per share, of
MXP ("MXP Preferred Stock"). At the close of business on December 31, 1996 (i)
64,279,568 shares of MXP Common Stock were issued and outstanding; (ii)
3,000,000 and 9,000,000 shares of MXP Common Stock were reserved for issuance
pursuant to MXP's 1991 Stock Option Plan and 1996 Incentive Plan (collectively,
the "MXP Stock Plans"), respectively; (iii) 6,079,350 shares of MXP Common
Stock were subject to issuance under outstanding options under the MXP Stock
Plans; (iv) no shares of MXP Common Stock were held by MXP in its treasury or
by its wholly owned Subsidiaries; (v) of the authorized shares of MXP
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Preferred Stock, 140,000,000 were designated as MXP Series A Preferred
Stock and 140,000,000 were designated as MXP Series B Preferred Stock,
and 60,443,259 and 61,200,427 shares of MXP Series A Preferred Stock
and MXP Series B Preferred Stock, respectively, were issued and
outstanding; (vi) the shares of MXP Series A Preferred Stock and MXP
Series B Preferred Stock are convertible into shares of MXP Common
Stock at the option of the holder thereof on a one-for-one basis and
shares of MXP Series B Preferred Stock are convertible into shares of
MXP Series A Preferred Stock at the option of the holder thereof on a
one-for-one basis; (vii) of the authorized shares of MXP Preferred
Stock, 1,000,000 shares were designated Series A Junior Participating
Preferred Stock, no shares of which were issued and outstanding; and
(viii) no Voting Debt was issued and outstanding. All outstanding
shares of MXP capital stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set
forth on Schedule 3.2(b) of the MXP Disclosure Schedule, all
outstanding shares of capital stock of the Subsidiaries of MXP are
owned by MXP or a direct or indirect wholly owned Subsidiary of MXP,
free and clear of all liens, charges, encumbrances, claims and options
of any nature. Except as set forth in this Section 3.2(b) or on
Schedule 3.2(b) of the MXP Disclosure Schedule, and except for changes
since December 31, 1996 resulting from the grant or exercise of stock
options granted prior to the date hereof pursuant to, or from issuances
or purchases under, MXP Stock Plans, or as contemplated by this
Agreement, there are outstanding: (i) no shares of capital stock,
Voting Debt or other voting securities of MXP; (ii) no securities of
MXP (other than the MXP Series A Preferred Stock and MXP Series B
Preferred Stock) or any Subsidiary of MXP convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting
securities of MXP or any Subsidiary of MXP; and (iii) no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which MXP or any Subsidiary of MXP is a party or by which
it is bound in any case obligating MXP or any Subsidiary of MXP to
issue, deliver, sell, purchase, redeem or acquire, or cause to be
issued, delivered, sold, purchased, redeemed or acquired, additional
shares of capital stock or any Voting Debt or other voting securities
of MXP or of any Subsidiary of MXP or obligating MXP or any Subsidiary
of MXP to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. Except as contemplated by this
Agreement, there are not as of the date hereof and there will not be at
the RM Effective Time any stockholder agreements, voting trusts or
other agreements or understandings to which MXP is a party or by which
it is bound relating to the voting of any shares of the capital stock
of MXP that will limit in any way the solicitation of proxies by or on
behalf of MXP from, or the casting of votes by, the stockholders of MXP
with respect to the Reincorporation Merger. There are no restrictions
on MXP to vote the stock of any of its Subsidiaries. As of the date
hereof, the authorized capital stock of Merger Sub consists of 1,000
shares of common stock, par value $.01 per share, 100 shares of which
are validly issued, fully paid and nonassessable and are owned by MXP
and the balance of which are not issued or outstanding. As of the date
hereof, the authorized capital stock of Reincorporation Sub consists of
1,000 shares of common stock, par value $.01 per share, 100 shares of
which are validly issued, fully paid and nonassessable and are owned by
MXP and the balance of which are not issued or outstanding. When
issued in accordance with this Agreement upon exercise of the Spice
Stock Options (as defined in Section 5.10) and the MXP Stock Options
(as defined in Section 5.10), in each case to be assumed pursuant to
the Mergers, the shares of New Common Stock and New Series A Preferred
Stock, if any, issued thereunder will be validly issued, fully paid and
nonassessable and not subject to
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preemptive rights. MXP will seek stockholder approval of the 1996 Incentive
Plan at its stockholder meeting referred to in Section 5.5 and pursuant to the
Joint Proxy Statement.
(c) Authority; No Violations, Consents and Approvals.
(i) The Boards of Directors of MXP,
Reincorporation Sub and Merger Sub have approved the Mergers and this
Agreement, and declared the Mergers and this Agreement to be in the
best interests of the stockholders of MXP, Reincorporation Sub and
Merger Sub, respectively. The directors of MXP have advised Spice and
MXP that they intend to vote or cause to be voted all of the shares of
MXP Common Stock beneficially owned by them and their affiliates in
favor of approval of the Reincorporation Merger and this Agreement.
Each of MXP, Reincorporation Sub and Merger Sub has all requisite
corporate power and authority to enter into this Agreement, subject
with respect to consummation of the Mergers, to approval of this
Agreement and the MXP Merger by the stockholders of MXP in accordance
with the TBCA and the Amended and Restated Articles of Incorporation
and Amended and Restated Bylaws of MXP, and to consummate the
transactions contemplated hereby (and subject to the amendment and
restatement of the Certificate of Incorporation of Reincorporation Sub
as contemplated by Section 5.20 to provide sufficient authorized
capital to effect the Mergers). The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of MXP, Reincorporation Sub and Merger Sub, subject, with respect to
the consummation of the Mergers, to approval of this Agreement and the
Reincorporation Merger by the stockholders of MXP in accordance with
the TBCA and the Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws of MXP (and subject to the amendment and
restatement of the Certificate of Incorporation of Reincorporation Sub
as contemplated by Section 5.20 to provide sufficient authorized
capital to effect the Mergers). This Agreement has been duly executed
and delivered by MXP, Reincorporation Sub and Merger Sub, subject with
respect to consummation of the Mergers, to approval of this Agreement
and the MXP Merger by the stockholders of MXP in accordance with the
TBCA and the Amended and Restated Articles of Incorporation and Amended
and Restated Bylaws of MXP, and, assuming this Agreement constitutes
the valid and binding obligation of Spice, constitutes a valid and
binding obligation of each of MXP, Reincorporation Sub and Merger Sub
enforceable in accordance with its terms, subject as to enforceability,
to bankruptcy, insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(ii) Except as set forth on Schedule 3.2(c) of the
MXP Disclosure Schedule, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to the loss
of a material benefit under, or give rise to a right of
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purchase under, result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of MXP or
any of its Subsidiaries under, or otherwise result in a material
detriment to MXP or any of its Subsidiaries under, any provision of (i)
the Amended and Restated Articles of Incorporation or Amended and
Restated Bylaws of MXP or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license
applicable to MXP or any of its Subsidiaries, (iii) any joint venture
or other ownership arrangement or (iv) assuming the consents,
approvals, authorizations or permits and filings or notifications
referred to in Section 3.2(c)(iii) are duly and timely obtained or
made, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to MXP or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights, liens,
security interests, charges, encumbrances or detriments that,
individually or in the aggregate, would not have a Material Adverse
Effect on MXP, materially impair the ability of MXP to perform its
obligations hereunder or thereunder or prevent the consummation of any
of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to MXP or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by MXP, Reincorporation Sub and Merger Sub or the
consummation by MXP, Reincorporation Sub and Merger Sub of the
transactions contemplated hereby, as to which the failure to obtain or
make would have a Material Adverse Effect on MXP, except for: (A) the
filing of a premerger notification report by MXP or its ultimate parent
under the HSR Act and the expiration or termination of the applicable
waiting period with respect thereto; (B) the filing with the SEC of the
Joint Proxy Statement, the S-4, such reports under Section 13(a) of the
Exchange Act and such other compliance with the Securities Act and the
Exchange Act and the rules and regulations thereunder as may be
required in connection with this Agreement and the transactions
contemplated hereby, and the obtaining from the SEC of such orders as
may be so required; (C) the filing of a Certificate of Merger for each
of the Spice Merger and the Reincorporation Merger with the Delaware
Secretary of State and the filing of the Articles of Merger for the
Reincorporation Merger with the Texas Secretary of State; (D) filings
with, and approval of, the NYSE; (E) such filings and approvals as may
be required by any applicable state securities, "blue sky" or takeover
laws or environmental laws; (F) such filings and approvals as may be
required by any foreign premerger notification, securities, corporate
or other law, rule or regulation; and (G) any such consent, approval,
order, authorization, registration, declaration, filing, or permit that
the failure to obtain or make would not, individually or in the
aggregate, have a Material Adverse Effect on MXP, materially impair the
ability of MXP to perform its obligations hereunder or prevent the
consummation of any of the transactions contemplated hereby.
(d) SEC Documents. MXP has made available to Spice a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by MXP with the SEC since December 31, 1995
and prior to or on the date of this Agreement (the "MXP SEC
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Documents"), which are all the documents (other than preliminary
material) that MXP was required to file with the SEC between December 31, 1995
and the date of this Agreement. As of their respective dates, the MXP SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such MXP SEC Documents, and none
of the MXP SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of MXP included in the MXP SEC
Documents complied as to form in all material respects with the published rules
and regulations of the SEC with respect thereto, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of the unaudited statements, to normal, recurring adjustments, none of which are
material) the consolidated financial position of MXP and its consolidated
Subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of MXP and its consolidated
Subsidiaries for the periods presented therein. Except as disclosed in the MXP
SEC Documents, there are no agreements, arrangements or understandings between
MXP and any party who is at the date of this Agreement or was at any time prior
to the date hereof but after December 31, 1995 an Affiliate (as defined in
Section 4.1(k)) of MXP that are required to be disclosed in the MXP SEC
Documents.
(e) Information Supplied. None of the information
supplied or to be supplied by MXP, Reincorporation Sub or Merger Sub for
inclusion or incorporation by reference in the S-4 will, at the time the S-4
becomes effective under the Securities Act or at the RM Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, and none of the information supplied or to be supplied by MXP,
Reincorporation Sub or Merger Sub and included or incorporated by reference in
the Joint Proxy Statement will, at the date mailed to stockholders of Spice or
MXP, as the case may be, or at the time of the meeting of such stockholders to
be held in connection with the Mergers or at the RM Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the RM Effective Time any event with respect to MXP or any of
its Subsidiaries, or with respect to other information supplied by MXP,
Reincorporation Sub or Merger Sub for inclusion in the Joint Proxy Statement or
the S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the S-4 or the Joint Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with the
SEC. The Joint Proxy Statement, insofar as it relates to MXP, Reincorporation
Sub or Merger Sub or other Subsidiaries of MXP or other information supplied by
MXP, Reincorporation Sub or Merger Sub for inclusion therein, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as
disclosed in, or reflected in the financial statements included in, the MXP SEC
Documents, or except as contemplated by this
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Agreement, since December 31, 1996 there has not been: (i) any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of MXP's capital stock, other than
the declaration and payment of regular quarterly pay-in-kind dividends at the
required annual 8% rate per share on the MXP Series A Preferred Stock and MXP
Series B Preferred Stock, with usual record and payment dates for such
dividends; (ii) any amendment of any material term of any outstanding equity
security of MXP or any Significant Subsidiary of MXP; (iii) any repurchase,
redemption or other acquisition by MXP or any Subsidiary of MXP of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, MXP or any Subsidiary of MXP, except as contemplated by
the MXP Stock Plans; (iv) any material change in any method of accounting or
accounting practice or any tax method, practice or election by MXP or any
Significant Subsidiary of MXP; or (v) any other transaction, commitment,
dispute or other event or condition (financial or otherwise) of any character
(whether or not in the ordinary course of business) that is reasonably likely
to have a Material Adverse Effect on MXP, except for general economic changes
and changes that may affect the industries of MXP or any of its Subsidiaries
generally.
(g) No Undisclosed Material Liabilities. Except as set
forth in the MXP SEC Documents, as of the date hereof, there are no liabilities
of MXP or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that are
reasonably likely to have a Material Adverse Effect on MXP, other than: (i)
liabilities adequately provided for on the balance sheet of MXP dated as of
December 31, 1996 (including the notes thereto) contained in MXP's Annual
Report on Form 10-K for the year ended December 31, 1996; (ii) liabilities
incurred in the ordinary course of business subsequent to December 31, 1996;
and (iii) liabilities under this Agreement.
(h) No Default. Neither MXP nor any of its Subsidiaries
is in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (i) the Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws of MXP or any provision of the
comparable charter or organizational documents of any of its Subsidiaries, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license to which MXP or
any of its Subsidiaries is now a party or by which MXP or any of its
Subsidiaries or any of their respective properties or assets is bound (except
for the requirement under certain of such instruments to file supplemental
indentures as a result of the transactions contemplated hereby) or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to MXP
or any of its Subsidiaries, except in the case of (ii) and (iii) for defaults
or violations which in the aggregate would not have a Material Adverse Effect
on MXP.
(i) Compliance with Applicable Laws. MXP and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "MXP Permits"), except where the
failure so to hold would not have a Material Adverse Effect on MXP. MXP and
its Subsidiaries are in compliance with the terms of the MXP Permits, except
where the failure so to comply would not have a Material Adverse Effect on MXP.
Except as disclosed in the MXP SEC Documents, the
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businesses of MXP and its Subsidiaries are not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, except for
possible violations which would not have a Material Adverse Effect on MXP. As
of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to MXP or any of its Subsidiaries is pending and of which
MXP has knowledge or, to the knowledge of MXP as of the date hereof,
threatened, other than those the outcome of which would not have a Material
Adverse Effect on MXP.
(j) Litigation. Except as disclosed in the MXP SEC
Documents or Schedule 3.2(j) of the MXP Disclosure Schedule, as of the date of
this Agreement there is no suit, action or proceeding pending, or, to the
knowledge of MXP, threatened against or affecting MXP or any Subsidiary of MXP
("MXP Litigation"), and MXP and its Subsidiaries have no knowledge of any facts
that are likely to give rise to any MXP Litigation, that (in any case) is
reasonably likely to have a Material Adverse Effect on MXP, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against MXP or any Subsidiary of MXP ("MXP Order") that
is reasonably likely to have a Material Adverse Effect on MXP or its ability to
consummate the transactions contemplated by this Agreement. Schedule 3.2(j) of
the MXP Disclosure Schedule contains an accurate and complete list of all
suits, actions and proceedings pending or, to the knowledge of MXP, threatened
against or affecting MXP or any of its Subsidiaries as of the date hereof.
(k) Taxes. Except as set forth on Schedule 3.2(k) of the
MXP Disclosure Schedule:
(i) Each of MXP, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which
MXP or any of its Subsidiaries is or was a member has (A) duly filed on
a timely basis (taking into account any extensions) all U.S. federal
income Tax Returns, and all other material Tax Returns required to be
filed or sent by or with respect to it, (B) duly paid or deposited on a
timely basis all Taxes (as hereinafter defined) that are shown to be
due and payable on or with respect to such Tax Returns, and all
material Taxes that are otherwise due and payable (except for audit
adjustments not material in the aggregate or to the extent that
liability therefor is reserved for in MXP's most recent audited
financial statements) for which MXP or any of its Subsidiaries may be
liable, (C) established reserves that are adequate for the payment of
all material Taxes not yet due and payable with respect to the results
of operations of MXP and its Subsidiaries through the date hereof, and
(D) complied in all material respects with all applicable laws, rules
and regulations relating to the reporting, payment and withholding of
Taxes that are required to be withheld from payments to employees,
independent contractors, creditors, shareholders or any other third
party and has in all material respects timely withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over.
(ii) Schedule 3.2(k) of the MXP Disclosure
Schedule sets forth (A) the last taxable period through which the
federal income Tax Returns of MXP and any of its Subsidiaries have been
examined by the IRS or for which the statute of limitations for
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assessment has otherwise closed and (B) any affiliated, consolidated,
combined, unitary or similar group or Return in which MXP or any of its
Subsidiaries is or has been a member or joins or has joined in the
filing. Except to the extent being contested in good faith, all
material deficiencies asserted as a result of such examinations and any
examination by any applicable taxing authority have been paid, fully
settled or adequately provided for in MXP's most recent audited
financial statements. Except as disclosed in or adequately provided
for in the MXP SEC Documents or disclosed in Schedule 3.2(k) of the MXP
Disclosure Schedule, no audits or other administrative proceedings or
court proceedings are presently pending, or to the knowledge of MXP,
threatened, with regard to any Taxes for which MXP or any of its
Subsidiaries would be liable, and no material deficiency for any Taxes
has been proposed, asserted or assessed (whether by examination report
or prior to completion of examination by means of notices of proposed
adjustment or other similar requests or notices) pursuant to such
examination against MXP or any of its Subsidiaries by any taxing
authority with respect to any period.
(iii) Neither MXP nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on the
Closing Date will execute or enter into) with the IRS or any taxing
authority (A) any agreement or other document extending or having the
effect of extending the period for assessment or collection of any
income or franchise Taxes for which MXP or any of its Subsidiaries
would be liable or (B) a closing agreement pursuant to Section 7121 of
the Code or any similar provision of state, local, foreign or other
income tax law, which will require any increase in taxable income or
alternative minimum taxable income, or any reduction in tax credits,
for MXP or any of its Subsidiaries for any taxable period and after the
Closing Date.
(iv) Except as set forth in the MXP SEC Documents,
neither MXP nor any of its Subsidiaries is a party to an agreement that
provides for the payment of any amount that would constitute a
"parachute payment" within the meaning of Section 280G of the Code or
that would constitute compensation whose deductibility is limited under
Section 162(m) of the Code.
(v) Except as set forth in the MXP SEC Documents,
neither MXP nor any of its Subsidiaries is a party to, is bound by or
has any obligation under any tax sharing or allocation agreement or
similar agreement or arrangement.
(vi) There are no requests for rulings or
outstanding subpoenas from any taxing authority for information with
respect to Taxes of MXP or any of its Subsidiaries and, to the
knowledge of MXP, no material reassessments (for property or ad valorem
Tax purposes) of any assets or any property owned or leased by MXP or
any of its Subsidiaries have been proposed in written form.
(vii) Neither MXP nor any of its Subsidiaries has
agreed to make any adjustment pursuant to section 481(a) of the Code
(or any predecessor provision) by reason of any change in any
accounting method of MXP or any of its Subsidiaries, and neither MXP
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<PAGE> 48
nor any of its Subsidiaries has any application pending with any taxing
authority requesting permission for any changes in any accounting
method of MXP or any of its Subsidiaries. To the knowledge of MXP,
neither the IRS nor any other taxing authority has proposed in writing,
and neither MXP nor any of its Subsidiaries is otherwise required to
make, any such adjustment or change in accounting method.
(viii) There are no material excess loss accounts or
deferred intercompany transactions between MXP and/or any of its
Subsidiaries within the meaning of Treas. Reg. Section 1.1502-13 or
1.1502-19, respectively.
(l) Pension and Benefit Plans; ERISA. Except as set forth
on Schedule 3.2(l) of the MXP Disclosure Schedule or in the MXP SEC Documents:
(i) All "employee pension plans," as defined in
Section 3(2) of the ERISA, maintained by MXP or any of its Subsidiaries
or any trade or business (whether or not incorporated) which is under
common control, or which is treated as a single employer, with MXP
under Section 414(b), (c), (m) or (o) of the Code ("MXP ERISA
Affiliate") or to which MXP or any of its Subsidiaries or any MXP ERISA
Affiliate contributed or is obligated to contribute thereunder within
six years prior to the RM Effective Time (the "MXP Pension Plans")
intended to qualify under Section 401 of the Code so qualify and the
trusts maintained pursuant thereto are exempt from federal income
taxation under Section 501 of the Code, and, to the knowledge of MXP as
of the date hereof, nothing has occurred with respect to the operation
of the MXP Pension Plans that could cause the loss of such
qualification or exemption or the imposition of any material liability,
penalty, or tax under ERISA or the Code.
(ii) There has been no material "reportable event"
as that term is defined in Section 4043 of ERISA and the regulations
thereunder with respect to the MXP Pension Plans subject to Title IV of
ERISA that would require the giving of notice or any material event
requiring disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(iii) As to the MXP Pension Plans subject to Title
IV of ERISA, there has been no event or condition which presents the
material risk of termination, no notice of intent to terminate has been
given under Section 4041 of ERISA and no proceeding has been instituted
under Section 4042 of ERISA to terminate, such that would result in a
material liability to MXP, its Subsidiaries, or MXP ERISA Affiliates;
no material liability to the PBGC has been incurred; no material
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred; and the assets of each MXP Pension Plan equal or exceed the
actuarial present value of the benefit liabilities, within the meaning
of Section 4041 of ERISA, under such MXP Pension Plan, based upon
reasonable actuarial assumptions and the asset valuation principles
established by the PBGC.
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(iv) There is no violation of ERISA with respect
to the filing of applicable reports, documents, and notices regarding
the "employee benefit plans," as defined in Section 3(3) of ERISA and
all other material employee compensation and benefit arrangements or
payroll practices including, without limitation, severance pay, sick
leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation,
bonus, long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, life insurance and scholarship
programs maintained by MXP or any of its Subsidiaries or to which MXP
or any of its Subsidiaries contributed or is obligated to contribute
thereunder (all such plans, other than the MXP Pension Plans, being
hereinafter referred to as the "MXP Employee Benefit Plans") or the MXP
Pension Plans with the Secretary of Labor and the Secretary of the
Treasury or the furnishing of such documents to the participants or
beneficiaries of the MXP Employee Benefit Plans or MXP Pension Plans,
which violation is reasonably likely to have a Material Adverse Effect
on MXP;
(v) The MXP Employee Benefit Plans and MXP
Pension Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including
rules and regulations thereunder) and other applicable Federal and
state law, there is no material liability for breaches of fiduciary
duty in connection with the MXP Employee Benefit Plans and MXP Pension
Plans, and neither MXP nor any of its Subsidiaries or any "party in
interest" or "disqualified person" with respect to the MXP Employee
Benefit Plans and MXP Pension Plans has engaged in a material
"prohibited transaction" within the meaning of Section 4975 of the Code
or Section 406 of ERISA.
(vi) There are no material actions, suits or
claims pending (other than routine claims for benefits) or, to the
knowledge of MXP, threatened against, or with respect to, the MXP
Employee Benefit Plans or MXP Pension Plans or their assets.
(vii) Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will (A) result in any payment becoming due to any employee or group of
employees of MXP or any of its Subsidiaries; (B) increase any benefits
otherwise payable under any MXP Employee Benefit Plan or MXP Pension
Plan; or (C) result in the acceleration of the time of payment or
vesting of any such benefits. Except as set forth on Schedule
3.2(l)(vii) of the MXP Disclosure Schedule, there are no severance
agreements or employment agreements between MXP or any of its
Subsidiaries and any employee of MXP or such Subsidiary. True and
complete copies of all such severance agreements and employment
agreements have been provided to Spice.
(viii) Except as set forth on Schedule 3.2(l)(viii)
of the MXP Disclosure Schedule, neither MXP nor any of its Subsidiaries
has any consulting agreement or arrangement with any person involving
compensation in excess of $200,000, except as are terminable upon one
month's notice or less.
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<PAGE> 50
(ix) Neither MXP nor any of its Subsidiaries nor
any MXP ERISA Affiliate contributes to, or has an obligation to
contribute to, and has not within six years prior to the RM Effective
Time contributed to, or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(x) No stock or other security issued by MXP or
any of its Subsidiaries forms or has formed a material part of the
assets of any MXP Employee Benefit Plan or MXP Pension Plan.
(xi) Concerning each MXP Pension Plan that is or
has been subject to the funding requirements of Title I, Subtitle B,
Part 3 of ERISA, the funding method used in connection with such plan
is, and at all times has been, acceptable under ERISA, each of the
actuarial assumptions employed in connection with determining the
funding of each such plan is, and at all times has been, reasonable and
satisfies the requirements of Section 412(c)(3) of the Code and Section
302(c)(3) of ERISA, and Schedule 3.2(l)(xi) of the MXP Disclosure
Schedule sets forth as of December 31, 1996, (A) the actuarially
determined present value of all Benefit Liabilities determined on an
ongoing plan basis, employing in making such determination the same
actuarial assumptions as were used in determining plan fundings for the
most recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (B) the actuarially determined present value of
all Benefit Liabilities under each such MXP Pension Plan employing in
such determination the same actuarial assumptions, except turnover
assumptions, as were used in determining plan funding for the most
recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (C) the fair market value of the assets held to
fund each such MXP Pension Plan, (D) the funding method used in
connection with each such MXP Pension Plan, (E) identification of the
amount and related plan with respect to which there is or has been any
"accumulated funding deficiency," as defined in Section 302(a)(2) of
ERISA, (F) the estimated amount of, together with calculations showing
how such amounts were determined, any premiums due to the PBGC for the
most recently completed and following five years, (G) a demonstration
showing how any minimum or maximum contributions, including any
contributions required by reason of a liquidity shortfall within the
meaning of Section 412(m)(5) of the Code or Section 302(e)(5) of ERISA,
to any such plans were arrived at for the most recently completed year,
together with an estimate for the following five years based upon
present law and actuarial assumptions and methodologies, except where
such assumptions or methodologies are required by law to be changed
with respect to a particular year, and (H) the date of any change of
any assumptions used to determine current liability of any such plan,
together with a demonstration that such change either (x) received
appropriate approvals under Section 412(c)(5) of the Code and Section
302(c)(5) of ERISA or (y) that such approval was not necessary by law;
Schedule 3.2(l)(xi) sets forth a reasonable good faith estimate of
material changes between December 31, 1996 and the date hereof in the
value of benefits or plan assets described in the preceding clause (A),
(B) or (C); Schedule 3.2(l)(xi) of the MXP Disclosure Schedule sets
forth the information described in Clauses (A), (B), (C), (D), (F),
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(G) and (H) as of December 31, 1996, including a separate statement of
liabilities attributable to unpredictable contingent event benefits
within the meaning of Section 412(l)(7)(B)(ii) of the Code and Section
302(d)(7)(B)(ii) of ERISA; the sum of the amount of unfunded Benefit
Liabilities under all MXP Pension Plans (excluding each such plan with
an amount of unfunded Benefit Liabilities of zero or less) is not more
than $5,000,000; all contributions required to be made by Section 515
of ERISA by the Company or any affiliate to MXP Pension Plans have been
timely made; with respect to any such MXP Pension Plan and concerning
each MXP Pension Plan which is in whole or in part an "individual
account plan" (as defined in Section 3(34) of ERISA), there is set
forth in Schedule 3.2(l)(xi) of the MXP Disclosure Schedule (A) the
amount of any MXP liability for contributions due or to become due with
respect to each such MXP Pension Plan for periods up to the date
hereof, and the date any such amounts were paid and (B) the amount of
any contribution accrued or paid or expected to be accrued or paid with
respect to such MXP Pension Plan for the plan year in which the Closing
Date occurs; with respect to any such MXP Pension Plan, no such plan
has been terminated or subject to a "spin-off" or "spin-off
termination" or partial termination and no assets of any such plan have
been used or employed in a manner so as to subject them to an excise
tax imposed under Section 4980 of the Code; each such MXP Pension Plan
permits termination thereof, and distribution of any assets in excess
of those required to pay Benefit Liabilities may be distributed to or
for the benefit of MXP or its Affiliates and Section 4044(d) of ERISA
would not prevent such reversion; with respect to any such MXP Pension
Plan, any reduction in benefits was preceded by an adequate and
appropriate notice to the parties described in and as required by
Section 204(h) of ERISA; there are no former employees or participants
who are entitled to earn additional pension benefits by reason of "grow
in" or other rights with respect to service or time periods after such
employees have been terminated from employment with Seller.
(xii) None of MXP nor any of its Affiliates has
incurred, by reason of the transaction contemplated by this Agreement,
or will incur, any liability under Section 4062(e) of ERISA. Neither
MXP nor any of its Affiliates is a participant in any plan to which
Sections 4063 or 4064 of ERISA apply.
(xiii) Neither MXP nor any of its Affiliates has
engaged in any transaction described under Section 4069 of ERISA nor
can any lien be imposed on any of MXP, its Affiliates or any of their
respective assets under Section 4068 of ERISA.
(xiv) PBGC and Other Liabilities. MXP and its
Affiliates have complied in all material respects with all requirements
for premium payments, including any interest and penalty charges for
late payment, due the PBGC with respect to each MXP Pension Plan and
each separate plan year for which any premiums are required. Except as
set forth in Schedule 3.2(l)(xiv) of the MXP Disclosure Schedule, and
except for transactions required by this Agreement, from the period
commencing January 1, 1990 through the Closing Date there has been no
"reportable event" (within the meaning of Section 4043(b) or (c) of
ERISA and regulations promulgated by the PBGC thereunder, Section
4062(e) of ERISA or Section 4063(a) of ERISA) with respect to any MXP
Pension Plan subject to Title IV of ERISA for
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which notice to the PBGC has not, by rule or regulations, been waived.
There is not any unsatisfied material liability to the PBGC which has
been incurred by MXP or any Affiliate on account of any MXP Pension
Plan subject to Title IV of ERISA. From the period commencing January
1, 1990 through the Closing Date, no filing has been or will be made by
MXP or any Affiliate with the PBGC to terminate, nor has any proceeding
been commenced by the PBGC to terminate, any MXP Pension Plan subject
to Title IV of ERISA which was maintained, or wholly or partially
funded, by MXP or any Affiliate. Concerning both MXP and any Affiliate
(A) there has been no cessation of operations at a facility so as to
become subject to the provisions of Section 4062(e) of ERISA, (B) there
has been no withdrawal of a substantial employer from any MXP Pension
Plan so as to become subject to the provisions of Section 4063 of
ERISA, (C) there has been no cessation of contributions on or before
the Closing Date to any MXP Pension Plan subject to Section 4064(a) of
ERISA to which MXP or any Affiliate has made contributions during the
five calendar years prior to the Closing Date, (D) there has been no
complete or partial withdrawal from a multiemployer plan (as defined in
either Section 3(37) or Section 4001(a)(3) of ERISA) so as to incur
withdrawal liability as defined in Section 4201 of ERISA (without
regard to any subsequent reduction or waiver of such liability under
Section 4207 or 4208 of ERISA), (E) no employee pension benefit plan
which is a multiemployer plan (as defined in either Section 3(37) or
Section 4001(a)(3) of ERISA) which MXP or any Affiliate maintains or
contributes to is in "reorganization" (as defined in Section 4241 of
ERISA) or "insolvent" (as defined in Section 4245 of ERISA), (F) there
is not now, nor can there ever be, any liability under Section 4064 of
ERISA to any of MXP, RM Surviving Corporation or Spice by reason of
participation in any MXP Pension Plan by MXP or any Affiliate on or
prior to the Closing Date, (G) there has been no amendment to any MXP
Pension Plan that would require the furnishing of security under
Section 401(a)(29) of the Code and (H) there has been no event or
circumstance and there can be no event or circumstance which has or may
result in any liability being asserted by any MXP Pension Plan, the
PBGC or any other person or entity under Title IV of ERISA against MXP
or any MXP Affiliate or Spice or RM Surviving Corporation. Neither MXP
nor any of its Affiliates has any liability to any employee benefit
plan for contributions under Section 412(m) of the Code or Section
302(e) of ERISA, nor has any lien been imposed under Section 412(n) of
the Code or Section 302(f) of ERISA nor is there any liability for
excise taxes imposed under Section 4971 of the Code, and all
liabilities arising under Section 412(c)(11) of the Code with respect
to contributions to any employee benefit plan have been set forth in
Schedule 3.2(l)(xiv) of the MXP Disclosure Schedule; any notices to the
PBGC under Section 412(n) of the Code or Section 302(f) of ERISA have
heretofore been delivered to MXP; and copies of any notices required to
be given to participants under either Section 101(d) or Section 4011 of
ERISA have previously been delivered to MXP. Except as described in
Schedule 3.2(l)(xiv) of the MXP Disclosure Schedule, the PBGC has not
communicated with MXP, its Affiliates or any of its agents or
representatives concerning the transactions contemplated by the
Agreement, nor any other transactions implemented or contemplated by
MXP or any of its Affiliates within the preceding five calendar years.
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<PAGE> 53
(xv) Excess Assets or Benefits. Since January 1,
1990, MXP has not taken any action to vest any overfunded benefits in
any employee benefit plan in any of the participants thereunder. Upon
the termination of any MXP Pension Plans, any excess assets (defined as
the excess of plan assets over the amounts required to fund all
liabilities of the plan) will be distributed to or for the benefit of
the sponsor of the plan.
(xvi) Health Care Continuation Coverage. MXP and
its Affiliates have materially complied with the requirements of
Section 4980B of the Code and Sections 601-608 of ERISA regarding
continuation of health care coverage notices and provision of
appropriate health care coverage under the MXP Employee Benefit Plans.
(xvii) No Contribution to Multiemployer Plan. From
and after the Closing Date, neither Spice nor MXP nor RM Surviving
Corporation will be liable for contributions to any MXP Pension Plan
that is a multiemployer plan within the meaning of either Section 3(37)
or Section 4001(a)(3) of ERISA except to the extent that Spice or MXP
or RM Surviving Corporation subsequently affirmatively determines to
undertake such contribution obligations.
(xviii) WARN Notices. Any notice under the Workers
Adjustment Retirement Act that has been required with respect to MXP
employees or former employees or will be required by the transactions
contemplated by this Agreement has been, or will be, as the case may
be, properly and timely given by MXP.
(xix) Certain Pension Deductions. RM Surviving
Corporation will be entitled to deduct on its Tax Returns for periods
commencing on or after the Closing Date any contributions to a MXP
Pension Plan or MXP Employee Benefit Plan made by MXP on or before the
Closing Date.
(xx) Worker's Compensation. MXP and its
Affiliates have maintained worker's compensation coverage as required
by applicable state law through purchase of insurance and not by
self-insurance or otherwise except as disclosed to Spice on Schedule
3.2(l)(xx) of the MXP Disclosure Schedule.
(xxi) Section 162(m) Deduction Limitations. No
amount has been paid by MXP or any of its Affiliates, and no amount is
expected to be paid by MXP or any of its Affiliates, which would be
subject to the provisions of 162(m) of the Code such that all or a part
of such payments would not be deductible by the payor.
(m) Labor Matters. Except as set forth on Schedule 3.2(m)
of the MXP Disclosure Schedule on in the MXP SEC Documents:
(i) neither MXP nor any of its Subsidiaries is a
party to any collective bargaining agreement or other current labor
agreement with any labor union or organization, and there is no current
union representation question involving employees of MXP or any
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<PAGE> 54
of its Subsidiaries, nor does MXP or any of its Subsidiaries know of
any activity or proceeding of any labor organization (or representative
thereof) or employee group (or representative thereof) to organize any
such employees;
(ii) as of the date hereof, there is no unfair
labor practice charge or grievance arising out of a collective
bargaining agreement or other grievance procedure against MXP or any of
its Subsidiaries pending, or, to the knowledge or MXP or any of its
Subsidiaries, threatened, that has, or is reasonably likely to have, a
Material Adverse Effect on MXP;
(iii) as of the date hereof, there is no complaint,
lawsuit or proceeding in any forum by or on behalf of any present or
former employee, any applicant for employment or any classes of the
foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious
conduct in connection with the employment relationship against MXP or
any of its Subsidiaries pending, or, to the knowledge of MXP or any of
its Subsidiaries, threatened, that has, or is reasonably likely to
have, a Material Adverse Effect on MXP;
(iv) there is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of MXP or any of its
Subsidiaries, threatened, against or involving MXP or any of its
Subsidiaries that has, or is reasonably likely to have, a Material
Adverse Effect on MXP;
(v) MXP and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours
of work and occupational safety and health, except for non-compliance
that does not have, and is not reasonably likely to have, a Material
Adverse Effect on MXP; and
(vi) as of the date hereof, there is no
proceeding, claim, suit, action or governmental investigation pending
or, to the knowledge of MXP or any of its Subsidiaries, threatened, in
respect to which any current or former director, officer, employee or
agent of MXP or any of its Subsidiaries is or may be entitled to claim
indemnification from MXP or any of its Subsidiaries pursuant to the
Amended and Restated Articles of Incorporation or Amended and Restated
Bylaws of MXP or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, as provided in any
indemnification agreement to which MXP or any Subsidiary of MXP is a
party or pursuant to applicable law that has, or is reasonably likely
to have, a Material Adverse Effect on MXP.
(n) Intangible Property. MXP and its Subsidiaries possess
or have adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of MXP and its Subsidiaries (collectively, the "MXP Intangible
Property"), except
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<PAGE> 55
where the failure to possess or have adequate rights to use such
properties would not reasonably be expected to have a Material Adverse
Effect on MXP. All of the MXP Intangible Property is owned or licensed
by MXP or its Subsidiaries free and clear of any and all liens, claims
or encumbrances, except those that are not reasonably likely to have a
Material Adverse Effect on MXP and neither MXP nor any such Subsidiary
has forfeited or otherwise relinquished any MXP Intangible Property
which forfeiture would result in a Material Adverse Effect on MXP. To
the knowledge of MXP, the use of the MXP Intangible Property by MXP or
its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation
of any right, title, interest or goodwill, including, without
limitation, any intellectual property right, trademark, trade name,
patent, service mark, brand mark, brand name, computer program,
database, industrial design, copyright or any pending application
therefor of any other person and there have been no claims made and
neither MXP nor any of its Subsidiaries has received any notice of any
claim or otherwise knows that any of the MXP Intangible Property is
invalid or conflicts with the asserted rights of any other person or
has not been used or enforced or has failed to have been used or
enforced in a manner that would result in the abandonment, cancellation
or unenforceability of any of the MXP Intangible Property, except for
any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that would
not reasonably be expected to have a Material Adverse Effect on MXP.
(o) Environmental Matters. Except as disclosed on
Schedule 3.2(o) of the MXP Disclosure Schedule:
(i) The operations of MXP and its Subsidiaries
have been conducted, are and, as of the Closing Date, will be, in
compliance with all Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Material Adverse
Effect on MXP;
(ii) MXP and its Subsidiaries have obtained and
will maintain all permits, licenses and registrations, or applications
relating thereto, and have made and will make all filings, reports and
notices required under applicable Environmental Laws for the continued
operations of their respective businesses, except such matters the lack
or failure of which would not reasonably be expected to lead to a
Material Adverse Effect on MXP;
(iii) MXP and its Subsidiaries are not subject to
any outstanding written orders issued by, or contracts with, any
Governmental Entity or other person respecting (A) Environmental Laws,
(B) Remedial Action, (C) any Release or threatened Release of a
Hazardous Material or (D) an assumption of responsibility for
environmental liabilities of another person, except such orders or
contracts the compliance with which would not reasonably be expected to
have a Material Adverse Effect on MXP;
(iv) MXP and its Subsidiaries have not received
any written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which violation
or liability would reasonably be expected to have a Material Adverse
Effect on MXP;
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<PAGE> 56
(v) Neither MXP nor any of its Subsidiaries has
any contingent liability in connection with the Release of any
Hazardous Material into the indoor or outdoor environment (whether
on-site or off-site) or employee or third party exposure to Hazardous
Materials that would reasonably be expected to lead to a Material
Adverse Effect on MXP;
(vi) The operations of MXP or its Subsidiaries
involving the generation, transportation, treatment, storage or
disposal of hazardous or solid waste, as defined and regulated under 40
C.F.R. Parts 260-270 (in effect as of the date of this Agreement) or
any applicable state equivalent, are in compliance with applicable
Environmental Laws, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on MXP; and
(vii) To the knowledge of MXP, there is not now on
or in any property of MXP or its Subsidiaries or any property for which
Spice or its Subsidiaries is potentially liable any of the following:
(A) any underground storage tanks or surface impoundments or (B) any
on-site disposal of Hazardous Material, any of which ((A) or (B)
preceding) could reasonably be expected to have a Material Adverse
Effect on MXP.
(p) Insurance. Schedule 3.2(p) of the MXP Disclosure
Statement sets forth an insurance schedule of MXP's and each of its
Subsidiaries' directors' and officers' liability insurance, primary and excess
casualty insurance policies, providing coverage for bodily injury and property
damage to third parties, including products liability and completed operations
coverage, and worker's compensation, in effect as of the date hereof. MXP
maintains insurance in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to those of MXP and each of its Subsidiaries (taking into account the
cost and availability of such insurance).
(q) Opinion of Financial Advisor. The Board of Directors
of MXP has received the opinion dated April 4, 1997 of (i) Merrill Lynch & Co.
addressed to such Board (a copy of which has been provided to Spice for
information purposes only) that, as of such date, the MXP Conversion Number and
the Spice Conversion Number are fair from a financial point of view to the
holders of MXP Common Stock, (ii) Merrill Lynch & Co. addressed to such Board
(a copy of which has been provided to Spice for information purposes only)
that, as of such date, the MXP Common Consideration is fair from a financial
point of view to the holders of MXP Common Stock, and (iii) Morgan Stanley & Co
Incorporated addressed to such Board (a copy of which has been provided to
Spice for information purposes only) that, as of such date, the MXP Common
Consideration and the MXP Preferred Consideration are fair from a financial
point of view to the holders of MXP Series A Preferred Stock. Spice
acknowledges and agrees that it may not, and is not entitled to, rely on the
opinions of Merrill Lynch & Co. or Morgan Stanley & Co. Incorporated delivered
to the MXP Board of Directors.
(r) Vote. Subject to Section 5.5, MXP intends to seek, at
the MXP stockholders meeting referred to in Section 5.5, the affirmative vote
of the holders of (i) a majority of the outstanding shares of MXP Common Stock,
voting as a separate class, (ii) a majority of the
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outstanding shares of MXP Series A Preferred Stock and MXP Series B
Preferred Stock, voting as a single class, (iii) a majority of the
outstanding shares of MXP Common Stock, MXP Series A Preferred Stock
and MXP Series B Preferred Stock, voting as a single class (in each
case with shares of MXP Series A Preferred Stock and MXP Series B
Preferred Stock having one vote per share, on an as converted basis),
(iv) a majority of the outstanding shares of MXP Series A Preferred
Stock, voting as a separate class (the "Series A Approval"), and (v) a
majority of the outstanding shares of MXP Series B Preferred Stock,
voting as a separate class (the "Series B Approval"). There are no
approvals required of the holders of any class or series of MXP capital
stock necessary to approve this Agreement and the transactions
contemplated hereby other than as set forth in the preceding sentence.
MXP also intends to seek stockholder approval of its 1996 Incentive
Plan at such meeting.
(s) Beneficial Ownership of Spice Common Stock. As of the
date hereof, neither MXP nor its Subsidiaries beneficially owns any of the
outstanding Spice Common Stock.
(t) Brokers. Except for the fees and expenses payable to
Merrill Lynch & Co. and Morgan Stanley & Co. Incorporated, which fees are
reflected in their respective engagement letters with MXP (copies of which have
been delivered to Spice), no broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of MXP.
(u) Interim Operations of Reincorporation Sub and Merger
Sub. Reincorporation Sub was formed by MXP solely for the purpose of engaging
in the transactions contemplated hereby, has engaged in no other business or
activities, has incurred no other obligations or liabilities, has no other
assets and has conducted its operations only as contemplated hereby. All of
the outstanding capital stock of Reincorporation Sub and Merger Sub is owned
directly by MXP.
(v) Tax Matters. The representations in the form of
Officer's Certificate of Purchaser included as Schedule 3.2(v) of the MXP
Disclosure Schedule are true and correct in all material respects, assuming for
purposes of this representation and warranty that the Mergers had been
consummated on the date and in accordance with the terms hereof.
ARTICLE IV
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by Spice and MXP Pending the Merger.
Prior to the SM or RM Effective Time, as applicable, (i) Spice agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, or to the extent that MXP shall otherwise consent in
writing) and (ii) MXP agrees as to itself and its Subsidiaries that (except as
expressly contemplated or permitted by this Agreement, or to the extent that
Spice shall otherwise consent in writing) (for purposes of this Section 4.1
Spice and MXP each being a "Party"):
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(a) Ordinary Course. Each Party and its Subsidiaries
shall carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
commercially reasonable efforts to preserve intact its present business
organizations, keep available the services of its current officers and
employees, subject in the case of Spice to Section 5.9, and endeavor to
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not be
impaired in any material respect at the SM or RM Effective Time, as applicable.
(b) Dividends; Changes in Stock. Except as contemplated
by this Agreement and for transactions solely among a Party and its
Subsidiaries, a Party shall not and it shall not permit any of its Subsidiaries
to: (i) declare or pay any dividends on or make other distributions in respect
of any of its capital stock or partnership interests, except (x) in the case of
Spice, for the declaration and payment of regular cash dividends with respect
to Spice's first and third fiscal quarters not in excess of $.05 per share of
Spice Common Stock with usual record and payment dates, regular monthly cash
dividends on the MIPS paid by Spice LLC in accordance with their terms and
dividends from a Subsidiary of Spice to Spice or another Subsidiary of Spice
and (y) in the case of MXP, for the declaration and payment of regular
quarterly payment-in-kind dividends with respect to the MXP Series A Preferred
Stock and MXP Series B Preferred Stock in accordance with their terms, upon the
conversion of MXP Series A Preferred Stock and MXP Series B Preferred Stock
into MXP Common Stock and/or MXP Series A Preferred Stock, as the case may be,
in accordance with their terms, and dividends from a Subsidiary of MXP to MXP
or another Subsidiary of MXP; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of such
Party's capital stock; or (iii) repurchase, redeem or otherwise acquire, or
permit any of its Subsidiaries to purchase, redeem or otherwise acquire, any
shares of its capital stock, except as required by the terms of its securities
outstanding on the date hereof or as contemplated by any existing employee
benefit plan and except that Spice Capital LLC may redeem the MIPS for cash
and/or Spice may cause the exchange of the MIPS for Spice Common Stock, in each
case in accordance with the terms of the MIPS.
(c) Issuance of Securities. A Party shall not and it
shall not permit any of its Subsidiaries to, issue, deliver or sell, or
authorize or propose to issue, deliver or sell, any shares of its capital stock
of any class, any Voting Debt or other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Voting Debt, other voting securities or convertible securities, other
than: (i) in the case of Spice, (x) the issuance of Spice Common Stock and
accompanying Spice Rights upon the exercise of stock options granted under the
Spice Stock Plans that are outstanding on the date hereof, or in satisfaction
of stock grants or stock based awards made prior to the date hereof pursuant to
the Spice Stock Plans, (y) issuances by a wholly owned Subsidiary of Spice of
such Subsidiary's capital stock to its parent, and (z) the issuance of Spice
Series A Preferred Stock or Spice Common Stock upon the exchange of the MIPS in
accordance with their terms and the issuance of Spice Common Stock upon the
conversion of the Spice Series A Preferred Stock in accordance with its terms;
and (ii) in the case of MXP (x) the issuance of MXP Common Stock upon the
exercise of stock options granted under the MXP Stock Plans that are
outstanding on the date hereof, or in satisfaction of stock grants or stock
based awards made prior to the date hereof pursuant to MXP Stock Plans, (y)
issuances by a wholly owned
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subsidiary of MXP of such Subsidiary's capital stock to its parent and (z)
issuances upon the conversion of MXP Series A Preferred Stock and MXP Series B
Preferred Stock into MXP Common Stock and/or MXP Series A Preferred Stock, as
the case may be, in accordance with their terms.
(d) Governing Documents. Except as contemplated hereby or
in connection herewith, no Party shall amend or propose to amend its
certificate or articles of incorporation or bylaws.
(e) No Acquisitions. A Party shall not, and it shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof,
other than (i) in the case of Spice, the acquisitions described on Schedule
4.1(e) of the Spice Disclosure Schedule or any such acquisition or acquisitions
having a purchase price not exceeding $50,000,000 in the aggregate; and (ii) in
the case of MXP, the acquisition of Greenhill Petroleum Corporation and certain
federal leases in the Gulf of Mexico as described in the MXP SEC Documents or
any such acquisition or acquisitions having a purchase price not exceeding
$50,000,000 in the aggregate.
(f) No Dispositions. Other than: (i) as may be necessary
or required by law to consummate the transactions contemplated hereby or (ii)
sales, leases, encumbrances or other dispositions in the ordinary course of
business consistent with past practice that are not material, individually or
in the aggregate, to a Party and its Subsidiaries taken as a whole, a Party
shall not, and it shall not permit any of its Subsidiaries to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease (whether such lease
is an operating or capital lease), encumber or otherwise dispose of, any of its
material assets, except in the case of MXP, for encumbrances related to the
increase in MXP's bank credit facility as described in the MXP SEC Documents.
(g) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, neither Party shall authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of such Party or any of its Significant
Subsidiaries.
(h) Accounting. Neither Party shall, nor shall either
Party permit any of its Subsidiaries to, make any changes in their accounting
methods which would be required to be disclosed under the rules and regulations
of the SEC, except as required by law, rule, regulation or GAAP.
(i) Affiliate Transactions. Neither Party shall, nor
shall either Party permit any of its Subsidiaries to, enter into any agreement
or arrangement with any of their respective Affiliates (as such term is defined
in Rule 405 under the Securities Act, an "Affiliate"), other than with wholly
owned Subsidiaries of such Party, on terms less favorable to such Party or such
Subsidiary, as the case may be, than could be reasonably expected to have been
obtained with an unaffiliated third party on an arm's-length basis.
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(j) Insurance. Each Party shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for companies engaged in their
respective businesses.
(k) Tax Matters. Neither Party shall (i) make or rescind
any material express or deemed election relating to Taxes unless it is
reasonably expected that such action will not materially and adversely affect
Spice or MXP, including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other investments where Spice
or MXP, as appropriate, has the capacity to make such binding election, (ii)
settle or compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, except
where such settlement or compromise will not materially and adversely affect
Spice or MXP, or (iii) change in any material respect any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of its federal income Tax Returns that have been
filed for prior taxable years, except as may be required by applicable law or
except for changes that are reasonably expected not to materially and adversely
affect Spice or MXP.
(l) Certain Employee Matters. Except pursuant to Section
5.9, a Party shall not and it shall not permit any of its Subsidiaries to: (i)
grant any increases in the compensation of any of its directors, officers or
employees, except increases to employees who are not directors or officers made
in the ordinary course of business and in accordance with past practice; (ii)
pay or agree to pay any material pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing Spice
Employee Benefit Plans or Spice Pension Plans or MXP Employee Benefit Plans or
MXP Pension Plans, as applicable, in each case as in effect on the date hereof
to any such director, officer or employee, whether past or present; (iii) amend
or modify in any material respect or receive any assets from the Spice Pension
Plan; (iv) enter into any new, or amend any existing, material employment or
severance or termination agreement with any director, officer or employee; (v)
grant any options or other awards under the Spice Stock Plans or MXP Stock
Plans, as applicable; or (vi) become obligated under any new Spice Employee
Benefit Plan or Spice Pension Plan, or any new MXP Employee Benefit Plan or MXP
Pension Plan, which was not in existence or approved by the Board of Directors
of Spice or MXP, as applicable, prior to the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder.
(m) Indebtedness; Leases; Capital Expenditures. No Party
shall, nor shall any Party permit any of its Subsidiaries to, (i) incur any
indebtedness for borrowed money (except (x) to finance any transactions or
capital or other expenditures permitted by this Agreement (including those
referred to in Section 4.1(e)) and regular borrowings under credit facilities
made in the ordinary course of such Party's cash management practices, (y)
refinancings of existing debt and (z) immaterial borrowings that, in each such
case, permit prepayment of such debt without penalty (other than LIBOR breakage
costs)) or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of such Party or any of
its Subsidiaries or guarantee any debt securities of others, (ii) except in the
ordinary course of business, enter into any material lease (whether such lease
is an operating or capital lease) or create any material
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mortgages, liens, security interests or other encumbrances on the property of
such Party or any of its Subsidiaries in connection with any indebtedness
thereof, or (iii) make or commit to make aggregate capital expenditures not
described in the Spice SEC Documents or MXP SEC Documents in excess, in the
case of each of Spice and MXP, of an amount equal to the sum of (A) capital
expenditures budgeted by such Party for the fiscal year ending December 31,
1997 as set forth in the capital expenditure budgets delivered to the other
Party, less any budgeted capital expenditures expended prior to the date of
this Agreement, plus (B) capital expenditures (not otherwise included in
budgeted capital expenditures) that may be incurred in connection with the
acquisitions by Spice and MXP, as applicable, permitted under Section 4.1(e).
(n) Agreements. No Party shall, nor shall any Party
permit any of its Subsidiaries to, agree in writing or otherwise to take any
action inconsistent with any of the foregoing.
4.2 No Solicitation by Spice.
(a) From and after the date hereof, Spice will not, and
will not authorize or (to the extent within its control) permit any of its
officers, directors, employees, agents, Affiliates and other representatives or
those of any of its Subsidiaries (collectively, "Spice Representatives") to,
directly or indirectly, solicit or encourage (including by way of providing
information) any prospective acquiror or the invitation or submission of any
inquiries, proposals or offers or any other efforts or attempts that
constitute, or may reasonably be expected to lead to, any Spice Acquisition
Proposal (as hereinafter defined) from any person or engage in any discussions
or negotiations with respect thereto or otherwise cooperate with or assist or
participate in, or facilitate any such proposal; provided, however, that,
notwithstanding any other provision of this Agreement, (i) Spice's Board of
Directors may take and disclose to the stockholders of Spice a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (ii)
following receipt from a third party (without any solicitation, initiation or
encouragement, directly or indirectly, by Spice or any Spice Representatives)
of a bona fide Spice Acquisition Proposal, (x) Spice may engage in discussions
or negotiations with such third party and may furnish such third party
information concerning it, and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably customary form
and (y) the Board of Directors of Spice may withdraw, modify or not make its
recommendation referred to in Section 5.5 or terminate this Agreement in
accordance with Section 7.1(g), but in each case referred to in the foregoing
clauses (i) and (ii), only to the extent that Spice's Board of Directors shall
conclude in good faith based on the advice of Spice's outside counsel that such
action is necessary in order for Spice's Board of Directors to act in a manner
that is consistent with its fiduciary obligations under applicable law.
(b) Spice shall immediately cease and cause to be
terminated any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted heretofore by Spice or any
Spice Representatives with respect to any Spice Acquisition Proposal existing
on the date hereof.
(c) Prior to taking any action referred to in Section
4.2(a), if Spice intends to participate in any such discussions or negotiations
or provide any such information to any such third
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party, Spice shall give reasonable prior notice to MXP of each such action.
Spice will promptly notify MXP of any such requests for such information or the
receipt of any Spice Acquisition Proposal, including the identity of the person
or group engaging in such discussions or negotiations, requesting such
information or making such Spice Acquisition Proposal, and the material terms
and conditions of any Spice Acquisition Proposal (provided, however, that Spice
shall not be required to identify such person or group or disclose such terms
or conditions to MXP until the beginning of the one week period referred to in
Section 7.1(g), if Spice determines that such identification or disclosure
prior to such time would impair such discussions or negotiations).
(d) Nothing in this Section 4.2 shall permit Spice to
enter into any agreement with respect to any Spice Acquisition Proposal during
the term of this Agreement (it being agreed that during the term of this
Agreement, Spice shall not enter into any agreement with any person that
provides for, or in any way facilitates, any Spice Acquisition Proposal other
than a confidentiality agreement in the form referred to above).
(e) As used in this Agreement, "Spice Acquisition
Proposal" means any proposal or offer, other than a proposal or offer by MXP or
any of its Affiliates, for, or that could be reasonably expected to lead to, a
tender or exchange offer, a merger, consolidation or other business combination
involving Spice or any of its Significant Subsidiaries or any proposal to
acquire in any manner a substantial equity interest in, or any substantial
portion of the assets of, Spice or any of its Significant Subsidiaries.
4.3 No Solicitation by MXP.
(a) From and after the date hereof, MXP will not, and will
not authorize or (to the extent within its control) permit any of its officers,
directors, employees, agents, Affiliates and other representatives or those of
any of its Subsidiaries (collectively, "MXP Representatives") to, directly or
indirectly, solicit or encourage (including by way of providing information)
any prospective acquiror or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute, or may
reasonably be expected to lead to, any MXP Acquisition Proposal (as hereinafter
defined) from any person or engage in any discussions or negotiations with
respect thereto or otherwise cooperate with or assist or participate in, or
facilitate any such proposal; provided, however, that, notwithstanding any
other provision of this Agreement, (i) MXP's Board of Directors may take and
disclose to the stockholders of MXP a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act and (ii) following receipt from a third
party (without any solicitation, initiation or encouragement, directly or
indirectly, by MXP or any MXP Representatives) of a bona fide MXP Acquisition
Proposal, (x) MXP may engage in discussions or negotiations with such third
party and may furnish such third party information concerning it, and its
business, properties and assets if such third party executes a confidentiality
agreement in reasonably customary form and (y) the Board of Directors of MXP
may withdraw, modify or not make its recommendation referred to in Section 5.5
or terminate this Agreement in accordance with Section 7.1(i), but in each case
referred to in the foregoing clauses (i) and (ii), only to the extent that
MXP's Board of Directors shall conclude in good faith based on the advice of
MXP's outside counsel
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that such action is necessary in order for MXP's Board of Directors to act in a
manner that is consistent with its fiduciary obligations under applicable law.
(b) MXP shall immediately cease and cause to be terminated
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by MXP or any MXP
Representatives with respect to any MXP Acquisition Proposal existing on the
date hereof.
(c) Prior to taking any action referred to in Section
4.3(a), if MXP intends to participate in any such discussions or negotiations
or provide any such information to any such third party, MXP shall give
reasonable prior notice to Spice of each such action. MXP will promptly notify
Spice of any such requests for such information or the receipt of any MXP
Acquisition Proposal, including the identity of the person or group engaging in
such discussions or negotiations, requesting such information or making such
MXP Acquisition Proposal, and the material terms and conditions of any MXP
Acquisition Proposal (provided, however, that MXP shall not be required to
identify such person or group nor disclose such terms or conditions to Spice
until the beginning of the one week period referred to Section 7.1(i), if MXP
determines that such identification or disclosure prior to such time would
impair such discussions or negotiations).
(d) Nothing in this Section 4.3 shall permit MXP to enter
into any agreement with respect to any MXP Acquisition Proposal during the term
of this Agreement (it being agreed that during the term of this Agreement, MXP
shall not enter into any agreement with any person that provides for, or in any
way facilitates, any MXP Acquisition Proposal other than a confidentiality
agreement in the form referred to above).
(e) As used in this Agreement, "MXP Acquisition Proposal"
means any proposal or offer, other than a proposal or offer by Spice or any of
its Affiliates, for, or that could be reasonably expected to lead to, a tender
or exchange offer, a merger, consolidation or other business combination
involving MXP or any of its Significant Subsidiaries or any proposal to acquire
in any manner a substantial equity interest in, or any substantial portion of
the assets of, MXP or any of its Significant Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. MXP,
Reincorporation Sub and Spice shall promptly prepare and file with the SEC the
Joint Proxy Statement and MXP, Reincorporation Sub and Spice shall prepare, and
Reincorporation Sub will file with the SEC, the S-4 in which the Joint Proxy
Statement will be included as a prospectus. Each of MXP, Reincorporation Sub
and Spice shall use its reasonable best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing. Each of MXP and Spice shall use its reasonable best efforts to cause
the Joint Proxy Statement to be mailed to their respective
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stockholders at the earliest practicable date. Each of MXP and Reincorporation
Sub shall use its reasonable best efforts to obtain all necessary state
securities laws or "blue sky" permits, approvals and registrations in
connection with the issuance of New Common Stock in the Mergers and upon the
exercise of Spice Stock Options (as defined in Section 5.10) and MXP Stock
Options (as defined in Section 5.10) and each of MXP and Spice shall furnish
all information concerning MXP and Spice and its respective stockholders as may
be reasonably requested in connection with obtaining such permits, approvals
and registrations.
5.2 Letter of Spice's Accountants. Spice shall use its reasonable
best efforts to cause to be delivered to MXP a letter of KPMG Peat Marwick LLP,
Spice's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to MXP,
Reincorporation Sub and Spice, in form and substance reasonably satisfactory to
MXP and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
S-4.
5.3 Letter of MXP's Accountants. MXP shall use its reasonable
best efforts to cause to be delivered to Spice a letter of Arthur Andersen LLP,
MXP's independent public accountants, dated a date within two business days
before the date on which the S-4 shall become effective and addressed to MXP,
Reincorporation Sub and Spice, in form and substance reasonably satisfactory to
Spice and customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to the
S-4.
5.4 Access to Information. Upon reasonable notice, MXP and Spice,
as the case may be, shall (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the others, access, during normal business hours
during the period prior to the RM Effective Time, to all its properties, books,
contracts, commitments and records, as well as to its officers and employees
(provided that neither MXP nor Spice shall contact any officer or employee of
the other party without first inquiring of the other party as to whether the
officer and employee to be contacted has been advised of the pendency of the
transactions contemplated by this Agreement) and, during such period, each of
MXP and Spice, as the case may be, shall (and shall cause each of their
respective Subsidiaries to) furnish promptly to the others (a) a copy of each
report, schedule, registration statement and other document filed or received
by it during such period pursuant to SEC requirements and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Each of MXP and Spice agrees that it will not,
and will cause its respective representatives not to, use any information
obtained pursuant to this Section 5.4 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreement dated as of October 1, 1996 between MXP and Spice
(the "Confidentiality Agreement") shall apply with respect to information
furnished thereunder or hereunder and any other activities contemplated
thereby.
5.5 Stockholders Meetings. Each of Spice and MXP shall call a
meeting of its stockholders to be held as promptly as practicable after the
date hereof for the purpose of voting upon (i) in the case of Spice, this
Agreement and the Spice Merger and (ii) in the case of MXP, this Agreement and
the Reincorporation Merger. Subject to the fiduciary duties of its respective
Board
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of Directors, each of Spice and MXP, will, through its Board of Directors,
recommend to its stockholders approval of such matters and not rescind such
recommendation and shall use its reasonable best efforts to obtain (i) in the
case of Spice, approval and adoption of this Agreement and the Spice Merger by
its stockholders and (ii) in the case of MXP, approval and adoption of this
Agreement and the Reincorporation Merger by its stockholders. Each of Spice
and MXP shall use all commercially reasonable efforts to hold such meetings on
the same date and as soon as practicable after the date upon which the S-4
becomes effective.
5.6 HSR and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be
filed with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "Antitrust Division") any notification
required to be filed by their respective "ultimate parent" companies under the
HSR Act and the rules and regulations promulgated thereunder with respect to
the transactions contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings promptly and to respond on a timely
basis to any requests for additional information made by either of such
agencies. Each of the parties hereto agrees to furnish the others with copies
of all correspondence, filings and communications (and memoranda setting forth
the substance thereof) between it and its Affiliates and their respective
representatives, on the one hand, and the FTC, the Antitrust Division or any
other Governmental Entity or members or their respective staffs, on the other
hand, with respect to this Agreement and the transactions contemplated hereby,
other than personal financial information filed therewith. Each party hereto
agrees to furnish the others with such necessary information and reasonable
assistance as such other parties and their respective affiliates may reasonably
request in connection with their preparation of necessary filings,
registrations or submissions of information to any Governmental Entities,
including without limitation any filings necessary under the provisions of the
HSR Act. MXP and Spice will each pay 50% of the applicable filing fee under
the HSR Act relating to the Mergers.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its reasonable best efforts to promptly prepare and file all
necessary documentation to effect all necessary applications, notices,
petitions, filings and other documents, and use all commercially reasonable
efforts to obtain (and will cooperate with each other in obtaining) any
consent, acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made by
MXP or Spice or any of their respective Subsidiaries in connection with the
Mergers or the taking of any action contemplated thereby or by this Agreement.
5.7 Agreements of Rule 145 Affiliates. Prior to the RM Effective
Time, Spice shall cause to be prepared and delivered to MXP, and MXP shall
cause to be prepared and delivered to Spice, a list identifying all persons
who, at the time of the Spice or MXP stockholder meeting, as applicable, may be
deemed to be "affiliates" of Spice or MXP, as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates").
Spice shall use its reasonable best efforts to cause each person who is
identified as a Rule 145 Affiliate in such Spice list to deliver to MXP and
Reincorporation Sub, at or prior to the RM Effective Time, a written
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agreement, in form and substance agreeable to MXP and Spice, that such Rule 145
Affiliate will not sell, pledge, transfer or otherwise dispose of any shares of
New Common Stock issued to such Rule 145 Affiliate pursuant to the Spice
Merger, except pursuant to an effective registration statement or in compliance
with Rule 145 or an exemption from the registration requirements of the
Securities Act. Spice and the Rule 145 Affiliates shall be relieved of this
obligation under the foregoing provisions of this Section 5.7 and such written
agreements if, and to the extent, such Rule 145 is amended not to require such
written agreements or any of the covenants contained therein. MXP shall use
its reasonable best efforts to cause each person who is identified as a Rule
145 Affiliate in such MXP list to deliver to MXP and Reincorporation Sub, at or
prior to the RM Effective Time, a written agreement, in form and substance
agreeable to MXP and Spice, that such Rule 145 Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of New Common Stock or New Series A
Preferred Stock issued to such Rule 145 Affiliate pursuant to the
Reincorporation Merger, except pursuant to an effective registration statement
or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act. MXP and the Rule 145 Affiliates shall be
relieved of this obligation under the foregoing provisions of this Section 5.7
and such written agreements if, and to the extent, such Rule 145 is amended not
to require such written agreements or any of the covenants contained therein.
5.8 Authorization for Shares and Stock Exchange Listing. Prior to
the RM Effective Time, MXP and Reincorporation Sub shall have taken all action
necessary to permit Reincorporation Sub to issue the number of shares of New
Common Stock and New Series A Preferred Stock, if any, required to be issued
pursuant to Sections 2.1 and 2.2. Each of MXP and Reincorporation Sub shall
use its commercially reasonable efforts to cause the shares of New Common Stock
and New Series A Preferred Stock, if any, to be issued in the Mergers and the
shares of New Common Stock to be reserved for issuance upon exercise of Spice
Stock Options and MXP Stock Options and issuances under the Spice Stock Plans
and MXP Stock Plans to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the Closing Date.
5.9 Employee Matters. (a) MXP and Spice agree that all employees
of Spice immediately prior to the SM Effective Time shall be employed by SM
Surviving Corporation immediately after the SM Effective Time, it being
understood that RM Surviving Corporation and SM Surviving Corporation shall not
have any obligations to continue employing such employees for any length of
time thereafter. MXP and Spice further agree that the Spice Pension Plans in
effect at the date of this Agreement shall, to the extent practicable, remain
in effect until otherwise determined after the SM Effective Time. To the
extent such Spice Pension Plans are not continued, (i) Spice employees will be
covered by the MXP Pension Plans applicable to similarly situated employees of
MXP or (ii) RM Surviving Corporation will maintain for a period of one year
after the SM Effective Time benefit plans that are not less favorable, in the
aggregate, to the employees covered by Spice Pension Plans than are the Spice
Pension Plans. In the case of Spice Pension Plans that are continued and under
which the employees' interests are based upon Spice Common Stock, MXP and Spice
agree that such interests shall be based on New Common Stock in an equitable
manner (and in the case of any such interests existing at the SM Effective
Time, on the basis of the Spice Conversion Number); provided, however, that
nothing contained herein shall be construed as requiring RM Surviving
Corporation or SM Surviving Corporation to continue any specific Spice Pension
Plan.
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(b) After the SM Effective Time, RM Surviving Corporation
shall provide those employees of Spice and its Subsidiaries covered by the
Spice Employee Benefit Plans with the same benefits that accrue to employees of
MXP and its Subsidiaries; provided, however, that for a period of 90 days
following the SM Effective Time, RM Surviving Corporation shall only be
required to maintain the effectiveness of the Spice Employee Benefit Plans. RM
Surviving Corporation further agrees that any present employees of Spice shall
be credited for their service with Spice and its predecessor entities, for
purposes of eligibility and vesting in the plans provided by RM Surviving
Corporation. Those employees' benefits under RM Surviving Corporation's
medical benefit plan shall not be subject to any exclusions for any
pre-existing conditions, and credit shall be received for any deductibles or
out-of-pocket amounts previously paid. The provisions of this Section 5.9(b)
are intended to be for the benefit of, and shall be enforceable by, the parties
hereto and the employees of Spice and its Subsidiaries covered by the Spice
Employee Benefit Plans at the SM Effective Time and their respective heirs and
representatives.
(c) MXP and Spice agree that all employees of MXP
immediately prior to the RM Effective Time shall be employed by SM Surviving
Corporation immediately after the RM Effective Time, it being understood that
RM Surviving Corporation shall not have any obligations to continue employing
such employees for any length of time thereafter. MXP and Spice further agree
that the MXP Pension Plans in effect at the date of this Agreement shall, to
the extent practicable, remain in effect until otherwise determined after the
RM Effective Time. To the extent such MXP Pension Plans are not continued, RM
Surviving Corporation will maintain for a period of one year after the RM
Effective Time benefit plans that are not less favorable, in the aggregate, to
the employees covered by MXP Pension Plans than are the MXP Pension Plans. In
the case of MXP Pension Plans that are continued and under which the employees'
interests are based upon MXP Common Stock, MXP and Spice agree that such
interests shall be based on New Common Stock in an equitable manner (and in the
case of any such interests existing at the RM Effective Time, on the basis of
the MXP Conversion Number); provided, however, that nothing contained herein
shall be construed as requiring RM Surviving Corporation to continue any
specific MXP Pension Plan.
(d) After the RM Effective Time, RM Surviving Corporation
shall provide those employees of MXP and its Subsidiaries covered by the MXP
Employee Benefit Plans with the same benefits that accrue to employees of RM
Surviving Corporation and its Subsidiaries; provided, however, that for a
period of 90 days following the RM Effective Time, RM Surviving Corporation
shall only be required to maintain the effectiveness of the MXP Employee
Benefit Plans. RM Surviving Corporation further agrees that any present
employees of MXP shall be credited for their service with MXP and its
predecessor entities, for purposes of eligibility and vesting in the plans
provided by RM Surviving Corporation. Those employees' benefits under RM
Surviving Corporation's medical benefit plan shall not be subject to any
exclusions for any pre-existing conditions, and credit shall be received for
any deductibles or out-of-pocket amounts previously paid. The provisions of
this Section 5.9(d) are intended to be for the benefit of, and shall be
enforceable by, the parties hereto and the employees of MXP and its
Subsidiaries covered by the MXP Employee Benefit Plans at the RM Effective Time
and their respective heirs and representatives.
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5.10 Stock Options. (a) At the SM Effective Time, each outstanding
option to purchase Spice Common Stock and any stock appreciation rights related
thereto that has been granted pursuant to a Spice Stock Plan ("Spice Stock
Option") and, at the RM Effective Time, each outstanding option to purchase MXP
Common Stock and any stock appreciation rights related thereto that has been
granted pursuant to a MXP Stock Plan ("MXP Stock Option"), whether vested or
unvested, shall be assumed by RM Surviving Corporation. Each such option shall
be deemed to constitute an option to acquire, on the same terms and conditions
as were applicable under such Spice Stock Option or MXP Stock Option, a number
of shares of New Common Stock equal to the number of shares of Spice Common
Stock or MXP Common Stock, purchasable pursuant to such Spice Stock Option or
MXP Stock Option multiplied by the Spice Conversion Number or MXP Conversion
Number, as applicable, at a price per share equal to the per-share exercise
price for the shares of Spice Common Stock purchasable pursuant to such Spice
Stock Option divided by the Spice Conversion Number or the per-share exercise
price for the shares of MXP Common Stock purchasable pursuant to such MXP Stock
Option divided by the MXP Conversion Number, as applicable; provided, however,
that in the case of any option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422-424 of the Code, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code; and provided further, that, unless
otherwise provided in the applicable Spice Stock Plan, Spice Stock Option, MXP
Stock Plan or MXP Stock Option, the number of shares of New Common Stock that
may be purchased upon exercise of such Spice Stock Option or MXP Stock Option
shall not include any fractional share and, upon exercise of such Spice Stock
Option or MXP Stock Option, a cash payment shall be made for any fractional
share based upon the closing price of a share of New Common Stock on the NYSE
on the trading day immediately preceding the date of exercise.
(b) Reincorporation Sub shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of New Common
Stock for delivery upon exercise of the Spice Stock Options and MXP Stock
Options assumed in accordance with this Section 5.10. As soon as practicable
after the SM Effective Time, Reincorporation Sub shall file with the SEC a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of New Common Stock subject to the
Spice Stock Options and MXP Stock Options and shall use its reasonable best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as Spice Stock Options and MXP
Stock Options, as applicable, remain outstanding.
5.11 Indemnification; Directors' and Officers' Insurance. (a)
From and after the SM Effective Time, RM Surviving Corporation shall indemnify,
defend and hold harmless each person who is now, or has been at any time prior
to the date hereof or who becomes prior to the SM Effective Time, an officer or
director of Spice or any of its Subsidiaries or an employee of Spice or any of
its Subsidiaries who acts as a fiduciary under any Spice Employee Benefit Plans
or Spice Pension Plans (the "Spice Indemnified Parties") against all losses,
claims, damages, costs, expenses (including 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
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connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out
of the fact that such person is or was a director, officer, or such employee of
Spice or any Subsidiary whether pertaining to any matter existing or occurring
at or prior to the SM Effective Time and whether asserted or claimed prior to,
or at or after, the SM Effective Time ("Spice Indemnified Liabilities"),
including all Spice Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the fullest extent permitted
under applicable law (and RM Surviving Corporation will pay expenses in advance
of the final disposition of any such action or proceeding to each Indemnified
Party to the fullest extent permitted by law). Without limiting the foregoing,
in the event any such claim, action, suit, proceeding or investigation is
brought against any Spice Indemnified Parties (whether arising before or after
the SM Effective Time), (i) the Spice Indemnified Parties may retain counsel
reasonably satisfactory to them and RM Surviving Corporation, and RM Surviving
Corporation shall pay all fees and expenses of such counsel for the Spice
Indemnified Parties; and (ii) RM Surviving Corporation will use all
commercially reasonable efforts to assist in the vigorous defense of any such
matter, provided that no party shall be liable for any settlement effected
without its written consent, which consent shall not be unreasonably withheld.
Any Spice Indemnified Party wishing to claim indemnification under this Section
5.11(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall notify RM Surviving Corporation, but the failure so to
notify shall not relieve a party from any liability that it may have under this
Section 5.11(a), except to the extent such failure materially prejudices such
party. The Spice Indemnified 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 Spice Indemnified Parties. The
parties agree that the rights to indemnification, including provisions relating
to advances of expenses incurred in defense of any action or suit, existing in
favor of the Spice Indemnified Parties in the Restated Certificate of
Incorporation and Restated Bylaws of Spice with respect to matters occurring
through the SM Effective Time, shall survive the Spice Merger and shall
continue in full force and effect for a period of six years from the SM
Effective Time; provided, however, that all rights to indemnification in
respect of any Spice Indemnified Liabilities asserted or made within such
period shall continue until the disposition of such Spice Indemnified
Liabilities. The foregoing provisions of this Section 5.11(a) shall not limit
or impair the rights of the Spice Indemnified Parties arising under any
indemnification or other agreements to which they are a party, the charter,
bylaws or other organizational documents of Spice and its Subsidiaries or
applicable laws. RM Surviving Corporation shall keep in effect provisions in
SM Surviving Corporation's Certificate of Incorporation and Bylaws providing
for exculpation of director and officer liability and indemnification of
directors and officers to the fullest extent permitted by Delaware law, which
provisions shall not be amended except as required by applicable law or except
to make changes permitted by law that would enlarge the right of
indemnification or exculpation. RM Surviving Corporation hereby guarantees the
performance by SM Surviving Corporation of SM Surviving Corporation's
obligations under this Section 5.11(a).
(b) From and after the RM Effective Time, RM Surviving
Corporation shall indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to the RM
Effective Time, an officer or director of MXP or any
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of its Subsidiaries or an employee of MXP or any of its Subsidiaries who acts
as a fiduciary under any MXP Employee Benefit Plans or MXP Pension Plans (the
"MXP Indemnified Parties") against all losses, claims, damages, costs, expenses
(including 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 threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer, or such employee of MXP or any Subsidiary whether pertaining
to any matter existing or occurring at or prior to the RM Effective Time and
whether asserted or claimed prior to, or at or after, the RM Effective Time
("MXP Indemnified Liabilities"), including all MXP Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby, in each
case to the fullest extent permitted under applicable law (and RM Surviving
Corporation will pay expenses in advance of the final disposition of any such
action or proceeding to each MXP Indemnified Party to the fullest extent
permitted by law). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any MXP
Indemnified Parties (whether arising before or after the RM Effective Time),
(i) the MXP Indemnified Parties may retain counsel reasonably satisfactory to
them and RM Surviving Corporation, and RM Surviving Corporation shall pay all
fees and expenses of such counsel for the MXP Indemnified Parties; and (ii) RM
Surviving Corporation will use all commercially reasonable efforts to assist in
the vigorous defense of any such matter, provided that no party shall be liable
for any settlement effected without its written consent, which consent shall
not be unreasonably withheld. Any MXP Indemnified Party wishing to claim
indemnification under this Section 5.11(b), upon learning of any such claim,
action, suit, proceeding or investigation, shall notify RM Surviving
Corporation, but the failure so to notify shall not relieve a party from any
liability that it may have under this Section 5.11(b), except to the extent
such failure materially prejudices such party. The MXP Indemnified 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 MXP Indemnified Parties. The parties agree that the rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action or suit, existing in favor of the MXP Indemnified
Parties in the Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws of MXP with respect to matters occurring through the RM
Effective Time, shall survive the Reincorporation Merger and shall continue in
full force and effect for a period of six years from the RM Effective Time;
provided, however, that all rights to indemnification in respect of any MXP
Indemnified Liabilities asserted or made within such period shall continue
until the disposition of such MXP Indemnified Liabilities. The foregoing
provisions of this Section 5.11(b) shall not limit or impair the rights of the
MXP Indemnified Parties arising under any indemnification or other agreements
to which they are a party, the charter, bylaws or other organizational
documents of MXP and its Subsidiaries or applicable laws. RM Surviving
Corporation shall keep in effect provisions in RM Surviving Corporation's
Certificate of Incorporation and Bylaws providing for exculpation of director
and officer liability and indemnification of directors and officers to the
fullest extent permitted by Delaware law, which provisions shall not be amended
except as required by applicable law or except to make changes permitted by law
that would enlarge the right of indemnification or
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exculpation. RM Surviving Corporation shall hereby guarantee the performance
by SM Surviving Corporation of SM Surviving Corporation's obligations under
this Section 5.11(b).
(c) For a period of six years after the SM Effective Time,
RM Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by Spice
and its Subsidiaries and MXP and its Subsidiaries (provided that RM Surviving
Corporation may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous in any
material respect to the Indemnified Parties) with respect to matters arising
before the SM Effective Time.
(d) In the event that RM Surviving Corporation 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, in each such case, proper provisions
shall be made so that the successors and assigns of RM Surviving Corporation
shall assume the obligations set forth in this Section 5.11. The provisions of
this Section 5.11 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 or expense advancement pursuant to this Section 5.11, his
heirs and representatives.
5.12 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages
in connection therewith, the parties hereto agree to cooperate and use their
commercially reasonable efforts to defend against and respond thereto.
5.13 Public Announcements. The parties hereto will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such public statement
without the consent of the other parties, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or transaction reporting system so long as the
other parties are notified promptly by the disclosing party of such press
release or public statement.
5.14 Other Actions. Except as contemplated by this Agreement,
neither MXP nor Spice shall, nor shall MXP or Spice permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Mergers set forth in Article VI not being satisfied. Each of the parties
agrees to use its reasonable best efforts to satisfy the conditions to Closing
set forth in this Agreement.
5.15 Advice of Changes; SEC Filings. MXP and Spice, as the case
may be, shall confer on a regular basis with each other, report on operational
matters and promptly advise each other orally and in writing of any change or
event having, or which, insofar as can reasonably be foreseen, could have, a
Material Adverse Effect on MXP or Spice, as the case may be. MXP and Spice
shall
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promptly provide each other (or their respective counsel) copies of all filings
made by such party or its Subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
5.16 Reorganization. It is the intention of MXP and Spice that each
of the Mergers will qualify as a reorganization described in Section 368(a) of
the Code (and any comparable provisions of applicable state or local law).
Neither MXP nor Spice (nor any of their respective Subsidiaries) will take or
omit to take any action (whether before, on or after the Closing Date) that
would cause either of the Mergers not to be so treated. The parties will
characterize each of the Mergers as such a reorganization for purposes of all
Tax Returns and other filings.
5.17 Conveyance Taxes. MXP and Spice will (a) cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the SM Effective Time, (b)
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any applicable
exemptions to any such tax or fee, and (c) each pay any such tax or fee which
becomes payable by it on or before the RM or SM Effective Time, as applicable.
5.18 Board of Directors. Reincorporation Sub, MXP and Spice shall
take such action as may be necessary or advisable (including seeking approval
of such matters as may be necessary or advisable at the MXP stockholders
meeting and including a solicitation of proxies for such matters in the Joint
Proxy Statement) to ensure that immediately after the SM Effective Time the
Board of Directors of RM Surviving Corporation shall consist of (i) the seven
individuals currently serving on MXP's Board of Directors, (ii) seven of the
nine individuals currently serving on Spice's Board of Directors (such seven
individuals to be designated by Spice), and (iii) an individual to be mutually
agreed to by MXP and Spice, all of which individuals referred to in (i) and
(ii) are identified as Class I, II or III Directors on Exhibit A hereto.
Exhibit A hereto also indicates (x) the assignment of directors to classes
whose initial term on the Board of Directors would expire on the first, second
and third annual meetings of stockholders of RM Surviving Corporation following
Closing and (y) which of the directors shall serve on the audit and
compensation committees of the Board of Directors of RM Surviving Corporation
following the SM Effective Time.
5.19 Chairman and CEO; Other Officers. Immediately after the RM
Effective Time, Jon Brumley shall continue to serve as the Chairman of the
Board of Reincorporation Sub and Scott Sheffield shall be elected by the
Reincorporation Sub Board of Directors as the President and Chief Executive
Officer of Reincorporation Sub immediately prior to the SM Effective Time, but
to become effective immediately after the SM Effective Time. Each of the other
officers of Reincorporation Sub, and each of the directors and officers of
Merger Sub, that will assume office immediately after the SM Effective Time
shall be those persons to be designated by the agreement of Mr. Brumley and Mr.
Sheffield prior to the SM Effective Time, such persons to be elected by the
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Board of Directors of Reincorporation Sub or Merger Sub, as the case may be,
immediately prior to the SM Effective Time, but to become effective immediately
after the SM Effective Time.
5.20 Charter Amendments; Name and Place of Business. Prior to the
RM Effective Time, Reincorporation Sub and MXP shall take such actions as are
necessary to amend and restate the Certificate of Incorporation of
Reincorporation Sub into a form that is, in form and substance, agreeable to
MXP and Spice, it being understood that such amended and restated Certificate
of Incorporation shall include provisions for a classified board of directors,
certain other features contained in the charters of Spice and MXP and the
Certificate of Designation for the New Series A Preferred Stock. In addition,
prior to the RM Effective Time the name of Reincorporation Sub shall be changed
to "Pioneer Natural Resources Company" and the name of SM Surviving Corporation
shall be changed to a name that is mutually agreed to by MXP and Spice, which
names shall be included in the amended and restated Certificate of
Incorporation of Reincorporation Sub and SM Surviving Corporation. Following
the Mergers, the principal place of business of RM Surviving Corporation and SM
Surviving Corporation shall be the same as MXP's principal place of business on
the date hereof.
5.21 Employee and Director Incentive Indemnification and Severance
Plans. Notwithstanding Section 5.9, prior to the RM Effective Time, but to
become effective immediately after the SM Effective Time, Reincorporation Sub
shall approve and adopt (i) a Long-Term Incentive Plan, (ii) a Non-Employee
Director Equity Compensation Plan, (iii) a Section 423 Stock Purchase Plan,
(iv) Severance Agreements for officers of Reincorporation Sub and (v) Director
and Officer Indemnification Agreements, in each case in form and substance
agreeable to MXP and Spice and substantially in such forms as have previously
been reviewed by the parties.
5.22 Subsequent Mergers. As soon as practicable following the
Mergers, RM Surviving Corporation shall take all action which is necessary or
desirable, and shall cause each of P&P Holdings, Inc., Parker & Parsley
Petroleum USA, Inc., and Parker & Parsley Development L.P., each of which is
currently a Subsidiary of Spice, to take all action that is necessary or
desirable, for each such subsidiary to be merged with and into SM Surviving
Corporation, with SM Surviving Corporation to be the surviving entity in each
such merger.
5.23 MIPS Assumption Matters. As promptly as practicable following
the SM Effective Time, RM Surviving Corporation shall take all actions as are
necessary or appropriate (i) for RM Surviving Corporation to assume the
Guarantee and Exchange Agreement, the Expense Agreement and the Loan Agreement
related to the MIPS; and (ii) to adopt a certificate of designation
substantially in the form of the certificate of designation relating to the
Spice Series A Preferred Stock in order to provide for the exchange of the MIPS
into a new series of preferred stock of RM Surviving Corporation in accordance
with the terms of the MIPS.
5.24 Indenture Matters. MXP, Spice, Reincorporation Sub and Merger
Sub shall take all actions that are necessary or appropriate in order for
Reincorporation Sub or Merger Sub, as applicable, to assume by supplemental
indenture the indentures for the outstanding publicly held
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notes or guarantees thereof of MXP, Spice and their respective Subsidiaries
referred to in the MXP SEC Documents and the Spice SEC Documents, respectively.
5.25 New Bank Credit Facility. MXP, Spice, Reincorporation Sub and
Merger Sub shall use their reasonable best efforts, and shall cooperate, to (i)
obtain as promptly as practicable commitments from financing sources to
refinance on an unsecured basis the existing bank credit facilities of MXP,
Spice and Merger Sub and (ii) have Reincorporation Sub and/or Merger Sub enter
into a new credit facility pursuant to such commitments concurrent with the
Closing and to refinance such existing debt.
5.26 DNR Agreement. Concurrently with the execution of this
Agreement, MXP shall enter into an agreement with DNR-MXP Holdings, L.P. in
substantially the form previously provided to Spice regarding, among other
things, the voting of shares of MXP capital stock at the MXP stockholders
meeting relating to the Mergers. MXP recognizes that Spice is a third party
beneficiary of such agreement with DNR and will seek to enforce such agreement
upon request of Spice or provide Spice with such documentation and assistance
as Spice reasonably deems necessary for Spice to enforce such agreement
directly. MXP shall not amend such agreement, or waive any obligation
thereunder, without the prior written consent of Spice.
5.27 Pickens Agreement. Concurrently with the execution of
this Agreement, Spice and MXP shall enter into an agreement with Boone Pickens
in substantially the form previously provided to Spice regarding, among other
things, the voting of shares of MXP capital stock at the MXP stockholders
meeting relating to the Mergers.
5.28 MIPS Conversion. Spice and its Subsidiaries shall use their
reasonable best efforts to cause the redemption of the MIPS for cash (in
connection with a standby underwriting of Spice Common Stock, which issuance of
Spice Common Stock in connection with such underwriting shall be deemed not to
constitute a breach of any representation, warranty or covenant of Spice
herein) or the exchange of the MIPS into Spice Common Stock as soon as
practicable in accordance with the terms of the MIPS and to complete such
redemption or exchange prior to the RM Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligation of each party to effect the Mergers shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Spice Stockholder Approval. This Agreement and the
Spice Merger shall have been approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Spice Common Stock
entitled to vote thereon.
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(b) MXP Stockholder Approval. This Agreement and the
Reincorporation Merger shall have been approved and adopted by the affirmative
vote specified in clauses (i), (ii) and (iii) of Section 3.2(r) as the votes
required to approve such matters.
(c) NYSE Listing. The shares of New Common Stock and New
Series A Preferred Stock, if any, issuable to Spice and MXP stockholders
pursuant to this Agreement in the Mergers shall have been authorized for
listing on the NYSE upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to the
consummation of the Mergers under the HSR Act shall have expired or been
terminated and all filings required to be made prior to the RM or SM Effective
Time, as applicable, with, and all consents, approvals, permits and
authorizations required to be obtained prior to the RM or SM Effective Time, as
applicable, from, any Governmental Entity in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been made or obtained (as the case may be),
except for such consents, approvals, permits and authorizations the failure of
which to be obtained would not, in the aggregate, be reasonably likely to
result in a Material Adverse Effect on RM Surviving Corporation (assuming the
Mergers have taken place) or to materially adversely affect the consummation of
the Mergers, and no such consent, approval, permit or authorization shall
impose terms or conditions that would have, or would be reasonably likely to
have, a Material Adverse Effect on RM Surviving Corporation (assuming the
Mergers have taken place). Unless otherwise agreed to by MXP and Spice (which
agreement shall not be unreasonably withheld), no such consent, approval,
permit or authorization shall then be subject to appeal.
(e) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(f) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction, no order of any Governmental Entity having
jurisdiction over any party hereto, and no other legal restraint or prohibition
shall be in effect (an "Injunction") preventing or making illegal the
consummation of either of the Mergers.
6.2 Conditions of Obligations of MXP, Reincorporation Sub and
Merger Sub. The obligations of MXP, Reincorporation Sub and Merger Sub to
effect the Merger are subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by MXP:
(a) Representations and Warranties of Spice. Each of the
representations and warranties of Spice set forth in this Agreement shall be
true and correct in all material respects (provided that any representation or
warranty of Spice contained herein that is qualified by a materially standard
or a Material Adverse Effect qualification shall not be further qualified
hereby) as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and MXP
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shall have received a certificate signed on behalf of Spice by the Chief
Executive Officer and the Chief Financial Officer of Spice to such effect.
(b) Performance of Obligations of Spice. Spice shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and MXP shall have
received a certificate signed on behalf of Spice by the Chief Executive Officer
and the Chief Financial Officer of Spice to such effect.
(c) Tax Opinion. MXP shall have received an opinion, in
form and substance reasonably satisfactory to MXP, dated the Closing Date, a
copy of which will be furnished to Spice, of Baker & Botts, L.L.P., counsel to
MXP, to the effect that, if each of the Mergers is consummated in accordance
with the terms of this Agreement, each of the Mergers will be treated as a
reorganization within the meaning of Section 368(a) of the Code, no gain or
loss will be recognized for federal income tax purposes by MXP, Reincorporation
Sub, Merger Sub or Spice as a result of either of the Mergers, and no gain or
loss will be recognized for federal income tax purposes by a stockholder of
Spice or MXP as a result of either of the Mergers upon the conversion of shares
of Spice Common Stock, MXP Common Stock, MXP Series A Preferred Stock or MXP
Series B Preferred Stock into shares of New Common Stock or New Series A
Preferred Stock, as applicable, except with respect to (i) cash, if any,
received in lieu of fractional shares of New Common Stock or New Series A
Preferred Stock or (ii) a stockholder in special circumstances, such as a
stockholder who acquired Spice Common Stock or MXP Common Stock through
exercise of employee stock options or otherwise as compensation for employment.
In rendering such opinion, such counsel may receive and rely upon
representations of fact and covenants contained in the forms of Certificates
included as Schedule 3.1(u) and Schedule 3.2(v) of the Spice and MXP Disclosure
Schedules, respectively.
(d) Letters from Rule 145 Affiliates. MXP shall have
received from each person named in the Spice list referred to in Section 5.7 an
executed copy of an agreement as provided in such Section.
6.3 Conditions of Obligations of Spice. The obligation of Spice
to effect the Spice Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by Spice:
(a) Representations and Warranties of MXP, Reincorporation
Sub and Merger Sub. Each of the representations and warranties of MXP,
Reincorporation Sub and Merger Sub set forth in this Agreement shall be true
and correct in all material respects (provided that any representation or
warranty of MXP, Reincorporation Sub and Merger Sub contained herein that is
qualified by a materiality standard or a Material Adverse Effect qualification
shall not be further qualified hereby) as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, and Spice shall have received a certificate signed on behalf of MXP by
the Chief Executive Officer and the Chief Financial Officer of MXP to such
effect.
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(b) Performance of Obligations of MXP. MXP,
Reincorporation Sub and Merger Sub shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Closing Date, and Spice shall have received a certificate
signed on behalf of MXP by the Chief Executive Officer and the Chief Financial
Officer of MXP to such effect.
(c) Tax Opinion. Spice shall have received an opinion, in
form and substance reasonably satisfactory to Spice, dated the Closing Date, a
copy of which will be furnished to MXP, of Vinson & Elkins L.L.P., counsel to
Spice, to the effect that, if each of the Mergers is consummated in accordance
with the terms of this Agreement, each of the Mergers will be treated as a
reorganization within the meaning of Section 368(a) of the Code, no gain or
loss will be recognized for federal income tax purposes by MXP, Reincorporation
Sub, Merger Sub or Spice as a result of either of the Mergers upon the
conversion of shares of Spice Common Stock, MXP Common Stock, MXP Series A
Preferred Stock or MXP Series B Preferred Stock into shares of New Common Stock
or New Series A Preferred Stock, as applicable, except with respect to (i)
cash, if any, received in lieu of fractional shares of New Common Stock or New
Series A Preferred Stock or (ii) a stockholder in special circumstances, such
as a stockholder who acquired shares of Spice Common Stock or MXP Common Stock
through the exercise of employee stock options or otherwise as compensation for
employment. In rendering such opinion, such counsel may receive and rely upon
representations of fact and covenants contained in the forms of Certificates
included as Schedule 3.1(u) and Schedule 3.2(v) of the Spice and MXP Disclosure
Schedules, respectively.
(d) Letters from Rule 145 Affiliates. Spice shall have
received from each person named in the MXP list referred to in Section 5.7 an
executed copy of an agreement as provided in such Section.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Mergers
may be abandoned at any time prior to the RM Effective Time, whether before or
after approval of the matters presented in connection with the Mergers by the
stockholders of Spice and the stockholders of MXP:
(a) by mutual written consent of MXP and Spice, or by
mutual action of their respective Boards of Directors;
(b) by either MXP or Spice if (i) any Governmental Entity
shall have issued any Injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the Mergers
and such Injunction or other action shall have become final and nonappealable;
or (ii) any required approval of the stockholders of a party shall not have
been obtained by reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders, or at any adjournment thereof;
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(c) by MXP or Spice if the Mergers shall not have been
consummated by December 31, 1997 (the "Initial Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose breach of any representation or
warranty or failure to fulfill any covenant or agreement under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on or
before such date;
(d) by MXP if (i) Spice shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by Spice at or prior to such date of
termination (provided such breach has not been cured within 30 days following
receipt by Spice of notice of such breach and is existing at the time of
termination of this Agreement); (ii) any representation or warranty of Spice
contained in this Agreement shall not be true in all material respects
(provided that any representation or warranty of Spice contained herein that is
qualified by a materiality standard or a Material Adverse Effect qualification
shall not be further qualified hereby) when made on or at the time of
termination as if made on such date of termination (except to the extent it
relates to a particular date), provided such breach has not been cured within
30 days following receipt by Spice of notice of such breach and is existing at
the time of termination of this Agreement, or (iii) after the date hereof there
has been any Material Adverse Change with respect to Spice, except for general
economic changes or changes that may affect the industries of Spice or any of
its Subsidiaries generally;
(e) by Spice if (i) MXP, Reincorporation Sub or Merger Sub
shall have failed to comply in any material respect with any of the covenants
or agreements contained in this Agreement to be complied with or performed by
it at or prior to such date of termination (provided such breach has not been
cured within 30 days following receipt by MXP of notice of such breach and is
existing at the time of termination of this Agreement); (ii) any representation
or warranty of MXP, Reincorporation Sub or Merger Sub contained in this
Agreement shall not be true in all material respects (provided that any
representation or warranty of MXP, Reincorporation Sub or Merger Sub contained
herein that is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) when made or on or at the
time of termination as if made on such date of termination (except to the
extent it relates to a particular date), provided such breach has not been
cured within 30 days following receipt by MXP of notice of such breach and is
existing at the time of termination of this Agreement; or (iii) after the date
hereof there has been any Material Adverse Change with respect to MXP, except
for general economic changes or changes that may affect the industries of MXP
or any of its Subsidiaries generally;
(f) by MXP if (i) the Board of Directors of Spice shall
have withdrawn or modified, in any manner which is adverse to MXP, its
recommendation or approval of the Spice Merger or this Agreement and the
transactions contemplated hereby, or shall have resolved to do so, or (ii) the
Board of Directors of Spice shall have recommended to the stockholders of Spice
any Spice Acquisition Proposal or any transaction described in the definition
of Spice Acquisition Proposal, or shall have resolved to do so;
(g) by Spice, if Spice shall exercise the right specified
in clause (ii) of Section 4.2(a); provided that Spice may not effect such
termination pursuant to this Section 7.1(g)
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unless and until (i) MXP receives at least one week's prior written notice from
Spice of its intention to effect such termination pursuant to this Section
7.1(g); (ii) during such week, Spice shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that MXP may propose; and (iii) Spice pays the
amounts required by Section 7.2(b) concurrently with such termination;
(h) by Spice if (i) the Board of Directors of MXP shall
have withdrawn or modified, in any manner which is adverse to Spice, its
recommendation or approval of the Mergers or this Agreement and the
transactions contemplated hereby, or shall have resolved to do so, or (ii) the
Board of Directors of MXP shall have recommended to the stockholders of MXP any
MXP Acquisition Proposal or any transaction described in the definition of MXP
Acquisition Proposal, or shall have resolved to do so;
(i) by MXP, if MXP shall exercise the right specified in
clause (ii) of Section 4.3(a); provided that MXP may not effect such
termination pursuant to this Section 7.1(i) unless and until (i) Spice receives
at least one week's prior written notice from MXP of its intention to effect
such termination pursuant to this Section 7.1(i); (ii) during such week, MXP
shall, and shall cause its respective financial and legal advisors to, consider
any adjustment in the terms and conditions of this Agreement that Spice may
propose; and (iii) MXP pays the amounts required by Section 7.2(e) concurrently
with such termination;
(j) by either MXP or Spice if the Average Trading Price
for the fifteen (15) Trading Day period beginning on the twentieth (20th)
Trading Day prior to the date on which the meetings of the stockholders of MXP
and Spice with respect to the Mergers are to be held (such date to be the date
specified in the Joint Proxy Statement), is less than $5.00 per share, provided
that notice of termination is given by the terminating party to the other
parties hereto within two calendar days following the end of such fifteen (15)
Trading Day period. For purposes hereof, the term (i) "Average Trading Price"
means the average of the closing sales prices for MXP Common Stock during such
fifteen (15) Trading Day period as such closing sales prices are reported in
The Wall Street Journal's New York Stock Exchange Composite Transactions
Reports; and (ii) "Trading Days" refers to days on which the NYSE is open for
the trading; and
(k) by the passage of time in the event that the Board of
Directors of either or both of MXP or Spice shall have withdrawn or modified,
in any manner which is adverse to the other party, its recommendation or
approval of the Reincorporation Merger or the Spice Merger, as applicable, or
this Agreement and the transactions contemplated hereby, or shall have resolved
to do so, without further action by MXP or Spice, at the earlier of (x) 5:00
p.m., Dallas, Texas, time on the second calendar day after notice of such
withdrawal or modification is delivered to the other party or publicly
announced by the withdrawing or modifying party, or (y) immediately prior to
the commencement of the first stockholders meeting to be held pursuant to
Section 5.5 hereof, unless, in either case, MXP and Spice shall otherwise agree
in writing prior to such time of automatic termination.
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7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any
party hereto as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any party
hereto except (i) with respect to this Section 7.2, the second and third
sentences of Section 5.4, the last sentence of Section 5.6(a) and Section 8.1,
and (ii) to the extent that such termination results from the willful breach
(except as provided in Section 8.8) by a party hereto of any of its
representations or warranties or of any of its covenants or agreements
contained in this Agreement.
(b) If (i) this Agreement is terminated pursuant to
Section 7.1(b)(ii) (with respect to the Spice stockholder vote) and at the time
of such termination or after the date hereof and prior to the Spice
stockholders' meeting there shall have been pending a Spice Acquisition
Proposal, (ii) MXP terminates this Agreement pursuant to Section 7.1(f), (iii)
Spice terminates this Agreement pursuant to Section 7.1(g), or (iv) Spice, but
not MXP, withdraws or modifies, in any manner which is adverse to the other
party, its recommendation or approval of the Reincorporation Merger or the
Spice Merger, as applicable, or this Agreement and the transactions
contemplated hereby, or shall have resolved to do so, and this Agreement shall
terminate pursuant to Section 7.1(k), then Spice shall, on the day of such
termination, pay MXP a fee of $45 million in cash by wire transfer of
immediately available funds to an account designated by MXP.
(c) If within 12 months of any termination other than as
described in Section 7.2(b) or 7.1(j), Spice agrees to or consummates a Spice
Acquisition Proposal or a transaction described in the definition of Spice
Acquisition Proposal and such Spice Acquisition Proposal or transaction
involves a third party that had discussions with Spice after the date of this
Agreement and at or prior to the termination of this Agreement, then at the
closing or other consummation of such Spice Acquisition Proposal or
transaction, Spice shall pay MXP a fee equal to $45 million in cash by wire
transfer of immediately available funds to an account designated by MXP.
(d) The parties acknowledge and agree that the actual
damages that MXP might sustain upon termination of this Agreement under the
circumstances heretofore set forth in Section 7.2(b) or (c) would be difficult,
if not impossible, to ascertain, and that the payment of a $45 million fee to
MXP under this Section 7.2 would be reasonable compensation in the event of
such termination and shall constitute liquidated damage for purposes of this
Agreement and MXP's sole remedy for money damages for such termination. Under
no circumstances shall MXP be entitled to a fee of more than $45 million
pursuant to this Section 7.2.
(e) If (i) this Agreement is terminated pursuant to
Section 7.1(b)(ii) (with respect to the MXP stockholder vote) and at the time
of such termination or after the date hereof and prior to the MXP stockholders'
meeting there shall have been pending an MXP Acquisition Proposal, (ii) Spice
terminates this Agreement pursuant to Section 7.1(h), (iii) MXP terminates this
Agreement pursuant to Section 7.1(i), or (iv) MXP, but not Spice, withdraws or
modifies, in any manner which is adverse to the other party, its recommendation
or approval of the Reincorporation Merger or the Spice Merger, as applicable,
or this Agreement and the transactions contemplated hereby, or shall
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have resolved to do so, and this Agreement shall terminate pursuant to Section
7.1(k), then MXP shall, on the day of such termination, pay Spice a fee of $45
million in cash by wire transfer of immediately available funds to an account
designated by Spice.
(f) If within 12 months of any termination other than as
described in Section 7.2(e) or 7.1(j), MXP agrees to or consummates an MXP
Acquisition Proposal or a transaction described in the definition of MXP
Acquisition Proposal and such MXP Acquisition Proposal or transaction involves
a third party that had discussions with MXP after the date of this Agreement
and at or prior to the termination of this Agreement, then at the closing or
other consummation of such MXP Acquisition Proposal or transaction, MXP shall
pay Spice a fee equal to $45 million in cash by wire transfer of immediately
available funds to an account designated by Spice.
(g) The parties acknowledge and agree that the actual
damages that Spice might sustain upon termination of this Agreement under the
circumstances heretofore set forth in Section 7.2(e) or (f) would be difficult,
if not impossible, to ascertain, and that the payment of a $45 million fee to
Spice under this Section 7.2 would be reasonable compensation in the event of
such termination and shall constitute liquidated damage for purposes of this
Agreement and Spices's sole remedy for money damages for such termination.
Under no circumstances shall Spice be entitled to a fee of more than $45
million pursuant to this Section 7.2.
(h) If this Agreement is terminated by Spice or MXP
pursuant to Section 7.1(j), no fee shall be payable hereunder by or to any
party.
7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection
with the Mergers by the stockholders of Spice and the stockholders of MXP, but,
after any such approval, no amendment shall be made which by law requires
further approval by such stockholders without first obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the RM Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto; and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own
expenses incident to preparing for entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, whether
or not the Mergers shall be consummated, except (i) as otherwise contemplated
by the last sentence of Section 5.6(a) and (ii) that MXP and Spice shall share
equally the expenses incurred by MXP and Spice in connection with the printing
and mailing of the Joint Proxy Statement and all filing fees paid in connection
with the S-4 to the SEC.
8.2 Nonsurvival of Representations, Warranties and Agreements.
Subject to the remaining provisions of this Section 8.2, the representations,
warranties and agreements in this Agreement shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
other party hereto, any person controlling any such party or any of their
officers, directors, representatives or agents whether prior to or after the
execution of this Agreement. None of the representations, warranties and
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the SM Effective Time and any liability for breach or
violation thereof shall terminate absolutely and be of no further force and
effect at and as of the SM Effective Time, except for the agreements contained
in Sections 2.1, 2.2, 2.3, 5.9 through 5.11, 5.18 through 5.26 and Article
VIII, and the agreements delivered pursuant to Section 5.7. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement, and the provisions of the Confidentiality Agreement shall apply to
all information and material delivered hereunder.
8.3 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received (i) when so delivered personally,
(ii) upon receipt of an appropriate electronic answerback or confirmation when
so delivered by telegraph or telecopy (to such number specified below or
another number or numbers as such person may subsequently designate by notice
given hereunder), or (iii) five business days after the date of mailing to the
following address or to such other address or addresses as such person may
subsequently designate by notice given hereunder, if so delivered by mail:
(a) if to MXP, Reincorporation Sub or Merger Sub, to:
MESA Inc.
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
Telecopy: (972) 402-7031
Attention: Chief Executive Officer
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with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Telecopy: (214) 953-6503
Attention: Carlos A. Fierro
and (b) if to Spice, to:
Parker & Parsley Petroleum Company
303 W. Wall
Suite 101
Midland, Texas 79701
Telecopy: (915) 571-5051
Attention: Chief Executive Officer
with a copies to:
Vinson & Elkins L.L.P. Parker & Parsley Petroleum Company
2001 Ross Avenue 303 W. Wall, Suite 101
Dallas, Texas 75201 Midland, Texas 79701
Telecopy: (214) 220-7716 Telecopy: (915) 571-5050
Attention: Jeffrey A. Chapman Attention: Mark Withrow, General Counsel
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
Whenever the word "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." Unless the context otherwise requires, "or" is disjunctive but
not necessarily exclusive, and words in the singular include the plural and in
the plural include the singular.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Confidentiality Agreement and any other documents
and instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereto and (b) except as
provided in Sections 5.7, 5.9, 5.10 and 5.11, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
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8.7 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof, except to the extent the TBCA is
required to govern the Reincorporation Merger.
8.8 No Remedy in Certain Circumstances. Each party agrees that,
should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action constitutes a material breach of this
Agreement or makes this Agreement impossible to perform, in which case this
Agreement shall terminate pursuant to Article VII hereof. Except as otherwise
contemplated by this Agreement, to the extent that a party hereto took an
action inconsistent herewith or failed to take action consistent herewith or
required hereby pursuant to an order or judgment of a court or other competent
authority, such party shall not incur any liability or obligation unless such
party breached its obligations under Confidentiality Agreement or did not in
good faith seek to resist or object to the imposition or entering of such order
or judgment.
8.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that each of Reincorporation Sub and
Merger Sub may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any newly-formed direct wholly owned
Subsidiary of MXP. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
8.10 Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to this Agreement to perform its
obligations hereunder in accordance with their specific terms or to otherwise
comply with such obligations, including its failure to take all actions as are
necessary on its part to the consummation of the Mergers, will cause
irreparable injury to the other parties to this Agreement for which damages,
even if available, will not be an adequate remedy. Accordingly, each of the
parties hereto hereby consents to the issuance of injunctive relief by any
court of competent jurisdiction to compel performance of any party's
obligations, including an injunction to prevent breaches, and to the granting
by any such court of the remedy of specific performance of the terms and
conditions hereof.
8.10 Schedule Definitions. All capitalized terms in the Spice
Disclosure Schedule or MXP Disclosure Schedule shall have the meanings ascribed
to them herein, unless the context otherwise requires or as otherwise defined.
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IN WITNESS WHEREOF, each party has caused this Agreement to be
signed by its respective officers thereunto duly authorized, all as of the date
first written above.
MESA INC.
By: /s/ GARRETT SMITH
----------------------------------------
M. Garrett Smith
Vice President - Corporate Acquisitions
MESA OPERATING CO.
By: /s/ GARRETT SMITH
----------------------------------------
M. Garrett Smith
Vice President - Corporate Acquisitions
MXP REINCORPORATION CORP.
By: /s/ GARRETT SMITH
----------------------------------------
M. Garrett Smith
Vice President - Corporate Acquisitions
PARKER & PARSLEY PETROLEUM
COMPANY
By: /s/ SCOTT D. SHEFFIELD
----------------------------------------
Scott D. Sheffield
President
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EXHIBIT A
POST EFFECTIVE TIME BOARD OF DIRECTORS
Class I Directors (term expires at the 1998 annual meeting):
1. Philip B. Smith*
2. John S. Herrington**
3. James L. Houghton**
4. R. Hartwell Gardner**
5. Michael D. Wortley
Class II Directors (term expires at the 1999 annual meeting):
1. Scott D. Sheffield
2. Robert L. Stillwell
3. Jerry P. Jones**
4. Kenneth A. Hersh*
5. To be determined
Class III Directors (term expires at the 2000 annual meeting):
1. T. Boone Pickens
2. I. Jon Brumley
3. Richard E. Rainwater
4. Charles E. Ramsey, Jr.*
5. Arthur L. Smith*
Honorary, non-voting, advisory directors:
1. Mel H. Fischer
2. Edward O. Vetter
__________________________________
*Compensation Committee
**Audit Committee
A-1
<PAGE> 1
[EXECUTION COPY]
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of April 6, 1997 (this "Agreement"),
by and between MESA Inc., a Texas corporation ("Mesa"), and DNR-MESA Holdings,
L.P., a Texas limited partnership (the "Shareholder").
WHEREAS, Mesa, Mesa Operating Co., a Delaware corporation and a wholly
owned subsidiary of Mesa ("MOC") and MXP Reincorporation Corp., a Delaware
corporation and a wholly owned subsidiary of Mesa ("Reincorporation Sub"), have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"; capitalized terms not defined in this Agreement have the
meanings ascribed to them in the Merger Agreement) with Parker & Parsley
Petroleum Company, a Delaware corporation ("Parker & Parsley"), which provides,
among other things, upon the terms and subject to the conditions thereof, for
(a) the merger of Mesa with and into Reincorporation Sub (the "Reincorporation
Merger") pursuant to which, among other things, the outstanding shares of (x)
MXP Common Stock will be converted into shares of New Common Stock of
Reincorporation Sub, as the surviving company in the Reincorporation Merger,
and (y) MXP Series A Preferred Stock and MXP Series B Preferred Stock shall
have the right to receive, at the holders' election, either shares of New
Common Stock or New Series A Preferred Stock of Reincorporation Sub, subject to
certain conditions; and (b) the merger of Parker & Parsley with and into MOC,
with MOC being the surviving corporation, pursuant to which, among other
things, the shareholders of Parker & Parsley will receive shares of MXP Common
Stock of Reincorporation Sub in exchange for the outstanding Parker & Parsley
Common Stock.
WHEREAS, as of the date hereof, Shareholder owns (beneficially or of
record) all of the issued and outstanding shares of MXP Series B Preferred
Stock; and
WHEREAS, as a condition to the willingness of Mesa to enter into the
Merger Agreement, Mesa has required that the Shareholder agree, and in order to
induce Mesa and Parker & Parsley to enter into the Merger Agreement, the
Shareholder has agreed, to vote, in accordance with the terms of this
Agreement, all the shares of MXP Series B Preferred Stock now owned
(beneficially or of record) and any and all shares of MXP Series A Preferred
Stock and MXP Common Stock which may hereafter be acquired by the Shareholder
(the "Shares").
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
-1-
<PAGE> 2
ARTICLE I
COVENANTS OF THE SHAREHOLDER
SECTION 1.01. No Disposition or Encumbrance of Shares. Except as
contemplated by Section 1.07 hereof, Shareholder hereby covenants and agrees
that Shareholder shall not, and shall not offer or agree to, sell, transfer,
tender, assign, hypothecate or otherwise dispose of, or create any security
interest, lien, claim, pledge, option, right of first refusal, agreement,
limitation on Shareholder's voting rights, charge or other encumbrance of any
nature whatsoever with respect to the Shares now owned or that may hereafter be
acquired by Shareholder.
SECTION 1.02. No Solicitation of Transactions. (a) From and after the
date hereof, Shareholder will not, and will not authorize or (to the extent
within its control) permit any of its partners, officers, employees, agents,
Affiliates and other representatives or those of any of its subsidiaries
(collectively, "Shareholder Representatives") to, directly or indirectly,
solicit or encourage (including by way of providing information) any
prospective acquiror or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute, or may
reasonably be expected to lead to, any MXP Acquisition Proposal from any person
or engage in any discussions or negotiations with respect thereto or otherwise
cooperate with or assist or participate in, or facilitate any such proposal;
provided, however, that, notwithstanding any other provision of this Agreement
or the Merger Agreement, any Shareholder Representative serving as a member of
the Board of Directors of Mesa may take and disclose to the Board of Directors
of Mesa a position contemplated by Rule 14e-2(a) promulgated under the Exchange
Act (and the Board of Directors may disclose such position to the shareholders
pursuant to Section 4.3 of the Merger Agreement) and may take any other action
specifically permitted to be taken by representatives of Mesa pursuant to the
Merger Agreement.
(b) Shareholder shall, and shall cause its Shareholder
Representative to, immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Shareholder or any Shareholder
Representatives with respect to any MXP Acquisition Proposal existing on the
date hereof.
(c) Shareholder will promptly notify Mesa and Parker &
Parsley of any inquiries it receives for information covered by clause (a)
above or the receipt by Shareholder or any Shareholder Representative of any
MXP Acquisition Proposal, including the identity of the person or group
engaging in such discussions or negotiations, requesting such information or
making such MXP Acquisition Proposal, and the material terms and conditions of
any MXP Acquisition Proposal it receives.
SECTION 1.03. Marketable Title. Shareholder represents and warrants to
Mesa that Shareholder has good and marketable title to the Shares, free and
clear of all liens, claims, charges and encumbrances (other than those arising
pursuant to the terms of the Agreement of Limited
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<PAGE> 3
Partnership of Shareholder, as amended to the date hereof) and has full power
and authority to exercise all voting rights in respect thereof.
SECTION 1.04. Revocation of Proxies. Shareholder hereby revokes any and
all previous proxies granted with respect to the Shares.
SECTION 1.05. Waiver of Appraisal Rights. Shareholder hereby
irrevocably waives any appraisal rights Shareholder may have pursuant to
Article 5.11 of the Texas Business Corporation Act ("TBCA") by reason of the
Mergers and agrees that Shareholder shall not attempt to perfect any such
appraisal right pursuant to Articles 5.11 through 5.13 of the TBCA.
SECTION 1.06. Agreement to Vote the Shares for the Merger. Shareholder
agrees that it will attend (either in person or by proxy) any meeting of the
shareholders of Mesa to be held for the purpose of obtaining shareholder
approval of the Reincorporation Merger and related matters, and that
Shareholder will vote in favor of the Reincorporation Merger and each of the
related matters recommended by the Board of Directors (the "Related Matters")
all the Shares now owned (beneficially or of record) or that may hereafter be
acquired by Shareholder.
SECTION 1.07. Election. Shareholder agrees that it will elect to
receive New Common Stock upon conversion of the Shares as contemplated by
Section 2.2 and 2.4 of the Merger Agreement.
SECTION 1.08. Further Assurances. Each party hereto shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of such party's obligations under this Agreement, including
without limitation any actions reasonably requested by Mesa in connection with
obtaining any required consents or approvals to the actions contemplated hereby
under the HSR Act or the Exchange Act. Without limiting the generality of the
foregoing, none of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or
arrangement) if such action would materially impair the ability of any party to
effectuate, carry out or comply with all of the terms of this Agreement.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. Expenses. Except as otherwise provided herein, all costs
and expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
SECTION 2.02. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance or injunctive relief in
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<PAGE> 4
respect of the terms hereof. The parties further agree that specific
performance or injunctive relief shall be the sole and exclusive remedies for
any breach of Section 1.02 or 1.08 hereof.
SECTION 2.03. Entire Agreement. This Agreement constitutes the entire
agreement between Mesa and Shareholder with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written and
oral, between Mesa and Shareholder with respect to the subject matter hereof.
SECTION 2.04. Assignment. This Agreement shall not be assigned except
in accordance with the terms of the Merger Agreement.
SECTION 2.05. Third Party Beneficiary. Mesa and Shareholder agree and
acknowledge that the obligations and rights created hereby are material and
important to Parker & Parsley and that Parker & Parsley is a third party
beneficiary of this Agreement and, as such, shall have the right to enforce the
obligations of the Shareholder set forth herein.
SECTION 2.06. Parties in Interest. This Agreement shall inure to the
benefit of, and be enforceable by, the parties hereto, Parker & Parsley and
their respective successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any person other than
the parties hereto and Parker & Parsley any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 2.07. Amendment; Waiver. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto containing the
express written consent of Parker & Parsley. Any party hereto may (i) extend
the time for the performance of any obligation or other act of any other party
hereto, (ii) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any agreement or condition contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby and containing Parker & Parsley's
written consent thereto.
SECTION 2.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
SECTION 2.09. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail
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<PAGE> 5
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 2.09):
if to Parker & Parsley:
303 West Wall, Suite 101
Midland, Texas 79701
Facsimile No.: (915) 571-5050
Attention: Mark Withrow
with a copy to:
Vinson & Elkins, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
Facsimile No.: (214) 220-7716
Attention: Jeffrey A. Chapman
if to Mesa:
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Facsimile No.: (972) 402-7028
Attention: Stephen K. Gardner
with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
Facsimile No.: (214) 953-6503
Attention: Carlos A. Fierro
if to Shareholder:
777 Main Street
Suite 2700
Fort Worth, Texas 76102
Facsimile No.: (817) 820-6650
Attention: Kenneth A. Hersh
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<PAGE> 6
SECTION 2.10. Termination. This Agreement shall terminate upon the
Effective Time or upon the termination of the Merger Agreement in accordance
with the termination provisions provided therein; provided that Section 1.07
shall survive the Effective Time.
SECTION 2.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Texas State or federal court sitting in the City of Dallas.
SECTION 2.12. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 2.13. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
-6-
<PAGE> 7
IN WITNESS WHEREOF, each of Mesa and Shareholder have caused this
Agreement to be executed by its respective officer thereunto duly authorized,
each as of the date first written above.
MESA INC.
By: /s/ GARRETT SMITH
--------------------------------
Name: Garrett Smith
--------------------------
Title: Vice President
-------------------------
DNR-MESA HOLDINGS, L.P.
BY: RAINWATER, INC. ITS GENERAL PARTNER
By: /s/ KENNETH A. HERSH
--------------------------------
Name: Kenneth A. Hersh
--------------------------
Title: Vice President
-------------------------
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<PAGE> 1
DNR-MESA HOLDINGS, L.P.
777 Main Street, Suite 2700
Fort Worth, Texas 76102
April 6, 1997
Parker & Parsley Petroleum Company
303 W. Wall, Suite 101
Midland, Texas 79701
Gentlemen:
The undersigned serves as the sole general partner of DNR-MESA
Holdings, L.P. (the "Partnership"), and the Partnership is the owner of all
outstanding shares of the Series B 8% Cumulative Convertible Preferred Stock
(the "Series B Preferred Stock") of MESA, Inc. ("MXP"). This letter is provided
to you in connection with the execution and delivery of the Agreement and Plan
of Merger dated as of the date hereof (the "Merger Agreement"), among you, MXP,
Mesa Operating Co. and MXP Reincorporation Corp. Capitalized terms used herein
which are not otherwise defined have the meanings set forth in the Merger
Agreement.
In consideration of the execution and delivery of the Merger Agreement
and the consummation of the Mergers and for other good and valuable
consideration, receipt of which is hereby acknowledged, the Partnership agrees
as follows:
1. During the period commencing on the date hereof and ending on the
earlier of (i) the first anniversary of the date hereof, or (ii) the date of
abandonment of the Mergers and termination of the Merger Agreement pursuant to
Section 7.1 thereof (the "Lock-Up Period"), the Partnership will not offer,
sell, contract to sell or make any other distribution (collectively, a
"Transfer") of any shares of the Series B Preferred Stock or any securities of
RM Surviving Corporation received by the Partnership in exchange for shares of
the Series B Preferred Stock in connection with the Mergers (collectively,
"Securities"), except with your prior written consent (or after the Closing,
that of RM Surviving Corporation); provided that, the Partnership may Transfer
Securities to its partners at any time if prior to making such Transfer, the
Partnership receives the written agreement (which shall be for the benefit of
and enforceable by RM Surviving Corporation) of (i) each partner to enter into
an "Underwriting Lock-Up" (as defined in paragraph 2 below) with respect to the
Securities distributed to such partner under the circumstances set forth in
paragraph 2 hereof, and (ii) Richard E. Rainwater and each other partner which
is an Affiliate of Richard E. Rainwater (which for the purposes hereof includes
any trust established for the benefit of any member of his family), not to make
any Transfer of the Securities distributed to such partner during the remainder
of the Lock-Up Period.
2. If within the 90 day period following the date of Closing of the
Mergers, RM Surviving Corporation shall file a registration statement with the
Securities and Exchange Commission pertaining to the issuance and sale of
common stock for its own account, the Partnership agrees that upon the written
request of RM Surviving Corporation and the managing
<PAGE> 2
underwriter for such offering, the Partnership will enter into an agreement (an
"Underwriting Lock-Up") not to make Transfers of the Securities for such period
of time after the closing of such offering that RM Surviving Corporation deems
reasonably necessary (based upon the advice of such managing underwriter), but
in no event to be longer than a period of 180 days. The obligations arising
under this paragraph 2 are independent of those under paragraph 1.
This letter agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas applicable to contracts
executed in and to be performed in that State. The undersigned agrees that
irreparable damage would occur in the event that any provision of this letter
agreement was not performed in accordance with the terms hereof and that you
and RM Surviving Corporation shall be entitled to specific performance of the
terms hereof.
This letter agreement and all obligations hereunder shall terminate if
the Mergers are abandoned and the Merger Agreement is terminated pursuant to
Section 7.1 thereof. The undersigned understands that you will rely upon the
representations set forth in this letter agreement in proceeding with the
Mergers. The undersigned confirms that this letter agreement is irrevocable and
shall be binding upon the undersigned's successors and assigns.
Sincerely,
DNR-MESA HOLDINGS, L.P
By: Rainwater, Inc., general partner
By:/s/ KENNETH A. HERSH
----------------------------------
Kenneth A. Hersh, Vice President
Acknowledged and Accepted
Parker & Parsley Petroleum Company
By: /s/ SCOTT D. SHEFFIELD
--------------------------------
Name: Scott D. Sheffield
------------------------------
Title: President
-----------------------------
2
<PAGE> 1
[EXECUTION COPY]
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of April 6, 1997 (this "Agreement"),
by and between MESA Inc., a Texas corporation ("Mesa"), Parker & Parsley
Petroleum Company, a Delaware corporation ("Parker & Parsley") and Boone
Pickens (the "Shareholder").
WHEREAS, Mesa, Mesa Operating Co., a Delaware corporation and a wholly
owned subsidiary of Mesa ("MOC") and MXP Reincorporation Corp., a Delaware
corporation and a wholly owned subsidiary of Mesa ("Reincorporation Sub"), have
entered into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"; capitalized terms not defined in this Agreement have the
meanings ascribed to them in the Merger Agreement), with Parker & Parsley which
provides, among other things, upon the terms and subject to the conditions
thereof, for (a) the merger of Mesa with and into Reincorporation Sub (the
"Reincorporation Merger") pursuant to which, among other things, the
outstanding shares of (x) MXP Common Stock will be converted into shares of New
Common Stock of Reincorporation Sub, as the surviving company in the
Reincorporation Merger, and (y) MXP Series A Preferred Stock and MXP Series B
Preferred Stock shall have the right to receive, at the holders' election,
either shares of New Common Stock or New Series A Preferred Stock of
Reincorporation Sub, subject to certain conditions; and (b) the merger of
Parker & Parsley with and into MOC, with MOC being the surviving corporation,
pursuant to which, among other things, the shareholders of Parker & Parsley
will receive shares of MXP Common Stock of Reincorporation Sub in exchange for
the outstanding Parker & Parsley Common Stock.
WHEREAS, as of the date hereof, Shareholder owns (beneficially or of
record) the number of shares of MXP Series A Preferred Stock and MXP Common
Stock set forth opposite Shareholder's name on Schedule A hereto; and
WHEREAS, as a condition to the willingness of Parker & Parsley to
enter into the Merger Agreement, Parker & Parsley has required that the
Shareholder agree, and in order to induce Parker & Parsley to enter into the
Merger Agreement, the Shareholder has agreed, to vote, in accordance with the
terms of this Agreement, all the shares of MXP Series A Preferred Stock and MXP
Common Stock now owned (beneficially or of record) and any and all shares of
MXP Series A Preferred Stock and MXP Common Stock which may hereafter be
acquired by the Shareholder (the "Shares").
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
-1-
<PAGE> 2
ARTICLE I
COVENANTS OF THE SHAREHOLDER
SECTION 1.01. No Solicitation of Transactions. (a) From and after the
date hereof, Shareholder will not, and will not authorize or (to the extent
within its control) permit any of its partners, officers, employees, agents,
Affiliates and other representatives or those of any of its subsidiaries
(collectively, "Shareholder Representatives") to, directly or indirectly,
solicit or encourage (including by way of providing information) any
prospective acquiror or the invitation or submission of any inquiries,
proposals or offers or any other efforts or attempts that constitute, or may
reasonably be expected to lead to, any MXP Acquisition Proposal from any person
or engage in any discussions or negotiations with respect thereto or otherwise
cooperate with or assist or participate in, or facilitate any such proposal;
provided, however, that, notwithstanding any other provision of this Agreement
or the Merger Agreement, any Shareholder Representative serving as a member of
the Board of Directors of Mesa may take and disclose to the Board of Directors
of Mesa a position contemplated by Rule 14e-2(a) promulgated under the Exchange
Act (and the Board of Directors may disclose such position to the shareholders
pursuant to Section 4.3 of the Merger Agreement) and may take any other action
specifically permitted to be taken by representatives of Mesa pursuant to the
Merger Agreement.
(b) Shareholder shall, and shall cause its Shareholder
Representatives to, immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Shareholder or any Shareholder
Representative with respect to any MXP Acquisition Proposal existing on the
date hereof.
(c) Shareholder will promptly notify Mesa and Parker &
Parsley of any inquiries it receives for information covered by clause (a)
above or the receipt by Shareholder or any Shareholder Representative of any
MXP Acquisition Proposal, including the identity of the person or group
engaging in such discussions or negotiations, requesting such information or
making such MXP Acquisition Proposal, and the material terms and conditions of
any MXP Acquisition Proposal it receives.
SECTION 1.02. Marketable Title. Shareholder represents and warrants
to Parker & Parsley that Shareholder has good and marketable title to the
Shares, free and clear of all liens, claims, charges and encumbrances and has
full power and authority to exercise all voting rights in respect thereof
(other than any limitation on the foregoing which may result from the
application of the community property laws of the State of Texas).
SECTION 1.03. Revocation of Proxies. Shareholder hereby revokes any
and all previous proxies granted with respect to the Shares.
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<PAGE> 3
SECTION 1.04. Waiver of Appraisal Rights. Shareholder hereby
irrevocably waives any appraisal rights Shareholder may have pursuant to
Article 5.11 of the Texas Business Corporation Act ("TBCA") by reason of the
Mergers and agrees that Shareholder shall not attempt to perfect any such
appraisal right pursuant to Articles 5.11 through 5.13 of the TBCA.
SECTION 1.05. Agreement to Vote the Shares for the Merger.
Shareholder agrees that it will attend (either in person or by proxy) any
meeting of the shareholders of Mesa to be held for the purpose of obtaining
shareholder approval of the Reincorporation Merger and related matters, and
that Shareholder will vote in favor of the Reincorporation Merger and each of
the related matters recommended by the Board of Directors (the "Related
Matters") all the Shares now owned (beneficially or of record) or that may
hereafter be acquired by Shareholder.
SECTION 1.06. Election. Shareholder agrees that it will elect to
receive New Common Stock upon conversion of the Shares as contemplated by
Section 2.2 and 2.4 of the Merger Agreement.
SECTION 1.07. Further Assurances. Each party hereto shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of such party's obligations under this Agreement, including
without limitation any actions reasonably requested by Parker & Parsley or Mesa
in connection with obtaining any required consents or approvals to the actions
contemplated hereby under the HSR Act or the Exchange Act. Without limiting
the generality of the foregoing, none of the parties hereto shall enter into
any agreement or arrangement (or alter, amend or terminate any existing
agreement or arrangement) if such action would materially impair the ability of
any party to effectuate, carry out or comply with all of the terms of this
Agreement. The parties hereto understand and agree that notwithstanding any
other provision contained herein, Shareholder is not prohibited from affecting
any sale, transfer, assignment, division or any other disposition of Shares at
any time, and the obligation to vote the Shares as provided in Section 1.05 and
Section 1.06 of this Agreement applies only to the Shares owned by the
Shareholder at the time of the events referred to in such sections.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. Expenses. Except as otherwise provided herein, all
costs and expenses incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses.
SECTION 2.02. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance or injunctive relief in
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<PAGE> 4
respect of the terms hereof. The parties further agree that specific
performance or injunctive relief shall be the sole and exclusive remedies for
any breach of Section 1.01 or 1.07 hereof.
SECTION 2.03. Enforcement of Shareholder Obligations. The parties
hereto agree that the respective rights of Mesa and Parker & Parsley hereunder
with respect to the obligations of Shareholder are enforceable independently by
each of Mesa and Parker & Parsley.
SECTION 2.04. Entire Agreement. This Agreement constitutes the entire
agreement among Mesa, Parker & Parsley and Shareholder with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, among Mesa, Parker & Parsley and Shareholder with
respect to the subject matter hereof.
SECTION 2.05. Assignment. This Agreement shall not be assigned by
operation of law or otherwise (other than by will or the laws of descent and
distribution).
SECTION 2.06. Parties in Interest. This Agreement shall inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any person other than the parties
hereto any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 2.07. Amendment; Waiver. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto. Any
party hereto may (i) extend the time for the performance of any obligation or
other act of any other party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 2.08. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the terms of this Agreement remain as originally contemplated to the
fullest extent possible.
SECTION 2.09. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telecopy, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at
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<PAGE> 5
such other address for a party as shall be specified in a notice given in
accordance with this Section 2.09):
if to Parker & Parsley:
303 West Wall
Suite 101
Midland, Texas 79701
Facsimile No.: (915) 571-5050
Attention: Mark Withrow
with a copy to:
Vinson & Elkins, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
Facsimile No.: (214) 220-7716
Attention: Jeffrey A. Chapman
if to Mesa:
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Facsimile No.: (972) 402-7028
Attention: Stephen K. Gardner
with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, Texas 75201-2980
Facsimile No.: (214) 953-6503
Attention: Carlos A. Fierro
if to Shareholder:
BP Capital LLC
260 Preston Road
Dallas, Texas 75225
Facsimile No.: (214) 750-9773
Attention: Malcolm Gorrie
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<PAGE> 6
with a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 7702-4995
Facsimile No.: (713) 229-1522
Attention: Robert Stillwell
SECTION 2.10. Termination. This Agreement shall terminate upon the
Effective Date or upon the termination of the Merger Agreement in accordance
with the termination provisions provided therein; provided that Section 1.06
shall survive the Effective Time.
SECTION 2.11. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in that State. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined in any Texas State or federal court sitting in the City of Dallas.
SECTION 2.12. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
SECTION 2.13. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
-6-
<PAGE> 7
IN WITNESS WHEREOF, each of Mesa and Parker & Parsley have caused this
Agreement to be executed by its respective officer thereunto duly authorized
and Shareholder has duly executed this Agreement, each as of the date first
written above.
MESA INC.
By: /s/ STEPHEN K. GARDNER
-------------------------------------
Stephen K. Gardner
Senior Vice President and Chief
Financial Officer
PARKER & PARSLEY PETROLEUM COMPANY
By: /s/ SCOTT SHEFFIELD
-------------------------------------
Scott Sheffield
President and Chief Executive Officer
SHAREHOLDER
By: /s/ BOONE PICKENS
-------------------------------------
Boone Pickens
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<PAGE> 8
SCHEDULE A
MXP SERIES A PREFERRED STOCK 5,037,982 SHARES
MXP COMMON STOCK 1,500,000 SHARES
A-1
<PAGE> 1
EXCLUSIVE TO THE WALL STREET JOURNAL
EMBARGOED UNTIL 11:00 PM CENTRAL, APRIL 6, 1997
MESA AND PARKER & PARSLEY PETROLEUM TO MERGE
CREATE PIONEER NATURAL RESOURCES COMPANY
A NEW LEADER IN ENERGY INDUSTRY
DALLAS, TEXAS AND MIDLAND, TEXAS, April 6, 1997-- MESA Inc. [NYSE: MXP] and
Parker & Parsley Petroleum Company [NYSE: PDP] today signed a definitive
agreement to merge and create Pioneer Natural Resources Company, the third
largest independent oil and gas exploration and production company in the
United States.
The merger combines MESA's well-known, long-lived, low cost natural
gas reserves and state-of-the-art gas processing facilities with Parker &
Parsley's long-lived, high quality oil reserves and exploration and
exploitation opportunities. The merger creates a new company with a balanced
oil and gas reserve base and significant production and reserve growth
potential. Pioneer will be led by a proven management team with the financial
strength and flexibility to pursue an aggressive growth strategy.
Following the planned merger, Pioneer will have critical mass,
stability and strength:
- - Pioneer's proved reserve base will be among the largest in the independent
oil and gas industry. Pioneer will have over 3.7 trillion cubic feet of
natural gas equivalent reserves, comprised of 1.9 trillion cubic feet of
natural gas and 293 million barrels of crude oil and liquids. Pioneer's
current daily production will be over 64,000 barrels of crude oil and
natural gas liquids and 459 million cubic feet of natural gas. Among the
"crown jewels" of the Pioneer holdings will be the Hugoton gas field in
Kansas and the Texas Panhandle and Spraberry fields in West Texas.
- - Pioneer's reserve base will be well balanced, with 52% natural gas and 48%
crude oil and liquids. Pioneer will be the only independent that owns both
long lived gas and long lived oil reserves and will have an aggregate
reserve life index in excess of 12 years. Pioneer's properties will provide
stable annual production and cash flow to fund accelerated development of
existing reserves, exploration for new reserves and strategic acquisitions.
- - Pioneer's enterprise value will be approximately $4.2 billion, based on
Friday's closing prices for the equity securities of each company and
including $1.3 billion in combined net debt outstanding. Combined, the
companies generated approximately $550 million in EBITDA in 1996 and have
significant borrowing capacity under their existing bank facilities.
Pioneer's debt will initially comprise 42% of its book capitalization. The
companies believe that this financial strength will allow greater access to
exploration, acquisition and financing opportunities, and allow the
companies to attract additional talented personnel.
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- - Pioneer's 1997 capital spending budget of $400 million, which excludes
recent and pending acquisitions, will be directed at increasing production
and reserves. Of this, Pioneer plans to invest $300 million on further
development of existing reserves. Approximately 600 wells will be drilled,
many with new technologies such as horizontal and dual lateral drilling.
Pioneer expects to invest approximately $100 million to explore for new
reserves using 3-D seismic evaluation technology and other proven methods.
In addition, the Company will continue to pursue strategic acquisitions.
- - Pioneer's management, directors and affiliates will own approximately 17%
of the Company's common stock upon consummation of the merger, strongly
aligning their interests with shareholders' interests. This is the highest
level of insider ownership among the top independent exploration and
production companies.
Pioneer's Chairman of the Board will be Jon Brumley, currently
Chairman and CEO of MESA. Mr. Brumley, 58, joined MESA in August 1996 and was
co-founder and Chairman of Cross Timbers Oil Co. and President and CEO of
Southland Royalty Co. Scott Sheffield, 44, currently Chairman and CEO of Parker
& Parsley, will be Pioneer's President and Chief Executive Officer. Mr.
Sheffield has been with Parker & Parsley since 1979. Pioneer will have fifteen
Directors on its board: the existing seven from MESA, seven from Parker &
Parsley, and one new director to be jointly named by the parties.
Mr. Brumley said, "MESA is paying a premium for a premium opportunity:
to create a major new independent with the size, strength and management
experience necessary to capitalize on the tremendous potential of MESA's long
lived natural gas reserves and Parker & Parsley's long lived oil properties.
This merger widens the door for both of our companies' management, technical,
operational and administrative teams to accelerate growth from a trot to a
gallop, stepping up our exploitation and exploration efforts across the board.
The timing is perfect for this combination, and we are seizing the day."
Mr. Sheffield commented, "This merger puts Pioneer in the top tier of
independent exploration and production companies in the country. Pioneer will
be the largest independent oil and gas company that has been built from
scratch, which is a tribute to the entrepreneurial spirit and culture of both
companies. With strong cash flow, a solid capital structure and a proven
management team, Pioneer will have more firepower to increase development and
exploration than either of us have on our own. We share a commitment to
operating efficiency and the use of cutting-edge technology to enhance the
productivity of our existing assets and to increase the success rate of our
exploration projects. As the third largest independent, we will be exposed to
more and better opportunities for exploitation, exploration and strategic
acquisitions, and we will have the financial flexibility necessary to
capitalize on those opportunities."
Richard Rainwater, currently a director of MESA and its largest
individual shareholder, said, "Pioneer will be aggressive under Jon Brumley and
Scott Sheffield, two of the country's most experienced and successful builders
of oil and gas companies. Pioneer will grow through well-planned development
and exploration and have the financial strength to act quickly and decisively
when new opportunities arise. The timing of this merger positions Pioneer to be
the
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preeminent independent producer of oil and gas at a time when the global supply
and demand environment should favor energy companies." Mr. Rainwater will be a
director, and the largest individual shareholder of Pioneer.
Pioneer Natural Resources Company will be headquartered in Irving,
Texas. Pioneer will retain Parker & Parsley's operations in Midland, Texas, and
the Company said that it expects that location's employment to increase in
coming years as Pioneer increases its production activities in the Permian
Basin. Pioneer will also have significant operations in Amarillo, Houston and
Corpus Christi, Texas; Oklahoma City, Oklahoma; and Lafayette, Louisiana.
Pioneer will have approximately 1,000 employees.
TERMS OF AGREEMENT
Under the merger agreement, holders of MESA and Parker & Parsley
common stock will receive common stock of Pioneer Natural Resources Company, a
newly-organized Delaware corporation. Parker & Parsley common stockholders will
receive one share of Pioneer common stock for each share of Parker & Parsley.
MESA's common stockholders will receive one share of Pioneer common stock for
every seven shares of MESA.
Holders of MESA Series A 8% Cumulative Convertible Preferred Stock and
Series B 8% Cumulative Convertible Preferred Stock will have the option to
receive either (i) 1.25 shares of Pioneer common for every seven shares held;
or (ii) one share of Pioneer Series A 8% Cumulative Convertible Preferred Stock
for every seven shares held; these shares are convertible into one share of
Pioneer common stock.
If a majority of the outstanding shares of MESA's Series A Preferred
Stock vote in favor of the merger, then all holders of MESA Series A Preferred
will receive common stock. This majority voting provision applies to MESA
Series B Preferred, however all of the holders of Series B Preferred have
agreed to vote in favor of the merger and exchange each of their shares for
common stock. Richard Rainwater and his affiliates own all of the outstanding
MESA Series B Preferred Stock.
The merger is subject to Parker & Parsley and MESA stockholder
approvals and Hart-Scott-Rodino approvals. If, during the fifteen trading days
ended five trading days before the shareholder votes, MESA's average closing
common stock price is less than $5 per share, each party will have the option
to terminate the merger agreement. The merger was unanimously approved by
Parker & Parsley's and MESA's boards of directors, and is expected to be
completed in July.
Except where otherwise noted, all amounts for Pioneer's capital
expenditures, cash flow, borrowing capacity, reserves and aggregate life are
provided herein on a combined basis, giving effect to the merger as of January
1, 1997, and pro forma for MESA's acquisition of Greenhill Petroleum
Corporation. EBITDA represents income from continuing operations plus interest
expense, income tax expense, exploration and abandonment charges, and
depletion, depreciation, and amortization expense.
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Merrill Lynch & Co. is serving as financial advisor to MESA and has
rendered its opinion to its board of directors with respect to the fairness,
from a financial point of view, of the merger consideration to MESA's common
stockholders, as well as the common stock conversion ratio applicable to MESA
preferred stock. Morgan Stanley & Co. Incorporated has rendered an opinion
with respect to the fairness of the common stock conversion ratio and preferred
stock conversion ratio to MESA's preferred stockholders. Goldman, Sachs & Co.
is serving as financial advisor to Parker & Parsley.
This announcement includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include without limitation, estimates with respect to reserves,
production levels, cash flows, and capital expenditures. Although MESA and
Parker & Parsley believe that the expectations reflected in such
forward-looking statements are reasonable, they can give no assurance that such
expectations will prove to have been correct. Forward-looking statements are
qualified as may be provided in MESA's and Parker & Parsley's annual,
quarterly, and current reports and registration statements filed with the
Securities and Exchange Commission.
Attachments: Summary of Exchange Ratios
Fact Sheets on MESA and Parker & Parsley
# # #
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SUMMARY OF EXCHANGE RATIOS
FOR SHAREHOLDERS OF
MESA, INC. AND PARKER & PARSLEY PETROLEUM COMPANY
EXCHANGE RATIOS FOR COMMON SHAREHOLDERS:
Current Shareholding Receive Shares of Pioneer
- -------------------- -------------------------
7 common shares of MESA 1 common share of Pioneer
1 common share of Parker & Parsley 1 common share of Pioneer
EXCHANGE RATIOS FOR SERIES A PREFERRED SHAREHOLDERS:
MESA preferred shareholders may exchange their shares, at their option, as
follows:
Current Shareholding Receive Shares of Pioneer
- -------------------- -------------------------
7 shares MESA Series A 1.25 common shares of Pioneer
8% Cum. Cnv. Pfd.
or
1 Pioneer Series A
8% Cum. Cnv. Pfd.
If a majority of outstanding shareholders of MESA's Series A 8% Cum. Cnv. Pfd.
vote in favor of the merger, then ALL holders of such Series A will receive
common shares of Pioneer at the ratio described above.
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FACT SHEET - MESA, INC.
One of the largest independent oil and gas companies in the U.S., Mesa, Inc.
(NYSE: MXP) explores for and produces oil and gas. Mesa's reserves are
primarily concentrated in the Hugoton field in southwest Kansas and the West
Panhandle field in Texas. These fields are considered to be among the premier
natural gas properties in the U.S. and are characterized by long lived reserves
and stable, high margin production.
Mesa also has a significant and growing presence offshore in the Gulf of
Mexico, where it has been increasing its exploration efforts in recent years
through 3-D seismic evaluation technology.
Mesa owns and operates gas processing facilities in Satanta, Kansas and Fain,
Texas, where it extracts raw natural gas liquids and crude helium from its own
and third-parties' natural gas production.
Headquartered in Irving, Texas, Mesa has approximately 380 employees.
Mesa's strategy is to bring value to its shareholders by expanding its reserve
base, production and cash flows by:
- - PURSUING STRATEGIC ACQUISITIONS that offer opportunities for
exploitation and exploration, bring new core areas of operation and
increase Mesa's exposure to oil;
- - EXPANDING ITS EXPLORATION ACTIVITIES through increased investment in
higher risk projects that offer higher potential rates of return;
- - EXPLOITING ITS EXISTING AND ACQUIRED PROPERTIES AND maintaining
current production levels through investment in development drilling
projects as well as in existing production, compression and gathering
facilities, and technologies such as 3-D seismic evaluation;
- - EXPANDING ITS GAS PROCESSING BUSINESS to continue to extract the
processing margin on its own gas as well as to capture processing fees
from the processing it provides to third-parties;
- - MAINTAINING THE FINANCIAL FLEXIBILITY THAT allows it to act quickly
and decisively when investment opportunities arise.
RECENT EVENTS
- - In August 1996, Mesa completed a recapitalization led by Richard E.
Rainwater, which raised $265 million and allowed Mesa to repay and
refinance over $1.2 billion in debt and increase its cash flow for
investment in acquisitions and exploration.
- - On February 7, 1997, Mesa agreed to buy Greenhill Petroleum
Corporation for $270 million. The acquisition of the Greenhill
properties, which are concentrated in the inland waters of the
Louisiana Gulf Coast, the Texas Gulf Coast, offshore in the Gulf of
Mexico and in the Permian Basin, is the first phase of in Mesa's new
and significant exploitation and exploration drilling program.
- - On February 6, 1997, Mesa acquired all of MAPCO, Inc.'s condensate and
natural gas liquid ("NGL") interests in the West Panhandle field of
Texas for $66 million. Mesa expects this acquisition to result in an
additional 850,000 barrels in 1997 and approximately 11 million
barrels of proved reserves in 1997.
<PAGE> 7
MANAGEMENT
Members of Mesa's senior management include Jon Brumley, Chief Executive
Officer and Chairman of the Board of Directors, Dennis E. Fagerstone, Executive
Vice President and Chief Operating Officer, Stephen K. Gardner, Senior Vice
President and Chief Financial Officer, and M. Garrett Smith, Vice President -
Strategic Acquisitions.
Before joining Mesa in August 1996, Jon Brumley, 58, was co-founder and former
Chairman of Cross Timbers Oil Co. (NYSE: XTO). Prior to that, Mr. Brumley was
President and CEO of Southland Royalty Co. (NYSE: SRC).
<TABLE>
<CAPTION>
MESA PROPERTIES WEST GULF OF
HUGOTON PANHANDLE MEXICO OTHER TOTAL
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proved reserves:
Natural gas (MMcf) 691,412 288,444 27,332 30,534 1,037,723
Natural gas liquids (MBbls) 45,418 42,498 120 15 88,051
Oil and condensate (MBbls) -- 3,971 2,188 704 6,863
Natural gas equivs (MMcfe) 963,920 567,258 41,180 34,848 1,607,206
Present value of
future net cash flows,
before income taxes,
discounted at 10% $ 1,129.7 $ 611.4 $ 67.6 $ 26.9 $ 1,835.6
</TABLE>
FINANCIAL HIGHLIGHTS
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1996 1995
PRO FORMA* AS REPORTED
--------------------------------------------------
<S> <C> <C> <C>
Revenues $ 382,355 $ 311,411 $ 234,959
Operating Income 104,934 96,688 47,965
Cash flow from operations -- 101,313 69,241
Net income (loss) before extraordinary item 32,498 8,339 (57,568)
Extraordinary loss on debt extinguishment -- (59,386) --
Net income (loss) -- (51,047) (57,568)
Net income (loss) per common share before 0.16 (.02) (.90)
extraordinary item
Loss per common share on extraordinary item -- (.92) --
Net income (loss) per common share -- (.94) (.90)
Total assets 1,494,527 1,213,879 1,486,824
Long-term debt, including current maturities 1,073,272 808,077 1,236,743
</TABLE>
*Pro forma (unaudited) for the 1996 recapitalization and the acquisition of
Greenhill Petroleum Corporation
<PAGE> 8
FACT SHEET - PARKER & PARSLEY PETROLEUM COMPANY
Parker & Parsley Petroleum Company (NYSE: PDP) is among the largest independent
oil and gas exploration and production companies in the United States. The
company has total proved reserves of more than 302 million barrel oil
equivalents (MMBOE), 54 percent crude oil. Parker & Parsley's domestic oil and
gas drilling and production operations are concentrated in Texas, Oklahoma,
Louisiana, and New Mexico, with international drilling and production
operations in Argentina.
Over the past three years, the company has added over 285 MMBOE of total proved
oil and gas reserves through a balanced strategy of acquisition, development
and exploration. Parker & Parsley has achieved this growth at an average cost
of $3.99 per BOE, significantly below the industry average. In addition, the
company has replaced 377 percent of its annual production volumes with new
reserve additions.
Headquartered in Midland, Texas, Parker & Parsley has offices in Midland and
Corpus Christi, Texas; Oklahoma City, Oklahoma; and Buenos Aires, Argentina.
The company employs approximately 650 persons.
STRATEGY
Parker & Parsley Petroleum is focused on being the industry leader in applying
the latest technology and implementing the best production practices to achieve
the maximum value for its shareholders. During 1996, the company adhered to a
focused growth strategy, balancing backyard development projects with a
moderate yet high potential exploration program.
1996 EVENTS
- - Added 75 million barrel oil equivalents (BOES) of proved reserves at a
finding cost of $3.10 per BOE. Three-year finding costs averaged
$3.99 per BOE.
- - Replaced 314% of oil and gas production. Replaced 377% of production
over the last three years.
- - Increased oil and gas production 13%, excluding production from
properties divested.
- - Sold Australasian properties for $238 million recognizing an $83
million gain.
- - Added new reserve potential with War Wink oil discovery and
identification of 13 additional exploration prospects in the Delaware
Basin of West Texas.
<PAGE> 9
MANAGEMENT
Parker & Parsley is managed by Scott D. Sheffield, Chairman of the Board,
President, and Chief Executive Officer; Timothy A. Leach, Executive Vice
President; Steven L. Beal, Senior Vice President, Chief Financial Officer and
Treasurer; Timothy L. Dove, Senior Vice President, Business Development; and
Lon C. Kile, Senior Vice President and investor contact.
Scott Sheffield has been President and a director of Parker & Parsley since May
1990, and Chairman of the Board and Chief Executive Officer since October 1990.
Mr. Sheffield joined Parker & Parsley Development Company (PPDC), the
predecessor company, as a petroleum engineer in 1979, and served as Vice
President-Engineering of PPDC from September 1981 to April 1985, when he was
elected President and a director. In March 1989, Mr. Sheffield was elected
Chairman of the Board and Chief Executive Officer of PPDC. Previously, Mr.
Sheffield was a production and reservoir engineer for Amoco Production Company.
PARKER & PARSLEY PETROLEUM - OIL AND GAS RESERVE PROFILE
<TABLE>
<CAPTION>
DIVISION MMBBLS BCF MMBOE %
-------------------------------------------
<S> <C> <C> <C> <C>
Spraberry 112.3 284.6 159.7 53%
Permian Basin 41.4 119.7 61.4 20%
Gulf Coast 4.3 252.3 46.4 16%
Mid Continent 2.8 167.1 30.6 10%
Other 3.1 5.7 4.1 1%
-------------------------------------------
Total 163.9 829.4 302.2 100%
</TABLE>
BBL = Standard barrel of 42 U.S. gallons, basic unit for measuring production
of crude oil and condensate
MMBBLS = Millions of barrels
BCF = One billion cubic feet
BOE = Barrel-of-oil-equivalent, used in the U.S. to express oil and gas volumes
on a comparable basis
MMBOE = Millions of Barrel of oil equivalents
FINANCIAL HIGHLIGHTS
(in millions, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues $ 535.3 $ 513.7 $ 496.2
Net income (loss) 140.2 (99.8) (14.6)
Cash flow from operations 230.1 157.3 129.8
Net income (loss) per common share 3.92 (2.83) (.49)
Total assets 1,199.9 1,319.2 1,604.9
Long-term debt, less current maturities 320.9 586.5 708.8
</TABLE>
