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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this 1st
day of August, 2000, by and among:
TEXONA PETROLEUM CORPORATION ("TEXONA"), a Delaware corporation;
TOREADOR RESOURCES CORPORATION ("TRC"), a Delaware corporation; and
TOREADOR ACQUISITION CORPORATION ("TAC"), a Delaware corporation.
The respective Boards of Directors of TEXONA, TRC and TAC have determined
that the merger of TEXONA with and into TAC is desirable and in the best
interests of their respective stockholders, and such Boards of Directors and all
of the stockholders of TEXONA have approved such merger. For federal income tax
purposes, it is intended that the merger shall qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code. It is the
intent of the parties that this Agreement and the Merger contemplated hereby be
treated as effective as of August 1, 2000, for accounting, tax and all other
purposes.
NOW, THEREFORE, for the mutual covenants, promises and agreements herein
contained and the benefits to be derived by all of the parties hereto, the
parties hereto have COVENANTED and AGREED, and by these presents do COVENANT and
AGREE, as follows:
ARTICLE I
DEFINITIONS
Unless otherwise specifically stated in the text of this Agreement, the
following terms shall have the following meanings:
"Affiliate" shall mean, in relation to any Person (the "First Party"), any
other Person (a) that is directly or indirectly controlled by the First Party,
or (b) that directly or indirectly controls the First Party, or (c) that is,
directly or indirectly, Controlled by a Person that also, directly or
indirectly, controls the First Party.
"Additional Amount" has the meaning ascribed thereto in Section 11.5.
"Agreement" means this Agreement and Plan of Merger between TRC, TAC and
TEXONA, including all exhibits hereto.
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"Base Consideration" means the amount obtained by multiplying the
arithmetic average of the closing sales prices of a share of TRC Common Stock,
as reported by NASDAQ Automated Quotations System, for the ten consecutive
trading days ending at least five trading days prior to the Effective Time, by
90,000.
"Benefit Plan" shall mean any collective bargaining agreement or any bonus,
Pension Plan, Welfare Plan, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical dependent care, cafeteria, employee assistance, scholarship program or
other plan, arrangement or understanding (whether or not legally binding)
providing benefits.
"Certificate" shall have the meaning ascribed thereto in Section 3.2(a).
"Certificate of Merger" shall have the meaning ascribed thereto in Section
2.1.
"Closing" has the meaning ascribed thereto in Section 9.1.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal tax laws.
"Constituent Corporations" has the meaning ascribed thereto in Section 2.2.
"Contracts" has the meaning ascribed thereto in Section 4.10.
"DGCL" means the General Corporation Law of Delaware.
"Damages" shall mean any and all liabilities, losses, damages, demands,
assessments, claims, costs and expenses (including interest, awards, judgments,
penalties, settlements, fines, costs of remediation, diminutions in value, costs
and expenses incurred in connection with investigating and defending any claims
or causes of action (including, without limitation, attorneys' fees and expenses
calculated on a solicitor and client basis and all fees and expenses of
consultants and other professionals)).
"Debt" shall mean (i) the principal amount of all Debt Obligations, (ii)
the carrying value of all capital leases, and (iii) all accrued liabilities,
including deferred income taxes, if any.
"Debt Obligations" shall mean any contract, agreement, indenture, note or
other instrument relating to the borrowing of money or any guarantee or other
contingent liability in respect of any indebtedness for borrowed money or
obligation of any Person (other than the endorsement of negotiable instruments
for deposit or collection in the ordinary course of business) and shall
specifically include any shareholder loans.
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"Deferred Consideration" means the amount obtained by multiplying the
arithmetic average of the closing sales prices of a share of TRC Common Stock,
as reported by NASDAQ Automated Quotations System, for the ten consecutive
trading days ending at least five trading days prior to the Deferred
Consideration Date, by the number of TRC Deferred Shares.
"Deferred Consideration Date" means the date (which is expected to be prior
to June 1, 2001) on which the Deferred Consideration is issued to SHAREHOLDERS.
"Effective Time" has the meaning ascribed thereto in Section 2.1.
"Environmental Condition" means any pollution, contamination, degradation,
damage or injury caused by, related to or arising from the generation, handling,
use, treatment, storage, transportation, disposal, discharge, release or
emission of any Hazardous Materials.
"Environmental Laws" shall mean all federal, state, provincial or municipal
laws, rules, regulations, statutes, ordinances, or orders of any Governmental
Entity relating to (a) the control of any potential pollutant or protection of
the air, water, or land, (b) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal or transportation and (c) exposure to
hazardous, toxic or other substances alleged to be harmful. The term
"Environmental Laws" shall also include all state, local and municipal laws,
rules, regulations, statutes, ordinances and orders dealing with the same
subject matter or promulgated by any governmental or quasi-governmental agency
thereunder or to carry out the purposes of any federal, state, local and
municipal law.
"Environmental Liabilities" shall mean any and all Damages (including
remediation, removal, response, abatement, clean-up, investigative and/or
monitoring costs and any other related costs and expenses) incurred or imposed
(a) pursuant to any agreement, order, notice, requirement, responsibility or
directive (including directives embodied in Environmental Laws), injunction,
judgment or similar documents (including settlements) arising out of, in
connection with or under Environmental Laws, or (b) pursuant to any claim by a
Governmental Entity or other third Person or entity for personal injury,
property damage, damage to natural resources, remediation or similar costs or
expenses incurred or asserted by such entity or person pursuant to common law or
statute and arising out of or in connection with a release, as such term is
defined in Environmental Laws, of Hazardous Materials.
"Environmental Permit" shall mean any permit, license, approval,
registration, identification number or other authorization with respect to
TEXONA under any applicable law, regulation or other requirement of the United
States or of any state, province, municipality or other subdivision thereof
relating to the control of any pollutant or protection of health or the
environment, including laws, regulations or other requirements relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or hazardous or toxic materials or wastes into ambient air, surface
water, groundwater or land, or otherwise relating to the manufacture,
processing,
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distribution, use, treatment, storage, disposal, transport, or handling of
chemical substances, pollutants, contaminants or hazardous or toxic materials or
wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exhibit" shall refer to the Exhibits to this Agreement, unless otherwise
stated, and an Exhibit may be attached to the Agreement or set forth in a
separate document denoted as an Exhibit to this Agreement.
"Financial Statements" has the meaning stated in Section 4.4.
"Governmental Entity" shall mean any and all foreign, federal, state or
local governments, governmental institutions, public authorities and
governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and existing.
"Governmental Requirement" shall mean any and all laws (including, but not
limited to, applicable common law principles), statutes, ordinances, codes,
rules, regulations, interpretations, guidelines, directions, orders, judgments,
writs, injunctions, decrees, decisions or similar items or pronouncements,
promulgated, issued, passed or set forth by any Governmental Entity.
"Hazardous Material" shall mean (a) any petroleum or petroleum products,
(b) radioactive materials, urea formaldehyde, asbestos and PCBs and (c) any
other chemical, substance or waste that is regulated by any Governmental Entity
under any Environmental Law.
"Indemnity Claim" has the meaning ascribed thereto in Section 13.6.
"Material Adverse Effect" shall mean a single event, occurrence or fact
that (together with all other events, occurrences and facts that could
reasonably be expected to result in a loss to TEXONA) would have, or might
reasonably be expected to have, a material adverse effect on the assets,
business, operations, prospects or financial condition of TEXONA, or that would
constitute a criminal violation of law involving a felony or indictable offense.
"Merger" has the meaning ascribed thereto in the recitals to this
Agreement.
"Merger Consideration" means the TRC Initial Shares and the TRC Deferred
Shares and the right to receive the TRC Deferred Shares.
"Merger Tax" has the meaning ascribed thereto in Section 11.5.
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"Net Equity" means the total assets less the total liabilities of TEXONA,
calculated in accordance with the historical accounting of TEXONA.
"Ordinary Course of Business" shall mean the operation of TEXONA's business
in the ordinary course consistent with past practices.
"PBGC" has the meaning ascribed thereto in Section 4.9.
"Pension Plans" has the meaning ascribed thereto in Section 4.9.
"Person" shall mean any natural person, any Governmental Entity and any
entity the separate existence of which is recognized by any Governmental Entity
or Governmental Requirement, including, but not limited to, corporations,
partnerships, limited liability companies, joint ventures, joint stock
companies, trusts, estates, companies and associations, whether organized for
profit or otherwise.
"Post-Closing Period" shall mean any period that begins after the Closing
Date and, with respect to any period that begins before the Closing Date and
ends after the Closing Date, the portion of that period beginning after the
Closing Date.
"Pre-Closing Period" shall mean any period that ends on or prior to the
Closing Date and, with respect to any period that begins before the Closing Date
and ends after the Closing Date, the portion of that period ending on the
Closing Date.
"Proportionate Share" in respect of any SHAREHOLDER shall mean a fraction,
the numerator of which shall be the total number of shares of TEXONA Common
Stock held by such SHAREHOLDER immediately prior to the Merger and the
denominator of which is the total number of issued and outstanding shares of
TEXONA Common Stock immediately prior to the Merger.
"Reference Balance Sheet" has the meaning ascribed thereto in Section 4.4.
"Securities Act" has the meaning ascribed in Section 4.30.
"SHAREHOLDER" shall mean the registered holder as of the date hereof of
shares of TEXONA Common Stock, and the plural of such term shall mean the
aggregate of all of such registered holders.
"Shares" shall mean all of the issued and outstanding shares of capital
stock of TEXONA.
"Surviving Corporation" has the meaning ascribed thereto in Section 2.2.
"Taxes" shall mean all federal, state, local, foreign and other taxes,
assessments or duties, including, but not limited to, all income, gross
receipts, ad valorem, sales, use, franchise,
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transfer, profits, value added, withholding, payroll, employment, excise,
estimated severance, property, windfall profits and other taxes, assessments or
duties of any kind whatsoever, imposed or collected by any Governmental Entity
or pursuant to any Governmental Requirement, together with any interest,
penalty, addition to tax, fine or other additional amounts imposed thereon or
related thereto, and the term "Tax" means any one of the foregoing items.
"Tax Returns" shall mean all returns (including information returns),
declarations, reports, statements and other documents of, relating to, or
required to be filed in respect of, any and all Taxes, whether or not based in
whole or in part on net income (including, but not limited to, the Texas
franchise tax), and the term "Tax Return" shall mean any one of the foregoing
Tax Returns.
"TEXONA Common Stock" shall have the meaning ascribed thereto in Section
3.1.
"TRC Common Stock" means the common stock, $.15625 par value, of TRC.
"TRC Deferred Shares" means the aggregate number of shares obtained by
dividing the Base Consideration by the arithmetic average of the Closing Prices
(as defined below) of a share of TRC Common Stock for the ten consecutive
trading days ending five trading days prior to the Deferred Consideration Date
and rounding such number of shares to the nearest whole number; provided,
however, that the TRC Deferred Shares shall in no event be less than 90,000 (the
"Floor") and no greater than 180,000 (the "Ceiling"). The TRC Deferred Shares
are not negotiable or assignable until the Deferred Consideration Date, except
by operation of law. The "Closing Price" shall be the closing sale price of a
share of TRC Common Stock, as reported by NASDAQ Automated Quotations System.
(A) The number of TRC Deferred Shares issuable and the Floor and Ceiling
numbers shall be subject to adjustment from time to time, as follows:
(1) If TRC shall at any time pay a dividend on its TRC Common Stock in
shares of TRC Common Stock (including, if applicable, shares of TRC Common Stock
held by TRC in treasury or by a subsidiary), subdivide its outstanding shares of
TRC Common Stock into a larger number of shares or combine its outstanding
shares of TRC Common Stock into a smaller number of shares or otherwise effect a
reclassification or recapitalization of the TRC Common Stock, then in each such
case the number of TRC Deferred Shares thereafter issuable and the Floor and
Ceiling numbers shall be adjusted to be the number of shares of TRC Common Stock
which the holder would have held after the occurrence of any of the events
described above had such TRC Deferred Shares been issued in full immediately
prior to the occurrence of such event. An adjustment made pursuant to this
paragraph (1) shall become effective retroactively to the related record date in
the case of a dividend and shall become effective on the related effective date
in the case of a subdivision, combination, reclassification or recapitalization.
(2) Except with respect to Permitted Issuances (as defined below), if TRC
or a subsidiary shall at any time issue or sell shares of TRC Common Stock at a
purchase price per share
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of TRC Common Stock (the value of any consideration, if other than cash, to be
determined in good faith by the Board of Directors) less than the arithmetic
average of the Closing Prices of a share of TRC Common Stock for the ten
consecutive trading days ending five trading days prior to the date TRC or such
subsidiary agrees to the issuance or sale (for the purpose of this paragraph
(2), the "Adjustment Date"), then in each such case, the number of TRC Deferred
Shares thereafter issuable and the Floor and Ceiling numbers shall be determined
by multiplying such numbers immediately preceding such Adjustment Date by a
fraction, the numerator of which shall be the sum of the number of shares of TRC
Common Stock outstanding immediately before issuance or sale and the number of
additional shares of TRC Common Stock so issued or sold, and the denominator of
which shall be the sum of the number of shares of TRC Common Stock outstanding
immediately before such issuance or sale and the number of shares of TRC Common
Stock which the aggregate offering price of the total number of shares so
offered would purchase at such arithmetic average of such Closing Prices. For
the purposes of this paragraph (2), the number of shares of TRC Common Stock at
any time outstanding shall not include shares held in the treasury of TRC or by
a subsidiary.
(3) If TRC or a subsidiary shall at any time issue or sell Derivative
Securities (as defined below) providing for the purchase of shares of TRC Common
Stock upon the conversion, exchange or exercise thereof at a price per share of
TRC Common Stock (taking into account any consideration received by TRC upon the
issuance or sale of such Derivative Securities and any additional consideration
to be received upon the conversion, exchange or exercise thereof, the value of
such consideration, if other than cash, to be determined in good faith by the
Board of Directors (the "Aggregate Derivative Consideration")) less than the
Closing Price on the date TRC or such subsidiary agrees to the issuance or sale
(for the purpose of this paragraph (3), the "Adjustment Date"), then in each
such case, the number of TRC Deferred Shares thereafter issuable and the Floor
and Ceiling numbers after such Adjustment Date shall be determined by
multiplying such numbers on the date immediately preceding such Adjustment Date
by a fraction, the numerator of which shall be the sum of the number of shares
of TRC Common Stock outstanding on such Adjustment Date and the number of
additional shares of TRC Common Stock so offered for subscription or purchase
upon the conversion, exchange or exercise of such Derivative Securities, and the
denominator of which shall be the sum of the number of shares of TRC Common
Stock outstanding on such Adjustment Date and the number of shares of TRC Common
Stock which the Aggregate Derivative Consideration for the total number of
shares so offered would purchase at the Closing Price. Such adjustment shall be
made whenever any such Derivative Securities are issued, and shall become
effective on the date of issuance retroactive to the Adjustment Date. If all the
shares of TRC Common Stock so offered for subscription or purchase are not
delivered upon the final conversion, exchange or exercise of such Derivative
Securities, then, upon the final conversion, exchange or exercise of such
Derivative Securities, or the expiration, cancellation or other termination
thereof, the number of TRC Deferred Shares issuable and the Floor and Ceiling
numbers shall thereafter be readjusted to the numbers which would have been in
effect had the numerator and the denominator of the foregoing fraction and the
resulting adjustment been made based upon the number of shares of TRC Common
Stock actually delivered upon the conversion, exchange or exercise of such
Derivative Securities, or the expiration, cancellation or other termination
thereof rather than upon the number of shares of TRC Common Stock so offered for
subscription or purchase. If the purchase
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price provided for in any Derivative Securities, the additional consideration,
if any, payable upon the conversion, exchange or exercise of any Derivative
Securities or the rate at which any Derivative Securities are convertible into
or exchangeable or convertible into TRC Common Stock shall change at any time
(including, without limitation, at the time of or after such conversion,
exchange or exercise), the number of TRC Deferred Shares issuable and the Floor
and Ceiling numbers at the time of such change shall be readjusted to the
numbers which would have been in effect at such time had such Derivative
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, on the
related Adjustment Date, and such readjustment shall become effective on the
date of such change retroactive to the Adjustment Date; PROVIDED, that no such
readjustment shall have the effect of decreasing the number of TRC Deferred
Shares issuable and the Floor and Ceiling numbers by an amount in excess of the
amount of the adjustment initially made with respect to the issuance or sale of
the Derivative Securities. For the purposes of this paragraph (3), the number of
shares of TRC Common Stock at any time outstanding shall not include shares held
in the treasury of TRC or by a subsidiary.
(4) If TRC shall at any time declare or pay a dividend or other
distribution on its TRC Common Stock other than (x) a stock dividend payable
solely in shares of TRC Common Stock or (y) a cash dividend paid out of current
earnings (the value of any such dividend or other distribution, if other than
cash, to be determined in good faith by the Board of Directors), then in each
such case, the number of TRC Deferred Shares thereafter issuable and the Floor
and Ceiling numbers after the declaration date therefor (for the purpose of this
paragraph (4), the "Adjustment Date") shall be determined by multiplying the
number of TRC Deferred Shares issuable and the Floor and Ceiling numbers on the
date immediately preceding such Adjustment Date by a fraction, the numerator of
which shall be the sum of the number of shares of TRC Common Stock outstanding
on such Adjustment Date and the number of additional shares of TRC Common Stock
which the aggregate value of such dividend or distribution would purchase at
such price and the denominator of which shall be the sum of the number of shares
of TRC Common Stock outstanding on such Adjustment Date. For the purposes of
this paragraph (4), the number of shares of TRC Common Stock at any time
outstanding shall not include shares held in the treasury of TRC or by a
subsidiary.
(5) In case of any capital reorganization or any reclassification (other
than a change in par value) of the capital stock of TRC, or of any exchange or
conversion of the TRC Common Stock for or into securities of another
corporation, or in case of the consolidation or merger of TRC with or into any
other person (other than a merger which does not result in reclassification,
conversion, exchange or cancellation of outstanding shares of TRC Common Stock)
or in case of any sale or conveyance of all or substantially all of the assets
of TRC, the person formed by such consolidation or resulting from such capital
reorganization, reclassification or merger or which acquires such assets, as the
case may be, shall make provision such that the TRC Deferred Shares shall
thereafter be issued as the kind and amount of shares of stock, other
securities, cash and other property receivable upon such capital reorganization,
reclassification of capital stock, consolidation, merger, sale or conveyance, as
the case may be, by a holder of the shares of TRC Common Stock equal to the
number of TRC Deferred Shares issuable immediately prior to the effective date
of such capital reorganization, reclassification of capital stock,
consolidation, merger, sale or conveyance,
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assuming (1) such holder of TRC Common Stock is not a person with which TRC
consolidated or into which TRC merged or which merged into TRC or to which such
sale or transfer was made as the case may be ("Constituent Entity"), or an
affiliate of a Constituent Entity, and (2) such person failed to exercise his
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such capital reorganization, reclassification of
capital stock, consolidation, merger, sale or conveyance and, in any case
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to rights and
interests thereafter of the holder, to the end that the provisions set forth
herein (including the specified changes in and other adjustments of the number
of TRC Deferred Shares issuable and the Floor and Ceiling numbers) shall
thereafter be applicable, as near as reasonably may be, in relating to any
shares of stock or other securities or other property thereafter deliverable
with respect to the TRC Deferred Shares.
(6) For the purposes of this Agreement:
(X) "DERIVATIVE SECURITIES" means securities convertible into or
exchangeable or convertible into shares of TRC Common Stock,
rights or warrants to subscribe for or purchase shares of TRC
Common Stock, options for the purchase of, or calls, commitments
or other claims of any character relating to, shares of TRC
Common Stock or any securities convertible into or exchangeable
for any of the foregoing; and
(Y) "PERMITTED ISSUANCES" means the issuance of shares of TRC
Common Stock after the date hereof (x) pursuant to the exercise
of options issued pursuant to employee benefit plans and (y)
pursuant to the exercise or conversion of options, warrants or
convertible securities existing on the date hereof and reported
in TRC's reports made pursuant to the Securities Act of 1934.
(7) If any shares of TRC Common Stock or Derivative Securities are issued
or sold or deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the net amount received by TRC therefor.
In case any shares of TRC Common Stock or Derivative Securities are issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by TRC shall be the fair value of such consideration, except
where such consideration consists of marketable securities, in which case the
amount of consideration received by TRC shall be the market price thereof as of
the date of receipt. In case any shares of TRC Common Stock or Derivative
Securities are issued to the owners of the non-surviving entity in connection
with any merger or other business combination in which TRC is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such shares of TRC Common Stock or Derivative Securities,
as the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by TRC and the holders of
rights to more than 50% of the TRC Deferred Shares. If such parties are unable
to reach agreement within a reasonable period
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of time, such fair value shall be determined by an appraiser jointly selected by
TRC and such holders, whose determination shall be final and binding on TRC and
the holders. The fees and expenses of such appraiser shall be paid by TRC.
(8) If TRC takes a record of the holders of TRC Common Stock for the
purpose of entitling them (A) to receive a dividend or other distribution on its
TRC Common Stock or (B) to subscribe for or purchase shares of TRC Common Stock
or Derivative Securities, then such record date shall be deemed to be the date
of the payment or distribution of such dividend or other distribution or the
date of issuance and sale of any shares of TRC Common Stock deemed to have been
issued or sold in connection thereto.
(9) All calculations under this definition of TRC Deferred Shares shall be
made to the nearest share of TRC Common Stock (with one-half being rounded
upward).
(10) If any event occurs of the type contemplated by the provisions of this
definition of TRC Deferred Shares but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then TRC's
Board of Directors shall make an appropriate adjustment in the number of TRC
Deferred Shares issuable and the Floor and Ceiling amounts so as to protect the
rights of the holders of rights to TRC Deferred Shares.
(11) For the purpose of this definition of TRC Deferred Shares, the term
"Shares of TRC Common Stock" means (W) the class of stock designated as the TRC
Common Stock of TRC at the date hereof or (X) any other class of stock resulting
from successive changes or reclassification of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to paragraphs (1) through (4), inclusive, above, the holders of rights
to TRC Deferred Shares shall become entitled to receive any shares of TRC other
than shares of TRC Common Stock, thereafter the number of such other shares so
receivable shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
TRC Deferred Shares contained in paragraphs (1) through (4), inclusive, above,
and the provisions of the definition of TRC Deferred Shares, shall apply on like
terms to any such other shares.
(12) Notwithstanding anything herein to the contrary, there shall be no
adjustment in the number of TRC Deferred Shares in respect of Permitted
Issuances.
(13) In case of any consolidation or merger of TRC with or into another
entity (whether or not TRC is the surviving entity) or in case of any sale,
transfer or lease of all or substantially all of the assets of TRC, TRC or such
successor or purchasing entity, as the case may be, shall execute with the
holders of shares of rights to TRC Deferred Shares an agreement that such
holders shall have the right thereafter to receive the kind and amount of shares
and other securities, cash and property that such holders would have owned or
would have been entitled to receive after
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the happening of such consolidation, merger, sale, transfer, lease or conveyance
had the TRC Deferred Shares been issued immediately prior to such action. Such
agreement shall provide for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for above. The provisions of this
paragraph (13) shall similarly apply to successive consolidations, mergers,
sales or conveyances.
(B) Whenever the number of TRC Deferred Shares issuable is adjusted as
herein provided, TRC shall promptly mail by first class mail, postage prepaid,
to each holder of shares of rights to TRC Deferred Shares a certificate provided
by, at the discretion of such holder, an officer of TRC or a firm of independent
public accountants selected by the Board of Directors of TRC (who may be the
regular accountants employed by TRC) setting forth the number of TRC Deferred
Shares issuable and the Floor and Ceiling numbers after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made.
"TRC Indemnified Parties" has the meaning ascribed thereto in Section 13.1.
"TRC Initial Shares" means One Million Twenty-Five Thousand (1,025,000) of
the TRC Shares.
"TRC Shares" means the TRC Initial Shares and the TRC Deferred Shares, when
and if issued.
ARTICLE II
THE MERGER
Section 2.1 The Merger; Effective Time of the Merger. Upon the terms and
conditions of this Agreement and in accordance with the DGCL, TEXONA shall be
merged with and into TAC at the Effective Time. The Merger shall become
effective immediately when a certificate of merger (the "Certificate of
Merger"), prepared and executed in accordance with the relevant provisions of
the DGCL, are filed with the Secretary of State of the State of Delaware or, if
agreed to by the parties, at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time"). The filing of the Certificate of
Merger shall be made as soon as practicable on or after the Closing.
Section 2.2 Effects of the Merger.
(a) At the Effective Time: (i) TEXONA shall be merged with and into TAC,
the separate existence of TEXONA shall cease and TAC shall continue as the
surviving corporation (TAC and TEXONA are sometimes referred to herein as the
"Constituent Corporations" and TAC is sometimes referred to herein as the
"Surviving Corporation"); (ii) the Certificate of Incorporation
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of TAC shall be the Certificate of Incorporation of the Surviving Corporation;
and (iii) the Bylaws of TAC as in effect immediately prior to the Effective Time
shall be the Bylaws of the Surviving Corporation.
(b) The directors and officers of TAC at the Effective Time shall, from and
after the Effective Time, be the directors and officers of the Surviving
Corporation and shall serve until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
(c) At and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations; and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired; and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and liabilities had been
incurred by it.
Section 2.3 Tax-Free Reorganization. None of the parties, nor their
affiliates, shall take any action that would prevent the Merger from qualifying
as a tax-free reorganization under the provisions of Section 368(a) of the Code.
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ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
common stock of TEXONA ("TEXONA Common Stock") or capital stock of TAC:
(a) Cancellation of Treasury Stock. Each share of TEXONA Common Stock and
all other shares of capital stock of TEXONA that are owned by TEXONA as treasury
stock shall be canceled and retired and shall cease to exist and no stock of TRC
or other consideration shall be delivered or deliverable in exchange therefor
other than as provided in Section 3.1(b) hereof.
(b) Consideration for TEXONA Common Stock. Subject to the provisions of
Section 3.1(c), each share of TEXONA Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in
accordance with Section 3.1(a)) shall be converted into the right to receive (i)
at the Closing, a Proportionate Share of the TRC Initial Shares, and (ii) on the
Deferred Consideration Date, a Proportionate Share of the TRC Deferred Shares,
subject to approval by a majority vote of TRC shareholders. In the event the TRC
Deferred Shares are not issued prior to or on June 1, 2001, TRC shall pay a
proportionate penalty to the Shareholders in the amount of $150,000 for each
successive calendar month thereafter until such time that such shares are
issued. TRC will use all reasonable efforts to obtain approval by a majority
vote of TRC shareholders to issue the TRC Deferred Shares on or prior to June 1,
2001.
(c) Conversion and Cancellation of TEXONA Common Stock. All shares of
TEXONA Common Stock, when converted into the TRC Initial Shares as provided in
Section 3.1(b), shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a Certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive on the dates specified in Section 3.1(b)
such holder's Proportionate Share of the Merger Consideration upon the surrender
of such certificate in accordance with Section 3.2, without interest.
Section 3.2 Exchange of Certificates.
(a) Exchange Procedure. Immediately after the Effective Time and upon
surrender of a certificate representing outstanding shares of TEXONA Common
Stock (a "Certificate") for cancellation to TRC and TAC, together with any other
documents reasonably required by TRC, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration that such
holder has the right to receive pursuant to the provisions of Section 3.1, and
the Certificate so surrendered shall forthwith be canceled. Until surrendered as
contemplated by this Section 3.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by Section 3.1. Upon delivery
of the Certificates for cancellation, TRC shall as soon as practicable deliver
to such
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SHAREHOLDER the Merger Consideration that such SHAREHOLDER is entitled to
receive as of such date.
(b) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to TRC Common Stock declared or made after the
Effective Time with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the right to receive
shares of TRC Common Stock represented thereby until the holder of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder thereof, without interest: (i) at the time of such surrender,
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such shares of TRC Common Stock;
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of TRC Common Stock.
(c) No Further Ownership Rights in TEXONA Common Stock. All TRC Shares to
be issued upon the surrender for exchange of shares of TEXONA Common Stock when
issued in accordance with the terms hereof shall be deemed to have been issued,
paid or delivered in full satisfaction of all rights pertaining to such shares
of TEXONA Common Stock, and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of TEXONA of the shares of
TEXONA Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to TEXONA for any
reason, they shall be canceled and exchanged as provided in this Article III.
(d) No Fractional Shares. No certificates or scrip representing fractional
shares of TRC Common Stock shall be issued upon the surrender for exchange of
Certificates pursuant to this Article III and all fractional shares shall be
rounded to the nearest whole share of TRC Common Stock.
(e) No Liability. Neither TRC nor TAC shall be liable to any holder of
shares of TEXONA Common Stock for such shares (or dividends or distributions
with respect thereto) or any cash amounts to the extent such amount or TRC
Common Stock is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any amounts remaining unclaimed by
holders of any such shares two years after the Effective Time (or such earlier
date immediately prior to the time at which such amounts would otherwise escheat
to or become property of any governmental entity) shall, to the extent permitted
by applicable law, become the property of TRC free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
(f) Lost Share Certificates. If a holder shall have lost or had destroyed
such holder's Certificate, such holder may be entitled to receive the Merger
Consideration and other payments provided for hereunder subject to such holder
providing TAC and TRC with a lost certificate affidavit and indemnification
acceptable to TRC.
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(g) Non-Assignability. After the Effective Time, no SHAREHOLDER may assign
the right to receive the Deferred Consideration without the written consent of
TRC.
Section 3.3 Stock Option Plan. At the Effective Time, the existing options
to acquire shares of TEXONA Common Stock pursuant to the TEXONA Stock Option
Plan will be deemed to be converted into options issued and fully exercisable
pursuant to the TRC Amended and Restated 1990 Stock Option Plan to acquire an
aggregate of 143,040 shares of TRC Common Stock at a price of $3.12 for each
share of TRC Common Stock. Such options shall be immediately exercisable. Each
person identified on Schedule 3.3 to the Disclosure Schedule shall hold such an
option to so acquire that number of shares of TRC Common Stock which is the
product of multiplying the aggregate of 143,040 shares by a fraction, the
denominator of which is 44,700 and the numerator of which is the number of
shares set forth opposite the name of such person on Schedule 3.3 to the
Disclosure Schedule. Any options issuable pursuant hereto shall have the same or
substantially similar antidilution and other protections as currently exist
under the TEXONA Stock Option Plan.
Section 3.4 SHAREHOLDER Representative.
(a) In order to efficiently administer the transactions contemplated
hereby, including but not limited to the waiver of any condition to the
obligations of the TEXONA or its SHAREHOLDERS to consummate the transactions
contemplated hereby, the SHAREHOLDERS hereby designate Earl E. Rossman, Jr., as
their SHAREHOLDER Representative.
(b) The SHAREHOLDERS hereby authorize the SHAREHOLDER Representative (i) to
take any and all action necessary in connection with the waiver of any condition
to the obligations of the SHAREHOLDERS to consummate the transactions
contemplated hereby, including, without limitation, pursuant to this Agreement
and the Registration Rights Agreement, (ii) to give and receive all notices
given under this Agreement and the Registration Rights Agreement, and (iii) to
take any and all additional action as is contemplated to be taken by or on
behalf of the SHAREHOLDERS by the terms of this Agreement or the Registration
Rights Agreement.
(c) In the event that the SHAREHOLDER Representative dies, becomes unable
to perform his responsibilities hereunder or resigns from such position, the
persons constituting the Board of Directors of TEXONA immediately prior to the
Effective Time shall select another representative to fill such vacancy and such
substituted representative shall be deemed to be the SHAREHOLDER Representative
for all purposes of this Agreement and the documents delivered pursuant hereto.
(d) All decisions and actions by the SHAREHOLDER Representative shall be
binding upon all of the SHAREHOLDERS and no SHAREHOLDER shall have the right to
object, dissent, protest or otherwise contest the same.
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(e) By his, her or its approval of the Merger and this Agreement as
contemplated pursuant to the terms hereof and/or execution of that certain
Subscription and Release Agreement, each SHAREHOLDER will agree that:
(i) all actions, decisions and instructions of the SHAREHOLDER
Representative shall be conclusive and binding upon all of the SHAREHOLDERS
and no SHAREHOLDER shall have any cause of action against the SHAREHOLDER
Representative for any action taken, decision made or instruction given by
the SHAREHOLDER Representative under this Agreement, except for fraud or
willful breach of this Agreement by the SHAREHOLDER Representative;
(ii) the provisions of this Section 3.4 are independent and severable,
are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any SHAREHOLDER may have in
connection with the transactions contemplated by this Agreement;
(iii) remedies available at law for any breach of the provisions of
this Section 3.4 are inadequate; therefore, TAC, SHAREHOLDER Representative
and TEXONA shall be entitled to temporary and permanent injunctive relief
without the necessity of proving damages if either the TAC, TEXONA and/or
the Company brings an action to enforce the provisions of this Section 3.4;
and
(iv) The provisions of this Section 3.4 shall be binding upon the
executors, heirs, legal representatives, personal representatives,
successor trustees, and successors of each SHAREHOLDER, and any references
in this Agreement to a SHAREHOLDER or the SHAREHOLDER shall mean and
include the successors to the SHAREHOLDER's rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution
or otherwise.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TEXONA
TEXONA represents and warrants to TRC as follows:
Section 4.1 Incorporation; Authority. TEXONA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly authorized, qualified and licensed under all applicable
Governmental Requirements to carry on its business in the places and in the
manner as now conducted. Schedule 4.1 of the Disclosure Schedule sets forth a
complete list of all jurisdictions in which TEXONA owns or leases properties,
has employees or conducts business, and a complete list of all jurisdictions in
which TEXONA is qualified as a foreign corporation. TEXONA is duly qualified or
licensed to do business and in good standing as a foreign corporation in every
jurisdiction (which jurisdictions are listed in Schedule 4.1 of the Disclosure
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Schedule) in which the conduct of its business or the ownership or leasing of
its assets require it to be so qualified or licensed, except where the failure
to be so qualified or licensed would not have a Material Adverse Effect. TEXONA
has the corporate power and authority to carry on its business as it is now
being conducted and to own and operate its assets, properties and business. The
copies of the Certificate of Incorporation of TEXONA and all amendments thereto
to date (certified by the Secretary of the State of Delaware) and of the bylaws
of TEXONA as amended to date (certified by its Secretary), each of which are
included in Section 4.1 of the Disclosure Schedule, are true, complete and
correct.
Section 4.2 Share Capital. The authorized capital stock of TEXONA consists
of 4,000,000 shares of common stock, $0.01 par value, of which 348,314 shares
are issued and 348,314 shares are outstanding as of the date of this Agreement
and 1,000,000 shares of preferred stock, $1.00 par value, none of which are
issued or outstanding as of the date of this Agreement. All of such issued and
outstanding shares are validly issued and outstanding, fully paid and
nonassessable or will be validly issued, fully paid and non-assessable on the
Closing Date. Except as set forth on Schedule 4.2 of the Disclosure Schedule,
there are no outstanding subscriptions, options, warrants, calls, commitments,
obligations or agreements relating to any of the authorized or outstanding
capital stock of TEXONA. The record owners of all of the Shares and the number
of Shares owned by each of them are set forth on Schedule 4.2 of the Disclosure
Schedule.
Section 4.3 Subsidiaries. TEXONA does not, directly or indirectly, own or
control any capital stock, equity interest, or have any proprietary interest in,
any Person, nor does it directly or indirectly control the management of any
Person, nor does it have any obligation to acquire any such interest in the
future, and TEXONA has not, since its inception, directly or indirectly owned or
controlled any capital stock, equity interest, or had any proprietary interest
in, any Person, nor has it directly or indirectly controlled the management of
any Person.
Section 4.4 Financial Statements. TEXONA has delivered to TRC copies of the
balance sheet of TEXONA as of December 31, 1999 (the "Reference Balance Sheet"),
and income statement for the twelve-month period ended on such date (the
"Balance Sheet Date"), copies of which are included in Schedule 4.4 of the
Disclosure Schedule (the "Financial Statements"). The Financial Statements are
true and accurate in all material respects, have been prepared in accordance
with generally accepted accounting principles and present fairly the financial
condition and the results of the operations of TEXONA as of the dates and for
the periods indicated thereon.
Section 4.5 Liabilities, Debts and Obligations. TEXONA has no liabilities,
debts or obligations of any nature whatsoever, whether due or to become due, and
whether accrued, absolute, contingent or otherwise, that are not disclosed on
the Reference Balance Sheet or in this Agreement or the Disclosure Schedule,
except for (a) liabilities incurred in the Ordinary Course of Business
subsequent to the Balance Sheet Date and (b) obligations under contracts and
commitments entered into in the Ordinary Course of Business and not required
under the historical accounting of TEXONA to be reflected on the Reference
Balance Sheet (including required footnotes), which, in both cases,
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individually or in the aggregate are not material to the financial condition or
operating results of TEXONA.
Section 4.6 Events Since Balance Sheet Date. Since the Balance Sheet Date
there has not been, except as disclosed fully and correctly in Schedule 4.6 of
the Disclosure Schedule:
(a) any change in the condition (financial or otherwise) or in the
properties, assets, liabilities, business or prospects of TEXONA, except normal
and usual changes in the Ordinary Course of Business that individually and in
the aggregate have not had a Material Adverse Effect;
(b) any declaration, setting aside, or payment of any dividend or other
distribution on or in respect of the capital stock of TEXONA, or any direct or
indirect redemption, purchase or other acquisition of any of such stock or any
issuance of any shares of such stock or any granting or entering into of any
option or commitment relating to any of such stock;
(c) any increase in the compensation or rate of compensation or commissions
payable or to become payable by TEXONA to any of its directors, officers,
employees or consultants, or any hiring of any employee by TEXONA who is
entitled to compensation, or any payment or accrual of any bonus, profit-sharing
or other extraordinary compensation to any director, officer, employee or
consultant, or any change in any then existing bonus, profit-sharing, pension,
retirement or other similar plan, agreement or arrangement or any adoption of or
entering into of any new bonus, profit-sharing, pension, stock option,
retirement, group life or health insurance or other similar plan, agreement or
arrangement;
(d) any change in the accounting methods or practices followed by TEXONA,
including, but not limited to, the method for accounting for contract revenues
and expenses, or any change in depreciation or amortization policies or rates
heretofore adopted by it;
(e) any sale, lease, abandonment or other disposition by TEXONA of any
interest in real property or of any machinery, equipment or other asset, except
for any sales, leases, abandonments or other dispositions in the Ordinary Course
of Business not exceeding $50,000 individually or $100,000 in the aggregate,
except as set forth in Schedule 4.6(e) of the Disclosure Schedule;
(f) any labor trouble, strike or any other occurrence, event or condition
affecting the employees of TEXONA that has or is reasonably expected to have a
Material Adverse Effect;
(g) any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the assets or the business of TEXONA, except for damages,
destruction or loss that reasonably would be expected to occur in the Ordinary
Course of Business not exceeding $25,000, individually or in the aggregate;
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(h) any transaction entered into or engaged in by TEXONA other than
transactions in the Ordinary Course of Business;
(i) any waiver by TEXONA of a valuable right or of a material debt owed to
it, or any satisfaction or discharge of any encumbrance or payment of any
obligation by TEXONA except in the Ordinary Course of Business; or
(j) any transaction between TEXONA and any SHAREHOLDER or any Affiliate of
a SHAREHOLDER or any family member of a SHAREHOLDER or Affiliate of such family
member.
Section 4.7 Directors. Officers and Employees. TEXONA has provided to TRC a
true and complete list of the names of and current annual compensation paid by
TEXONA to each director, officer and employee of TEXONA. To the best of TEXONA's
knowledge, no officer or key employee of TEXONA is in violation of any term of
any employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship of any such employee with TEXONA, or any
other party. To the best of TEXONA's knowledge, no employee of TEXONA has
received notice from a former employer claiming such employee to be in breach of
any such employment contract, patent disclosure agreement or other contract or
agreement. TEXONA does not have any collective bargaining agreements covering
any of its employees. TEXONA is not aware that any officer or key employee of
TEXONA, or that any group of those Persons, intends to terminate their
employment with TEXONA. The employment of each officer and employee of TEXONA is
terminable at the will of TEXONA.
Section 4.8 Taxes and Governmental Returns and Reports. Except as set forth
in Schedule 4.8 of the Disclosure Schedule:
(a) all Tax Returns of or relating to any Tax that are required to be filed
on or before the Closing Date for, by, on behalf of or with respect to TEXONA
with respect to any period ending, including, but not limited to, those relating
to the income, business, operations or property of TEXONA and those which
include or should include TEXONA (whether on a separate, consolidated,
affiliated, combined, unitary or any other basis) have been or will be timely
filed with the appropriate foreign, federal, provincial, state and local
authorities on or before the Closing Date in accordance with applicable tax
laws, and all Taxes shown to be due and payable on such Tax Returns or related
to such Tax Returns have been (and as to all Taxes shown as due and payable on
such Tax Returns filed as of the Closing Date, will be) paid in full in
accordance with applicable laws;
(b) all such Tax Returns and the information and data contained therein
have been or will be properly and accurately compiled and completed, fairly
present or will fairly present the information purported to be shown therein,
and reflect or will reflect all liabilities for Taxes for the periods covered by
such Tax Returns;
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(c) none of such Tax Returns are under audit or examination by any foreign,
federal, state or local authority (except a proposed assessment by the State of
Louisiana which TEXONA currently believes is incorrect) and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the assessment or collection of any Tax or deficiency of any
nature against TEXONA or with respect to any such Tax Return, or any suits or
other actions, proceedings, investigations or claims now pending or threatened
against TEXONA with respect to any Tax, or any matters under discussion with any
foreign, federal, provincial, state or local authority relating to any Tax, or
any claims for any additional Tax asserted by any such authority;
(d) all Taxes assessed and due and owing from or against TEXONA on or
before the Closing Date (including, but not limited to, ad valorem Taxes
relating to any property of TEXONA) have been or will be timely paid in full on
or before the Closing Date;
(e) all withholding Tax and Tax deposit requirements imposed on TEXONA for
any and all periods ending on or before the Closing Date, or through and
including, the Closing Date for periods that have not ended on or before the
Closing Date, have been or will be timely satisfied in full on or before the
Closing Date;
(f) the Financial Statements reflect and include adequate charges,
accruals, reserves and provisions for the payment in full of any and all Taxes
payable by TEXONA with respect to any and all periods ending on or before the
respective dates thereof;
(g) there is no basis known to TEXONA for any reassessment of any material
amount of Tax and there have been no special assessments on any assets of
TEXONA;
(h) the charges, accruals and reserves for Taxes with respect to TEXONA for
any period ending on or before the Closing Date (including any such period for
which no Tax Return has yet been filed) reflected on the books of TEXONA
(excluding any provision for deferred income Taxes) are adequate to cover such
Taxes;
(i) neither TEXONA nor any other Person on behalf of TEXONA, has entered
into nor will it enter into any agreement or consent pursuant to Section 341(f)
of the Code;
(j) there are no liens for Taxes upon the assets of TEXONA except liens for
current property taxes not yet due and payable;
(k) TEXONA is not delinquent in the payment of any Tax and has not
requested any extension of time within which to file any Tax Return which has
not been filed except that the 1999 federal and state income and franchise tax
returns are on extension;
(l) there are no requests or determinations in respect of any Tax matter
relating to TEXONA pending before or with any Governmental Authority;
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(m) all Tax Returns filed with respect to the Tax years of TEXONA through
the Tax year ended December 31, 1996, have been examined and closed or are Tax
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired;
(n) TEXONA has not:
(i) been a member of any affiliated, consolidated, combined, or
unitary group, or
(ii) participated in any arrangement whereby any income, revenues,
receipts, gain, loss, deduction or credit of TEXONA was determined or taken
into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, deduction, credit, or liability of
any other Person (other than TEXONA);
(o) TEXONA is not a party to any Tax allocation or Tax sharing agreement
other than tax partnerships created by joint operating agreements;
(p) TEXONA has no "net unrealized built-in gain" as that term is defined in
Section 1374 of the Code;
(q) on and following the date of incorporation of TEXONA and through the
date hereof:
(i) the only authorized and outstanding shares of capital stock of
TEXONA have been the Shares,
(ii) TEXONA has not issued or entered into any restricted stock,
deferred compensation or profit-sharing plans, call options, warrants or
similar instruments with respect to its stock, stock appreciation rights,
convertible debt instruments, stock-based employee incentive plans, or
other similar instruments, obligations or arrangements, except a stock
option plan,
(iii) TEXONA has not issued or entered into any indebtedness other
than indebtedness which constitutes "straight debt" within the meaning of
Section 1361(c)(5) of the Code and Treas. Reg. Section 1.1361-1(l)(5),
except the bank debt,
(iv) neither TEXONA nor any Person who has been the record or
beneficial owner of any Shares (or any interest therein) has entered into
any binding agreements relating to rights to distributions or liquidation
proceeds in respect of the Shares, or any other agreement with respect to
the Shares, including, but not limited to, buy-sell agreements, agreements
restricting the transferability of Shares, or redemption agreements,
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(v) TEXONA has not acquired the assets of any other corporation in a
transaction described in Section 381(a) of the Code, except the 1997
acquisition of Texona Acquisition Company, and
(vi) TEXONA has not owned any stock (including any instrument or
interest that constitutes stock for U.S. federal income tax purposes) of
any corporation and has not entered into any partnership (other than tax
partnership), joint venture, marketing or other similar contract or
arrangement with any person; and
(r) Schedule 4.8 of the Disclosure Schedule contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is properly payable
by TEXONA.
Section 4.9 Employee Benefit Plans.
(a) Schedule 4.9 of the Disclosure Schedule contains a list and brief
description of all "employee pension benefit plans" (as defined in Section 3(2)
of ERISA) (sometimes referred to herein as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) (sometimes referred to
herein as "Welfare Plans") and all other Benefit Plans maintained, or
contributed to, by TEXONA for the benefit of any present or former officers or
employees of TEXONA. TEXONA has delivered to TRC true, complete and correct
copies of (i) each Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent three annual reports on Form 5500
filed with the IRS with respect to each Benefit Plan, (if any such report was
required), (iii) the most recent IRS determination letter and all rulings or
determinations requested subsequent to the date of that letter, (iv) the most
recent actuarial report for each Benefit Plan for which an actuarial report is
required, (v) the most recent summary plan description for each Benefit Plan for
which such summary plan description is required and each summary of material
modifications prepared after the last summary plan description, (vi) each trust
agreement and group annuity contract relating to any Benefit Plan and (vii) all
material correspondence for the last three years with the IRS or Department of
Labor relating to plan qualification, filing of required forms, or pending,
contemplated or announced plan audits.
(b) Except as set forth in Schedule 4.9 of the Disclosure Schedule, all
Pension Plans have been the subject of determination letters from the IRS to the
effect that such Pension Plans are qualified and exempt from Federal income
taxes under Section 401(a) and 501(a), respectively, of the Code and no such
determination letter has been revoked nor has revocation been threatened, nor
has any such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or materially increase its costs. To the best of the
knowledge of TEXONA, no event has occurred which could subject any Pension Plan
to disqualification by the Internal Revenue Service under the Code. TEXONA has
paid all premiums (including any applicable interest, charges and penalties for
late payment) due the Pension Benefit Guaranty Corporation ("PBGC") with respect
to each Pension Plan for which
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premiums are required. No Pension Plan maintained by TEXONA has been terminated
under circumstances which would result in liability to the PBGC.
(c) Each Benefit Plan which has been or is sponsored, participated in or
contributed to by TEXONA: (i) is in compliance in all material respects with all
requirements of ERISA, (ii) has no issue pending (other than the payment of
benefits in the normal course) nor any issue resolved adversely to TEXONA which
may subject TEXONA to the payment of any penalty, interest, tax or other
obligation, and (iii) is in compliance with the terms of the Benefit Plan and
the Code.
(d) Except as set forth in Schedule 4.9 of the Disclosure Schedule, the
execution of this Agreement or the consummation of the transactions contemplated
by this Agreement will not give rise to any, or trigger any, change of control,
or severance benefit or other similar provision in any Benefit Plan.
(e) TEXONA does not provide employee post-retirement medical or health
coverage or contribute to or maintain any employee welfare benefit plan which
provides for health benefit coverage following termination of employment except
as is required by Section 4980B(f) of the Code or other applicable statute, nor
has it made any representations, agreements, covenants or commitments to provide
that coverage.
(f) No Pension Plan that TEXONA maintains, or to which TEXONA is obligated
to contribute, had, as of the respective annual valuation date for each such
Pension Plan, an "unfunded benefit liability" (as such term is defined in
Section 4001(a)(18) of ERISA). None of the Pension Plans has an "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived. To the best of TEXONA's knowledge, none
of TEXONA, any officer of TEXONA or any of the Benefit Plans which are subject
to ERISA, including the Pension Plans, or any trusts created thereunder, or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406, 407 or 408 of ERISA or Section 4975 of the
Code) or any other breach of fiduciary responsibility that could subject TEXONA
or any officer of TEXONA to the tax or penalty on prohibited transactions
imposed by such Section 4975 or to any liability under Section 502(i)(1) of
ERISA. Neither any of such Benefit Plans nor any of such trusts have been
terminated, nor has there been any "reportable event" (as that term is defined
in Section 4043 of ERISA) with respect to which the 30-day notice requirement
has not been waived, and TEXONA is not aware of any other reportable events with
respect thereto during the last five years. TEXONA has never been a party to or
contributed to a "multiemployer pension plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
(g) With respect to any Benefit Plan that is a Welfare Plan, (i) no such
Benefit Plan includes a welfare benefits fund, as such term is defined in
Section 419(e) of the Code, (ii) each such Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code, complies with
the applicable requirements of Section 4980B(f) of the Code and (iii) each such
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Benefit Plan (including any such Plan covering retirees or other former
employees) may be amended or terminated without material liability to TEXONA on
or at any time after the Closing.
(h) Neither TEXONA, the SHAREHOLDERS, nor any member of a controlled group
or affiliated service group as defined in Section 5 414(b), (c), (m) and (o) of
the Code of which TEXONA or the SHAREHOLDERS is a member has made a complete or
partial withdrawal from a multiemployer plan (as defined in Section 3(37) of
ERISA) so as to incur withdrawal liability as defined in Section 4201 of ERISA
which remains unpaid. The execution of this Agreement or the consummation of the
transactions contemplated by this Agreement will not give rise to, or trigger,
any liability under ERISA to TEXONA. TEXONA, and each Benefit Plan maintained by
TEXONA has complied with all the requirements of such Benefit Plan, ERISA, and
the Code.
Section 4.10 Contracts and Agreements. Schedule 4.10 of the Disclosure
Schedule sets forth a true and complete list of all of the following contracts,
agreements, leases, licenses, plans, arrangements or commitments, written or
oral, to the extent there exist any continuing obligation of TEXONA thereunder,
any unperformed obligations on behalf of any other party thereto, or any of the
assets or properties of TEXONA is in any way bound or obligated (including all
amendments, supplements and modifications thereto):
(a) each contract, agreement or commitment which creates a liability of
TEXONA, fixed or contingent, in an amount in excess of $50,000, including, but
not limited to, drilling contracts (identifying each contract that is a turn-key
contract), all subcontracts and contracts in respect of the provision of
services or the purchase of raw materials, supplies or other products or
utilities, except those entered into in the Ordinary Course of Business
involving payments or receipts by TEXONA of less than $50,000;
(b) all outstanding offers, tenders, bids or the like outstanding and
capable of being converted into an obligation of TEXONA in an amount in excess
of $50,000 in the aggregate by an acceptance or other act of some other Person,
including bids to provide turn-key drilling services;
(c) all master supply and service contracts;
(d) all collective bargaining agreements, union agreements, employment
agreements, consulting agreements or agreements providing for the services of an
independent contractor;
(e) all profit-sharing, pension, stock option, severance pay, retirement,
bonus, deferred compensation, group life and health insurance or other employee
benefit plans, agreements, arrangements or commitments of any nature whatsoever
and all agreements with any present or former officer, director or stockholder
of TEXONA;
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(f) all leases and all other contracts, agreements or legally enforceable
commitments relating to or affecting real property or any interest therein;
(g) all Debt Obligations;
(h) all contracts, agreements, arrangements or legally enforceable
commitments relating to the issuance of capital stock, bonds or other securities
of TEXONA;
(i) all contracts, agreements, arrangements or legally enforceable
commitments relating to the acquisition by TEXONA of its assets having a value
in excess of $50,000 in the aggregate;
(j) all performance bonds, bid bonds, surety bonds and the like, all
contracts and bids covered by such bonds, and all letters of credit and
guaranties;
(k) all consent decrees and other judgments, decrees or orders, settlement
agreements and agreements relating to competitive activities, requiring or
prohibiting any future action;
(1) all accounts, notes and other receivables (other than customer account
receivables generated in the Ordinary Course of Business), and all security
therefor, and all documents and agreements related thereto;
(m) all contracts, agreements, arrangements or legally enforceable
commitments of any nature with the SHAREHOLDERS or any Affiliate of the
SHAREHOLDERS or any family member of a Shareholder or Affiliate of such family
member;
(n) all licenses of intellectual property to or from TEXONA;
(o) each contract, agreement, arrangement, or legally enforceable
commitment that cannot be canceled by TEXONA by notice of 60 days or less or
without penalty involving amounts in excess of $50,000 or that would restrict
the operations of TEXONA or affiliates thereof after the Closing; and
(p) all contracts, agreements, arrangements or legally enforceable
commitments that are material to TEXONA or the operation of any of its
businesses.
All of such contracts, agreements, leases, licenses, plans, arrangements
and commitments and all other such items binding on TEXONA or its assets not
specifically described above (collectively, the "Contracts") are valid, binding
and in full force and effect in accordance with their terms and conditions and
there is no existing default thereunder or breach thereof by TEXONA, or, to the
best of TEXONA's knowledge, by any other party to the Contracts, or any
conditions that, with the passage of time or the giving of notice or both, might
constitute such a default by TEXONA,
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or, to the best of TEXONA's knowledge, by any other party to the Contracts, and
the Contracts will not be breached by or give any other party a right of
termination as a result of the transactions contemplated by this Agreement.
TEXONA has not waived any of its material rights under any Contract, and no
party to any Contract has requested or demanded renegotiation of any Contract.
Copies of all of the documents (or in the case of oral commitments, descriptions
of the material terms thereof) relevant to the Contracts listed on Schedule 4.10
of the Disclosure Schedule have been delivered by TEXONA to TRC and such copies
and descriptions are true and accurate and include all amendments, supplements
or modifications to the Contracts.
Section 4.11 Effect of Agreement. The execution and delivery of this
Agreement by TEXONA and the consummation of the Merger and the transactions
contemplated hereby will not (i) result in any breach of any of the terms or
conditions of, or constitute a default under, the Certificate of Incorporation
or other charter documents or bylaws of TEXONA or any Contract; (ii) result in
any violation of any Governmental Requirement applicable to TEXONA; (iii) cause
TEXONA to lose the benefit of any right or privilege it presently enjoys or, to
the best of TEXONA's knowledge, cause any Person who normally does business with
TEXONA not to continue to do so on the same basis as before; (iv) relieve any
Person of any obligation to TEXONA (whether contractual or otherwise) or enable
any other Person to terminate any such obligation or any right or benefit
enjoyed by TEXONA or to exercise any right under any agreement, including any
Contract, with or otherwise in respect of TEXONA or the assets or business of
TEXONA; or (v) require notice to or the consent, authorization, approval or
order of any Person.
Section 4.12 Properties, Assets and Leasehold Estates. TEXONA owns or has
the right to use (pursuant to a valid lease or license disclosed on Schedule
4.12 of the Disclosure Schedule) all property, real or personal, tangible or
intangible, (i) reflected on the Reference Balance Sheet (other than items sold
by TEXONA since the Balance Sheet Date in the Ordinary Course of Business for
which the proceeds from such sales did not exceed $50,000 individually or
$100,000 in the aggregate) or (ii) utilized in or necessary for the operation of
its business. Section 4.12 of the Disclosure Schedule sets forth a true and
complete list of all such property as of the date hereof (with all property that
is leased or licensed being designated as such). TEXONA has good and defensible
title to all the properties, interests in properties, assets and leasehold
estates, real and personal, set forth in Schedule 4.12 of the Disclosure
Schedule, free and clear of all mortgages, liens, pledges, conditional sales
agreements, charges, easements, covenants, assessments, restrictions and
encumbrances of any nature whatsoever, except as described on Schedule 4.12 of
the Disclosure Schedule,, and no Person has ever challenged or given TEXONA
notice of its intent to challenge TEXONA's title or rights to the properties,
assets and leasehold estates listed on Schedule 4.12 or otherwise utilized in or
necessary for the operation of TEXONA's business. All leases of property under
which TEXONA purports to be a lessee are valid, binding and in full force and
effect. All such structures, equipment and other properties of TEXONA and the
present use of such items conform to all Governmental Requirements, and no
notice of any violation of any such Governmental Requirements relating to such
assets or their use has been received by TEXONA. TEXONA has all easements,
rights of ingress and egress, and utilities and services necessary for all
operations conducted by it. Neither the whole nor any portion of any real
property owned or occupied by
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TEXONA has been condemned or otherwise taken by any public authority, nor, to
the best of the SHAREHOLDERS's and TEXONA's knowledge, is any such condemnation
or taking threatened or planned. TEXONA MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE CONDITION, FITNESS FOR A PARTICULAR PURPOSE,
QUANTITY, QUALITY OR USEFULNESS OF ANY TANGIBLE PROPERTY OF TEXONA,
NOTWITHSTANDING ANY OTHER IMPLIED PROVISION OF THIS AGREEMENT OR THE LAW. TRC
AND TAC HAVE MADE AND ARE RELYING SOLELY ON THEIR OWN INDEPENDENT INSPECTION AND
EXAMINATION OF SUCH PROPERTY. NEITHER TRC NOR TAC IS RELYING ON ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, BY TEXONA AS TO THE QUALITY OF
ANY OF SUCH PROPERTY, ITS CONDITION, FITNESS FOR A PARTICULAR PURPOSE OR
MERCHANTABILITY, AND THE SAME IS ACCEPTED AS IS, WHERE IS, WITH ALL DEFECTS AND
REDHIBITORY VICES, KNOWN OR UNKNOWN, APPARENT OR HIDDEN.
Section 4.13 Bank Accounts. Schedule 4.13 of the Disclosure Schedule sets
forth a true and complete list of all bank or financial accounts and safe
deposit boxes of TEXONA and of the credit and debit balances of such bank and
financial accounts as of the most recent practicable date.
Section 4.14 Suits, Actions and Claims. Except as set forth in Schedule
4.14 of the Disclosure Schedule, (i) there are no suits, actions, claims,
inquiries, investigations or legal, administrative or arbitration proceedings
involving TEXONA or in which TEXONA is engaged or that are pending or, to the
best of TEXONA's knowledge, threatened against or affecting TEXONA or any of its
properties, assets or business, or that question the validity or legality of the
transactions contemplated hereby, (ii) no basis or grounds for any such suit,
action, claim, inquiry, investigation or proceeding exists, and (iii) there is
no outstanding order, writ, injunction or decree of any Governmental Entity
against or affecting TEXONA or any of its properties, assets or business.
Section 4.14 of the Disclosure Schedule sets forth all claims, including the
status thereof, over the past two years against TEXONA with respect to personal
injury, negligence or responsibility for damages or injuries relating to
TEXONA's business and operations or for reservoir damage or obligation to
redrill or work over a well.
Section 4.15 Insurance Policies. Schedule 4.15 of the Disclosure Schedule
contains a list of all insurance policies (specifying the insurer, the amount of
coverage, the type of insurance and the policy number) covering TEXONA or its
properties, assets, business and personnel. Such policies afford TEXONA coverage
in such amounts and against such risks as is customary for companies engaged in
the same type and scope of business as TEXONA. There are no special
circumstances with respect to such policies or the business or operations of
TEXONA that lead to any liability under such insurance policies being avoided by
the insurers issuing such policies or, to the best of TEXONA's knowledge, the
premiums thereunder being increased. Except as set forth on Schedule 4.15 of the
Disclosure Schedule, there is no claim outstanding under any such insurance
policy nor to the best of TEXONA's knowledge are there any circumstances that
are likely to give rise to such a claim. TEXONA is not in default with respect
to any provision contained in such
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insurance policies, nor has it failed to give any notice or present any claim
thereunder in timely fashion. All such policies are in full force and effect,
with all premiums due thereon to date fully paid.
Section 4.16 Licenses and Permits; Compliance with Governmental
Requirements.
(a) Schedule 4.16 of the Disclosure Schedule sets forth a true and complete
list of all licenses and permits necessary for the conduct of TEXONA's business.
TEXONA has all such licenses and permits validly issued to it and in its name,
and all such licenses and permits are in full force and effect. No violations
are or have been recorded in respect of such licenses or permits and no
proceeding is pending or, to the best of TEXONA's knowledge, threatened seeking
the revocation or limitation of any of such licenses or permits. The
consummation of the transactions contemplated by this Agreement will not
constitute a violation of any such license or permit or impair or adversely
affect in any manner any such license or permit. TEXONA has complied in all
material respects with all Governmental Requirements applicable to its business,
and all Governmental Requirements with respect to the distribution and sale of
products and services by it.
(b) Except for any matters set forth in Schedule 4.16 of the Disclosure
Schedule, no consent, approval, authorization, declaration, filing or
registration with any Governmental Entity or any other Person is required to be
made or obtained by TEXONA or the SHAREHOLDERS in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
Section 4.17 No Untrue Statements. The statements, representations and
warranties of TEXONA set forth in this Agreement and the Exhibits hereto and in
all other documents and information furnished to TRC and TAC and its
representatives in connection herewith do not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements, representations and warranties made not misleading.
Section 4.18 Records. The books, records and minutes kept by TEXONA with
respect to its business and assets have been kept properly in all material
respects in accordance with all Governmental Requirements and contain records of
all matters required to be included therein by any Governmental Requirement, and
such books, records and minutes are true, accurate and complete in all material
respects.
Section 4.19 Environmental Representations and Warranties.
(a) TEXONA has not received any written notice of any investigation or
inquiry by any Governmental Entity under any applicable Environmental Laws
relating to the ownership or operation of the assets of TEXONA. TEXONA has not
disposed of any Hazardous Material on any of the assets currently owned or
leased or that have been owned or leased by TEXONA or its affiliates or
predecessor (the "TEXONA Assets"), and no condition exists on any of the TEXONA
Assets which would subject TEXONA or the TEXONA Assets to any remedial
obligations under any applicable Environmental Law.
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(b) Except where the failure to do so would not have a Material Adverse
Effect, TEXONA has obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in all applicable Environmental Laws relating to the TEXONA
Assets.
(c) TEXONA, and to the best of its knowledge, any prior owner or operator
of the TEXONA Assets, has not caused or allowed the generation, use, treatment,
storage or disposal of Hazardous Materials at any site or facility owned, leased
or operated by TEXONA or its Affiliates or used in connection with the TEXONA
Assets except in accordance with all applicable Environmental Laws or except to
the extent the same would not have a Material Adverse Effect.
(d) None of the TEXONA Assets have been subject to the release of any
Hazardous Materials except to the extent that the same would not have a Material
Adverse Effect.
(e) TEXONA has secured all Environmental Permits necessary to the operation
of the TEXONA Assets currently owned by TEXONA and TEXONA is in compliance with
such permits.
(f) TEXONA has not received any notice, nor is it aware, of any proposal to
amend, revoke or replace any Environmental Permit, or requiring the issuance of
any additional Environmental Permit, necessary to operate the TEXONA Assets
owned by TEXONA.
(g) TEXONA has not received inquiry or notice nor does TEXONA have any
reason to suspect or believe that it will receive inquiry or notice of any
actual or potential proceedings, claims, lawsuits or losses related to or
arising under any Environmental Laws and related to the TEXONA Assets.
(h) TEXONA is not currently operating or required to be operating any of
the TEXONA Assets under any compliance order, schedule, decree or agreement, any
consent decree, order or agreement, or corrective action decree, order or
agreement issued or entered into under any Environmental Law.
(i) TEXONA and the TEXONA Assets are to the best of TEXONA's knowledge in
compliance with all applicable limitations, restrictions, conditions, standards,
prohibitions, requirements and obligations established under Environmental Laws
except to the extent any such noncompliance would not have in Material Adverse
Effect.
Section 4.20 Brokers and Finders. No broker or finder has acted for TEXONA
in connection with this Agreement or the transactions contemplated by this
Agreement, and no broker or finder is entitled to any brokerage or finder's fee
or to any commission in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of TEXONA.
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Section 4.21 No Affiliate Obligations. TEXONA does not have any obligations
or liabilities to the SHAREHOLDERS or any Affiliate of the SHAREHOLDERS, except
for obligations and liabilities that will be released in full at no cost to
TEXONA on or prior to the Closing Date.
Section 4.22 TEXONA Corporate Authority. The execution and delivery of this
Agreement by TEXONA, the performance by it of all the terms and conditions
hereof to be performed by it and the consummation of the transactions
contemplated hereby by it, including the Merger, have been duly authorized and
approved by any requisite corporate action on the part of TEXONA, including all
necessary approvals by the SHAREHOLDERS of the Merger and this Agreement. This
Agreement constitutes the legal, valid and binding obligation of TEXONA
enforceable against TEXONA 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 general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
Section 4.23 Tax Treatment of Merger.
(a) None of the SHAREHOLDERS, TEXONA or any of their affiliates has taken
or will take any action that would prevent the Merger from qualifying as a
tax-free reorganization under the provisions of Section 368(a) of the Code.
(b) The Merger and related transactions will be carried out in accordance
with the provisions of this Agreement and the provisions of the DGCL.
(c) The terms of the Merger (including the merger consideration) were
negotiated at arm's-length, and TEXONA believes that the aggregate fair market
value of the shares of TRC Common Stock to be received by the TEXONA
Shareholders in connection with the Merger will approximately equal the
aggregate fair market value of the shares of TEXONA Common Stock surrendered in
exchange therefor.
(d) All of the shares of TEXONA Common Stock outstanding immediately prior
to the Merger will be exchanged solely for TRC Common Stock.
(e) The SHAREHOLDERS will pay their own expenses incurred in connection
with the merger transaction.
(f) No payment of cash in lieu of fractional shares of TRC Common Stock
will be received by any SHAREHOLDER.
(g) None of the compensation received by any stockholder-employee of TEXONA
pursuant to any employment, consulting or similar arrangement is or will be
separate consideration for, or allocable to, any of its shares of TEXONA Common
Stock. None of the TRC
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Common Stock received by any stockholder-employee of TEXONA pursuant to the
Merger is or will be separate consideration for, or allocable to, any such
employment, consulting or similar arrangement. The compensation paid to any
stockholder-employee of TEXONA pursuant to any such employment, consulting or
similar arrangement is or will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
(h) There is no intercorporate indebtedness existing between TRC and TEXONA
or between TAC and TEXONA that was or will be issued, acquired or settled at a
discount in connection with the Merger.
(i) None of the shares of TRC Common Stock to be received by any
SHAREHOLDER pursuant to the Merger is consideration for or allocable to options
issued with respect to TEXONA Common Stock, except as is provided in Section
3.3.
Section 4.24 Stock Option Plan. TEXONA adopted a Stock Option Plan
effective October 22, 1997, with respect to 50,000 shares of its common stock.
Pursuant to such Stock Option Plan, there have been granted and there exist
options to acquire 44,700 shares of TEXONA Common Stock. The persons identified
on the schedule attached as Schedule 3.3 to the Disclosure Schedule are vested
with options to acquire pursuant to such Stock Option Plan the number of shares
of TEXONA Common Stock set forth on such schedule.
Section 4.25 Intellectual Property.
(a) TEXONA owns, is licensed to use or otherwise possess the legally
enforceable right to use, all Intellectual Property used in the operation of the
business or necessary for the operation of the business as presently conducted.
Each such item of Intellectual Property owned by TEXONA will continue to be
owned by TEXONA immediately following the Closing, and each such item of
Intellectual Property available for use by TEXONA will continue to be available
for use by TEXONA on identical terms and conditions immediately following the
Closing. TEXONA has taken reasonable measures to protect the proprietary nature
of each such item of Intellectual Property and to maintain in confidence all
trade secrets and confidential information, that TEXONA owns or uses. No other
person or entity has any rights to any of the Intellectual Property owned or
used by TEXONA and no other person or entity is infringing, violating or
misappropriating any of the Intellectual Property that TEXONA owns or uses.
(b) The business, operations and activities of TEXONA as now conducted and
as conducted prior to the date of this Agreement have not infringed or violated,
or constituted a misappropriation of, and do not now infringe or violate, or
constitute a misappropriation of, any Intellectual Property rights of another
person or entity. TEXONA has not received any complaint, claim or notice
alleging any such infringement, violation or misappropriation, and to the
knowledge of TEXONA there is no basis for any such complaint, claim or notice.
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(c) For purposes of this Agreement, "Intellectual Property" shall mean and
include all (i) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, re-examination, utility
model, and certificate of invention and design patents, patent applications,
registrations and applications for registrations, (ii) trademarks, service
marks, trade dress, logos, trade names and corporate names and registrations and
applications for registration thereof; (iii) copyrights and registrations and
applications for registration thereof, (iv) computer software (including both
source code and object code), data and documentation, (v) trade secrets and
confidential business information, whether patentable or nonpatentable and
whether or not reduced to practice, know-how, technical drawings, manufacturing
and product processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, (vi) other proprietary rights relating to any of the foregoing
(including without limitation remedies against infringements thereof and rights
of protection of interest therein under the laws of all jurisdictions), and
(vii) copies and tangible embodiments thereof.
Section 4.26 Forward Triangular Merger. TEXONA hereby represents and
warrants that either no third party consents are required to be obtained under
any existing material contracts of TEXONA in connection with the Merger or that
such consents could be or will be obtained by TEXONA or TRC prior to the
Effective Time without unreasonable delay or expense.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRC
TRC represents and warrants to the SHAREHOLDERS that:
Section 5.1 Due Incorporation and Qualification. Each of TRC and TAC is a
corporation duly organized and validly existing under Delaware law and has all
requisite power to carry on its business as now being conducted. TRC and TAC are
qualified to do business in each other jurisdiction in which its failure to so
qualify would materially and adversely affect TRC or its financial condition or
business or ability to perform the transactions contemplated by this Agreement.
Section 5.2 Performance of Agreement.
(a) Each of TRC and TAC has all necessary corporate power and authority to
enter into and carry out the transactions contemplated by this Agreement.
(b) The execution, delivery and performance of this Agreement by TRC and
TAC have been duly and validly authorized and approved by all necessary
corporate action on the part of TRC and TAC, as applicable.
(c) The execution, delivery and performance of this Agreement by TRC and
TAC, and the transactions contemplated hereby, will not violate (i) any
provision of the certificate
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of incorporation or bylaws of TRC and TAC, as applicable, (ii) any material
agreement or instrument to which either is a party or by which either is bound,
or (iii) any judgment, order, ruling, or decree applicable to either as a party
in interest.
(d) Except for any matters set forth in Schedule 5.2 of the Disclosure
Schedule, no consent, approval, authorization, declaration, filing or
registration with any Governmental Entity or any other Person is required to be
made or obtained by TRC in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
(e) This Agreement is the valid and binding agreement of TRC and TAC,
enforceable against TRC and TAC in accordance with its terms, except as limited
by applicable bankruptcy, moratorium, insolvency or other similar laws affecting
generally the rights of creditors or by principles of equity and except as the
indemnification provisions contained in Section 15.4 are subject to limitation
under public policy.
Section 5.3 Brokers and Finders. No agent, broker, investment banker,
person or firm acting on behalf of TRC or under its authority is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly from the SHAREHOLDERS in connection with any of the
transactions contemplated hereby.
Section 5.4 Financial Ability. TRC has on the date hereof, and on the
Closing Date will have, the financial ability to perform its obligations under
this Agreement and all other agreements contemplated by this Agreement to be
executed and delivered by it.
Section 5.5 Authorization for TRC Common Stock. TRC has taken all necessary
corporate action to permit it to issue the Initial TRC Shares and will prior to
issuance take all necessary corporate action to permit it to issue any TRC
Deferred Shares. The TRC Shares will, when issued, be validly issued, fully paid
and nonassessable and not subject to preemptive rights.
Section 5.6 SEC Documents. TRC has provided to TEXONA its Form 10-K and its
Form 10-Q filed with the Securities and Exchange Commission in respect,
respectively, of the twelve-month period ending December 31, 1999, and the
three-month period ending March 31, 2000 (such documents collectively referred
to herein as the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of TRC included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with generally accepted accounting principles applied on
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a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position of TRC
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended. Since
March 31, 2000, other than as discussed in the SEC Documents, there has been no
material adverse change in the business of TRC and its subsidiaries, taken as a
whole.
Section 5.7 Tax Treatment of Merger.
(a) None of TRC, TAC or any of their affiliates has taken or will take any
action that would prevent the Merger from qualifying as a tax-free
reorganization under the provisions of Section 368(a) of the Code.
(b) The Merger and related transactions will be carried out in accordance
with the provisions of this Agreement and the provisions of the DGCL.
(c) The terms of the Merger (including the merger consideration) were
negotiated at arm's-length, and TRC believes that the aggregate fair market
value of the shares of TRC Common Stock to be received by the TEXONA
Shareholders in connection with the Merger will approximately equal the
aggregate fair market value of the shares of TEXONA Common Stock surrendered in
exchange therefor.
(d) Prior to the Merger, TRC will own 100% of the stock of TAC. Following
the Merger, TAC will not issue additional shares of its stock that would result
in TRC losing control of TAC nor issue warrants, options or any other type of
right pursuant to which any person could acquire stock of TAC that if exercised
or converted, would cause TRC to lose control of TAC (control for this purpose
defined as stock possessing at least 80% of the total voting power of all
classes of stock entitled to vote and at least 80% of each class of nonvoting
stock).
(e) Following the Merger, TAC will hold at least 90% of the fair market
value of TEXONA'S net assets held immediately prior to the Merger and at least
70% of the fair market value of TEXONA'S gross assets held immediately prior to
the Merger. For purposes of this representation, amounts paid by TEXONA to
dissenters, amounts paid by TEXONA to stockholders who receive cash or other
property, amounts used by TEXONA to pay transaction expenses, and amounts paid
by TEXONA to stockholders in redemption or distribution transactions (except for
regular, normal dividends) will be included as assets of TEXONA immediately
prior to the Merger.
(f) Following the Merger, TAC will hold at least 90% of the fair market
value of its net assets and at least 70% of the fair market value of its gross
assets held immediately prior to the Merger.
(g) Neither TRC nor any related person within the meaning of Treasury
Regulation Section 1.368-1(e)(3): (i) has purchased or will purchase any TEXONA
Common Stock with consideration other than TRC Common Stock, or has furnished
cash or other property directly or
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indirectly to TEXONA in connection with a redemption of TEXONA Common Stock or
to fund distributions by TEXONA to the TEXONA shareholders, or (ii) has any plan
or intention to purchase, redeem or otherwise reacquire any of the TRC Common
Stock issued to the TEXONA shareholders in the Merger. After the Merger, no
dividends or distributions will be made to the former TEXONA shareholders by TRC
other than regular, normal dividends or distributions made to all holders of TRC
Common Stock. For purposes of this representation, shares of TRC stock purchased
by a partnership will be deemed to have been purchased pro rata by the partners
of the partnership.
(h) TRC has no plan or intention: (i) to liquidate TAC following the
Merger; (ii) to merge TAC with or into another corporation following the Merger;
(iii) to sell or otherwise dispose of the stock of TAC following the Merger; or
(iv) to cause or permit TAC to sell or otherwise dispose of any of its assets
except for dispositions made in the ordinary course of business or transfers of
assets to a corporation controlled by TAC within the meaning of Section
368(a)(2)(C) of the Code.
(i) Following the Merger, TRC will cause TAC to continue the "historic
business" of TEXONA, or will use at least a "significant portion" of TEXONA's
historic business assets in a business, as such terms are defined in Treasury
Regulation Section 1.368-1(d).
(j) None of TRC, TAC or their affiliates own any shares of TEXONA stock and
have not owned any such stock during the last five years.
(k) All of the shares of TEXONA Common Stock outstanding immediately prior
to the Merger will be exchanged solely for TRC Common Stock. No stock of TAC
will be issued in the Merger. The TRC Common Stock to be issued in the Merger is
voting stock, and the holders thereof are entitled to vote for the election of
directors.
(l) TRC and TAC will each pay their own expenses incurred in connection
with the merger transaction.
(m) No payment of cash in lieu of fractional shares will be made by TRC to
any SHAREHOLDER.
(n) None of the compensation received by any stockholder-employee of TEXONA
pursuant to any employment, consulting or similar arrangement is or will be
separate consideration for, or allocable to, any of his shares of TEXONA stock.
None of the TRC Common Stock received by any stockholder-employee of TEXONA
pursuant to the Merger is or will be separate consideration for, or allocable
to, any such employment, consulting or similar arrangement. The compensation
paid to any stockholder-employee of TEXONA pursuant to any such employment,
consulting or similar arrangement is or will be for services actually rendered
and will be commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
(o) TAC will not have any liabilities as of the Effective Time.
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(p) There is no intercorporate indebtedness existing between TRC and TEXONA
or between TAC and TEXONA that was or will be issued, acquired or settled at a
discount in connection with the Merger.
(q) None of the shares of TRC Common Stock to be received by any party
pursuant to the Merger is consideration for or allocable to options issued with
respect to TEXONA Common Stock, except as is provided in Section 3.3.
(r) TRC does not have a "poison pill" stockholders' rights plan.
(s) Neither TRC nor TAC is an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(t) TRC will comply with the requirements set forth in Treasury Regulation
Section 1.368-3 concerning records to be kept and information to be filed with
returns to the Service.
Section 5.8 Stock Option Plan. TRC adopted its Amended and Restated 1990
Stock Option Plan.
ARTICLE VI
OBLIGATIONS OF PARTIES PRIOR TO CLOSING
Section 6.1 General. Up to and including the Closing Date, none of the
parties will take any action which would cause any of its representations and
warranties herein not to be true and correct in all material respects as of the
Closing Date except by written authorization of the other parties. Each party
shall use its best efforts to carry out and comply with the provisions of this
Agreement, to satisfy the conditions applicable to such party and to consummate
the merger in accordance with this Agreement.
Section 6.2 Access to Records and Properties of TEXONA. Subject to
requirements of confidentiality imposed by contract or by law, during the
Pre-Closing Period, TEXONA shall (a) provide TRC and its representatives and
agents with reasonable access to TEXONA's personnel and assets and to all
existing books, records, tax returns, work papers and other documents and
information relating to TEXONA; and (b) provide TRC and its representatives and
agents with copies of such existing books, records, tax returns, work papers and
other documents and information relating to TEXONA, and with such additional
financial, operating and other data and information regarding TEXONA as TRC or
its representatives or agents may reasonably request.
Section 6.3 Conduct of Business of TEXONA Until the Closing. Except as set
forth in Schedule 6.3 of the Disclosure Schedule, up to and including the
Closing Date, unless TRC consents in writing to contrary action, TEXONA will:
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(a) not change its capital stock by reclassification, subdivision,
reorganization, issuance of additional stock or otherwise;
(b) not issue or sell, or purchase or otherwise reacquire, any of its
capital stock, or grant or commit to grant any options, warrants, or other
rights to subscribe for, or purchase, or otherwise acquire, any shares of its
capital stock, or issue or commit to issue any securities convertible into or
exchangeable for shares of its capital stock;
(c) not declare any dividend on its capital stock or make any other similar
payment or distribution thereon or in respect thereof except for those made in
the Ordinary Course of Business and which shall reduce Net Equity except to the
extent accrued on the Reference Balance Sheet;
(d) not change or amend its Certificate of Incorporation or By-Laws;
(e) maintain its books, records and accounts in accordance with its
historical practice and in the usual and regular manner consistent with prior
years;
(f) not borrow or agree to borrow any money or guarantee, or agree to
guarantee the obligations of others;
(g) not make any contracts or commitments other than in the Ordinary Course
of Business;
(h) not allow any material contract to be terminated or to be materially
modified prior to the full term of the contract unless approved by a duly
authorized officer of TRC;
(i) not create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance on any of its assets except in the Ordinary Course of
Business;
(j) not sell, assign, lease or otherwise dispose of any of its material
assets other than in connection with the replacement of obsolete or worn-out
items;
(k) use best efforts to preserve intact the current business organizations
of TEXONA, keep available the services of the current officers, employees and
agents of TEXONA, and maintain the relations and goodwill with all suppliers,
customers, licensers, licensees, landlords, trade creditors, employees, agents
and others having business relationships with TEXONA;
(1) furnish to TRC copies of all financial statements and certificates and
reports concerning operation of the business, as and when such financial
statements, certificates and reports are delivered to any SHAREHOLDER or
pursuant to any material contract of TEXONA; and
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(m) use its best efforts not to do, or fail to do, any act which results or
will result (i) in any of the representations and warranties of TEXONA under
this Agreement being materially incorrect or (ii) in the nonfulfillment of any
of the conditions stated in Article VII.
Section 6.4 No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article X, TEXONA will not permit any of its
representatives to, directly or indirectly, solicit, initiate or encourage any
inquiries, offers or proposals from, discuss or negotiate with or execute any
agreement regarding or provide any information to, any Person (other than TRC)
relating to any transaction involving the sale of the capital stock of TEXONA,
or the business or operations of TEXONA or any of the property or assets of
TEXONA, or of any of the capital stock or any other equity securities of
TEXONA, or any merger, consolidation, business combination, liquidation,
recapitalization, dissolution or similar transaction involving TEXONA
(collectively, "Sale Proposals") or any other transaction the consummation of
which would or could reasonably be expected to impede, interfere with, prevent
or materially delay the transactions contemplated hereunder or which that or
could reasonably be expected to materially dilute the benefits to TRC of the
transactions contemplated hereunder. If any such written inquiries or Sale
Proposals are received by, or any such information is requested in writing from
or any such negotiations or discussions are sought to be initiated with TEXONA
or any of the SHAREHOLDERS, then TEXONA will promptly notify TRC of the nature,
terms and status of the foregoing and the identity of the inquiring party and
provide TRC with a copy of all written materials provided in connection with
such Sale Proposal. Until such time, if any, as this Agreement is terminated
pursuant to Article 10, TEXONA will not accept any Sale Proposal from any person
or entity other than TRC.
Section 6.5 Consent of SHAREHOLDERS. TEXONA shall obtain, in accordance
with the DGCL, written consents from all of the SHAREHOLDERS for the purpose of
consenting to the adoption of this Agreement and the approval of the Merger in
accordance with the DGCL (collectively, the "Special Consents") as soon as
reasonably practicable after the date hereof. In connection with obtaining the
Special Consents, TEXONA shall prepare and distribute to the SHAREHOLDERS, in
accordance with applicable law (it being understood that the Company is not
subject to the requirements of Schedule 14A of the Exchange Act), written
information regarding the Agreement and the Merger pursuant to which the Board
of Directors of TEXONA shall solicit from each SHAREHOLDER such SHAREHOLDER's
Special Consent in which such SHAREHOLDER consents to the adoption of this
Agreement, the appointment of the SHAREHOLDER's Representative, and the approval
of the Merger (together with a letter to SHAREHOLDERS and form of consent, the
"Consent Information"). TEXONA shall ensure that the Consent Information does
not, as of the date on which it is mailed to the SHAREHOLDERS, and as of the
date of each Special Consent, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not misleading. TEXONA,
acting through its Board of Directors, shall include in the Consent Information
the recommendation of its Board of Directors that the SHAREHOLDERS vote in favor
of this Agreement and the approval of the Merger, and shall otherwise use its
best efforts to obtain the requisite SHAREHOLDER approval.
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ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF TEXONA
The obligations of TEXONA to close the transactions contemplated herein are
subject to satisfaction of the conditions set out in this Article VII at or
before the Closing Date.
Section 7.1 Absence of Litigation. No suit, action or other proceeding by a
third party or governmental entity shall have been instituted or threatened
before any Governmental Entity to enjoin, restrain or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby, which, in
the reasonable judgment of TEXONA, would make it inadvisable to consummate such
transactions.
Section 7.2. Performance and Obligations of TRC.
(a) All of the terms and conditions of this Agreement to be complied with
and performed by TRC at or before the Closing Date shall have been complied with
and performed in all material respects, and the representations and warranties
made by TRC in this Agreement shall be correct in all material respects with the
same force and effect as though such representations and warranties had been
made at and as of the Closing Date.
(b) TRC shall have delivered to TEXONA a certificate, dated the Closing
Date, substantially in the form of Exhibit 7.2(b).
(c) TRC shall have complied on or before the Closing Date in all material
respects with each of its covenants or agreements contained in this Agreement to
be performed on or before the Closing Date.
Section 7.3. Governmental Approvals. No statute, rule or regulation or
order of any court or administrative agency shall be in effect which prohibits
TEXONA and the SHAREHOLDERS from consummating the transactions contemplated
hereby, and no suit, action, investigation or other proceeding by any
Governmental Entity shall have been instituted or threatened seeking to restrain
or prohibit TRC, TEXONA or the SHAREHOLDERS from consummating the transactions
contemplated hereby.
Section 7.4 Consents. All consents, approvals, authorizations, exemptions
and waivers from third persons that shall be required in order to enable TRC and
TAC to consummate the transactions contemplated hereby shall have been obtained,
excluding, in all events, any stockholder approval that may be required to be
obtained prior to the issuance of TRC Deferred Shares.
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Section 7.5 No Adverse Change. There shall not have occurred any single
event, occurrence or fact that (together with all other events, occurrences and
facts that could reasonably be expected to result in a loss to TRC) would have,
or might reasonably be expected to have, a material adverse effect on the
assets, business, operations, prospects or financial condition of TRC, or that
would constitute a criminal violation of law involving a felony or indictable
offense.
Section 7.6 NASDAQ. TRC shall have obtained authorization for listing on
NASDAQ of the TRC Initial Shares which constitute the Merger Consideration, upon
official notice of issuance.
Section 7.7 Registration Rights Agreement. TRC shall have executed and
delivered to each SHAREHOLDER an executed counterpart of the Registration Rights
Agreement, a copy of which is attached as Exhibit 7.7.
Section 7.8 Subscription and Release. TRC shall have executed and delivered
to each SHAREHOLDER an executed counterpart of the Subscription and Release, a
copy of which is attached as Exhibit 7.8 hereto.
Section 7.9 Certificate of Merger. TAC shall have executed and have had
TEXONA execute the Certificate of Merger, a copy of which is attached as Exhibit
7.9 hereto, and filed such Certificate of Merger with the Secretary of State of
the State of Delaware.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF TRC AND TAC
The obligations of TRC and TAC to close the transactions contemplated
herein are subject to satisfaction of the conditions set out in this Article
VIII at or before the Closing Date.
Section 8.1 Absence of Litigation. No suit, action or other proceeding by a
third party or governmental entity shall have been instituted or threatened
before any Governmental Entity to enjoin, restrain or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby, which, in
the reasonable judgment of TRC, would make it inadvisable to consummate such
transactions.
Section 8.2 Performance, Representations and Warranties. All of the terms
and conditions of this Agreement to be complied with and performed by TEXONA at
or before the Closing Date shall have been complied with and performed in all
material respects, and the representations and warranties made by TEXONA in this
Agreement shall be correct in all material respects with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, and TEXONA shall have delivered to TRC and TAC a certificate,
substantially in the form of Exhibit 8.2.
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Section 8.3 Subscription and Release. Each SHAREHOLDER shall have delivered
to TRC an executed counterpart of the Subscription and Release, a copy of which
is attached as Exhibit 7.8 hereto.
Section 8.4 Consent of SHAREHOLDERS and Failure of SHAREHOLDERS to Exercise
Right of Appraisal. Each SHAREHOLDER shall have executed and delivered to TEXONA
its written consent in writing to (i) the execution and delivery by TEXONA of
this Agreement, (ii) the appointment of the SHAREHOLDERS' Representative, (iii)
the Merger herein provided to be effected, and (iv) each of the transactions and
acts herein provided to be effected by TEXONA, copies of which shall have been
delivered to TRC. An executive officer of TEXONA approved by TRC also shall have
delivered to TRC a certificate that such instruments have been executed and
delivered by all SHAREHOLDERS of TEXONA. No SHAREHOLDER shall have exercised any
right of appraisal with respect to the Merger.
Section 8.5. Governmental Approvals. No statute, rule or regulation or
order of any court or administrative agency shall be in effect which prohibits
TRC and TAC from consummating the transactions contemplated hereby, and no suit,
action, investigation or other proceeding by any Governmental Entity shall have
been instituted or threatened seeking to restrain or prohibit TRC, TAC, TEXONA
or the SHAREHOLDERS from consummating the transactions contemplated hereby.
Section 8.6. Consents. All consents, approvals, authorizations, exemptions
and waivers set forth in Schedule 4.16 of the Disclosure Schedule shall been
obtained and be effective and all other consents, approvals, authorizations,
exceptions and waivers from third persons that shall be required in order to
enable TEXONA to consummate the transactions contemplated hereby shall have been
obtained.
Section 8.7 No Adverse Change. There shall not have occurred any Material
Adverse Effect.
Section 8.8. Casualty and Diminution in Value of the Assets. Since the date
of this Agreement, there shall not have occurred a casualty which occasions a
material adverse loss in the value of the assets of TEXONA.
Section 8.9. Certificate of Merger. TEXONA shall have executed and have had
TAC execute the Certificate of Merger, a copy of which is attached as Exhibit
7.9 hereto, and filed such Certificate of Merger with the Secretary of State of
the State of Delaware.
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ARTICLE IX
CLOSING
Section 9.1 Place of Closing and Closing Date. Subject to the satisfaction
of the conditions precedent stated in Articles VII and VIII, the closing of the
transactions contemplated herein (the "Closing") shall take place at the offices
of TRC, in Dallas, Texas, on September 15, 2000, or such other date as may be
mutually agreed.
Section 9.2 Closing Deliveries by TRC. At the Closing, TRC shall deliver to
TEXONA and the SHAREHOLDERS as provided in Article III the following:
(a) the certificate executed by an authorized officer of TRC described in
Section 7.2;
(b) a certificate executed by the Secretary (or Assistant Secretary) of TRC
and TAC dated as of the Closing Date, providing the resolutions authorizing the
merger under this Agreement adopted by the Boards of Directors of TRC and TAC
and the continued effectiveness of such resolutions, and presenting the
incumbency and representative signatures of the officers executing this
Agreement on behalf of TRC and TAC, as the case may be;
(c) executed counterparts of the Registration Rights Agreement, as provided
in Section 7.7; and
(d) executed Certificate of Merger to be filed with the Secretary of State
of the State of Delaware provided in Section 7.9.
Section 9.3 Closing, Deliveries by TEXONA and the SHAREHOLDERS. At the
Closing, TEXONA and the SHAREHOLDERS shall deliver to TRC, as applicable, the
following:
(a) certificates evidencing the Shares duly endorsed for transfer to TRC;
(b) a certificate of the good standing of TEXONA issued by the Secretary of
State of Delaware and a certificate of existence and good standing (including as
to tax status) in each jurisdiction listed on Schedule 4.1 of the Disclosure
Schedule, in each case and dated as of a date no more than ten (10) days prior
to the Closing Date;
(c) the certificate described in Section 8.2;
(d) a certificate executed by the Secretary (or Assistant Secretary) of
TEXONA dated as of the Closing Date stating that TEXONA and its SHAREHOLDERS
have taken all corporate action necessary on their parts to authorize the
execution, delivery and performance of this
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Agreement and presenting the authority of the officers executing this Agreement
on behalf of the SHAREHOLDERS;
(e) resignations by all officers of TEXONA and all members of the Board of
Directors of TEXONA, effective as of such Closing;
(f) the forms of consent by SHAREHOLDERS provided in Section 8.4;
(g) the Subscription Agreements and Releases provided in Section 8.3; and
(h) executed Certificate of Merger to be filed with the Secretary of State
of the State of Delaware provided in Section 7.9.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated:
(a) At any time prior to the Closing Date with the mutual written consent
of TRC and TEXONA;
(b) By TRC, if a material default shall be made in the observance or in the
due and timely performance by TEXONA of any agreement or covenant of TEXONA
herein contained, or if there shall have been a breach by TEXONA of any of the
warranties and representations of TEXONA herein contained, and such default or
breach has not been cured or has not been waived;
(c) By TEXONA, if a material default shall be made by TRC or TAC in the
observance or in the due and timely performance by TRC or TAC of any agreement
or covenant of TRC or TAC herein contained, or if there shall have been a breach
by TRC or TAC of any of the warranties and representations of TRC and TAC herein
contained, and such default or breach has not been cured or has not been waived;
and
(d) By TRC or TEXONA if the terminating party has not materially breached
any of its agreements, covenants, representations and warranties, and if the
Closing shall not have occurred on or before September 30, 2000.
Section 10.2 Effect of Termination. If any party terminates this Agreement
pursuant to Section 10.1, all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except for any
liability of any Party for breaches of this Agreement).
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ARTICLE XI
OBLIGATIONS OF PARTIES AFTER CLOSING
Section 11.1 Post-Closing Confidentiality. After the Closing, the
SHAREHOLDERS and their Affiliates shall maintain as confidential information all
information in their possession regarding TEXONA or its business or assets, and
shall not disclose any of such information to any Person except as may be
required to comply with applicable law.
Section 11.2 Cooperation Regarding Financial Information. The SHAREHOLDERS,
if requested by TRC, shall cooperate with and assist Ernst & Young LLP or other
accounting firm designated by TRC (the "Accountants") in preparing such audited
financial statements of TEXONA that TRC may reasonably require in order to
permit TRC to timely file a Current Report Form 8-K with the Securities and
Exchange Commission in accordance with the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder in connection with the
transactions contemplated hereby and to comply with any financial statement
requirements with respect to TEXONA applicable to TRC under the Securities
Exchange Act of 1934, as amended, the Securities Act and the rules and
regulations thereunder. If requested, the SHAREHOLDERS shall use reasonable good
faith efforts to cause B.D.O. Seidman to assist the Accountants in delivering
such audited financial statements to TRC within ten business days prior to the
date that TRC is required to file such financial statements with the Securities
and Exchange Commission in connection with such obligations. The SHAREHOLDERS
shall cause B.D.O. Seidman to provide TRC with access to such firm's work papers
in support of any accounting or auditing work performed by Ernst & Young LLP in
respect of TEXONA. The SHAREHOLDERS will cooperate with and assist TRC in
preparing, and, if requested, shall use reasonable efforts to cause B.D.O.
Seidman to cooperate with, and assist the Accountants in preparing such other
audited financial statements for TEXONA as may be specified by TRC.
Section 11.3 Severance and Retention Bonuses. TRC agrees to cause the
Surviving Corporation to honor and perform the Severance and Retention Bonus
Obligations with respect to all employees of TEXONA which are stated in Schedule
11.3 hereto. Nothing contained in this Section 11.3, however, shall prohibit or
prevent the Surviving Corporation or TRC from terminating the employment of any
employee of TEXONA nor shall this provision constitute an agreement to employ
any of such persons.
Section 11.4 TEXONA Returns and Tax Audits.
(a) All Returns for TEXONA with respect to any Pre-Closing Period that are
to be filed after the date of this Agreement and before the Closing Date shall
be prepared and filed by TEXONA, and TEXONA shall pay all due on those
Returns. All Returns for income and other Taxes for TEXONA with respect to any
Pre-Closing Period that are to be filed after the Closing shall be prepared by
TAC on behalf of TEXONA for filing by TAC on behalf of TEXONA, and any Taxes
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payable on such Returns shall be paid by TEXONA. The SHAREHOLDERS may file
amended Returns or claims for Tax refunds for any Pre-Closing Period with
respect to TEXONA. Any Tax refunds received with respect to a Pre-Closing Period
of TEXONA (irrespective of who caused the refund to be made) shall belong to
TEXONA.
(b) In the event that TRC receives notice of any Tax matter that could
affect the SHAREHOLDERS, or the SHAREHOLDERS receive notice of any Tax matter
that could affect TRC, the party receiving notice shall notify in writing the
potentially affected party within seven calendar days thereof. The failure of
any party to give the notice required by this Section 11.4(b) shall not impair
that party's rights under this Agreement except to the extent that the other
party demonstrates that it has been damaged thereby.
(c) The SHAREHOLDERS shall have the right to control, at their expense, any
tax audits or litigation involving any Taxes of TEXONA with respect to a
Pre-Closing Period or that could give rise to a liability of the SHAREHOLDERS to
TRC under this Section 11.4, including administrative, judicial or other
proceeding (and the settlement or resolution thereof) in connection with such
matters. TRC shall promptly furnish to the SHAREHOLDERS upon receipt a copy of
information document requests, notices of proposed adjustment, revenue agent's
reports or similar reports or notices of deficiency with respect to any matter
described in the previous sentence, together with all relevant background
information with respect to such documents. TRC shall execute and shall cause
TAC to execute powers of attorney or other documents necessary to enable the
SHAREHOLDERS to take any actions with respect to the Tax matters of TEXONA for
any Pre-Closing Period.
(d) After the Closing, TRC and the SHAREHOLDERS shall, at their own
expense, cooperate with each other and with each other's agents, including
accounting firms and legal counsel, in connection with the preparation or audit
of any Return, refund claim or Tax controversy matter with respect to TEXONA or
its activities. Such cooperation shall include making available, upon request
and as promptly as practicable, any information, records and documents in their
possession or under their control related to TEXONA. Without limiting the
generality of the foregoing, each party shall retain, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
Returns, supporting working papers, and other records or information that may be
relevant to such Returns for all Pre-Closing Period of TEXONA and shall not
destroy or otherwise dispose of any such records without first providing the
other party with a reasonable opportunity to review and copy the same. Any
information provided or obtained under this paragraph shall be kept
confidential, except as may otherwise be necessary in connection with the filing
of a Return, refund claims, tax audits, tax claims and tax litigation or as
required by law.
Section 11.5 Tax Gross Up.
(a) Although the parties intend for this Merger to qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code, if for any
reason any portion of the Merger Consideration is taxable to any of the
SHAREHOLDERS (such Taxes are referred to as the "Merger Tax"), TRC shall pay an
additional amount (the "Additional Amount") to the SHAREHOLDERS so
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that, after payment of any Taxes attributable to receipt of the Additional
Amount, the SHAREHOLDER has a net amount equal to the sum of: (i) the amount of
the Merger Tax; (ii) any interest and penalties due with respect of the Merger
Tax; (iii) any reasonable costs incurred in contesting the Merger Tax or the
interest and penalties thereon; (iv) any reasonable costs incurred by the
SHAREHOLDER in collecting the Additional Amount; and (v), if a SHAREHOLDER pays
an item described in clauses (i) through (iv) prior to the receipt of the
Additional Amount, then an interest amount computed at the rate of 8% per annum
on such payment from the date of the payment until the SHAREHOLDER received the
Additional Amount. TRC has the exclusive right in its sole discretion to contest
the Merger Tax and the interest and penalties thereon on behalf of any
SHAREHOLDER. Notwithstanding the foregoing, TRC shall not be responsible for
paying any costs incurred by any SHAREHOLDER in contesting the Merger Tax and
the interest and penalties thereon unless (i) such SHAREHOLDER issued TRC prior
written notice of such SHAREHOLDER'S intent to contest the Merger Tax and the
interest and penalties thereon (within 30 days of such SHAREHOLDER'S receipt of
a taxing authority's notice contesting the tax treatment of the Merger) and (ii)
TRC did not issue such SHAREHOLDER a written notice within 30 days of receiving
such SHAREHOLDER'S notice that TRC will contest the Merger Tax and the interest
and penalties thereon on behalf of such SHAREHOLDER.
(b) The provisions of Section 11.5(a) shall not apply to the extent the
Merger Tax is solely attributable to a specific action (i) of TEXONA (or any
affiliates) prior to the Effective Time or (ii) of a SHAREHOLDER at any time.
(c) The Additional Amount under Section 11.5(a) shall be payable in TRC
Common Stock (that is registered for issuance or resale with the Securities and
Exchange Commission and listed on NASDAQ as of the date such TRC Common Stock is
issued) within 120 days after written notice from a SHAREHOLDER that an
Additional Amount is due under Section 11.5(a). For this purpose, the shares of
TRC Common Stock to be issued shall be valued on the basis of the arithmetic
average of the closing sales prices of a share of TRC Common Stock, as reported
by NASDAQ Automated Quotations System, for the ten consecutive trading days
ending at least five trading days prior to the date the SHAREHOLDER requests TRC
to issue the Additional Amount pursuant to a notice under Section 12.2. Any
fractional shares due as a portion of the Additional Amount shall be rounded to
the nearest whole share of TRC Common Stock.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Binding Agreement. All the provisions, covenants,
representations, warranties and conditions of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and assigns. Prior to the Closing Date, no party
hereto may assign any of its interest herein without the written consent of the
other party (which consent will not be unreasonably withheld). After the Closing
Date, except for each
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SHAREHOLDER's right to Deferred Consideration, which may not be assigned, the
rights of each party hereto may be assigned by such party without any
requirement for consent from the other party.
Section 12.2 Notices. All notices, requests, waivers and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been duly given upon receipt by
personal delivery, messenger delivery, first-class mail or telecopier, at the
addresses set forth below (or at such other address for a party as such party
shall specify by like notice):
If to TEXONA or to SHAREHOLDERS:
Earl E. Rossman, Jr.
Texona Petroleum Corporation
16365 Park Ten Place
Suite 390
Houston, Texas 77084
Telephone: 281/578-2025
Fax: 281/578-6830
With copies to:
Nick Nimmo
Holme, Roberts & Owen, L.L.P.
Suite 4100
1700 Lincoln
Denver, Colorado 80203
Telephone: 303/861-7000
Fax: 303/866-0200
If to TRC or TAC, to:
Toreador Resources Corporation
4809 Cole Avenue
Suite 107
Dallas, Texas 75205
Attn: G. T. Graves III
Telephone: 214/521-3222
Fax: 214/521-3774
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With copies to:
Janice V. Sharry
Haynes and Boone, LLP
901 Main St., Suite 3100
Dallas, Texas 75202
Telephone: 214/651-5562
Fax: 214/651-5940
Section 12.3 Entire Agreement. This Agreement is the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements and understandings, written and oral, among the parties
hereto with respect to the subject matter hereof.
Section 12.4 Expenses. Except as otherwise provided herein, each party
shall be solely responsible for all expenses incurred by it in connection with
this transaction (including, without limitation, fees and expenses of its own
counsel and accountants).
Section 12.5 Severability. If any term or other provision of this Agreement
is held invalid, illegal or incapable of being enforced under any rule or law,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in a materially adverse manner
with respect to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 12.6 Waivers. The failure of any party at any time to require
performance of any provision hereof shall not affect its right later to require
such performance. No waiver in any one or more instances shall (except as
otherwise stated therein) be deemed to be a further or continuing waiver of any
such condition or breach in other instances or a waiver of any condition or
breach of any other term, covenant, representation or warranty.
Section 12.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. It shall not be necessary
for all SHAREHOLDERS to join in the execution of a single counterpart, but each
counterpart hereof shall be executed by TRC and TAC.
Section 12.8 Headings. The headings preceding the text of articles and
sections of this Agreement are for convenience only and are not part of this
Agreement.
Section 12.9 Applicable Law. This Agreement is governed by and shall be
construed and enforced in accordance with the internal laws of the State of
Delaware.
Section 12.10 Arbitration. ALL DISPUTES ARISING OUT OF OR IN CONNECTION
WITH THE EXECUTION, INTERPRETATION OR PERFORMANCE OF THIS
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AGREEMENT SHALL TO THE FULLEST EXTENT PERMITTED BY LAW BE SOLELY AND FINALLY
SETTLED BY A BOARD OF ARBITRATORS CONSISTING OF THREE ARBITRATORS AS DETERMINED
BELOW (THE "ARBITRATORS"). THE ARBITRATION PROCEEDING SHALL BE HELD IN THE CITY
OF DALLAS, TEXAS. EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 12.10, THE
ARBITRATION PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE RULES FOR
NON-ADMINISTERED ARBITRATION OF BUSINESS DISPUTES OF THE CENTER FOR PUBLIC
RESOURCES, INC. (THE "C.P.R.") AND, TO THE EXTENT NOT INCONSISTENT WITH THE
C.P.R. RULES, THE TEXAS GENERAL ARBITRATION ACT.
(a) Arbitration Notice. If a party hereto determines to submit a dispute to
arbitration pursuant to this Section 12.10, such party shall furnish the C.P.R.
and the other parties with a dated and written notice (the "Arbitration Notice")
indicating: (i) such party's intent to commence arbitration proceedings pursuant
to this Section 12.10, (ii) the name and address of such party and a designated
officer or agent thereof, (iii) the nature, in reasonable detail, of the
dispute, (iv) the remedy such party seeks, and (v) any other information
required under the C.P.R. Rules.
(b) Selection of the Arbitrators. Within 10 days after the date of the
Arbitration Notice, the SHAREHOLDERS shall select one qualifying arbitrator and
TRC shall select one qualifying arbitrator. A "qualifying" arbitrator shall be a
person who is not: (i) an employee of any SHAREHOLDER or an Affiliate thereof or
of TRC or any Affiliate thereof, or (ii) counsel to any such Person at such
time. If either the SHAREHOLDERS or TRC fail to select a qualifying arbitrator
or provide such notice within the 10-day period, the C.P.R. shall have the right
to make such selection. Such qualifying arbitrators hereafter may be referred to
respectively as the "First Arbitrator" and the "Second Arbitrator." Within 10
days following their selection, the First Arbitrator and the Second Arbitrator
shall select, and if they fail to do so, the C.P.R. shall select, a third
"neutral" arbitrator under Rule 6 of the C.P.R. Rules. A "neutral" arbitrator
shall be a person who would not be subject to disqualification under Rule No. 7
of the C.P.R. Rules.
(c) Fees. All fees and expenses of the Arbitrators shall be borne one-half
by the SHAREHOLDERS and one-half by TRC. All notices provided pursuant to this
Section 12.10 shall be given pursuant to the requirements of Section 12.2.
(d) Arbitration Award. To the extent permissible under applicable law, the
parties to this Agreement agree that the award of the Arbitrators shall be final
and binding upon them, and shall not be subject to judicial review. Judgment on
the arbitration award may be entered and enforced in any court having
jurisdiction over the parties or their assets. The parties to this Agreement
intend that these arbitration provisions be enforced to the fullest extent
permitted by applicable law, including The Federal Arbitration Act, 9 U.S.C.
Section 2, as amended from time to time.
(e) Injunctive Relief. Notwithstanding any other provision of this Section
12.10, any party to this Agreement may seek and receive injunctive relief
(whether in the form of a temporary restraining order, preliminary injunction,
or otherwise) or, subject to the provisions of
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Section 12.10, seek specific performance pending a decision of the Arbitrators,
and this Section 12.10 shall not apply to any such action or proceeding
(including any court proceeding or self-help).
Section 12.11 Construction of Agreement . This Agreement constitutes a
negotiated agreement among the parties, and the fact that one party or the other
shall have drafted a particular provision or provisions shall not be material in
the construction of any provision. All Exhibits referred to in the Agreement are
a part of the Agreement.
Section 12.12 References to Articles, Sections and Exhibits. Unless the
context otherwise requires, all references herein to Articles, Sections and
Exhibits shall be to the Articles, Sections and Exhibits of and to this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
TEXONA PETROLEUM CORPORATION
By
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TOREADOR RESOURCES CORPORATION
By
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TOREADOR ACQUISITION CORPORATION
By
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