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)September 23, 1997
TEJAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-17389 76-0263364
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification Number)
of incorporation)
1301 MCKINNEY, SUITE 700
HOUSTON, TEXAS 77010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 658-0509
ITEM 5. OTHER EVENTS.
On September 23, 1997, Tejas Gas Corporation (the "Company") and
Shell Oil Company ("Shell") issued a press release announcing that
they had entered into a merger agreement (the "Merger Agreement")
for the merger of a special purpose subsidiary of Shell with and
into the Company, which, subject to stockholder approval and other
conditions, will result in the Company becoming a subsidiary of
Shell. In the proposed merger, holders of the Company's common stock
will receive $61.50 for each common share. The foregoing summaries
of the press release and the Merger Agreement are qualified by the
copy of the press release attached hereto as Exhibit 99.1 and
incorporated herein by reference and the copy of the Merger
Agreement attached hereto as Exhibit 2.1 and incorporated herein by
reference. In connection with the Merger Agreement, the Company
amended the Company's Rights Agreement. A copy of such amendment is
attached hereto as Exhibit 4.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
2.1 - Merger Agreement dated as of September 23, 1997 among
Tejas Gas Corporation, Shell Oil Company, Trango Holdings
Corporation and Tango Acquisition Corporation.
4.1 - Amendment No. 1 to Rights Agreement dated as of
September 23, 1997, between Tejas Gas Corporation and Harris
Trust and Savings Bank.
99.1 - News Release dated as of September 23, 1997 issued by
Tejas Gas Corporation and Shell Oil Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEJAS GAS CORPORATION
(Registrant)
Date: September 25, 1997 By: /s/ James W. Whalen
James W. Whalen
Senior Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
2.1 Merger Agreement dated as of September 23, 1997 among
Tejas Gas Corporation, Shell Oil Company, Trango
Holdings Corporation and Tango Acquisition Corporation.
4.1 Amendment No. 1 to Rights Agreement dated as of September 23,
1997, between Tejas Gas Corporation and Harris Trust and
Savings Bank.
99.1 News Release dated September 23, 1997 issued by Tejas Gas
Corporation and Shell Oil Company.
The Registrant hereby undertakes to furnish supplementally a copy of
any omitted schedule to this Merger Agreement to the Commission upon
request.
MERGER AGREEMENT
dated as of
September 23, 1997
among
TEJAS GAS CORPORATION,
SHELL OIL COMPANY,
TRANGO HOLDINGS CORPORATION
and
TANGO ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1
The Merger
Section 1.01. The Merger . . . . . . . . . . . .2
Section 1.02. Conversion of Shares . . . . . . .3
Section 1.03. Surrender and Payment. . . . . . .4
Section 1.04. Dissenting Shares. . . . . . . . .6
Section 1.05. Stock Options. . . . . . . . . . .6
Section 1.06. Redemption of the Company
5-1/4% Preferred.............................7
Section 1.07. Transfer Taxes, etc. . . . . . . .7
Section 1.08. Creation of Sierra Acquisition . .7
Section 1.09. Shell Guarantee. . . . . . . . . .7
ARTICLE 2
The Surviving Corporation
Section 2.01. Certificate of Incorporation . . .8
Section 2.02. By-laws. . . . . . . . . . . . . .8
Section 2.03. Directors and Officers . . . . . .8
ARTICLE 3
Warranties of the Company
Section 3.01. Corporate Existence and Power. . .9
Section 3.02. Corporate Authorization. . . . . .9
Section 3.03. Governmental Authorization . . . .9
Section 3.04. Non-Contravention. . . . . . . . 10
Section 3.05. Capitalization . . . . . . . . . 10
Section 3.06. Subsidiaries . . . . . . . . . . 11
Section 3.07. SEC Filings. . . . . . . . . . . 13
Section 3.08. Financial Statements . . . . . . 13
Section 3.09. Disclosure Documents . . . . . . 14
Section 3.10. Absence of Certain Changes . . . 14
Section 3.11. Litigation; Compliance . . . . . 16
Section 3.12. Taxes. . . . . . . . . . . . . . 17
Section 3.13. ERISA. . . . . . . . . . . . . . 19
Section 3.14. Permits. . . . . . . . . . . . . 22
Section 3.15. Required Stockholder Vote. . . . 23
Section 3.16. Finders' Fees. . . . . . . . . . 23
Section 3.17. Environmental Matters. . . . . . 23
Section 3.18. Restrictions on Business
Activities...................................23
Section 3.19. Title to Property. . . . . . . . 24
Section 3.20. Interested Party Transactions. . 24
Section 3.21. Insurance. . . . . . . . . . . . 24
Section 3.22. Opinion of Financial Advisor . . 25
Section 3.23. Intellectual Property. . . . . . 25
Section 3.24. Certain Obligations. . . . . . . 26
Section 3.25. Public Utility . . . . . . . . . 27
Section 3.26. Takeover Statutes. . . . . . . . 27
Section 3.27. Minute Books . . . . . . . . . . 27
ARTICLE 4
Warranties of Shell
Section 4.01. Corporate Existence and Power. . 28
Section 4.02. Corporate Authorization. . . . . 28
Section 4.03. Governmental Authorization . . . 28
Section 4.04. Non-Contravention. . . . . . . . 29
Section 4.05. Disclosure Documents . . . . . . 29
Section 4.06. Public Utility . . . . . . . . . 30
Section 4.07. Finders' Fees. . . . . . . . . . 30
Section 4.08. Litigation . . . . . . . . . . . 30
Section 4.09. Financing. . . . . . . . . . . . 30
Section 4.10. Ownership of Company Common
Shares.......................................30
ARTICLE 5
Covenants of the Company
Section 5.01. Affirmative Covenants of the
Company......................................31
Section 5.02. Negative Covenants of the
Company .....................................31
Section 5.03. No Solicitation. . . . . . . . . 35
Section 5.04. Settlement of Certain Claims . . 36
Section 5.05. Antitakeover Statutes. . . . . . 37
ARTICLE 6
Covenants of Each Party
Section 6.01. Reasonable Efforts . . . . . . . 37
Section 6.02. Pending and Upcoming FERC
Proceedings .................................38
Section 6.03. Public Announcements . . . . . . 39
Section 6.04. Notification of Certain Matters. 39
Section 6.05. Proxy Statement; Stockholder
Meeting .....................................39
Section 6.06. Access to Information;
Confidentiality .............................40
Section 6.07. Confidentiality Agreement. . . . 40
Section 6.09. Director and Officer Liability . 40
Section 6.10. Revised Schedules. . . . . . . . 41
ARTICLE 7
Conditions
Section 7.01. Conditions to the Obligations of
Each Party.................................42
Section 7.02. Conditions to the Obligations of
Shell, Sierra Acquisition, Holdings and
MergerSub.............................. 43
Section 7.03. Conditions to the Obligations
of the Company.............................44
ARTICLE 8
Termination
Section 8.01. Termination. . . . . . . . . . . 45
Section 8.02. Effect of Termination. . . . . . 47
Section 8.03. Certain Fees . . . . . . . . . . 47
ARTICLE 9
Miscellaneous
Section 9.01. Notices. . . . . . . . . . . . . 48
Section 9.02. Amendments; No Waivers . . . . . 50
Section 9.03. Rules of Construction. . . . . . 50
Section 9.04. Successors and Assigns . . . . . 50
Section 9.05. Governing Law; etc . . . . . . . 50
Section 9.06. Counterparts; Effectiveness. . . 51
Section 9.07. Parties in Interest. . . . . . . 51
Section 9.08. Severability . . . . . . . . . . 52
Section 9.09. Entire Agreement . . . . . . . . 52
Section 9.10. Survival of Warranties . . . . . 52
EXHIBITS
Exhibit A Amended Certificate of Incorporation of the Company
Exhibit B Press Release
SCHEDULES
Schedule 3.04(b)(i) Non-Contravention
Schedule 3.05(a) Capitalization
Schedule 3.06(a) Subsidiaries
Schedule 3.06(b) Subsidiaries
Schedule 3.08 Financial Statements
Schedule 3.10 Absence of Certain Changes
Schedule 3.11(a) Litigation; Compliance
Schedule 3.11(b) Litigation; Compliance
Schedule 3.12(b) Taxes
Schedule 3.12(c) Taxes
Schedule 3.14(1) Permits
Schedule 3.14(2) Permits
Schedule 3.17 Environmental Matters
Schedule 3.18 Restrictions on Business Activities
Schedule 3.19 Title to Property
Schedule 3.20 Interested Party Transactions
Schedule 3.21 Insurance
Schedule 3.23(b) Intellectual Property
Schedule 3.23(c) Intellectual Property
Schedule 3.24(a)(1) Intellectual Property
Schedule 3.24(a)(2) Intellectual Property
Schedule 3.24(b) Intellectual Property
Schedule 3.24(c) Intellectual Property
Schedule 4.04(b)(i) Non-Contravention
Schedule 4.08 Litigation
Schedule 5.02 Negative Covenants of the Company
Schedule 5.02(e) Negative Covenants of the Company
Schedule 5.02(f) Negative Covenants of the Company
MERGER AGREEMENT
MERGER AGREEMENT dated as of September 23, 1997 among TEJAS
GAS CORPORATION, a Delaware corporation (the "COMPANY"), SHELL OIL
COMPANY, a Delaware corporation ("SHELL"), TRANGO HOLDINGS
CORPORATION, a Delaware corporation ("HOLDINGS"), and TANGO
ACQUISITION CORPORATION, a Delaware corporation and a wholly owned
subsidiary of Holdings ("MERGERSUB", and, together with Shell,
Holdings and SIERRA ACQUISITION, an entity to be formed prior to
the Effective Time ("SIERRA ACQUISITION"), the "SHELL GROUP").
Capitalized terms used but not defined in this Agreement shall
have the meanings assigned to them in Annex I.
WHEREAS, by approval of their Boards of Directors, each of
Shell, Holdings, MergerSub and the Company have determined to
engage in the transactions contemplated hereby, pursuant to which,
among other things, at the Effective Time, (i) MergerSub shall
merge with and into the Company, and (ii) each share of Common
Stock, par value $.25 per share, of the Company ("COMPANY COMMON
SHARES") (except for Company Common Shares owned by the Company
and Company Common Shares as to which appraisal rights have been
perfected) shall be converted into the right to receive, in
exchange for such Company Common Share, cash from Sierra
Acquisition in an amount equal to $61.50, without interest (the
"MERGER CONSIDERATION"), as set forth herein;
WHEREAS, the Board of Directors of the Company (at a
meeting duly called and held, and acting on the unanimous
recommendation of a special committee of the Board of Directors of
the Company comprised entirely of non-management independent
directors (the "SPECIAL COMMITTEE")), has approved this Agreement
and the Merger contemplated hereby and resolved to recommend,
subject to its fiduciary duties, that stockholders of the Company
approve and adopt this Agreement and the Merger;
WHEREAS, the Boards of Directors of each of Shell, Holdings,
and MergerSub have approved the transactions contemplated hereby;
WHEREAS, Shell and the Company desire to make certain
warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe certain
conditions to the transactions contemplated hereby; and
WHEREAS, as inducements to Shell, Holdings, and MergerSub
entering into this Agreement and incurring the obligations set
forth herein, and contemporaneously with the execution and
delivery of this Agreement, Messrs. Charles C. Gates, Jay A.
Precourt and Frederic C. Hamilton and certain of their respective
Affiliates have entered into three separate Voting Agreements with
Shell (the "VOTING AGREEMENTS") pursuant to which, among other
things, each such stockholder has agreed to vote all of its
Company Common Shares in favor of this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
warranties, covenants and agreements contained herein, the parties
hereto agree as follows:
ARTICLE 1
The Merger
SECTION 1.01 The Merger. (a) At the Effective Time,
MergerSub shall be merged (the "MERGER") with and into the Company
in accordance with the General Corporation Law of the State of
Delaware (the "DELAWARE LAW"), whereupon the separate existence of
MergerSub shall cease, and the Company shall be the surviving
corporation (the "SURVIVING CORPORATION").
(b) The Closing shall take place at the offices of Shell in
Houston, Texas at 10:00 a.m. on December 31, 1997 or at such other
place, time and date as the parties hereto may agree. The date on
which the Effective Time occurs is referred to herein as the
"CLOSING DATE."
(c) At the Closing, upon fulfillment or waiver of the
conditions precedent to the Merger set forth in Article 7, the
parties shall cause a Certificate of Merger to be filed with the
Secretary of State of the State of Delaware, in such form as
required by, and duly executed in accordance with, the relevant
provisions of the Delaware Law using the procedures permitted in
Section 251 of the Delaware Law. The Merger shall become
effective at such time as the certificate of merger is duly filed
with the Secretary of State of the State of Delaware or at such
later time as the Company and Shell agree to specify in the
certificate of merger (the "EFFECTIVE TIME").
(d) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities
and duties of the Company and MergerSub, all as provided under
Delaware Law.
(e) The Surviving Corporation may, at any time after
the Effective Time, take any action (including the execution and
delivery of any document) in the name and on behalf of either of
the Company and MergerSub in order to carry out and effectuate the
transactions contemplated by this Agreement.
(f) The Company hereby represents that (x) the Special
Committee has unanimously (i) determined that this Agreement and
the Merger are fair to and in the best interests of the Company's
stockholders, and (ii) recommended that this Agreement and the
Merger be approved by the full Board of Directors and (y) its
Board of Directors, at a meeting duly called and held, and acting
on such unanimous recommendation of the Special Committee, has
unanimously determined that this Agreement and the Merger are
fair to and in the best interests of the Company's stockholders,
approved this Agreement and the Merger (and for purposes of
Section 203 of the Delaware Law, the Voting Agreements), which
approval satisfies in full the requirements of the Delaware Law
that the Agreement be approved by the Company's Board of Directors
and resolved to recommend approval and adoption of this Agreement
and the Merger by its stockholders; provided, that such
recommendation may be withdrawn, modified or amended to the extent
the Board of Directors of the Company deems it necessary to do so
in the exercise of its fiduciary obligations to the Company's
stockholders based on the advice of counsel. The Company further
represents that Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MERRILL LYNCH") has delivered to the Company's Board of
Directors its written opinion that, as of the date of such
opinion, the Merger Consideration to be paid in the Merger was
fair to the holders of Company Common Shares from a financial
point of view. The Company has been advised that all of its
directors and executive officers who hold Company Common Shares
intend to vote in favor of the Merger.
SECTION 1.02 Conversion of SharesAt the Effective Time:
(a) each Company Common Share held by the Company as
treasury stock shall be canceled and no payment shall be made with
respect thereto;
(b) each Company Common Share outstanding immediately prior
to the Effective Time shall (except as otherwise provided in
Section 1.02(a) or as provided in Section 1.04 with respect to
Company Common Shares as to which appraisal rights have been
perfected) be converted into the right to receive in exchange for
such Company Common Share cash from Sierra Acquisition in an
amount equal to the Merger Consideration, without interest. The
Company Common Shares so converted and exchanged as provided in
this paragraph shall remain outstanding and be held by Sierra
Acquisition as common stock of the Surviving Corporation. After
the Effective Time, the Company Common Shares held by Sierra
Acquisition shall constitute the only outstanding common stock of
the Surviving Corporation. If, subsequent to the date of this
Agreement but prior to the Effective Time, the Company changes the
number of Company Common Shares outstanding as a result of any
stock split, stock dividend, recapitalization or similar
transaction, the Merger Consideration obtainable upon conversion
of a Company Common Share as provided in this Section 1.02(b)
shall be appropriately adjusted;
(c) each share of common stock, par value $.01 per share, of
MergerSub outstanding immediately prior to the Effective Time
shall be canceled, and no payment shall be made with respect
thereto; and
(d) each share of the Company's 9.96% Cumulative Preferred
Stock, par value $1.00 per share (the "COMPANY 9.96% PREFERRED"),
shall remain outstanding as one share of 9.96% Preferred of the
Surviving Corporation.
SECTION 1.03. Surrender and Payment. (a) On and after the
Effective Time, Sierra Acquisition will make available to the
Exchange Agent, as needed to permit prompt payment of the Merger
Consideration in accordance with this Agreement, the Merger
Consideration to be exchanged for Company Common Shares in
accordance with Section 1.02 (b). Promptly after the Effective
Time, Sierra Acquisition will send, or will cause the Exchange
Agent to send, to each holder of Company Common Shares at the
Effective Time a letter of transmittal for use in such exchange
(which shall specify that the delivery shall be effected, and risk
of loss shall pass, only upon proper delivery of the certificates
representing Company Common Shares to the Exchange Agent).
(b) Each holder of Company Common Shares that have been
converted into the right to receive in exchange for each Company
Common Share the Merger Consideration, upon surrender to the
Exchange Agent of a certificate or certificates representing such
Company Common Shares, together with a properly completed letter
of transmittal covering such Company Common Shares, will be
entitled immediately upon such surrender to receive the Merger
Consideration payable in respect of such Company Common Shares;
provided that the Exchange Agent will withhold from payment all
amounts required to be withheld by applicable law, including,
without limitation, under the provisions of Code section 1445,
unless the holder of Company Common Shares makes applicable
affidavits or certifications reasonably satisfactory to the
Exchange Agent (based on instructions from Sierra Acquisition)
that the Merger Consideration is not subject to withholding.
Until so surrendered, each certificate representing Company Common
Shares that have been converted into the right to receive in
exchange for each Company Common Share the Merger Consideration
shall, after the Effective Time, represent for all purposes, only
the right to receive the Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid
to a Person other than the registered holder of the Company Common
Shares represented by the certificate or certificates surrendered
in exchange therefor, it shall be a condition to such payment that
the certificate or certificates so surrendered shall be properly
endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such Company Common
Shares or establish to the satisfaction of the Exchange Agent
(based on instructions from Sierra Acquisition) that such tax has
been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of Company Common Shares other than any
such registration into the names of Sierra Acquisition or
Holdings, and other than registration of any subsequent transfers
by Sierra Acquisition or Holdings. If, after the Effective Time,
certificates representing Company Common Shares are presented to
the Surviving Corporation (by any Person other than by Sierra
Acquisition or Holdings or any subsequent transferee from Sierra
Acquisition or Holdings), they shall be exchanged for the
consideration provided for, and in accordance with the procedures
set forth, in this Article 1 and the relevant certificates
formerly representing Company Common Shares shall be delivered to
Sierra Acquisition as provided in Section1.02(b).
(e) Any Merger Consideration made available to the Exchange
Agent pursuant to Section 1.03(a) that remains unclaimed by the
holders of Company Common Shares one year after the Effective Time
shall be returned to Sierra Acquisition, upon demand, and any such
holders who have not exchanged their Company Common Shares for the
Merger Consideration in accordance with this Section prior to that
time shall thereafter look only to Sierra Acquisition for payment
of the Merger Consideration in respect of their Company Common
Shares, subject to applicable abandoned property, escheat and
other similar laws. Notwithstanding the foregoing, Sierra
Acquisition shall not be liable to any former holder of Company
Common Shares for any amount paid to a public official pursuant to
applicable abandoned property, escheat or other similar laws. Any
Merger Consideration remaining unclaimed by holders of Company
Common Shares one day prior to such time as 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 Sierra Acquisition free and clear of any claims or
interest of any Person previously entitled thereto.
(f) Any Merger Consideration made available to the Exchange
Agent pursuant to Section 1.03(a) to pay for Company Common Shares
for which appraisal rights have been perfected shall be returned
to Sierra Acquisition upon its demand.
(g) Shell, Sierra Acquisition, Holdings, MergerSub and the
Company, respectively, shall use all reasonable efforts to take
all such action as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible, subject, in the
case of the Company, to applicable fiduciary duties as provided in
Section 5.03. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes
of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights,
privileges, immunities, powers and franchises of either of the
Company or MergerSub, the officers and directors of the Surviving
Corporation are fully authorized in the name of either of the
Company or the MergerSub or otherwise to take, and shall take, all
such action.
SECTION 1.04. Dissenting SharesNotwithstanding Section
1.02, Company Common Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded
appraisal for such Company Common Shares in accordance with
Delaware Law ("DISSENTING SHARES") shall not be converted into a
right to receive the Merger Consideration, unless such holder
fails to perfect or withdraws or otherwise loses its right to
appraisal or it is determined that such holder does not have
appraisal rights in accordance with Delaware Law. If after the
Effective Time such holder fails to perfect or withdraws or loses
its right to appraisal, or if it is determined that such holder
does not have an appraisal right, such Company Common Shares shall
be treated as if they had been converted as of the Effective Time
into a right to receive in exchange for each Company Common Share
the Merger Consideration. The Company shall give Shell, Holdings
and Sierra Acquisition prompt notice of any demands received by
the Company for appraisal of Company Common Shares, and Shell,
Holdings and Sierra Acquisition shall have the right to
participate in all negotiations and proceedings with respect to
such demands except as required by applicable law. The Company
shall not, except with the prior written consent of Shell,
Holdings and Sierra Acquisition, make any payment with respect to,
or settle or offer to settle, any such demands.
SECTION 1.05. Stock Options. Except as otherwise agreed in
writing prior to the Effective Time between Holdings and the
holder of any stock option, each stock option to purchase Company
Common Shares outstanding at the Effective Time shall be canceled
and each holder of any such option, whether or not then vested or
exercisable, shall be paid by the Company promptly after the
Effective Time for each such option an amount in cash determined
by multiplying (i) the excess, if any, of the amount of the Merger
Consideration over the applicable per share exercise price of such
option by (ii) the number of Company Common Shares such holder
could have purchased (assuming full vesting of all options) had
such holder exercised such option in full immediately prior to the
Effective Time.
SECTION 1.06. Redemption of the Company 5-1/4% Preferred.
Prior to the Effective Time, the Company shall take all necessary
steps to redeem all of its 5-1/4% Convertible Preferred Stock, par
value $1.00 per share (the "COMPANY 5-1/4% PREFERRED"), in
accordance with the Certificate of Designation for such Company 5-1/4%
Preferred, so that such redemption shall be completed on or
prior to the record date for the Company Stockholder Meeting.
SECTION 1.07. Transfer Taxes, etc. Except as set forth in
Section 1.03(c), (i) Holdings shall bear and be responsible for
the payment of all transfer, stamp, documentary, sales, use,
registration and other similar Taxes (but excluding any federal,
state, or local taxes measured by the income of the Person
responsible for paying such Taxes) (collectively, the "TRANSFER
TAXES") incurred in connection with the exchange of Company Common
Shares for the Merger Consideration up to the amount which would
have been incurred had such shares been acquired by Holdings, and
(ii) Sierra Acquisition shall bear and be responsible for the
payment of any such Transfer Taxes in excess of the amount payable
by Holdings.
SECTION 1.08. Creation of Sierra Acquisition. Shell will
take all actions necessary to create Sierra Acquisition and to
cause it to become a party to and be bound by this Agreement prior
to the Effective Time.
SECTION 1.09. Shell Guarantee. Shell hereby irrevocably
guarantees and agrees that Sierra Acquisition will have sufficient
funds to pay when due the aggregate Merger Consideration and will
comply with its obligations in Section 1.03(a). The liability of
Shell under this Section shall be absolute and unconditional,
shall be as principal and not as a surety, and shall be binding
upon Shell and its successors and assigns without regard to the
insolvency, bankruptcy or reorganization of Sierra Acquisition or
otherwise. Shell hereby waives promptness, diligence,
presentment, demand, protest and notice of any kind as to such
obligations and its guarantee thereof and acceptance of or
reliance on its obligations contained in this Section or any other
circumstance that would constitute an equitable or legal discharge
of Sierra Acquisition's obligations under Section 1.03(a).
ARTICLE 2
The Surviving Corporation
SECTION 2.01. Certificate of Incorporation. At the
Effective Time, the certificate of incorporation of the Company
shall be amended to read in its entirety substantially in the form
set forth in Exhibit A and as so amended shall be the certificate
of incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law.
SECTION 2.02. By-laws. The by-laws of MergerSub in effect
at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.03. Directors and Officers. From and after the
Effective Time, the directors and officers of the Company shall be
the directors and officers of the Surviving Corporation.
ARTICLE 3
Warranties of the Company
Each member of the Shell Group acknowledges that it is an
informed and sophisticated buyer, and has engaged expert advisors,
experienced in the evaluation of transactions such as those
contemplated by this Agreement. Each member of the Shell Group
acknowledges that it has undertaken (or will prior to the
Effective Time undertake) such investigation and has been (or will
be) provided with and has evaluated (or will evaluate) such
documents and information as it deems necessary to enable it to
make an informed and intelligent decision with respect to the
execution, delivery and performance of this Agreement. In
particular, each member of the Shell Group acknowledges that it
and its representatives have been afforded (or will prior to the
Effective Time be afforded) the opportunity to inspect the assets
of the Company and to examine the records of the Company and its
Subsidiaries with respect to all information in possession of the
Company and its Subsidiaries relating to the Company and its
Subsidiaries that has been requested by any member of the Shell
Group. EACH MEMBER OF THE SHELL GROUP FURTHER ACKNOWLEDGES THAT,
EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 3, THE COMPANY AND
ITS SUBSIDIARIES AND THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS (IN THEIR CAPACITIES AS SUCH) HAVE MADE
NO, AND THE COMPANY AND ITS SUBSIDIARIES HEREBY EXPRESSLY DISCLAIM
ANY, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION, AS TO THE TITLE OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES TO ANY ASSETS OF THE COMPANY AND ITS
SUBSIDIARIES, OR AS TO ANY OTHER INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED TO THE SHELL GROUP OR ITS
REPRESENTATIVES BY OR ON BEHALF OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES. THE COMPANY AND ITS SUBSIDIARIES EXPRESSLY DISCLAIM
ANY WARRANTY OF MERCHANTABILITY OF ANY OF THE ASSETS OF THE
COMPANY OR OF THE FITNESS OF ANY OF THE ASSETS OF THE COMPANY AND
ITS SUBSIDIARIES FOR ANY PURPOSE. IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT NONE OF THE WARRANTIES IN THIS AGREEMENT BY THE
COMPANY SHALL BE DEEMED TO COVER CORAL. Subject to the foregoing,
the Company hereby warrants to Shell as follows:
SECTION 3.01. Corporate Existence and Power. The Company is
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a
Company Material Adverse Effect. The Company has heretofore
delivered to Shell true and complete copies of the Company's
certificate of incorporation and bylaws as currently in effect.
SECTION 3.02. Corporate Authorization. The execution,
delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated
hereby are within the Company's corporate powers and, except for
any required approval by the Company's stockholders in connection
with the consummation of the Merger, have been duly authorized by
all necessary corporate action. This Agreement constitutes a valid
and binding agreement of the Company, enforceable against the
Company in accordance with its terms, subject to applicable
bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
legal principles of general applicability governing the
application and availability of equitable remedies.
SECTION 3.03. Governmental Authorization. The execution,
delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated by this Agreement by
the Company require no action or waiting period by or in respect
of, or filing with, any governmental body, agency, official or
authority other than (a) the filing of a certificate of merger in
accordance with Delaware Law; (b) compliance with any applicable
requirements of the HSR Act; (c) compliance with any applicable
requirements of the Securities Act, the Exchange Act or any Blue
Sky Laws; (d) compliance with the rules and regulations of the
FERC, of the Minerals Management Service of the Department of the
Interior and of any other Governmental Authority in Texas,
Louisiana and Oklahoma having jurisdiction, which rules and
regulations apply generally to natural gas and natural gas liquids
pipelines and plants; (e) compliance with Environmental Laws; and
(f) compliance with those Laws, Regulations and Orders
noncompliance with which would not reasonably be expected to have
a Company Material Adverse Effect or to prevent, impair or result
in significant delay of the consummation of the Merger.
SECTION 3.04. Non-Contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby do not and
will not (a)contravene or conflict with the certificate of
incorporation or bylaws of the Company or (b) assuming
effectuation of all filings and registrations with, the
termination or expiration of any applicable waiting periods
imposed by, and receipt of all Permits and Orders of, Governmental
Authorities indicated as required in Section 3.03. (i) except as
set forth in Schedule3.04(b)(i), constitute a default under or
give rise to a right of termination, cancellation, acceleration,
amendment or modification with respect to the Company or any of
its Subsidiaries, a loss of any benefit to which the Company or
any of its Subsidiaries is entitled or an increase in the
obligations of the Company or any of its Subsidiaries, in each
case, under any provision of any Material Contract of the Company
or any of its Subsidiaries which, in any such case, individually
or in the aggregate, would have a Company Material Adverse Effect,
(ii) except as set forth in Schedule 3.04(b)(ii), result in the
creation or imposition of any material Lien (other than any
Permitted Encumbrances) on any material asset of the Company or
any of its Subsidiaries or (iii) except as set forth in Schedule
3.04(b)(iii), violate or cause a breach under any Law, Regulation,
Order or Permit applicable to the Company, its Subsidiaries and
their respective assets except for any such matters that would not
reasonably be expected, individually or in the aggregate, to have
a Company Material Adverse Effect.
SECTION 3.05. Capitalization. (a) The authorized capital
stock of the Company consists of (x) 30,000,000 authorized Company
Common Shares, and (y) 6,000,000 authorized preferred shares, par
value $1.00 per share, of which 260,000 shares have been
designated as the Company 5-1/4% Preferred, 200,000 shares have
been designated as the Company 9.96% Preferred, and 300,000 shares
have been designated as the Company's Series C Junior
Participating Preferred Stock, par value $1.00 per share, and have
been reserved for issuance pursuant to the Rights Plan. As of the
date of this Agreement, there were issued and outstanding
20,578,467 Company Common Shares, 260,000 shares of Company 5-1/4%
Preferred (convertible into an aggregate of 1,532,180 Company
Common Shares), 200,000 shares of Company 9.96% Preferred and
options to purchase an aggregate of 1,453,385 Company Common
Shares. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth in this Section, changes
since the date of this Agreement resulting from the exercise of
employee stock options outstanding on such date, the redemption of
the 5-1/4% Preferred as contemplated by this Agreement, the award
of up to $10,000 of Company Common Shares issued in accordance
with the Director Stock Award Plan to directors electing to
receive stock in lieu of quarterly fees after the date of this
Agreement, and the issuance by the Company of Company Common
Shares upon conversion of the Company 5-1/4% Preferred, there are
outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock or
voting securities of the Company, and (iii) no options or other
rights to acquire from the Company, and no obligation of the
Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or
voting securities of the Company (the items in clauses 3.05(a)(i),
3.05(a)(ii) and 3.05(a)(iii) being referred to collectively as the
"COMPANY SECURITIES"). Except as set forth in this Agreement or
on Schedule 3.05(a), there are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities.
(b) The Company has adopted an amendment to the Rights Plan,
a true and correct copy of which has been delivered to Shell,
pursuant to which Shell, Sierra Acquisition and Holdings will not
be deemed to be Acquiring Persons (as defined in the Rights Plan)
as a result of the execution or consummation of the transactions
provided for by this Agreement and the Voting Agreements (in the
manner provided for therein), including without limitation, the
consummation of the Merger.
SECTION 3.06. Subsidiaries. (a) Each of the Company's
Subsidiaries is a corporation or other legal entity duly
incorporated or organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization, has all corporate or entity powers and all
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted, except to the
extent the failure to have such licenses, authorizations, consents
and approvals would not, individually or in the aggregate, have a
Company Material Adverse Effect, and is duly qualified to do
business as a foreign corporation or entity and is in good
standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where
failure to be so qualified would not, individually or in the
aggregate, have a Company Material Adverse Effect. All of the
Company's Subsidiaries and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.06(a).
Complete copies of the certificate of incorporation and bylaws or
other organizational documents of each Subsidiary of the Company,
as amended to the date hereof, have been made available to Shell.
(b) The authorized, issued and outstanding capital stock of,
or other equity interests in, each of the Company's Subsidiaries
and the names and addresses of the holders of record of the
capital stock or other equity interests of each such Subsidiary
are set forth in Schedule 3.06(b). The issued and outstanding
shares of capital stock of, or other equity interests in, each of
the Subsidiaries of the Company that are owned by the Company or
any of its Subsidiaries have been duly authorized and are validly
issued, and, with respect to capital stock, are fully paid and
nonassessable, and were not issued in violation of any preemptive
or similar rights of any past or present equity holder of such
Subsidiary. All such issued and outstanding shares, or other
equity interests, that are indicated as owned by the Company or
one of its Subsidiaries in Schedule 3.06(b) are owned (i)
beneficially as set forth therein and (ii) free and clear of all
Liens other than Liens in favor of the Company's and its
Subsidiaries' lenders pursuant to credit facilities attached as
exhibits to the Company 10-K. Except as set forth in Schedule
3.06(b) and except as set forth in the agreements or
organizational documents listed on Schedule 3.06(b), no shares of
capital stock of, or other equity interests in, any Subsidiary of
the Company are reserved for issuance, and there are no contracts,
agreements, commitments or arrangements obligating the Company or
any of its Subsidiaries (i) to offer, sell, issue, grant, pledge,
dispose of or encumber any shares of capital stock of, or other
equity interests in, or any options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity
interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity
interests in, any of the Subsidiaries of the Company or (ii) to
redeem, purchase or acquire, or offer to purchase or acquire, any
outstanding shares of capital stock of, or other equity interests
in, or any outstanding options, warrants or rights of any kind to
acquire any shares of capital stock of or other equity interest
in, or any outstanding securities that are convertible into or
exchangeable for, any shares of capital stock of, or other equity
interests in, any of the Subsidiaries of the Company or (iii) to
grant any Lien on any outstanding shares of capital stock of, or
other equity interest in, any of the Subsidiaries of the Company;
provided, however, that certain terms and provisions of, and
applicable law relating to, the partnership or joint venture
agreements or arrangements listed in Schedule 3.06(b) may require
the partnerships or joint ventures to which such agreements or
arrangements relate or the partners or venturers therein to take
certain actions not material to the Company with respect to the
equity interests in such partnerships and joint ventures contrary
to clauses (i), (ii) or (iii) above; and provided further, that
the warranties set forth in this Section are subject to such other
matters as would not result in a Company Material Adverse Effect.
SECTION 3.07. SEC Filings. (a) The Company has delivered
to Shell (i) its annual reports on Form 10-K for its fiscal years
ended December 31, 1994, 1995 and 1996, (ii) its quarterly reports
on Form 10-Q for its fiscal quarters ended March 31, 1997 and June
30, 1997 ("COMPANY 10-Q"), (iii) its proxy or information
statements relating to meetings of, or actions taken without a
meeting by, the stockholders of the Company held since January 1,
1996, and (iv) all of its other reports, statements, schedules and
registration statements filed with the Securities and Exchange
Commission (the "SEC") since January 1, 1996 ("COMPANY SEC
REPORTS").
(b) As of its filing date, each such report or statement
filed pursuant to the Exchange Act did not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
(c) Each such registration statement, as amended or
supplemented, if applicable, filed pursuant to the Securities Act
as of the date such statement or amendment became effective did
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 3.08. Financial Statements. The audited consolidated
financial statements and unaudited consolidated interim financial
statements of the Company included in its annual reports on Form
10-K and the quarterly reports on Form 10-Q referred to in Section
3.07 fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may
be indicated in the notes thereto), the consolidated financial
position of the Company and its consolidated subsidiaries as of
the dates thereof and their consolidated results of operations and
changes in financial position for the periods then ended (subject
to normal year-end adjustments in the case of any unaudited
interim financial statements). For purposes of this Agreement,
"COMPANY BALANCE SHEET" means the consolidated balance sheet of
the Company as of June 30, 1997 set forth in the Company 10-Q and
"COMPANY BALANCE SHEET DATE" means June 30, 1997. Except as set
forth in Schedule 3.08, as of the date of this Agreement, there
exist no liabilities or obligations of the Company and its
Subsidiaries, whether accrued, absolute, contingent or threatened,
which would be required to be reflected, reserved for or disclosed
under generally accepted accounting principles in the financial
statements of the Company as of and for the period ended June 30,
1997, other than (i) liabilities or obligations which are
adequately reflected, reserved for or disclosed in the June 30,
1997 financial statements of the Company, (ii) liabilities
incurred in the ordinary course of business since June 30, 1997
and (iii) such as would not have a Company Material Adverse
Effect.
SECTION 3.09. Disclosure Documents. (a) Each document
required to be filed by the Company with the SEC in connection
with the transactions contemplated by this Agreement (the "COMPANY
DISCLOSURE DOCUMENTS"), including, without limitation, the proxy
statement (the "PROXY STATEMENT") to be filed with the SEC in
connection with the Merger and any amendments or supplements
thereto will, when filed, comply as to form in all material
respects with the applicable requirements of the Exchange Act and
the Securities Act, except that no warranty is made hereby with
respect to any information supplied by the Shell Group expressly
for inclusion in the Company Disclosure Documents.
(b) At the time the Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company,
and at the time such stockholders vote on adoption of this
Agreement, the Proxy Statement, as supplemented or amended, if
applicable, will not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances
under which they were made, not misleading, except that no
warranty is made hereby with respect to any information supplied
by the Shell Group for inclusion in the Proxy Statement.
SECTION 3.10. Absence of Certain Changes. Except for this
Agreement and except as set forth in Schedule 3.10 or in the
Company SEC Reports, from the Company Balance Sheet Date through
the date of this Agreement, the Company and its Subsidiaries have
conducted their business in all material respects in the ordinary
course consistent with past practice and there has not been:
(a) any event, occurrence or development (including the
commencement of any action, suit or proceedings or, to the
Knowledge of the Company, any investigation) of a state of
circumstances or facts which, individually or together with other
similar events, has had or reasonably would be expected to have a
Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of the Company (other than the regular quarterly
cash dividends on the Company 5-1/4% Preferred and the Company
9.96% Preferred, each having customary record and payment dates),
or any repurchase, redemption (other than (i) the redemption of
the Company 5-1/4% Preferred as contemplated by this Agreement,
(ii) the receipt of Company Common Shares in payment of the
exercise price of employee or director stock options and Taxes in
respect of such exercise, and (iii) repurchases to fulfill the
Company's matching contribution under its 401(k) plan) or other
acquisition by the Company or any of its Subsidiaries of any
outstanding shares of capital stock or other securities of, or
other ownership interests in, the Company or any of its
Subsidiaries;
(c) any amendment of any material term of any outstanding
security of the Company or any of its Subsidiaries other than
amendments to the terms of the existing credit facilities of the
Company or its Subsidiaries or borrowings under such facilities;
(d) any incurrence, assumption or guarantee by the Company
or any of its Subsidiaries of any indebtedness for borrowed money
other than in the ordinary course of business and in amounts and
on terms consistent with past practices and other than
indebtedness to provide funds for the redemption of the Company 5-1/4%
Preferred;
(e) any creation or assumption by the Company or any of its
Subsidiaries of any Lien (other than Permitted Encumbrances) on
any material asset of the Company or any of its Subsidiaries other
than in the ordinary course of business consistent with past
practices;
(f) any making of any loan, advance or capital contribution
to or investment in any Person other than loans, advances or
capital contributions to or investments in wholly-owned
Subsidiaries made in the ordinary course of business consistent
with past practices;
(g) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of
the Company or any of its Subsidiaries which, individually or in
the aggregate, has had or would reasonably be expected to have a
Company Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any of its Subsidiaries
relating to its assets or business (including the acquisition or
disposition of any assets) or any relinquishment by the Company or
any of its Subsidiaries of any contract or other right, in either
case, material to the Company and its Subsidiaries taken as a
whole, other than transactions and commitments in the ordinary
course of business consistent with past practice and those
contemplated by this Agreement;
(i)any change in any method of accounting or accounting
practice by the Company or any of its Subsidiaries, whether or not
any such change is required by reason of a concurrent change in
generally accepted accounting principles;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any of its
Subsidiaries, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee of
the Company or any of its Subsidiaries, (iii) increase in benefits
payable under any existing severance or termination pay policies
or employment agreements or (iv) increase in compensation, bonus
or other benefits payable to directors, officers or employees of
the Company or any of its Subsidiaries except for such grants,
payments, increases or changes in the ordinary course of business
consistent with past practice; or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or
any of its Subsidiaries, which employees were not subject to a
collective bargaining agreement at the Company Balance Sheet Date,
or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to such employees, which in any such
case would reasonably be expected to have a Company Material
Adverse Effect.
Except as disclosed in Schedule 3.10 or in the Company SEC
Reports, during the period from June 30, 1997 to the date of this
Agreement, neither the Company nor any of its Subsidiaries has
engaged in any conduct that is proscribed during the period from
the date of this Agreement to the Effective Time by Section 5.02
or agreed in writing during such period prior to the date of this
Agreement to engage in any such conduct.
SECTION 3.11. Litigation; Compliance. (a) Except as set
forth in the Company SEC Reports or Schedule 3.11(a), as of the
latest date through which the Company has supplemented its
Schedules pursuant to Section 6.10, there is no action, suit or
proceeding pending against, or (to the Knowledge of the Company)
threatened against or affecting, or (to the Knowledge of the
Company) any pending investigation against, the Company or any of
its Subsidiaries or any of their respective properties before any
court or arbitrator or any governmental body, agency or official
which would reasonably be expected, individually or in the
aggregate, to have a Company Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Merger or any of the other transactions
contemplated hereby.
(b) Except as set forth in Schedule 3.11(b), the Company and
its Subsidiaries are in substantial compliance with all applicable
Laws and Regulations and are not in default with respect to any
Order applicable to the Company or any of its Subsidiaries, except
such events of noncompliance or defaults that, individually or in
the aggregate, would not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.12. Taxes. (a) For purposes of this Agreement,
"TAX" or "TAXES" shall mean taxes, fees, levies, duties, tariffs,
imposts, and governmental impositions or charges of any kind in
the nature of (or similar to) taxes, payable to any federal,
state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad
valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license,
payroll, withholding, employment, social security, workers'
compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, alternative or add-on
minimum, estimated, environmental (including taxes under Code
section 59A), unemployment, transfer and gains taxes, and (ii)
interest, penalties, additional taxes, fines and other additions
to tax imposed with respect thereto and any interest in respect of
such penalties, additional taxes, fines and other additional
amounts; and "TAX RETURNS" shall mean returns, reports, and
information statements with respect to Taxes required to be filed
with the IRS or any other taxing authority, domestic or foreign,
including, without limitation, consolidated, combined and unitary
tax returns (including returns required in connection with any
Employee Plan).
(b) Other than as disclosed in Schedule 3.12 (b) or the
Company SEC Reports, the Company and its Subsidiaries have timely
filed all required United States federal, state, local and foreign
and other Tax Returns and such Tax Returns are true, complete and
correct, and the Company and its Subsidiaries have timely paid and
discharged all Taxes due in connection with or with respect to the
periods or transactions covered by such Tax Returns and have paid
all other Taxes as are due, except such as are being contested in
good faith by appropriate proceedings (to the extent that any such
proceedings are required) and there are no other Taxes that would
be due if asserted by a taxing authority, except Taxes with
respect to which the Company is maintaining reserves to the extent
required by generally accepted accounting principles, except where
the failure of any of the foregoing to be true would not,
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Except as disclosed in Schedule
3.12(b) or as does not involve or would not result in liability to
the Company or any of its Subsidiaries that would reasonably be
expected to have a Company Material Adverse Effect, (i) there are
no Tax Liens on any assets of the Company or any of its
Subsidiaries (other than Permitted Encumbrances); (ii) neither the
Company nor any of its Subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a
period for the assessment or payment of, any Tax; (iii) there is
no written claim against the Company or any of its Subsidiaries
for any Taxes, and no assessment, deficiency or adjustment has
been asserted or proposed with respect to any Tax Return; (iv) all
Tax Returns filed by the Company and its Subsidiaries have been
audited by the applicable Governmental Authority or the applicable
statute of limitations has expired for the period covered by such
Tax Returns; (v) none of the Company and its Subsidiaries, during
the last ten years, has been a member of an affiliated group
filing a consolidated federal income Tax Return (other than
Company's Tax Group); (vi) neither the Company nor any of its
Subsidiaries has any liability for the Taxes of any Person (other
than any of the Company and its Subsidiaries) under Treasury
Regulation section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract
or otherwise; (vii)neither the Company nor any of its Subsidiaries
has filed a consent under Code section 341(f) concerning
collapsible corporations; (viii) neither the Company nor any of
its Subsidiaries has any deferred intercompany gains or losses
from any "deferred intercompany transactions" (as defined in
Treasury Regulation section 1.1502-13); (ix) neither the Company
nor any of its Subsidiaries has any Tax attribute carry forwards
(including, but not limited to, any net operating loss carry
forward, net capital loss carry forward, credit carry forward or
carry forward of any other Tax attribute); (x) none of the Company
or Subsidiary Tax attribute carry forwards are limited by
applicable law, such as the provisions of Code sections 382, 383
and 384 and of Treasury Regulations promulgated under Code section
1502; (xi) neither the Company nor its Subsidiaries has agreed to
any adjustments under Code section 481; and (xii) neither the
Company nor any of its Subsidiaries has an excess loss account
under Treasury Regulation section 1.1502. The accruals and
reserves (including deferred taxes) reflected in the Company
Balance Sheet are in all material respects adequate to cover all
Taxes accruable through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles.
(c) Other than as disclosed on Schedule 3.12(c) or in the
Company SEC Reports, and other than with respect to items the
inaccuracy of which would not reasonably be expected to have a
Company Material Adverse Effect, neither the Company nor any of
its Subsidiaries is obligated under any agreement with respect to
industrial development bonds or other obligations with respect to
which the excludability from gross income of the holder for
federal or state income tax purposes could be affected by the
transactions contemplated hereunder, and to the Knowledge of the
Company, neither the Company nor any of its Subsidiaries owns any
property of a character, the indirect transfer of which, as a
consequence of the Merger, would give rise to any material
documentary, stamp or other transfer tax.
(d) The Company is a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code).
SECTION 3.13. ERISA. (a) The Company has provided Shell
with a list identifying each Company Employee Plan. True and
complete copies of such plans (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations
thereof have been made available for review to Shell together with
(A) the most recent annual report (Form 5500 including, if
applicable, Schedule B thereto) required to be prepared in
connection with any such plan, (B) the most recent actuarial
valuation report prepared in connection with any such plan, (C)
summary descriptions of any amendments not included in the most
recent restated plan instrument, which amendments have been
approved by the person in the Company having the final authority
to adopt plan amendments, whether or not such amendments have been
previously reduced to writing, and (D) the dollar amount of
unfunded liabilities resulting from any benefit increases that
have been adopted in an amendment but are not yet reflected in the
latest actuarial report. The only Company Employee Plans which
individually or collectively would constitute an "employee pension
benefit plan" as defined in Section 3(2) of ERISA (the "COMPANY
PENSION PLANS") have been identified as such in the information
provided to Shell by the Company.
(b) No Company Employee Plan constitutes a Company
Multiemployer Plan. Except as otherwise identified in the list
referred to in Section 3.13(a), no Company Employee Plan is
maintained in connection with any trust described in Section
501(c)(9) of the Code. The only Company Pension Plans that are
subject to Title IV of ERISA (the "COMPANY RETIREMENT PLANS") have
been identified as such in information provided to Shell by the
Company. The funding status of each Company Retirement Plan is
disclosed in the Company's annual report in the Company 10-K; no
Company Retirement Plan is omitted from such discussion. With
respect to each Company Retirement Plan, as of the date of the
latest actuarial valuation report for such Company Retirement
Plan, the fair market value of all of the assets of such Company
Retirement Plan (excluding for these purposes any accrued but
unpaid contributions) exceeded the accrued benefits under such
Company Retirement Plan, calculated on an accumulated benefit
obligation basis and based upon the actuarial assumptions used for
accounting purposes (i.e., those determined in accordance with
FASB statement no. 87 and used in preparing such Company
Retirement Plan's financial statements). With respect to each
Company Retirement Plan, as of the date of this Agreement, such
fair market value of assets exceeded said accrued benefits, taking
into account: (i) any shortfall between the actual return on
assets and the expected return on assets; (ii) any change in
funding assumptions; (iii) any change in participant demographics;
and (iv) benefit increases that have been adopted in an amendment
but are not yet reflected in the latest actuarial report. No
"ACCUMULATED FUNDING DEFICIENCY", as defined in Section 412 of the
Code, has been incurred with respect to any Company Pension Plan,
whether or not waived. The Company knows of no "REPORTABLE EVENT",
within the meaning of Section 4043 of ERISA, and no event
described in Section 4041, 4042, 4062 or 4063 of ERISA has
occurred in connection with any Company Employee Plan, other than
a "REPORTABLE EVENT" or other such event that will not have a
Company Material Adverse Effect. No condition exists and no event
has occurred that would be expected to constitute grounds for
termination of any Company Retirement Plan and neither the Company
nor any of its affiliates has incurred any liability which would
have a Company Material Adverse Effect under Title IV of ERISA
arising in connection with the termination of, or complete or
partial withdrawal from, any plan covered or previously covered by
Title IV of ERISA. To the Knowledge of the Company, nothing done
or omitted to be done and no transaction or holding of any asset
under or in connection with any Company Employee Plan has or will
make the Company or any of its Subsidiaries, any officer or
director of the Company or any of its Subsidiaries subject to any
liability under Title I of ERISA or liable for any tax pursuant to
Section 4975 of the Code that could directly or indirectly have a
Company Material Adverse Effect. For purpose of this Section,
"AFFILIATE" of any Person means any other Person which, together
with such Person, would be treated as a single employer under
Section 414 of the Code.
(c) Each Company Employee Plan which is intended to be
qualified under Section 401(a) of the Code has received from the
Internal Revenue Service favorable determination letters with
respect to each such Plan. The Company has made available to
Shell true and complete copies of such determination letters. No
event has occurred, and no condition exists, which could
reasonably be expected to result in the revocation of such
determination. Any terms and conditions of the determination
letter have been complied with. Each Company Employee Plan has
been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code,
which are applicable to such Company Employee Plan except for
failures to comply which, singly or in the aggregate, would not
have a Company Material Adverse Effect.
(d) The Company has provided Shell with a list of each
enforceable employment, severance or other similar contract,
arrangement or policy and each plan or arrangement providing for
insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is
not a Company Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by the Company or any of its
affiliates and (iii) covers any employee or former employee of the
Company or any of its affiliates and will become an obligation of
the Company after the Effective Time. Such contracts, plans and
arrangements as are described above, copies or descriptions of all
of which have been made available for review previously to Shell
are referred to collectively herein as the "COMPANY BENEFIT
ARRANGEMENTS". Each Company Benefit Arrangement has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Company Benefit
Arrangement except for failures to comply which, singly or in the
aggregate, would not have a Company Material Adverse Effect.
(e) Except as disclosed on Schedule 3.13(e), the Company has
not established, and does not maintain, any post-retirement
benefits for its employees, including but not limited to post-retirement
life insurance or post-retirement medical. No
condition exists that would prevent the Company or any of its
Subsidiaries from amending or terminating any Company Employee
Plan or Company Benefit Arrangement providing health or medical
benefits in respect of any active employee of the Company or any
of its Subsidiaries other than limitations imposed under the terms
of a collective bargaining agreement. The Company has, at all
times, reserved in the summary plan description or other plan
document with respect to its employee health, welfare and pension
plan, the right to amend any and all such plans with respect to
benefits which are not vested as of the date of the amendment to
the extent permitted by applicable law.
(f) Except as disclosed in writing to Shell prior to the
date hereof, there has been no amendment to, written
interpretation or announcement (whether or not written) by the
Company or any of its affiliates relating to, or change in
employee participation or coverage under, any Company Employee
Plan or Company Benefit Arrangement which would increase the
expense of maintaining such Company Employee Plan or Company
Benefit Arrangement above the level of the expense incurred in
respect thereof for the fiscal year ended on the Company Balance
Sheet Date by an amount which would have a Company Material
Adverse Effect.
(g) Prior to the date of this Agreement, neither the Company
nor any of its Subsidiaries has made any representations to its
employees as to employment opportunities with the Shell Group or
benefits available to them under the Shell Group employee benefit
plans except as agreed in writing by Shell. After the date of
this Agreement, the Company or its Subsidiaries may make
representations to its employees as to employment opportunities by
Holdings or its Subsidiaries; provided that any such
representations indicate that such employees will be employed at
will; provided further that any such representations will not
include any representations as to benefits available to such
employees different from those available prior to the date of this
Agreement except as agreed in writing by Shell and the Company.
(h) The agreements listed in the letter dated the date
hereof from the Company to Shell constitute all agreements or
arrangements of the Company or its Subsidiaries in effect on the
date hereof that provide for the payment of income or the
provision of benefits (including vesting, entitlement, receipt,
creation or transfer of any rights, privileges, income or title to
property or beneficial ownership) to any employees of the Company
as a result of a change of control of the Company. There is no
acceleration of payments under the Annual Incentive Plan of the
Company that would result from the Merger, nor is any forfeiture
provision of such Annual Incentive Plan altered by the Merger.
The person to whom the Company granted 180,000 stock options in
September 1997 has no right to accelerate the vesting of those
options as a result of the Merger, and, except for a change of
control agreement substantively identical to that of Rene Joyce,
as of the date hereof there are no other arrangements between that
individual and the Company that would provide for the payment of
income or the provision of benefits (including vesting,
entitlement, receipt, creation or transfer of any rights,
privileges, income or title to property or beneficial ownership)
to such individual as a result of a change of control of the
Company.
SECTION 3.14. Permits. To the Knowledge of the Company and
except as set forth in Schedule 3.14(1), the Company and its
Subsidiaries have all Permits, including all certificates of
public convenience and necessity and rate authorizations required
by the LCC and by the FERC, as are necessary to carry on their
businesses as currently conducted, except for any such Permits for
which the Company has made due application and except for any such
Permits that the failure to possess which, individually or in the
aggregate, would not reasonably be expected to have a Company
Material Adverse Effect. Except as set forth in Schedule 3.14(2),
the Company has not received notice from any Governmental
Authority (i) that such Permits are not in full force and effect
or have been violated, in either case in any respect that would
reasonably be expected to have a Company Material Adverse Effect
or (ii) threatening to suspend, revoke or suspend any such Permits
which, in any such case, would reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.15. Required Stockholder Vote. The affirmative
vote by stockholders of the Company Common Shares of the Company
representing a majority of the outstanding Company Common Shares
is the only vote of the Company stockholders required by Law for
the adoption and approval of this Agreement, the Merger and the
transactions contemplated hereby.
SECTION 3.16. Finders' Fees. Except for the fees and
expenses of Morgan Stanley & Co. Incorporated (a copy of whose
engagement agreement has been provided to Shell) incurred in
connection with the transactions contemplated hereby, which will
be paid 50% by the Company and 50% by Shell, there is no
investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Company
or any of its Subsidiaries who might be entitled to any fee or
commission from Shell or any of its Subsidiaries in connection
with the transactions contemplated by this Agreement. The parties
acknowledge that the Special Committee has retained Merrill Lynch
as financial advisor and that the fees and expenses of Merrill
Lynch will be paid by the Company.
SECTION 3.17. Environmental Matters. Except for matters
disclosed in Schedule 3.17 and except for matters that,
individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect, (a) to the Knowledge of
the Company, the properties, operations and activities of the
Company and its Subsidiaries are in compliance with all applicable
Environmental Laws; (b) the Company and its Subsidiaries and the
properties and operations of the Company and its Subsidiaries are
not subject to any existing, pending or, to the Knowledge of the
Company, threatened action, suit, or proceeding by or before any
Court or Governmental Authority under any Environmental Law; and
(c) all Permits, if any, required to be obtained or filed by the
Company or any of its Subsidiaries under any Environmental Law in
connection with the business of the Company and its Subsidiaries
have been obtained or filed and are valid and currently in full
force and effect. To the Knowledge of the Company, the Company
and its Subsidiaries have made available to Shell all material
written internal and external environmental audits and studies in
each case relevant to the Company and which to the Knowledge of
the Company are in the possession of the Company or its
Subsidiaries.
SECTION 3.18. Restrictions on Business Activities. Except
for this Agreement, and except as set forth in Schedule 3.18,
there is no agreement, judgment, injunction, order or decree
binding upon the Company or any of its Subsidiaries which has or
would reasonably be expected to have the effect of prohibiting any
acquisition of property by the Company or any of its Subsidiaries
or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted
by the Company, except for any prohibition or impairment as would
not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.19. Title to Property. Except as set forth in
Schedule 3.19 and subject to the Permitted Encumbrances and all
Material Contracts, the Company and its Subsidiaries have good and
valid title against any Person claiming by, through or under the
Company to all of their properties reflected as owned by them in
the Company 10-K or the Company 10-Q (other than any such
properties reflected in the Company 10-K or the Company 10-Q that
(i) have been sold or otherwise disposed of since the date of the
Company 10-K or the Company 10-Q without breaching Section 3.10 or
(ii) the failure to have such good and valid title would not,
individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect. Each member of the Shell Group
acknowledges that for the assets of the Company or any of its
Subsidiaries of which a third party is the operator, title to the
relevant assets may be held in the names of such operator subject
to the terms of the applicable contractual arrangements. The
Company or its Subsidiaries, individually or together, hold under
valid lease agreements all real and personal properties reflected
in the Company 10-K or the Company 10-Q as being held under
capitalized leases, and all real and personal property that is
subject to the operating leases to which reference is made in the
notes to the Company 10-K or the Company 10-Q, and enjoy peaceful
and undisturbed possession of such properties under such leases,
other than (i) any properties as to which such leases have
terminated in the ordinary course of business since the date of
the Company 10-K or the Company 10-Q and (ii) any matters that,
individually or in the aggregate, would not reasonably be expected
to have a Company Material Adverse Effect.
SECTION 3.20. Interested Party Transactions. Except as a
result of the transactions contemplated by this Agreement or as
set forth in Schedule 3.20 or the Company SEC Reports, since the
date of the Company's proxy statement dated April 7, 1997, no
event has occurred that would be required to be reported as a
Certain Relationship or Related Transaction pursuant to Item 404
of Regulation S-K promulgated by the SEC.
SECTION 3.21. Insurance. Except as disclosed in Schedule
3.21, all insurance policies maintained by the Company or any of
its Subsidiaries (i) are with reputable insurance carriers, (ii)
provide adequate coverage for all normal risks incident to the
business of the Company and its Subsidiaries and their respective
properties and assets and (iii) are in character and amount at
least equivalent to that carried by entities engaged in similar
businesses and subject to the same or similar perils or hazards,
except in each case as would not reasonably be expected to have a
Company Material Adverse Effect.
SECTION 3.22. Opinion of Financial Advisor. The Special
Committee has received an opinion dated September 23, 1997 of its
financial advisor, Merrill Lynch, that, as of such date, the
Merger Consideration was fair to the Company's stockholders from a
financial point of view.
SECTION 3.23. Intellectual Property. (a) The Company and/or
each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary
information or material that are used in the business of the
Company and its Subsidiaries as currently conducted, except as
would not reasonably be expected to have a Company Material
Adverse Effect.
(b) Except as disclosed in Schedule 3.23(b) or the Company
SEC Reports or as would not reasonably be expected to have a
Company Material Adverse Effect: (i) the Company is not, nor will
it be as a result of the execution and delivery of this Agreement
or the performance of its obligations hereunder, in violation of
any licenses, sublicenses and other agreements as to which the
Company is a party and pursuant to which the Company is authorized
to use any third-party patents, trademarks, service marks and
copyrights ("THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS"); (ii) no
claims with respect to the patents, registered and material
unregistered trademarks and service marks, registered copyrights,
trade names and any applications therefor owned by the Company or
any of its Subsidiaries (the "COMPANY INTELLECTUAL PROPERTY
RIGHTS"), any trade secret material to the Company, or Third Party
Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual
Property Rights by or through the Company or any of its
Subsidiaries, are currently pending or, to the Knowledge of the
Company, are overtly threatened by any Person; and (iii) to the
Company's knowledge, there are no valid grounds for any bona fide
claims (A) to the effect that the manufacture, sale, licensing or
use of any product as now used, sold or licensed or proposed for
use, sale license by the Company or any of its Subsidiaries
infringes on any copyright, patent, trademark, service mark or
trade secret; (B) against the use by the Company or any of its
Subsidiaries of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in the business of the Company or
any of its Subsidiaries as currently conducted or as proposed to
be conducted; (C) challenging the ownership, validity or
effectiveness of any part of the Company Intellectual Property
Rights or other trade secret material to the Company, or (D)
challenging the license or legally enforceable right to use of the
Third Party Intellectual Rights by the Company or any of its
Subsidiaries.
(c) Except as set forth in Schedule 3.23(c) or the Company
SEC Reports, and except as would not reasonably be expected to
have a Company Material Adverse Effect, to the Company's
Knowledge, (i) all patents, registered trademarks and copyrights
held by the Company and its Subsidiaries are valid and subsisting,
and (ii) there is no material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by
any third party, including any employee or former employee of the
Company or any of its Subsidiaries.
SECTION 3.24. Certain Obligations. (a) Except as set forth
in Schedule 3.24(a)(1), except for this Agreement and the
transactions contemplated hereby, and except for Material
Contracts entered into after the date hereof in accordance with
Section 5.02, neither the Company nor any of its Subsidiaries is a
party to or bound by any Material Contract. Except as set forth
in Schedule 3.24(a)(2), all Material Contracts relating to the
Company or any of its Subsidiaries are in full force and effect,
the Company and its Subsidiaries have performed their obligations
thereunder to date and, to the Knowledge of the Company, each
other party thereto has performed its obligations thereunder to
date (including, in the case of all Hydrocarbons delivered under
any Material Contract, conforming such Hydrocarbons to the quality
specifications of such Material Contracts and the transporting
pipelines), other than any failure of a Material Contract to be in
full force and effect or any nonperformance thereof that would not
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in Schedule 3.24(b) and for matters
that would not reasonably be expected to have a Company Material
Adverse Effect, none of the Company and its Subsidiaries engages
in any natural gas or other futures or options trading or is a
party to any price swaps, hedges, futures or similar instruments,
except for transactions and agreements entered into primarily to
hedge contracts for the purchase or sale of Hydrocarbons which
will be binding upon the Company or its Subsidiaries after
September 1, 1997. Schedule 3.24(b) sets forth a true and correct
statement of the position, as of the date hereof, of the Company
and its Subsidiaries with respect to obligations under Fixed Price
Contracts (including, with respect to each Fixed Price Contract,
location of delivery and variations in the obligation to take or
deliver) and related Hydrocarbon price swaps, hedges, futures or
similar instruments to which the Company or any of its
Subsidiaries is a party and that are material to the Company.
(c) Except as set forth in Schedule 3.24(c) or as referred
to in the Company SEC Reports, neither the Company nor its
Subsidiaries has entered into, or is a party to, or has any
obligations under, any contract for the purchase of Hydrocarbons
or other property or services that require payment be made by the
Company or its Subsidiaries regardless of whether or not delivery
is ever made of such Hydrocarbons or other property or services.
SECTION 3.25. Public Utility. The Company is not a
"holding company," a "subsidiary company" of a "holding company,"
an "affiliate" of a "holding company," or a "public utility
company," as such terms are defined in the Holding Company Act.
SECTION 3.26. Takeover Statutes. The action of the Board of
Directors of the Company in approving the Merger, this Agreement
and the Voting Agreements for purposes of Section 203 of the
Delaware Law is sufficient to render inapplicable to the Merger
and this Agreement and the Voting Agreements (and the transactions
provided for herein and therein) the provisions of Section 203 of
the Delaware Law.
SECTION 3.27. Minute Books. The minute books of the
Company (and those of its Subsidiaries for which the Company or
its Subsidiaries maintain such minute books) that have been made
available to Shell for review constitute all of the minute books
of the Company and its Subsidiaries and contain a complete and
accurate record in all material respects of all resolutions and
formal actions of the stockholders and directors (and any
committees thereof) of the Company and its Subsidiaries.
ARTICLE 4
Warranties of Shell
The Company acknowledges that it is an informed and
sophisticated party, and has engaged expert advisors, experienced
in the evaluation of transactions such as those contemplated by
this Agreement. The Company acknowledges that it has undertaken
such investigation and has been (or will be) provided with and has
evaluated (or will evaluate) such documents and information as it
deems necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance
of this Agreement. The Company will undertake prior to the
Effective Time such further investigation and request such
additional documents and information as it deems necessary. THE
COMPANY FURTHER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
THIS ARTICLE 4, SHELL AND ITS SUBSIDIARIES AND THEIR OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES AND AGENTS (IN THEIR
CAPACITIES AS SUCH) HAVE MADE NO, AND SHELL AND ITS SUBSIDIARIES
HEREBY EXPRESSLY DISCLAIM ANY, REPRESENTATIONS OR WARRANTIES AS TO
THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION OR AS TO ANY
OTHER INFORMATION, DATA OR OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED TO THE COMPANY, OR ITS REPRESENTATIVES BY OR ON BEHALF
OF SHELL OR ANY OF ITS SUBSIDIARIES. IT IS EXPRESSLY UNDERSTOOD
AND AGREED THAT NONE OF THE WARRANTIES IN THIS AGREEMENT BY SHELL
SHALL BE DEEMED TO COVER CORAL. Subject to the foregoing, Shell
hereby warrants to the Company as follows:
SECTION 4.01. Corporate Existence and Power. Each of
Shell, Holdings and MergerSub is, and, at the Effective Time,
Sierra Acquisition will be, a corporation or other legal entity
duly incorporated or organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, and has (or will have) all corporate or entity
powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted,
except to the extent the failure to have such licenses,
authorizations, consents and approvals would not, individually or
in the aggregate, be reasonably expected to prevent, impair or
result in significant delay of the consummation of the Merger.
Shell is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, be reasonably expected to
prevent, impair or result in significant delay of the consummation
of the Merger. Shell has heretofore delivered to the Company true
and complete copies of Holdings' and MergerSub's certificate of
incorporation and bylaws as currently in effect.
SECTION 4.02. Corporate Authorization. The execution,
delivery and performance of this Agreement by each member of the
Shell Group and the consummation by such member of the
transactions contemplated hereby are (or, in the case of Sierra
Acquisition, will be) within such member's corporate or other
powers and have been (or, in the case of Sierra Acquisition, will
be) duly authorized by all necessary corporate or other action.
This Agreement constitutes (or in the case of Sierra Acquisition,
will constitute) the valid and binding agreement of each member of
the Shell Group enforceable against such member in accordance with
its terms, subject to applicable bankruptcy, insolvency or other
similar laws relating to or affecting the enforcement of
creditors' rights generally and to legal principles of general
applicability governing the application and availability of
equitable remedies.
SECTION 4.03. Governmental Authorization. The execution,
delivery and performance by each member of the Shell Group of this
Agreement and the consummation of the transactions contemplated
hereby by such member require no action or waiting period by or in
respect of, or filing with, any governmental body, agency,
official or authority other than (a) the filing of a certificate
of merger in accordance with Delaware Law; (b) compliance with any
applicable requirements of the HSR Act; (c) compliance with any
applicable requirements of the Securities Act, the Exchange Act or
any Blue Sky Laws; (d) compliance with the rules and regulations
of FERC, of the Minerals Management Service of the Department of
the Interior and of any other Governmental Authority in Texas,
Mississippi and Louisiana having jurisdiction, which rules and
regulations apply generally to natural gas and natural gas liquids
pipelines and plants; (e) compliance with Environmental Laws; and
(f) compliance with those Laws, Regulations and Orders
noncompliance with which would reasonably be expected to prevent,
impair or result in significant delay of the consummation of the
Merger.
SECTION 4.04. Non-Contravention. The execution, delivery
and performance by each member of the Shell Group of this
Agreement and the consummation by each such member of the
transactions contemplated hereby do not and will not (a)
contravene or conflict with the certificate of incorporation or
bylaws or other organizational documents of such member or (b)
assuming effectuation of all filings and registrations with, the
termination or expiration of any applicable waiting periods
imposed by, and receipt of all Permits and Orders of, Governmental
Authorities indicated as required in Section 4.03, (i) except as
set forth in Schedule 4.04(i), constitute a default under or give
rise to (A) a right of termination, cancellation, acceleration,
amendment or modification with respect to any assets or
liabilities of such member, (B) a loss of any benefit to which
such member is entitled or (C) an increase in the obligations of
such member, in each case, under any provision of any Material
Contract of such member, which, in any such case, individually or
in the aggregate, would prevent, impair or result in significant
delay of the consummation of the Merger, (ii) except as set forth
in Schedule 4.04(b)(ii), result in the creation or imposition of
any material Lien (other than a Permitted Encumbrance) on any
material assets of such member or (iii) except as set forth in
Schedule 4.04(b)(iii), violate or cause a breach under any Law,
Regulation, Order or Permit applicable to any member of the Shell
Group, except for any such matters that would not reasonably be
expected, individually or in the aggregate, to prevent, impair or
result in significant delay of the consummation of the Merger.
SECTION 4.05. Disclosure Documents. (a) Each document, if
any, required to be filed by the Shell Group with the SEC in
connection with the transactions contemplated by this Agreement
(the "SHELL DISCLOSURE DOCUMENTS") will, when filed, comply as to
form in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, except that no warranty
is made hereby with respect to any information supplied by the
Company expressly for inclusion in the Shell Disclosure Documents.
(b) At the time the Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company
and at the time such stockholders vote on adoption of this
Agreement, the information supplied by the Shell Group for
inclusion in the Proxy Statement will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
SECTION 4.06. Public Utility. Shell is not a "holding
company," a "subsidiary company" of a "holding company," an
"affiliate" of a "holding company," or a "public utility company,"
as such terms are defined in the Holding Company Act.
SECTION 4.07. Finders' Fees. Except for the fees and
expenses of Morgan Stanley & Co. Incorporated (a copy of whose
engagement agreement has been provided to the Company) incurred in
connection with the transactions contemplated hereby, which will
be paid 50% by the Company and 50% by Shell, there is no
investment banker, broker, finder or other intermediary which has
been retained by, or is authorized to act on behalf of, the Shell
Group who might be entitled to any fee or commission from the
Company or Holdings or any of their Subsidiaries in connection
with the transactions contemplated by this Agreement.
SECTION 4.08. Litigation. Except as set forth in Schedule
4.08, as of the latest date through which Shell has supplemented
its Schedules pursuant to Section 6.10, there is no action, suit
or proceeding pending against, or (to the Knowledge of Shell)
threatened against or affecting, or (to the Knowledge of Shell)
any pending investigation against any member of the Shell Group or
any of their respective properties before any court or arbitrator
or any governmental body, agency or official which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay
the Merger or any of the other transactions contemplated hereby.
SECTION 4.09. Financing. Prior to the Effective Time,
Shell will have available all necessary funds or financing to
provide funds in an amount necessary to pay the aggregate Merger
Consideration.
SECTION 4.10. Ownership of Company Common Shares. As of
the date of this Agreement, no member of the Shell Group nor any
of its Affiliates beneficially owns any Company Common Shares.
ARTICLE 5
Covenants of the Company
SECTION 5.01. Affirmative Covenants of the Company. Except
as expressly contemplated by this Agreement or consented to in
writing by Shell, during the period from the execution of this
Agreement by the Company to the Effective Time, the Company will,
and will cause its Subsidiaries to:
(a) operate their businesses in all material respects in the
usual and ordinary course consistent with past practices;
(b) use all reasonable efforts to preserve substantially
intact their business organizations, maintain the rights and
franchises that are material to the Company, retain the services
of their officers and maintain the relationships with the
customers and suppliers that are material to the Company;
(c) maintain supplies and inventories in quantities deemed
appropriate by the Company and maintain and keep the properties
and assets that are material to the Company in as good repair and
condition in all material respects as on the date of this
Agreement, ordinary wear and tear excepted;
(d) use all commercially reasonable efforts to keep in full
force and effect insurance comparable in amount and scope of
coverage to that set forth in Section 3.21;
(e) use all commercially reasonable efforts to comply in all
material respects with all applicable Laws, Regulations and
Orders; and
(f) provide Shell with at least 180 days' advance written
notice of its intent to terminate any Company Pension Plan or to
freeze accruals thereunder.
SECTION 5.02. Negative Covenants of the Company. Except as
(i) expressly contemplated by this Agreement, (ii) required or
contemplated by the partnership or joint venture agreements or
arrangements listed in Schedule 5.02 with respect to the business,
condition (financial or otherwise), operations, performance or
properties of the partnerships and joint ventures created thereby,
or (iii) otherwise consented to in writing by Shell, from the
execution of this Agreement by the Company until the Effective
Time, the Company will not, and will not permit any of its
Subsidiaries to:
(a) adopt or propose any change in the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries
that are less than wholly-owned;
(b) (i) acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or
in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
(other than in the routine conduct of its business) otherwise
acquire or agree to acquire any assets of any other Person if, in
any such case, either (x) Shell believes, in its discretion, that
such acquisition or agreement would delay, impede or prevent the
consummation of the transactions contemplated by this Agreement,
(y) such acquisition or agreement would, if consummated after the
Effective Time, require the consent of Shell under any
arrangements described in the memorandum of understanding (the
"memorandum of understanding") dated the date of this Agreement
among Shell, certain stockholders of the Company and certain other
Persons (or in the attachments thereto) or (z) such acquisition or
agreement would not, if consummated after the Effective Time,
satisfy the other conditions for such acquisition or agreement set
forth in any arrangements described in the memorandum of
understanding (or in the attachments thereto), (ii) incur any
Indebtedness or issue any debt securities or assume, guarantee or
endorse or otherwise become responsible for the obligations of any
other Person or make any loans or advances, except in each case in
the ordinary course of business and consistent with past practice
(for purposes hereof, ordinary course of business consistent with
past practice includes the incurrence of Indebtedness (A) to
finance acquisitions permitted by Section 5.02(b)(i) above, (B)
needed to provide funds for the redemption of the Company 5-1/4%
Preferred, (C) to acquire gas for storage in the Company's
underground storage facilities (including payments under
derivative instruments entered into in connection with such
storage operations) and (D) to fund capital expenditures
consistent with the Company's 1997 operating plan; provided that
in the case of any Indebtedness incurred in accordance with this
clause (ii), the Company will, to the extent commercially
practicable, minimize any early termination costs associated with
the Company's financing activities), (iii) make or authorize any
capital expenditures other than capital expenditures in accordance
with the Company's existing capital plan, capital expenditures to
repair or replace casualty losses or other capital expenditures in
the ordinary course of the Company's business or (iv) enter into
or amend in any material respect any contract, agreement,
commitment or arrangement with respect to any of the matters set
forth in this Section 5.02(b);
(c) sell, lease, license or otherwise dispose of any
material assets or property except (i) pursuant to existing
contracts or commitments, (ii) dispositions for fair market value
of properties that the Company does not consider strategic in its
business and which aggregate less than $75 million in sale
proceeds or (iii) in the ordinary course consistent with past
practice;
(d) (i)take or agree or commit to take any action that
would make any warranty of the Company hereunder inaccurate in any
respect at, or as of any time prior to, the Effective Time such
that the conditions set forth in Section 7.02(a) would not be
satisfied or (ii) omit or agree or commit to omit to take any
action necessary to prevent any such warranty from being
inaccurate in any respect at any such time such that the
conditions set forth in Section 7.02(a) would not be satisfied;
provided that, in each case where the covenants in this Agreement
permit the Company and its Subsidiaries to acquire any business or
assets they shall not be restricted by this clause from taking
such actions so long as the Company updates any applicable
Schedules (whether before or after November 1, 1997 so long as
such date is no later than three (3) Business Days prior to the
Effective Time and otherwise in accordance with and subject to
Section 6.10) to reflect such acquisition;
(e) except as set forth on Schedule 5.02(e) and except as
contemplated by this Agreement, split, combine or reclassify any
shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock (other
than regular quarterly cash dividends on the Company 5-1/4%
Preferred and the Company 9.96% Preferred, the redemption of the
Company 5-1/4% Preferred as contemplated by this Agreement, or
cash dividends and distributions by a wholly owned Subsidiary of
the Company to the Company or to a Subsidiary, all of the capital
stock of which is owned directly or indirectly by the Company), or
redeem, repurchase or otherwise acquire or offer to redeem,
repurchase or otherwise acquire any of its securities or any
securities of its Subsidiaries (other than the redemption of the
Company 5-1/4% Preferred, receipt of Company Common Shares in
payment of the exercise price of employee or director stock
options and Taxes in respect of such exercise and repurchases to
fulfill the Company's matching contribution obligations under its
401(k) plan);
(f) except as set forth in Schedule 5.02(f), adopt any
change in executive compensation except in the ordinary course
consistent with past practices or adjust or amend any bonus,
profit sharing, compensation, severance, termination, stock
option, pension, retirement, deferred compensation, employment or
employee benefit plan, agreement, trust, plan, fund or other
arrangement for the benefit and welfare of any director, officer
or employee (except as required to comply with ERISA or to
continue then existing tax and securities law status);
(g) revalue in any material respect any significant portion
of its assets, including, without limitation, writing down the
value of inventory in any material manner or writing-off of notes
or accounts receivable in any material manner except as required
by generally accepted accounting principles;
(h) pay, discharge or satisfy any material claims,
liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business,
consistent with past practices, of liabilities reflected or
reserved against in the consolidated financial statements of the
Company referred to in Section 3.08 or incurred in the ordinary
course of business, consistent with past practices;
(i) make any tax election with respect to or settle or
compromise any material income tax liability;
(j) offer, sell, issue or grant, or authorize the offering,
sale, issuance or grant, of any shares of capital stock of, or
other equity interests in, any securities convertible into or
exchangeable for any shares of capital stock of, or other equity
interests (or phantom equity interests) in, or any options,
warrants or rights of any kind to acquire any shares of capital
stock of, or other equity interests (or phantom equity interests)
in, the Company or any of its Subsidiaries (other than the
issuance of Company Common Shares upon the exercise of outstanding
options or rights or the conversion of outstanding convertible
securities or to fund obligations under the Company's 401(k) plan
or quarterly awards of up to $10,000 of Company Common Shares
under the Director Stock Award Plan);
(k) grant any Lien (except Permitted Encumbrances) with
respect to any material assets including any shares of capital
stock of, or other equity interests in, any Subsidiary of the
Company;
(l) (i) change any of its policies or practices with
respect to business transactions between the Company and its
Subsidiaries, on the one hand, and the Company's Affiliates (other
than the Company and its Subsidiaries), on the other hand, (ii)
change any of its methods of accounting in effect at December 31,
1996, except as may be required to comply with generally accepted
accounting principles, or (iii) change any of its methods of
reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1996, except, in
each case, as may be required by Law and except, in the cases of
clauses (i), (ii) and (iii), for matters that would not reasonably
be expected to have a Company Material Adverse Effect;
(m) (i) take any action to revoke, amend or nullify the
amendment to the Rights Plan referred to in Section 3.05(b) and
(ii) except to the extent the Board of Directors of the Company
deems it necessary to do so in the exercise of its fiduciary
obligations to its stockholders based on the advice of counsel,
redeem or make any other amendment to its Rights Plan;
(n) enter into or adopt any new agreements or arrangements
that provide for the payment of income or the provision of
benefits (including vesting, entitlement, receipt, creation or
transfer of any rights, privileges, income or title to property or
beneficial ownership) to employees of the Company as a result of a
change of control of the Company; or
(o) agree or commit to do any of the foregoing.
SECTION 5.03. No Solicitation. From and after the date of
this Agreement, the Company will not, and will not authorize or
permit any of the officers, directors, employees, agents and other
representatives of the Company and its Subsidiaries (collectively,
the "REPRESENTATIVES") to, directly or indirectly, solicit,
encourage or initiate any Acquisition Proposal or negotiate with
any prospective buyer in connection therewith; provided, however,
that (a) nothing herein shall restrict the Company from filing a
Current Report on Form 8-K describing this Agreement, the Merger
and the transactions contemplated hereby and by any other
agreements being entered into by the Company on the date of this
Agreement (which filing may include this Agreement as an exhibit)
promptly after the date hereof or from complying with its
obligations under the Securities Act, the Exchange Act and any
other applicable Law; (b) the Company's Board of Directors and/or
the Special Committee may authorize the Company to engage in
discussions or negotiations with any Person who (without any
solicitation or initiation, directly or indirectly, by the Company
or any Representative after the date of this Agreement) seeks to
initiate such discussions or negotiations and may furnish such
third party information concerning and access to the Company and
its Subsidiaries and their respective businesses, properties and
assets, and the Company's Board of Directors and/or the Special
Committee may direct the Company's Representatives to cooperate
with and be available to consult with any such Person; provided
that in the case of this clause (b), the Company's Board of
Directors and/or the Special Committee shall have determined in
the exercise of its fiduciary duties based on the advice of its
counsel that such action is in the best interests of the Company's
stockholders, (c) following receipt of an Acquisition Proposal
that is financially superior to the Merger (as determined in good
faith by the Company's Board of Directors after consultation with
the Company's financial advisors), the Board of Directors of the
Company may withdraw, modify or not make its recommendation in
favor of the Merger; provided that in the case of this clause (c),
the Company's Board of Directors shall have concluded in good
faith and upon advice of counsel that such action is necessary in
order for the Company's Board of Directors to act in a manner that
is consistent with its fiduciary obligations under applicable law
and (d) the Company's Board of Directors may take and disclose to
the Company's stockholders any position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act; provided that, in each
case referred to in the foregoing clauses (a), (b), (c) and (d),
the Company shall not engage in negotiations with, or disclose any
nonpublic information to, any Person unless it receives from such
Person an executed confidentiality agreement with terms, in the
aggregate, not materially less favorable to the Company than the
Confidentiality Agreement. The Company shall immediately cease
and cause to be terminated any existing solicitation of, and any
discussion or negotiation conducted prior to the date of this
Agreement by the Company or any of the Company's Representatives
with respect to any Acquisition Proposal. Except to the extent
the Company's Board of Directors or the Special Committee deems it
necessary not to do so in the exercise of its fiduciary
obligations to its stockholders based on the advice of counsel,
the Company will promptly notify Shell of the receipt of any
Acquisition Proposal not less than two business days prior to
entering into any agreement in connection with the Acquisition
Proposal, including the identity of the Person or group making
such Acquisition Proposal and the material terms and conditions of
such Acquisition Proposal; provided that, except to the extent
the Company's Board of Directors deems it necessary not to do so
in the exercise of its fiduciary obligations to its stockholders
based on the advice of counsel, in no event shall the Company
enter into a definitive agreement in connection with the
Acquisition Proposal less than five business days after the
Company's initial notification to Shell of an inquiry or proposal
relating to an Acquisition Proposal. Within the two-business-day
or five-business-day period referred to above, if any, Shell may
propose an improved transaction.
SECTION 5.04. Settlement of Certain Claims. Without the
prior written agreement of Shell, prior to the Effective Time, the
Company shall not settle or compromise any claim brought by any
present, former or purported holder or owner of Company Common
Shares or other securities of the Company, or by any other Person,
which relates to or seeks to challenge or enjoin the transactions
contemplated by this Agreement, if in any such case such
settlement or compromise involves the payment of cash or
securities to such Person, or an order restraining or enjoining
the transactions contemplated by this Agreement or limiting the
ability of any member of the Shell Group to consummate the
transactions contemplated hereby or to exercise control of the
business and operations of the Company and its Subsidiaries after
the Effective Time.
SECTION 5.05. Antitakeover Statutes. If any takeover
statute is or may become applicable to the transactions
contemplated hereby, the Company and the members of its Board of
Directors shall use all reasonable efforts to grant such approvals
and to take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any takeover statute on any
of the transactions contemplated by this Agreement.
ARTICLE 6
Covenants of Each Party
Each party agrees that:
SECTION 6.01. Reasonable Efforts. (a) Subject to the terms
and conditions of this Agreement, each party shall use, and shall
cause each of its respective Subsidiaries to use, all commercially
reasonable efforts (i) to take, or to cause to be taken, all
appropriate action, and to do, or to cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise
to consummate and make effective the transactions contemplated by
this Agreement, (ii) to obtain from any Governmental Authorities
any Licenses, Permits or Orders required to be obtained by such
party or any of its Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the
performance of its obligations hereunder and (iii) to make all
necessary filings and thereafter to make promptly any other
required submissions, with respect to this Agreement required
under (A) the HSR Act or (B) any other applicable Law, Regulation
or Order; provided, that the Company and Shell shall cooperate
with each other in connection with the making of all such filings
and in supplying any information requested supplementally or by
second request from any Governmental Authority. The Company and
Shell shall request early termination of the waiting period under
the HSR Act with respect to the transactions contemplated hereby.
(b) The parties agree to cooperate and to cause their
respective Subsidiaries to cooperate with respect to, and agree to
use all commercially reasonable efforts vigorously to contest and
resist and to have vacated, lifted, reversed or overturned, any
action, including legislative, administrative or judicial action,
including any Order (whether temporary, preliminary or permanent)
of any Governmental Authority, that is in effect and that
restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement. Each of the parties
also agrees to take any and all commercially reasonable actions
that may be required by any Governmental Authority as a condition
to the granting of any Permit or Order required in order to permit
the consummation of the transactions contemplated hereby or as may
be required to vacate, lift, reverse or overturn any
administrative or judicial action that would otherwise cause any
condition to the Effective Time not to be satisfied; provided,
however, that in no event shall any party be required to take any
action that could reasonably be expected to have a Company
Material Adverse Effect or to result in a breach of this
Agreement.
(c) Each of the parties shall use, and shall cause its
Subsidiaries to use, all commercially reasonable efforts to obtain
from all Persons (other than Governmental Authorities) all
consents that are (i) necessary, proper or advisable or (ii)
otherwise required under any contracts, licenses, leases,
easements or other agreements to which such party or any of its
Subsidiaries is a party or by which it is bound, in order to
permit such party to perform its obligations hereunder.
(d) If any party shall fail to obtain any third party
consent described in Section 6.01(c), such party shall use all
commercially reasonable efforts, and shall take any such actions
reasonably requested by the other parties, to limit the adverse
effect upon the Company and its Subsidiaries, and Shell and its
Subsidiaries, and each of their respective businesses resulting,
or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
(e) Upon learning thereof, each party shall promptly notify
the other parties of (i) any complaints, investigations or
hearings (or communications indicating that the same may be
contemplated) from or by any Governmental Authorities with respect
to the transactions contemplated hereby or (ii) the institution or
the threat of litigation involving this Agreement or the
transactions contemplated hereby.
SECTION 6.02. Pending and Upcoming FERC Proceedings.
Except for the rate reduction filing planned for the Mississippi
Canyon pipeline project in 1997, from the date of this Agreement
until the Effective Time, with respect to any pending certificate
and tariff proceedings before the FERC, Shell and the Company
shall use reasonable efforts to consult with one another regarding
any agreement (x) to obtain approval for rates that are less than
the rates that have been requested in such proceedings prior to
the date hereof or (y) to settle all or any material part of the
issues in such proceedings, including any material issues
regarding the appropriate rate, fuel component, rate of return or
other cost of service or rate design aspect.
SECTION 6.03. Public Announcements. Each party will
consult with each other before issuing any press release or making
any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by
applicable Law or any listing agreement with any national
securities exchange, will not issue any such press release or make
any such public statement prior to such consultation; provided,
however, that following the execution hereof the Company and Shell
may each issue a press release in the form of Exhibit B attached
hereto.
SECTION 6.04. Notification of Certain Matters. Each party
shall use all commercially reasonable efforts to give prompt
notice to the other parties of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be
likely to cause any warranty contained in this Agreement to be
materially untrue or inaccurate, or (ii) any failure of any party
materially to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies
available hereunder to the parties receiving such notice; and
provided further that failure to give such notice shall not be
treated as a breach of covenant for the purposes of Sections
7.02(a) or 7.03(a) hereof unless the failure to give such notice
results in material prejudice to the other parties.
SECTION 6.05. Proxy Statement; Stockholder Meeting. (a) As
promptly as practicable after the execution of this Agreement, the
Company and Shell shall prepare, and the Company shall file with
the SEC, the preliminary Proxy Statement relating to the adoption
of this Agreement and approval of the transactions contemplated
hereby by the stockholders of the Company, subject to Section
5.03. As promptly as practicable after comments are received from
the SEC thereon and after the furnishing by the Company and Shell
of all information required to be contained therein, the Company
shall file with the SEC a revised Proxy Statement and will use all
commercially reasonable efforts to have it cleared by the SEC as
soon thereafter as practicable, subject to Section 5.03.
(b) Subject to Section 5.03, the Company shall cause a
meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") to
be duly called and held as soon as reasonably practicable after
the SEC clears the Proxy Statement for the purpose of voting on
the approval and adoption of this Agreement and the Merger and
will (i) thereafter mail to its stockholders as promptly as
practicable the Proxy Statement, (ii) include in the Proxy
Statement the Board's recommendation set forth in Section 1.01(f),
(iii) use all commercially reasonable efforts to obtain the
necessary approval by its stockholders of this Agreement and the
transactions contemplated hereby and (iv) otherwise comply with
all legal requirements applicable to such meeting.
SECTION 6.06. Access to Information; Confidentiality. (a)
From the date of this Agreement until the Effective Time, the
Company shall (i) afford Shell and its officers, directors,
employees, accountants, consultants, legal counsel, agents and
other representatives, including environmental engineers
(collectively, the "SHELL REPRESENTATIVES"), reasonable access at
reasonable times, upon reasonable prior notice, to the officers,
employees, agents, properties, offices and other facilities of the
Company and its Subsidiaries and to the books and records thereof
and (ii) furnish promptly to Shell and the Shell Representatives
such information concerning the business, properties, contracts,
records and personnel of the Company and its Subsidiaries
(including financial, operating and other data and information) as
may be reasonably requested, from time to time, by Shell.
(b) Notwithstanding the foregoing provisions of this
Section, the Company shall not be required to (i) grant access to
or furnish any Company Proprietary Information to Shell or any of
the Shell Representatives or (ii) grant access or furnish
information to Shell or any of Shell Representatives to the extent
that such information is subject to an attorney/client or attorney
work product privilege or that such access or the furnishing of
such information is prohibited by Law or by a confidentiality
agreement with a third party; provided, however, that, in the
latter instance, if so requested by Shell, the Company will use
all commercially reasonable efforts to obtain from such third
party a waiver of such prohibition.
SECTION 6.07. Confidentiality Agreement. From the date
hereof until the Effective Time, each party shall keep all
information received pursuant to this Agreement confidential in
accordance with the terms of the Confidentiality Agreement. The
Confidentiality Agreement will expire at the Effective Time.
SECTION 6.08. No Reorganization. It is the intention of
the parties that the Merger will not qualify as a reorganization
described in Section 368(a) of the Code (and any comparable
provisions of applicable state law). The parties will not
characterize the Merger as such a reorganization for purposes of
any income tax returns and other filings.
SECTION 6.09. Director and Officer Liability. The
Surviving Corporation will indemnify and hold harmless the present
and former officers and directors of the Company and its
Subsidiaries (the "COVERED EMPLOYEES") in respect of acts or
omissions occurring prior to the Effective Time to the extent
provided under the Company's certificate of incorporation and
bylaws in effect on the date hereof until any applicable statute
of limitations has expired; provided that such indemnification
shall be subject to any limitation imposed from time to time under
applicable Law. For not less than six years after the Effective
Time, Holdings will provide officers' and directors' liability
insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such Person currently covered by the
Company's officers' and directors' liability insurance policy on
terms with respect to coverage and amount no less favorable than
those of the Company's policy in effect on the date hereof;
provided that in satisfying its obligation under this Section,
Holdings shall not be obligated to pay premiums in excess of 150%
of the amount per annum that the Company paid for this purpose in
its last full fiscal year, which amount has been disclosed to
Shell; but provided further, that Holdings shall be obligated to
provide such coverage as may be obtained for such amount. The
provisions of this Section 6.09 are for the benefit of and may be
enforced after the Effective Time by the Covered Employees.
SECTION 6.10. Revised Schedules. The parties acknowledge
that the Schedules attached to this Agreement as of the date of
this Agreement may not be complete, and may need to be revised.
Accordingly, the parties agree that Shell or the Company may
revise their respective Schedules to this Agreement by delivering
revised Schedules to the other party at any time prior to November
1, 1997; provided that no party will be entitled to insert generic
exceptions to the Schedules that would modify the scope of the
warranties or covenants set forth herein. Any revised Schedules
will be marked to show all additions and deletions to the previous
Schedules. The Company or Shell, as the case may be, shall have
the right to review the revised Schedules for a period of 5
business days after receipt thereof. At any time within the 5
business-day time period the Company or Shell, as the case may be,
shall have the right to terminate this Agreement by notice to the
other parties if the revised or supplemented information would
reasonably be likely to have a Company Material Adverse Effect or
discloses that a condition to the terminating party's obligations
to consummate the transactions contemplated hereby is not capable
of satisfaction. This notice, if given, shall specify the
information forming the basis for the decision to terminate.
Shell or the Company, as the case may be, shall have 10 business
days after receipt of the notice to review with the other parties
the information forming the basis for the decision to terminate
and to attempt to agree on corrective measures, if any. If the
parties cannot agree on corrective measures within such 10
business-day period, then this Agreement shall terminate. If this
Agreement is not terminated as permitted by this Section, the
Company or Shell, as the case may be, shall be deemed to have
accepted such revisions, and the Schedules attached to this
Agreement as of the date hereof shall be deemed to be superseded
by the revised Schedules (and the applicable warranties to which
such revised Schedules refer shall be deemed qualified by the
matters included in the applicable Schedules).
ARTICLE 7
Conditions
SECTION 7.01. Conditions to the Obligations of Each Party.
The obligations of the Company, Shell, Sierra Acquisition,
Holdings and MergerSub to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted
and approved by the stockholders of the Company in accordance with
the Delaware Law;
(b) any applicable waiting period under the HSR Act relating
to the Merger and the other transactions contemplated hereby shall
have expired;
(c) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the
consummation of the Merger or the other transactions contemplated
hereby;
(d) all material actions by or in respect of or filings with
any governmental body, agency, official or authority required to
permit the consummation of the Merger and the other transactions
contemplated hereby shall have been obtained;
(e) there shall not be pending any action or proceeding (or
any investigation or other inquiry that might result in such an
action or proceeding) by any governmental authority or
administrative agency before any governmental authority,
administrative agency or court of competent jurisdiction, domestic
or foreign, nor shall there be in effect any judgment, decree or
order of any governmental authority, administrative agency or
court of competent jurisdiction, or any other legal restraint, (i)
preventing or seeking to prevent consummation of the Merger or the
other transactions contemplated hereby, (ii) prohibiting or
seeking to prohibit or limiting or seeking to limit any party from
exercising all material rights and privileges pertaining to its
ownership of the Company or any of its Subsidiaries, or (iii)
compelling or seeking to compel Shell, Holdings, the Company or
any of their Subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company or
any of its Subsidiaries (including the Surviving Corporation and
its Subsidiaries), in each case as a result of the Merger or the
other transactions contemplated by this Agreement, nor shall there
be any threat of any matter of a type referred to in clauses (ii)
or (iii) above which would reasonably be expected to have a
Company Material Adverse Effect; and
(f) no statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Merger which makes
the consummation of the transactions contemplated hereby illegal.
SECTION 7.02. Conditions to the Obligations of Shell,
Sierra Acquisition, Holdings and MergerSub. The obligations of
Shell, Sierra Acquisition, Holdings and MergerSub to consummate
the Merger and the other transactions contemplated by this
Agreement, are subject to the satisfaction of the following
further conditions:
(a) (i) the Company shall have performed in all material
respects all of its obligations hereunder required to be performed
by it at or prior to the Effective Time, and (ii) except for such
inaccuracies or omissions the consequences of which do not singly
or in the aggregate constitute a Company Material Adverse Effect,
the warranties of the Company contained in this Agreement and in
any certificate or other writing delivered by the Company pursuant
hereto shall be true in all respects at and as of the Effective
Time as if made at and as of such time (except to the extent such
warranty is made as of an earlier date, in which case the warranty
shall be true in all respects as of such date) and Shell shall
have received a certificate signed by the Chairman, the CEO or the
Chief Financial Officer of the Company to the foregoing effect;
(b) all consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be
made, by the Company for the consummation by it of the
transactions contemplated by this Agreement shall have been
obtained and made by the Company, except where the failure to
receive such consents, etc. would not reasonably be expected to
have a Company Material Adverse Effect;
(c) Shell shall have received all documents it may
reasonably request relating to the existence of the Company and
the authority of the Company for this Agreement, all in form and
substance satisfactory to Shell; and
(d) there shall not have been any event, occurrence or
development since the date hereof which, individually or together
with other similar events, has had or would reasonably be expected
to have a Company Material Adverse Effect.
SECTION 7.03. Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger are
subject to the satisfaction of the following further conditions:
(a) (i) each member of the Shell Group shall have performed
in all material respects all of its obligations hereunder required
to be performed by it at or prior to the Effective Time, and (ii)
except for such inaccuracies or omissions the consequences of
which would not singly or in the aggregate reasonably be expected
to impede the receipt of the Merger Consideration by the Company's
stockholders, the warranties of each member of the Shell Group
contained in this Agreement and in any certificate or other
writing delivered by any member of the Shell Group pursuant hereto
shall be true in all respects at and as of the Effective Time as
if made at and as of such time (except to the extent such warranty
is made as of an earlier date, in which case the warranty shall be
true in all respects as of such date) and the Company shall have
received a certificate signed by the President, any Vice President
or the Treasurer of Shell to the foregoing effect;
(b) all consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be
made, by each member of the Shell Group for the consummation by it
of the transactions contemplated by this Agreement shall have been
obtained and made by such member, except where the failure to
receive such consents, etc. would not reasonably be expected to
impede the receipt of the Merger Consideration by the Company's
stockholders; and
(c) the Company shall have received all documents it may
reasonably request relating to the authority of each member of the
Shell Group for this Agreement, all in form and substance
satisfactory to the Company.
ARTICLE 8
Termination
SECTION 8.01. Termination. This Agreement may be
terminated and the Merger and the other transactions contemplated
by this Agreement may be abandoned at any time prior to the
Effective Time (notwithstanding any approval of this Agreement by
the stockholders of the Company):
(a) by mutual written consent of the Company and Shell;
(b) by either the Company or Shell, if the Merger has not
been consummated by March 31, 1998;
(c) by either the Company or Shell, if there shall be any
law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or
decree enjoining any member of the Shell Group or the Company from
consummating the Merger is entered and such judgment, injunction,
order or decree shall become final and nonappealable;
(d) by Shell, if any Person, entity or "group" (as defined
in Section 13(d)(3) of the Exchange Act) other than Shell and its
Affiliates (including, for purposes of this clause only, any
parent of Shell and its Subsidiaries) shall have increased its
beneficial ownership (calculated in accordance with Rule 13d-3
under the Exchange Act) of Company Common Shares by an amount
equal to 25% or more of the outstanding Company Common Shares
compared with its level of ownership on the date of this
Agreement;
(e) (i) by Shell if any warranty of the Company set forth in
this Agreement shall be untrue when made such that the condition
set forth in Section 7.02(a) would not be satisfied; provided
that, if such warranty is curable prior to the date 60 days after
notice to the Company by Shell of such breach, through the
exercise by the Company of its reasonable best efforts, so that
the condition in Section 7.02(a) would be satisfied, and for so
long as the Company continues to exercise such reasonable best
efforts, Shell will not have the right to terminate this Agreement
under this Section, or (ii) by the Company if any warranty of any
member of the Shell Group set forth in this Agreement shall be
untrue when made such that the condition set forth in Section
7.03(a) would not be satisfied; provided that, if such warranty is
curable prior to the date 60 days after notice to Shell by the
Company of such breach, through the exercise by Shell of its
reasonable best efforts, so that the condition in Section 7.02(a)
would be satisfied, and so long as Shell continues to exercise
such reasonable best efforts, the Company will not have the right
to terminate this Agreement under this Section;
(f) (i) by Shell upon a breach of any covenant or agreement
on the part of the Company set forth in this Agreement such that
the condition set forth in Section 7.02(a) would not be satisfied;
provided that, if such breach is curable prior to the date 60 days
after notice to the Company by Shell of such breach, through the
exercise by the Company of its reasonable best efforts, so that
the condition in Section 7.02(a) would be satisfied, and for so
long as the Company continues to exercise such reasonable best
efforts, Shell will not have the right to terminate this Agreement
under this Section, or (ii) by the Company upon a breach of any
covenant or agreement on the part of Shell set forth in this
Agreement such that the condition set forth in Section 7.03(a)
would not be satisfied; provided that, if such breach is curable
prior to the date 60 days after notice to Shell by the Company of
such breach, through the exercise by Shell of its reasonable best
efforts, so that the condition in Section 7.03(a) would be
satisfied, and for so long as Shell continues to exercise such
reasonable best efforts, the Company will not have the right to
terminate this Agreement under this Section;
(g) by Shell (i) if the Board of Directors of the Company
shall have withdrawn or modified or amended, in a manner adverse
in any material respect to Shell, its approval of this Agreement
and the Merger or its recommendation set forth in Section 1.01(f),
(ii) if the Board of Directors of the Company shall have approved,
recommended or endorsed any Acquisition Proposal other than the
Merger or (iii) if the Company shall have failed to call the
Company Stockholders Meeting within a reasonable time after
completion of the SEC review process or shall have failed as
promptly as reasonably practicable thereafter to mail the Proxy
Statement to its stockholders or (iv) if the Company shall have
failed to include in such Proxy Statement the recommendation
referred to above;
(h) by the Company if (i) its Board of Directors determines
in good faith (after reviewing the advice of its financial
advisor) that an Acquisition Proposal is financially superior to
the transactions contemplated hereby and is reasonably capable of
being financed, (ii) the Company has complied with the
requirements of Section 5.03, (iii) concurrently with such
termination, the Company makes all payments required by Section
8.03(b) and (iv) concurrently with such termination, the Company
enters into a definitive agreement to effect the financially
superior Acquisition Proposal;
(i) by Shell or the Company if, at a duly held stockholders
meeting of the Company or any adjournment thereof at which this
Agreement and the Merger is voted upon, the requisite stockholder
adoption and approval (the "STOCKHOLDER APPROVAL") shall not have
been obtained; and
(j) by Shell or the Company in accordance with Section 6.10.
The party desiring to terminate this Agreement pursuant to clauses
8.01(b) through 8.01(j) shall give written notice of such
termination to the other parties in accordance with Section 9.01.
SECTION 8.02. Effect of Termination. If this Agreement is
terminated pursuant to Section 8.01, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except for liability or damages resulting from a willful
breach of this Agreement and except that the agreements contained
in this Section 8.02 and in Sections 6.06 and 8.03 and Article 9
shall survive the termination hereof.
SECTION 8.03. Certain Fees. (a) Except as provided in
Section 8.03(b) and (c), all costs and expenses incurred in
connection with this Agreement shall be paid by the party
incurring such cost or expense; provided, that Shell and the
Company shall share equally all SEC filing fees and printing
expenses incurred in connection with the printing and filing of
the Proxy Statement (including financial statements and exhibits)
and any amendments or supplements thereto.
(b) So long as no member of the Shell Group shall have
materially breached its warranties or obligations under this
Agreement, the Company agrees to pay Shell a fee in immediately
available funds equal to $25 million in the following
circumstances and at the following times only:
(i) promptly, but in no event later than two
business days after the termination by Shell of this Agreement
pursuant to Section 8.01(g);
(ii)concurrently with any termination of this
Agreement by the Company pursuant to Section 8.01(h); and
(iii) if Shell or the Company has terminated this
Agreement pursuant to Section 8.01(i) and within 12 months after
the termination of this Agreement, either (x) any Person, entity
or "group" (as defined in Section 13(d)(3) of the Exchange Act)
other than Shell and its Affiliates (including, for purposes only
of this clause, any parent of Shell and its Subsidiaries) shall
have increased its beneficial ownership (calculated in accordance
with Rule 13d-3 under the Exchange Act) of Company Common Shares
by an amount equal to 25% or more of the outstanding Company
Common Shares compared with its level of ownership on the date of
this Agreement or (y) the Company shall have entered into an
agreement to consummate a transaction contemplated by an
Acquisition Proposal, and such transaction shall subsequently be
consummated, such payment to be made upon such acquisition of
Company Common Shares or the consummation of such Acquisition
Proposal.
(c) So long as no member of the Shell Group shall have
materially breached its warranties or obligations under this
Agreement, the Company agrees to pay to Shell up to $5 million of
Shell's Expenses promptly, but in no event later than two business
days, after Shell terminates this Agreement pursuant to Section
8.01(e) or (f). So long as the Company shall not have materially
breached its warranties or obligations under this Agreement, Shell
agrees to pay to the Company up to $5 million of the Company's
Expenses promptly, but in no event later than two business days,
after the Company terminates this Agreement pursuant to Section
8.01(e) or (f).
ARTICLE 9
Miscellaneous
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given,
if to Shell, Sierra Acquisition, Holdings or MergerSub, to:
President, Shell Exploration & Production Company
Shell Oil Company
One Shell Plaza, Room 4401
Houston, TX 77002
Telecopy: (713) 241-7913
with a copy to:
David W. Ferguson
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
if to the Company, to:
James W. Whalen
Tejas Gas Corporation
1301 McKinney, Suite 700
Houston, TX 77010
Telecopy: (713) 658-9600
with a copy to:
James L. Palenchar
Bartlit Beck Herman Palenchar & Scott
The Kittredge Building
511 Sixteenth Street
Denver, CO 80202
Telecopy: (303) 592-3140
to:
Robert G. Stone
Kirby Exploration
405 Lexington Avenue
39th Floor
New York, NY 10174-0039
Telecopy: (212) 687-7829
and to:
Richard I. Beattie
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopy: (212) 455-2502
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. Each such notice, request or other communication shall be
effective (a) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
the appropriate telecopy confirmation is received or (b) if given
by any other means, when delivered at the address specified in
this Section.
SECTION 9.02. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective
Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the parties hereto, in the
case of a waiver, by the party against whom the waiver is to be
effective; provided that after the adoption of this Agreement by
the stockholders of the Company, no such amendment or waiver
shall, without the further approval of such stockholders, alter or
change (i) the Merger Consideration, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii)
any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any
shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege.
SECTION 9.03. Rules of Construction. Unless the context
otherwise requires, as used in this Agreement: (i) all defined
terms used herein and not otherwise defined have the meanings
assigned to such terms in Annex I hereto, (ii) an accounting term
not otherwise defined has the meaning ascribed to it in accordance
with generally accepted accounting principles; (iii) "or" is not
exclusive; (iv) "including" means "including, without limitation,"
(v) words in the singular include the plural and words in the
plural include the singular, and (vi) masculine pronouns shall be
deemed to include the feminine counterpart and vice versa.
SECTION 9.04. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
SECTION 9.05. Governing Law; etc. (a) Governing Law. The
terms of this Agreement shall be construed in accordance with and
governed by the law of the State of Delaware (without regard to
principles of conflict of laws).
(b) Jurisdiction. Each of the parties hereto agrees that
any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby may be
brought against any of the parties in the United States District
Court for the District of Delaware or any state court sitting in
the City of Wilmington, Delaware, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such suit, action, or
proceeding and waives any objection to venue laid therein. Process
in any suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the State of
Delaware. Without limiting the foregoing, each of the parties
hereto agrees that service of process upon such party at the
address referred to in Section 9.01, together with written notice
of such service to such party, shall be deemed effective service
of process upon such party.
(c) Specific Performance. Each of the parties acknowledges
and agrees that the parties' respective remedies at law for a
breach or threatened breach of any of the provisions of this
agreement would be inadequate and, in recognition of that fact,
each agrees that, in the event of a breach or threatened breach by
any party of the provisions of this Agreement, in addition to any
remedies at law, each party, respectively, without posting any
bond, shall be entitled to obtain equitable relief in the form of
specific performance, a temporary restraining order, a temporary
or permanent injunction or any other equitable remedy which may
then be available.
(d) Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the
actions of any of them in the negotiation, administration,
performance and enforcement thereof.
SECTION 9.06. Counterparts; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received
counterparts (or signature pages) hereof signed by all of the
other parties hereto.
SECTION 9.07. Parties in Interest. Except as expressly
provided in Article 1 and Section 6.09 in this Agreement, express
or implied, is intended to or shall confer upon any other Person,
other than the parties hereto and their respective permitted
successors and assigns, any right, benefit or remedy of any nature
or kind whatsoever under or by reason of this Agreement.
SECTION 9.08. Severability. If any provisions of this
Agreement or the application thereof to either party or set of
circumstances shall in any jurisdiction and to any extent, be
finally held invalid or unenforceable, such term or provision
shall only be ineffective as to such jurisdiction, and only to the
extent of such invalidity or unenforceability, without
invalidating or rendering unenforceable any other terms or
provisions of this Agreement or under any other circumstances, and
the parties shall negotiate in good faith a substitute provision
which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each party in a
position as nearly comparable as possible to the position it would
have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
SECTION 9.09. Entire Agreement. This Agreement, together
with the letter agreement dated April 15, 1997 between Shell and
the Company (which the parties agree shall terminate as of the
Effective Time), constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all
prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof.
SECTION 9.10. Survival of Warranties. The warranties
contained herein and in any certificate or writing delivered
pursuant hereto shall not survive the Effective Time or, if
earlier, the termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
TEJAS GAS CORPORATION
By:
Name: Jay A. Precourt
Title: Chief Executive Officer and
President
TRANGO HOLDINGS CORPORATION
By:
Name: Curtis R. Fraiser
Title: President
SHELL OIL COMPANY
By:
Name: Jack E. Little
Title: Executive Vice President
(Exploration and Production)
TANGO ACQUISITION CORPORATION
By:
Name: Richard W. Bohan
Title: Vice President and Secretary
ANNEX I
DEFINED TERMS
The following terms when used in the Agreement shall have the
meanings set forth below unless the context shall otherwise
require:
"ACQUISITION PROPOSAL" shall mean any proposal or offer with
respect to (i) a tender or exchange offer, a merger, consolidation
or other business combination involving the Company or any of its
Subsidiaries (including a merger of equals of the Company but
excluding a transaction where the Company or its Subsidiaries is
acquiring the stock or assets of another Person unless the
transaction involves the issuance (other than in a broadly
marketed public offering) by the Company of 20% or more of its
outstanding Company Common Shares (or securities convertible into
or exercisable for 20% or more of the outstanding Company Common
Shares)), or (ii) the acquisition of an equity interest in the
Company representing in excess of 25% of the power to vote for the
election of a majority of directors of the Company or (iii) the
acquisition of assets of the Company or its Subsidiaries
(including stock of one or more Subsidiaries of the Company)
representing 25% or more of the consolidated assets of the
Company, in each case by any Person other than Shell or its
Affiliates (including for purposes of this definition any parent
of Shell or any Subsidiaries of such parent).
"AFFILIATE" shall, with respect to any Person, mean any other
Person that controls, is controlled by or is under common control
with the former; provided that, for purposes of this Agreement,
none of the members of the Shell Group or their Subsidiaries shall
be considered an Affiliate of any entity that controls Shell or
any Subsidiaries of such entity (other than the members of the
Shell Group and their Subsidiaries), and none of the entities that
control Shell shall be considered an Affiliate of any member of
the Shell Group or their Subsidiaries. The term "CONTROL" and
correlative terms shall have the meanings ascribed to them in Rule
405 under the Securities Act.
"BLUE SKY LAWS" shall mean any applicable state securities laws.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"CORAL" means Coral Energy, L.P., a Delaware limited partnership.
"COMPANY 10-K" means the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1996.
"COMPANY EMPLOYEE PLANS" means each "EMPLOYEE BENEFIT PLAN", as
defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA and (ii) is maintained, administered or
contributed to by the Company or any affiliate (as defined below)
and covers any director, officer or employee or former director,
officer or employee of the Company or of any affiliate, or under
which the Company or any affiliate has any liability.
"COMPANY INTELLECTUAL PROPERTY RIGHTS" means patents, registered
and material unregistered trademarks and service marks, registered
copyrights, trade names and any applications therefor owned by the
Company or any of its Subsidiaries.
"COMPANY MATERIAL ADVERSE EFFECT"shall mean a material adverse
effect on the condition (financial or otherwise), business, assets
or results of operations of the Company and its Subsidiaries,
taken as a whole, other than changes in general economic
conditions or in the economic conditions affecting the Industry.
"COMPANY MULTIEMPLOYER PLAN"means an Employee Plan that
constitutes a "multiemployer plan" as defined in Section 3(37) or
ERISA.
"COMPANY PROPRIETARY INFORMATION" means documents containing
operating, financial, technical or other information relating to
the Company's evaluation of the transactions contemplated by this
Agreement.
"COMPANY REPRESENTATIVES" shall mean the officers, directors,
employees, accountants, consultants, legal counsel, agents and
other representatives, including environmental engineers, of the
Company.
"CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
agreement between the Company and Shell, dated as of April 15,
1997.
"COURT" shall mean any court, federal, state or local, or
arbitration tribunal.
"ENVIRONMENTAL LAW OR LAWS" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental
Authority pertaining to the protection of the environment, as in
effect at the applicable time and that are applicable to a
specified Person and such Person's Subsidiaries, including the
Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the
Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste
Amendments Act of 1984, as amended, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Hazardous Materials
Transportation Act, as amended, the Oil Pollution Act of 1990
("OPA"), any state laws implementing the foregoing federal laws,
and any state laws pertaining to the handling of oil and gas
exploration and production wastes or the use, maintenance, and
closure of pits and impoundments, and all other environmental
conservation or protection laws. For purposes of the Agreement,
"ENVIRONMENTAL LAWS" shall not include laws primarily related to
the protection of human health and safety and the terms "hazardous
substance" and "releases" have the meanings specified in CERCLA
(but without regard to the exclusions set forth in the definition
of hazardous substance); provided, however, that to the extent
other federal laws or the laws of the state in which the property
is located establish a meaning for "hazardous substance" or
"release" that is broader than that specified in CERCLA, such
broader meaning shall apply, and the term "hazardous substance"
shall include all dehydration and treating wastes, waste (or
spilled) oil, and waste (or spilled) petroleum products, and (to
the extent in excess of background levels) radioactive material,
even if such items are not classified as hazardous substances or
wastes pursuant to CERCLA, or RCRA or the analogous statutes of
any applicable jurisdiction.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" means a national bank or trust company designated
by Shell and the Company prior to the Effective Time to act as
exchange agent in exchanging Company Common Shares for the Merger
Consideration.
"EXPENSES" shall mean all actual, documented and reasonable out-of-pocket
expenses (including all reasonable fees and expenses of
counsel, accountants, investment bankers, experts and consultants
to a party hereto and its affiliates), but excluding general and
administrative costs and overhead, incurred by a party or on its
behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of the
Agreement, and all other matters related to the consummation of
the transactions contemplated thereby.
"FERC" shall mean the Federal Energy Regulatory Commission
including its predecessor, the Federal Power Commission, and any
successors thereto.
"FIXED PRICE CONTRACTS" shall mean any contracts, commitments or
agreements for the purchase or sale of Hydrocarbons (i) having a
remaining term of more than sixty (60) days, wherein the purchase
or sale price thereunder throughout part of the remaining life of
such contract, commitment or agreement is a fixed amount or an
amount that is otherwise reasonably determinable as of the date
hereof pursuant to the terms of such contract, commitment or
agreement, or (ii) which has been hedged with futures contracts or
otherwise; provided, however, that the term Fixed Price Contracts
will not include any contract, commitment or agreement under which
the purchase or sales price throughout the remaining life of the
contract, commitment or agreement is based on a market responsive
reference price for a Hydrocarbon.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state or local
governmental agency or authority (other than a Court).
"HOLDING COMPANY ACT" shall mean the Public Utility Holding
Company Act of 1935, as amended, and the rules and regulations
promulgated thereunder.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"HYDROCARBONS" shall mean crude oil, natural gas, natural gas
liquids and other hydrocarbons produced from crude oil or natural
gas.
"INDUSTRY" shall mean the business of purchasing, gathering,
processing, treating, storing, transporting and marketing natural
gas.
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE OF THE COMPANY" (and any other phrase to substantially
similar effect) means the actual knowledge of any of J.A.
Precourt, J.W. Whalen, R.F. Joyce, P.A. Lannie and F.T.
Whittinghill, and with respect to (i) employee benefit matters,
J.A. Street, (ii) Taxes, J.W. Bracewell and (iii) environmental
matters, B. Salinas, in each case after reasonable inquiry with
the head of the department who is principally responsible for the
subject matter of any warranty given to the Knowledge of the
Company.
"LAW" shall mean all laws, statutes, ordinances, rules and
regulations of the United States, any foreign country, or any
domestic or foreign state, and any political subdivision or agency
thereof, including all decisions of Courts having the effect of
law in each such jurisdiction.
"LCC" shall mean the Office of Conservation, Department of Natural
Resources of the State of Louisiana, and any predecessors or
successors thereto.
"LIEN" shall mean, with respect to any asset, any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind
(including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any lease in
the nature thereof or the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any
jurisdiction, with respect to such an asset.
"MATERIAL" shall mean material to the condition (financial and
other), results of operations or business of a specified Person
and its Subsidiaries, if any, taken as a whole.
"MATERIAL CONTRACT" shall mean, as between any Person (the
"Disclosing Person") or any of its Subsidiaries, on the one hand,
and any other Person other than any other member of the group
consisting of the Disclosing Person and its Subsidiaries, on the
other hand:
(1) Any collective bargaining agreement or other agreement
with any labor union;
(2) Any employment or consulting agreement, contract or
commitment between the Disclosing Person or any of its
Subsidiaries and any employee, officer or director thereof (i)
having more than one year to run from the date hereof, (ii)
providing for an obligation to pay or accrue compensation of
$250,000 or more per annum or (iii) providing for the payment or
accrual of any additional compensation upon a change in control of
the Disclosing Person or any of its subsidiaries or upon any
termination of such employment or consulting relationship
following a change in control of the Disclosing Person or any of
its Subsidiaries;
(3) Any agency or representation agreement with any Person
which is not terminable by the Disclosing Person or one of its
Subsidiaries without penalty upon not more than ninety (90) days'
notice providing for the payments to such person of $250,000 or
more;
(4) Any partnership, joint venture or profit sharing
agreement between the Disclosing Person or its Subsidiaries with
any Person involving aggregate payments in excess of $500,000;
(5) Any agreement, contract, commitment, indenture or
other instrument relating to the borrowing of money in a principal
amount of $500,000 or more or any direct or indirect guarantee of
any obligation of any other Person or Governmental Authority for,
or agreement to service the repayment of, borrowed money in a
principal amount of $500,000 or more, including any agreement or
arrangement (i) relating to the maintenance of compensating money
balances, (ii) with respect to lines of credit or letters of
credit, (iii) relating to the purchase or repurchase obligations
of any other Person or Governmental Authority, (iv) to advance or
supply funds to or to invest in any other Person or Governmental
Authority, (v) to pay for property, products or services of any
other Person or Governmental Authority even if such property,
products or services are not conveyed, delivered or rendered and
(vi) to guarantee any lease or other similar periodic payments to
be made by any other Person or Governmental Authority;
(6) Any lease with annual rental payments aggregating
$500,000 or more that is not terminable without premium or penalty
on ninety (90) days' or less notice;
(7) Any agreement, contract or commitment for the
disposition or acquisition of any investment in any Person if such
investment requires payment of $1 million or more;
(8) Any agreement, contract or commitment to which the
Disclosing Person or any of its Subsidiaries is a party or by
which any of them is bound (i) which relates to the receiving,
storing, compressing, dehydrating, processing, purchasing,
transporting, gathering, exchanging or sale of Hydrocarbons
(either for the account of the Disclosing Person or a subsidiary
thereof) for a term in excess of one year (or that may not be
terminated by the Disclosing Person upon notice of one year or
less) and involving cash payment in excess of $1 million within
any twelve-month period commencing after the date of the
Agreement, or (ii) by which the Disclosing Person or its
Subsidiaries has agreed to park, store, wheel, loan, exchange, or
otherwise deal in energy, Hydrocarbons or other commodities, or to
provide such services to others, or (iii) which is a swap,
exchange or futures contract; or
(9) Any other agreement, contract or commitment which
involves payment or potential payment, pursuant to the terms of
such agreement, contract or commitment, by or to the Disclosing
Person or any of its Subsidiaries of $1 million or more within any
twelve month period commencing after the date of the Agreement.
"NGA" shall mean the Natural Gas Act of 1938, as amended.
"NGPA" shall mean the Natural Gas Policy Act of 1978, as amended.
"ORDER" shall mean any judgment, order or decree of any court,
arbitration tribunal or Governmental Authority, federal, state or
local.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" shall mean any and all permits, licenses, authorizations,
orders, certificates, registrations or other approvals granted by
any federal, state, local or foreign Governmental Authority.
"PERMITTED ENCUMBRANCES" shall mean the following:
(1) Liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in
good faith by appropriate proceedings; provided that, in the
latter case, adequate reserves shall have been set aside with
respect thereto;
(2) all rights, if any, to consent by, required notices
to, filings with, or other actions by any Governmental Authority
in connection with the contribution or the operation of any
assets;
(3) mechanics', repairmen's, employees', contractors',
materialmen's or other similar Liens not filed of record and
similar charges not delinquent or which are filed of record but
are being contested in good faith by appropriate proceedings;
provided that, in the latter case, adequate reserves shall have
been set aside with respect thereto;
(4) Liens in respect of judgments or awards currently
being prosecuted in good faith on an appeal or other proceeding
for review and with respect to which a stay of execution pending
such appeal or such proceeding for review shall have been secured;
provided that adequate reserves shall have been set aside with
respect thereto;
(5) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to,
property or assets; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for
which they are held;
(6) any lien or privilege vested in any lessor, licensor
or permittor for rent or other obligations, so long as the payment
of such rent or the performance of such obligations is not
delinquent; and
(7) any lien imposed in favor of interest owners of
Hydrocarbon production.
"PERSON" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint
venture, association or unincorporated organization, or any other
entity or organization, including a government or political
subdivision or any agency or instrumentality thereof.
"PIPELINE ASSETS" shall mean the pipelines, equipment, other
tangible personal property, Easements and other similar assets and
rights used in connection with natural gas pipeline, gathering,
processing and storage operations.
"REGULATION" shall mean any rule or regulation of any Governmental
Authority having the effect of law.
"RIGHTS PLAN" means the Rights Agreement dated as of November 11,
1994 among the Company and Harris Trust and Savings Bank, as
rights agent.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SUBSIDIARY" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other
persons performing similar functions are directly or indirectly
owned by a Person. Coral shall not be deemed to be a Subsidiary
of either Shell or the Company or their respective Subsidiaries.
"TRC" shall mean the Texas Railroad Commission and any
predecessors and successors thereto.
Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
affiliate 3.13(b)
Closing Date 1.01(b)
Company Recitals
Company 5-1/4% Preferred 1.06
Company 9.96% Preferred 1.02(d)
Company Balance Sheet 3.08
Company Balance Sheet Date 3.08
Company Benefit Arrangements 3.13(d)
Company Common Shares Recitals
Company Disclosure Documents 3.09
Company Pension Plans 3.13(a)
Company Retirement Plans 3.13(b)
Company SEC Reports 3.07(a)
Company Securities 3.05(a)
Company Stockholder Meeting 6.05(b)
Company 10-K 3.06(a)
Company 10-Q 3.07(a)
Covered Employees 6.09
Delaware Law 1.01(a)
Dissenting Shares 1.04
Effective Time 1.01(c)
Holdings Recitals
Merger 1.01(a)
Merger Consideration Recitals
MergerSub Recitals
Merrill Lynch 1.01(f)
Proxy Statement 6.05
Representatives 5.03
SEC 3.07(a)
Shell Recitals
Shell Disclosure Documents 4.05
Sierra Acquisition Recitals
Shell Group Recitals
Shell Representatives 6.06
Special Committee Recitals
Stockholder Approval 8.01(i)
Surviving Corporation 1.01(a)
Tax Returns 3.12
Taxes 3.12
Terminating Breach 8.01(f)
Third-Party Intellectual Property Rights 3.23(b)
Transfer Taxes 1.07
Voting Agreements Recitals
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1, dated as of September 23, 1997 to the Rights Agreement
dated as of November 11, 1994, as amended (the "RIGHTS AGREEMENT") between TEJAS
GAS CORPORATION, a Delaware corporation (the "COMPANY"), and HARRIS TRUST AND
SAVINGS BANK, a national banking association (the "RIGHTS AGENT"). Terms used
herein and not defined herein shall have the meanings assigned to them in the
Merger Agreement (as defined below).
Recitals
A. The Company and the Rights Agent have heretofore executed and
entered into the Rights Agreement.
B. Pursuant to Section 27 of the Rights Agreement, the Company and the
Rights Agent may from time to time amend the Rights Agreement in accordance with
the provisions of Section 27 thereof.
C. The Company, Shell Oil Company, a Delaware corporation ("SHELL"),
Trango Holdings Corporation, a Delaware corporation ("HOLDINGS"), and Tango
Acquisition Corporation, a Delaware corporation ("MERGERSUB"), propose to enter
into a Merger Agreement dated as of the date hereof (the "MERGER AGREEMENT"),
pursuant to which MergerSub would merge with and into the Company.
D. In connection with the Merger Agreement, Shell proposes to enter
into Voting Agreements with certain stockholders of the Company.
E. In connection with the anticipated approval, execution, and delivery
of the Merger Agreement, the Board of Directors of the Company has approved, in
accordance with Section 27 of the Rights Agreement, this Amendment and has
authorized the appropriate officers of the Company to take all appropriate
steps to execute and deliver this Amendment.
F. All acts necessary to make this Amendment a valid agreement
according to its terms have been performed, and the execution and delivery of
this Amendment by the Company and the Rights Agent have been in all respects
authorized by the Company and the Rights Agent.
In consideration of the foregoing premises and mutual agreements set forth
in the Rights Agreement and this Amendment, the parties hereto agree as follows:
1. Amendment of Section 1(a). Section 1(a) of the Rights Agreement is
hereby amended by adding as the final sentence thereto the following:
Notwithstanding anything in this Agreement to the contrary, (a) no
Person shall become an Acquiring Person and no Stock Acquisition
Date shall be deemed to occur, and no Beneficial Ownership of
securities shall be attributed to any Person, as a result of the
execution, performance or consummation of the transactions provided
for by the Merger Agreement dated as of September __, 1997 (the
"MERGER AGREEMENT") among the Company, Shell Oil Company, a Delaware
corporation ("SHELL"), Sierra Acquisition, an entity to be formed by
Shell ("SIERRA ACQUISITION"), Trango Holdings Corporation, a
Delaware corporation ("HOLDINGS") and Tango Acquisition Corporation,
a Delaware corporation ("MERGERSUB") and the Voting Agreements (as
defined in the Merger Agreement and as amended from time to time
with the prior written consent of the Company) in the manner
provided for therein, including without limitation, the consummation
of the Merger (as defined in the Merger Agreement) and (b) Shell and
its Affiliates and Associates shall not be deemed to be Acquiring
Persons for purposes of this Agreement unless they acquire
Beneficial Ownership of 15% or more of the outstanding Common Stock
of the Company.
2. Effectiveness. This Amendment shall be deemed effective as of the
date first herein stated, as if executed by both parties on such date. Except
as amended hereby, the Rights Agreement shall remain in full force and effect
and shall be otherwise unaffected hereby.
3. Miscellaneous. This Amendment to the Rights Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
This Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument. If any
term, provision, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid, illegal, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Rights Agreement to be duly executed as of the date first set forth herein.
Attest: TEJAS GAS CORPORATION
By: By:
Name: P. Anthony Lannie Name: James W. Whalen
Title: Secretary Title: Senior Executive Vice President
Attest: HARRIS TRUST AND SAVINGS
BANK
By: By:
Name: Name:
Title: Title:
James W. Whalen
SHELL OIL COMPANY AGREES TO ACQUIRE TEJAS GAS CORPORATION --
TEJAS COMMON STOCKHOLDERS TO RECEIVE $61.50 PER SHARE
Houston, September 23, 1997 - Tejas Gas Corporation ("Tejas") (NYSE:
TEJ, TEJPR, TEJPRA) and Shell Oil Company ("Shell") announced today that they
have entered into a merger agreement pursuant to which a subsidiary of Shell
will acquire all of the outstanding common stock of Tejas for $61.50 per share
in cash, which, on a fully diluted common stock basis, would represent an
aggregate common stock purchase price of approximately $1.45 billion. In
addition, balance sheet debt and preferred stock of approximately $900 million
will be assumed. Tejas common stock closed today at $50.00.
The Board of Directors of Tejas, acting on the unanimous recommendation of
a special committee of the Board of Directors of Tejas, unanimously approved the
transaction and recommended that stockholders of Tejas approve and adopt the
agreement and the merger. Certain Tejas stockholders and members of Tejas
management, who now hold approximately 19 percent of the outstanding Tejas
Common Stock, have agreed to vote in favor of the transaction. The transaction
is subject to the approval of the Tejas stockholders, applicable regulatory
approvals and certain other conditions.
Following the transaction, Shell s own natural gas midstream business will
be combined with the business of Tejas. Tejas is one of the largest owners and
operators of intrastate natural gas pipelines, processing and storage facilities
in each of the States of Texas, Oklahoma and Louisiana. Shell s natural gas
midstream business consists of offshore and onshore pipelines, gas processing
and natural gas liquids fractionation, transportation and marketing, with
facilities in Texas, Louisiana, Mississippi and the Gulf of Mexico. The
consolidated Tejas and Shell executive and operating team will be led by Tejas
Chief Executive Officer, Jay A. Precourt, and Tejas Chairman of the Board,
Frederic C. Hamilton, both of whom have been with Tejas since it became a
publicly-traded company in 1988. Two Shell Oil Company Executives, Philip J.
Carroll, the President and Chief Executive Officer of Shell Oil Company, and
Jack E. Little, President and Chief Executive Officer, Shell Exploration and
Production Company, will join the Board of the new combined business.
Tejas currently has 20,578,467 issued and outstanding shares of Common
Stock. Tejas also currently has outstanding 1,300,000 Depositary Shares
representing its 5-1/4% Convertible Preferred Stock; the Depositary Shares are
currently convertible into an aggregate of approximately 1.53 million shares of
Tejas Common Stock at a conversion price of approximately $42.42 per share of
Tejas Common Stock. The merger agreement requires Tejas to redeem the 5-1/4%
Convertible Preferred Stock in accordance with its terms prior to the record
date for the Tejas stockholders meeting. Tejas 2,000,000 Depositary Shares
representing its 9.96% Cumulative Preferred Stock will remain outstanding after
the merger.
Tejas expects to mail a proxy statement describing the transaction to all
stockholders of Tejas upon completion of Securities and Exchange Commission
review. The transaction is expected to close by the end of the year.
Merrill Lynch & Co. served as financial advisor to the special committee
of the Board of Directors of Tejas and Goldman, Sachs & Co. advised Shell in
connection with this transaction.
Contacts: Tejas Gas Corporation
Jim Whalen (713) 951-3587
Debbie Dawson (713) 951-3511
Shell Oil Company
Kitty Borah (713) 241-4544
Stacy Hutchinson (713) 241-4544
