EXCHANGE AGREEMENT
BY AND AMONG
PRESIDIO OIL COMPANY,
PRESIDIO EXPLORATION, INC.,
PRESIDIO WEST VIRGINIA, INC.,
PALISADE OIL, INC.,
AND
TOM BROWN, INC.
Dated August 5, 1996
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
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1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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1.2 References and Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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ARTICLE II
THE EXCHANGE
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2.1 Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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2.2 Directors and Officers of the Presidio Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.3 Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.4 Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.5 Tom Brown Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.6 No Further Ownership Rights in Presidio Securities . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.7 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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2.9 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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2.10 Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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2.11 Merger Alternative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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ARTICLE III
CLOSING AND PRE-CLOSING ACTIONS
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3.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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3.2 Adjustment to Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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ARTICLE IV
COVENANTS
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4.1 Access to Assets, Personnel, and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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4.2 Confidentiality Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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4.3 Indemnity Regarding Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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4.4 Tom Brown to Vote for Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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4.5 Petition Under the Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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4.6 Preparation of Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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4.7 Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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4.8 Solicitation of Presidio Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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4.9 Cooperation; Notification of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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4.10 Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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4.11 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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4.12 Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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4.13 Amendment to Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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4.14 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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4.15 New D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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4.16 Information Kept Confidential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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4.17 Pre-Closing Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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4.18 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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4.19 Conduct of Presidio's Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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4.20 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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4.21 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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4.22 Severance Plan and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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4.23 Presidio ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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4.24 Presidio 401K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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4.25 Other Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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4.26 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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4.27 Certain Tom Brown Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PRESIDIO
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5.1 Disclaimers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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5.2 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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5.3 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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5.4 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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5.5 Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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5.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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5.7 Presidio SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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5.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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5.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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5.10 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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5.11 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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5.12 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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5.13 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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5.14 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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5.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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5.16 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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5.17 Intangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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5.18 Presidio's Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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5.19 Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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5.20 Oil and Gas Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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5.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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5.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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5.23 Compliance with Law; Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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5.24 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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5.25 Contracts, Agreements, Commitments and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 40
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5.26 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TOM BROWN
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6.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.2 Authorization and Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.3 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.5 Tom Brown SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
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6.7 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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6.8 Claims and Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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6.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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ARTICLE VII
NATURE OF REPRESENTATIONS AND WARRANTIES
----------------------------------------
7.1 Limited Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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7.2 Nonsurvival of Representations, Warranties, Covenants, and Agreements . . . . . . . . . . . . . . . 45
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ARTICLE VIII
CONDITIONS TO CLOSING
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8.1 Conditions Precedent to the Obligations of Presidio . . . . . . . . . . . . . . . . . . . . . . . . 45
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8.2 Conditions Precedent to the Obligations of Tom Brown . . . . . . . . . . . . . . . . . . . . . . . . 46
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ARTICLE IX
TERMINATION
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9.1 Termination Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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9.2 Payment of Termination Expenses and Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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9.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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ARTICLE X
MISCELLANEOUS
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10.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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10.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.4 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.6 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.7 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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10.8 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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10.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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LIST OF EXHIBITS
Exhibit A -- Leases
Exhibit B -- Wells
Exhibit C -- Form of Plan of Reorganization
Exhibit D -- Form of Disclosure Statement
Exhibit E -- Form of Affiliate Letter
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LIST OF DEFINED TERMS
PAGE
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1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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401k Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Acreage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
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Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-
affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Aggregate Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Aggregate Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Allocated Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Alternative Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Bankruptcy Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
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Bankruptcy Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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Bar Date Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
CERCLIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Common Share Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confirmation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Confirmation Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Defensible Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Designated Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Distributee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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Environmental Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Environmental Response Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
ESOP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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Exchange Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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Exchange Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Existing Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
-
Final Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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Hart Scott Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Initial Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Major Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
--
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
New D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
--
NRI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Oil and Gas Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
Palisade Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
Permitted Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
Permitted Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Plan of Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Plan Proponents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Class B Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
--
Presidio Common Stock Cash Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Options or Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Presidio Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Presidio Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--
Presidio Tax Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Presidio West Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Released Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--
-vi-
41
DEFINED TERMS, CONTINUED
PAGE
----
Releasing Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
--
Reorganization Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--
Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
Schedule and Exhibit Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
--
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
SEC Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Senior Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Senior Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Severance Plan and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Subordinated Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Subordinated Gas Indexed Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Termination Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
--
Third Party Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--
Tom Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tom Brown Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
--
Tom Brown Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
Tom Brown SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
Tom Brown Trading Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
--
US Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
-
Wells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
-
WI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
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42
LIST OF SCHEDULES
PAGE
----
Schedule 5.25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
-
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-
Schedule 4.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
--
Schedule 4.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
--
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Schedule 4.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--
Schedule 4.26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
Schedule 5.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
--
Schedule 5.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Schedule 5.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
--
Schedule 5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--
Schedule 5.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
--
Schedule 5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
--
Schedule 5.9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
--
Schedule 5.11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
--
Schedule 5.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
Schedule 5.16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
--
Schedule 5.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
--
Schedule 5.21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
--
Schedule 5.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
--
Schedule 5.22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 5.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
Schedule 6.8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
--
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43
EXCHANGE AGREEMENT
This Exchange Agreement dated August 5, 1996, is entered into by and
among Presidio Oil Company, a Delaware corporation, Presidio Exploration, Inc.,
a Colorado corporation, Presidio West Virginia, Inc., a Delaware corporation,
Palisade Oil, Inc., a Colorado corporation, and Tom Brown, Inc., a Delaware
corporation.
RECITALS:
A. The boards of directors of Presidio and Tom Brown have each
determined that it is in the best interests of their respective constituencies
for Tom Brown to acquire Presidio upon the terms and subject to the conditions
set forth in this Agreement.
B. Presidio and Tom Brown desire to make certain representations,
warranties, covenants, and agreements in connection with such acquisition and
also to prescribe various conditions to such acquisition.
Now, therefore, for and in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms, as used herein, have the
following meanings:
"1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Acreage" means the Leases set forth on Appendix A-1 to Exhibit A
attached hereto.
"Affiliate" of a person means any person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
person. The term "control" including, with correlative meaning, the terms
"controlled by" and "under common control with" as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise.
-1-
44
"Aggregate Common Share Value" means a dollar amount equal to the
difference between the Aggregate Consideration and the Cash Consideration, as
adjusted pursuant to Section 5.09 of the Plan of Reorganization.
"Aggregate Consideration" means $183,000,000 except as such may be
adjusted pursuant to Section 5.09 of the Plan of Reorganization.
"Agreement" means this Exchange Agreement and all Schedules and
Exhibits attached hereto.
"Allocated Value" means (a) the net present value allocated to the
interest of the Presidio Parties in and to each Oil and Gas Asset that is
separately valued on the Reserve Report or (b) the amounts set forth on
Appendix A-1 to Exhibit A in respect of the Leases comprising the Acreage.
"Alternative Transaction" has the meaning set forth in Section
4.20(a).
"Bank Obligations" means the obligations of Presidio and its
Affiliates pursuant to the Amendment and Restatement of Amendment, Restatement
and Consolidation of Credit Agreement dated August 6, 1993, as amended, between
Presidio, Presidio Exploration, each bank which is a signatory thereto or
successor or assign thereof and The Chase Manhattan Bank, N.A., as agent.
"Bankruptcy Code" means Title 11 of the United States Code, as amended
from time to time.
"Bankruptcy Court" means the Bankruptcy Court presiding over the
Presidio Parties' Chapter 11 cases.
"Bankruptcy Event" has the meaning set forth in Section 4.5(a).
"Bar Date Order" has the meaning set forth in Section 4.5(d).
"Cash Consideration" means a cash payment in an amount equal to the
sum of (a) the Presidio Common Stock Cash Consideration, plus (b) the excess of
(i) the sum of (x) $100,193,267, plus (y) the amount of accrued and unpaid
interest on the Bank Obligations allowed by an order of the Bankruptcy Court,
over (ii) all amounts, if any, paid by a Presidio Party in respect of the Bank
Obligations (other than interest paid in respect thereof) or the Senior Secured
Notes from the date of this Agreement through and including the Closing.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List.
"Closing" has the meaning set forth in Section 3.1(a).
-2-
45
"Closing Date" has the meaning set forth in Section 3.1(b).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Common Share Value" means a value per share of Tom Brown Common Stock
equal to $16.50, as adjusted pursuant to Section 3.2.
"Confidentiality Agreement" means that certain letter agreement dated
August 15, 1995 between Tom Brown and Presidio, as amended by letters dated
October 30, 1995 and November 10, 1995 and as such may be hereafter amended.
"Confirmation Date" means the date upon which the Confirmation Order
is entered.
"Confirmation Order" means the order of the Bankruptcy Court
confirming the Plan of Reorganization pursuant to Sections 1129 and 1141 of the
Bankruptcy Code.
"Contract" has the meaning set forth in Section 5.4.
"Debt Obligations" means the obligations of Presidio pursuant to the
following:
(a) Indenture dated as of August 6, 1993 among Presidio,
various of its subsidiaries and U.S. Trust Company of New York ("US
Trust") relating to $75,000,000 original aggregate principal amount of
11.5% Senior Secured Notes due 2000 (the "Senior Secured Notes");
(b) Indenture dated as of August 6, 1993 among Presidio,
various of its subsidiaries and US Trust relating to $100,000,000
original aggregate principal amount of Senior Gas Indexed Notes due
2002 (the "Senior Gas Indexed Notes");
(c) Indenture dated as of February 16, 1989 among
Presidio, various of its subsidiaries and US Trust, as amended,
relating to $100,000,000 original aggregate principal amount of Senior
Subordinated Gas Indexed Notes due 1999 (the "Subordinated Gas Indexed
Notes"); and
(d) Indenture dated as of February 14, 1990 among
Presidio and Bank of Montreal Trust Company relating to $50,000,000
original aggregate principal amount of 9% Convertible Subordinated
Debentures Due 2015.
"Defensible Title" with respect to the Major Assets means that title
of a Presidio Party which, subject to Permitted Encumbrances:
(a) is deducible of record (either from the records of
the applicable county clerk and recorder or, in the case of federal
leases, from the records of the applicable office of the Bureau of
Land Management, or in the case of Indian leases, from the applicable
offices of the Bureau of Indian Affairs, or in the case of state
leases, from
-3-
46
the records of the applicable state land office, or from some
combination of the foregoing official records), and is free from
reasonable doubt such that a prudent person with knowledge of all the
facts and their legal bearing would be willing to accept the same;
(b) entitles a Presidio Party to receive not less than
the net revenue interest (indicated by the letters "NRI") set forth in
Exhibit B attached hereto of all oil, gas and associated liquid and
gaseous hydrocarbons produced, saved and marketed from each of the
Major Assets throughout the life of such Major Asset, provided, that
the provisions of this clause (b) shall not be applicable to the
Leases comprising the Acreage;
(c) obligates a Presidio Party to bear costs and expenses
relating to the maintenance, development, and operation of each of the
Major Assets in an amount not greater than the working interest
(indicated by the letters "WI") set forth in Exhibit B attached hereto
throughout the life of such Major Asset except to the extent such
increase in working interest is accompanied by a proportionate
increase in the net revenue interest attributable to such Major Asset,
provided, that the provisions of this clause (c) shall not be
applicable to the Leases comprising the Acreage; and
(d) is free and clear of Liens.
"Designated Contracts" shall mean each of the operating agreements set
forth on Schedule 5.25.
"Directors and Officers"shall have the meaning given such terms in the
New D&O Insurance.
"Disclosure Statement" means the disclosure statement in the form
attached hereto as Exhibit D as such may be amended or supplemented after the
date of this Agreement, together with such other solicitation materials that
may be jointly prepared by the Plan Proponents and filed by Presidio pursuant
to Section 1125 of the Bankruptcy Code in connection with the Plan of
Reorganization.
"Distributee" means a person who is a holder of Bank Obligations, Debt
Obligations or Presidio Common Stock.
"Employee Benefit Plans" has the meaning set forth in Section 5.9(a).
"Environmental Laws" means any and all applicable laws (including, but
not limited to, CERCLA and corresponding state or local acts), statutes,
ordinances, rules, regulations, policies, guidelines, consents, approvals,
licenses, judgments, memoranda of understanding, orders, judicial decrees, or
administrative decrees, treaties, permit conditions, or injunctions of any
Governmental Authority or court of competent jurisdiction pertaining to the
protection of the environment.
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"Environmental Material" means (a) any hazardous substance, as defined
by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended through the date of this Agreement, (c) any
hazardous, dangerous, or toxic chemical, material, waste, or substance, within
the meaning of and regulated by any Environmental Law, (d) any material
emitting radiation in excess of ordinary background conditions, including any
naturally occurring radioactive material, and any source, special, or byproduct
material as defined in 42 U.S.C. Section 2011 et seq. and any amendments or
authorizations thereof, (e) any asbestos-containing materials in any form or
condition, or (f) any polychlorinated biphenyls in any form or condition.
"Environmental Response Action" means any remedial action, removal
action, remedial investigation and feasibility study, site characterization,
Natural Resource Damage Matters, Brownfield Agreements, or other investigations
whatsoever relating to the presence or suspected presence of Environmental
Materials on or originating from operations of Presidio. The term
Environmental Response Action shall not include customary well plugging,
abandonment, and drill site restoration requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ESOP" has the meaning set forth in Section 4.23.
"Exchange" means the transactions contemplated in Section 2.1.
"Exchange Agent" means a person appointed by Tom Brown and Presidio to
serve as Exchange Agent hereunder or absent such appointment a person appointed
pursuant to the Plan of Reorganization.
"Exchange Common Stock" means a number of shares of Tom Brown Common
Stock (or other securities as may be required under Section 3.2) obtained by
dividing (a) the Aggregate Common Share Value by (b) the Common Share Value,
less the number of shares of Tom Brown Common Stock to which Tom Brown
otherwise would have been entitled pursuant to Section 2.1 in respect of its
ownership of Senior Gas Indexed Notes or any other Presidio Securities it may
acquire hereafter. As of the date of this Agreement, the Exchange Common Stock
is initially established hereunder at 5,003,438 shares of Tom Brown Common
Stock (with such number of shares being calculated without any reduction
thereof in respect of the shares of Tom Brown Common Stock to which Tom Brown
otherwise would be entitled to receive in respect of its ownership of Senior
Gas Indexed Notes).
"Exchange Consideration" means the Cash Consideration and the Exchange
Common Stock and shall also include the net proceeds received from the sale of
fractional shares of Exchange Common Stock pursuant to Section 2.7.
"Existing Plans" means the Employee Benefit Plans and the Severance
Plan and Agreements.
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"Final Order" means an order or judgment of the Bankruptcy Court which
shall not have been reversed, stayed, modified, or amended and as to which (a)
the time to appeal from or to seek review, rehearing or certiorari shall have
expired and (b) no appeal or petition for review, rehearing, or certiorari is
pending or if appealed shall have been affirmed, or the appeal dismissed by the
highest court to which such order was appealed, or if review, rehearing or
certiorari was sought, such review, rehearing, or certiorari has been denied
and no further hearing, appeal or petition for review, rehearing, or certiorari
can be taken or granted or as to which any right to appeal or to seek a review,
rehearing, or certiorari has been waived.
"401k Plan" has the meaning set forth in Section 4.24.
"GAAP" means those generally accepted accounting principles and
practices that are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
"Governmental Authority" means any federal, state, local, foreign
government, or political subdivision thereof, exercising competent
jurisdiction.
"Hart Scott Act" has the meaning set forth in Section 4.9.
"Initial Order" has the meaning set forth in Section 4.5(c).
"Knowledge" means actual knowledge as of the date of this Agreement of
each of the officers and employees named in Schedule 4.22 and for the purposes
of Section 5.21, the term Knowledge shall also include the actual knowledge as
of the date of this Agreement of Brant Gimmeson.
"Leases" has the meaning set forth in the definition of Oil and Gas
Assets.
"Liabilities" has the meaning set forth in Section 5.12.
"Lien" means any mortgage, pledge, hypothecation, security interest,
encumbrance, charge or lien (statutory or otherwise) or assignment, deposit
arrangement or other preferential arrangement in respect of an interest in
property intended to secure, support or otherwise assure payment of an
obligation (including any conditional sale or other title retention agreement
and any lease having substantially the same economic effects as any of the
foregoing).
"Major Assets" means (a) each Oil and Gas Asset that is separately
valued on the Reserve Report as having an Allocated Value individually in
excess of $50,000 and (b) the Acreage.
"Material Contracts" has the meaning set forth in Section 5.25.
"Merger" has the meaning set forth in Section 2.11.
"NASDAQ" means the Nasdaq National Market of The Nasdaq Stock Market.
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"New D&O Insurance" has the meaning set forth in Section 4.15(a).
"Oil and Gas Assets" means the following:
(a) All right, title, and interest of the Presidio
Parties in and to (i) all oil and gas leases, all oil, gas and mineral
leases or other similar leases, mineral interests, fee estates,
production payments, net profits interests, carried interests,
royalties, and overriding royalties and all lands subject thereto,
whether producing or non-producing (the "Leases"), including the
leases, mineral interests, overriding royalties and royalties set
forth on Exhibit A attached hereto, and any other oil, gas or other
mineral interests of any type of a Presidio Party wherever situated
and including any and all right, title and interest of a Presidio
Party in and to the oil, gas and other hydrocarbons in, on or under
any of the foregoing, and (ii) all oil and gas wells and injection and
disposal wells located on any of the foregoing, or used or useful in
connection therewith, or on lands pooled or unitized therewith (the
"Wells"), including the wells set forth on Exhibit B attached hereto;
(b) All right, title, and interest of the Presidio
Parties in, to and under or derived from all presently existing or
proposed unitization, pooling and communitization agreements,
declarations and orders, and the properties covered and the units
created or to be created thereby (including all units formed or to be
formed under orders, regulations, rules or other official actions of
any federal, state or other governmental agency having jurisdiction)
to the extent that they relate to or affect the Leases or the Wells;
(c) All right, title, and interest of the Presidio
Parties in, to and under or derived from all presently existing and
effective oil, gas liquids, condensate, casinghead gas and gas sales,
purchase, marketing, exchange, gathering, transportation and
processing contracts, operating agreements, farmout agreements,
exploration agreements, option agreements, joint venture agreements,
partnership agreements, settlement agreements and all other agreements
and instruments to the extent that they relate to the Leases or the
Wells;
(d) All right, title, and interest of the Presidio
Parties in or to all personal property, fixtures, equipment,
improvements and other personal property, whether real, personal or
mixed (including well equipment, casing, tubing, tanks, pumping units,
rods, tank batteries, natural gas, crude oil, condensate or products
placed into storage or into pipelines, buildings, pumps, motors,
machinery, injection facilities, disposal facilities, field separators
and liquid extractors, compressors, pipelines, gathering and flow
lines, roads, field treating facilities, field offices and office
furnishings related thereto, field office leases, storage yards and
off-site inventories, equipment leases, vehicles, trailers, operating
supplies, inventories and all other appurtenances thereunto
belonging), and in and to all easements, permits, licenses,
servitudes, rights-of-way, surface leases and other surface rights to
the extent any of the foregoing is now being used or proposed to be
used in connection with the exploration, development, operation or
maintenance of the Leases or Wells or now being used or proposed to be
used in connection with the producing, treating, processing, storing,
gathering, transporting or marketing of oil and gas attributable to
such properties or interests
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and other hydrocarbons and products in association therewith, and all
contract rights (including rights under leases to third parties)
related to any of the foregoing; and
(e) All right, title, and interest of the Presidio
Parties in and to all oil, gas, and other minerals owned by a Presidio
Party or any interests credited to the account of a Presidio Party
pursuant to any production imbalances or balancing agreements relating
to any interests owned by a Presidio Party in the Leases or the Wells
or otherwise arising by virtue of the fact that a Presidio Party may
not have taken or marketed its full share of oil, gas or other
minerals attributable to its ownership in the Leases or the Wells
prior to the Closing Date.
"Palisade Oil" means Palisade Oil, Inc., a Colorado corporation.
"Permitted Claims" means any Liens, Liabilities, claims, or causes of
action arising from any defect adversely affecting a Presidio Party's title to
any Oil and Gas Asset, which defect arises from or is attributable to any
facts, events, or circumstances in existence on or before June 19, 1996. The
term Permitted Claims shall also include all Title Defects in existence on or
before June 19, 1996.
"Permitted Encumbrances" means:
(a) Lessors' royalties, overriding royalties,
reversionary interests and similar burdens as of the date of this
Agreement to the extent that (i) they burden the Leases comprising the
Acreage, or (ii) they do not prevent the Presidio Parties from
receiving the proceeds of production from each of the Major Assets
attributable to the net revenue interests reflected in Exhibit B;
(b) preferential rights to purchase;
(c) Third Party Consents with respect to which on or
before the Closing a waiver, consent or a judicial order or
determination is obtained as contemplated in Section 4.11;
(d) Liens for Taxes not yet delinquent or, if delinquent,
that are being contested in good faith in the normal course of
business;
(e) Materialman's, mechanic's, repairman's, employee's,
contractor's, operator's, and other similar Liens or charges arising
in the ordinary course of business (i) if they have not been filed
pursuant to law, (ii) if so filed, they have not yet become due and
payable or payment is being withheld as provided by law, or (iii) if
their validity is being contested in good faith by appropriate action;
(f) All rights to consent by, required notices to,
filings with, or other actions by Governmental Authorities in
connection with the sale or conveyance of oil and
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gas leases or interests therein if they are customarily obtained
subsequent to the sale or conveyance;
(g) Conventional rights of reassignment upon the
surrender or expiration of any Lease;
(h) Easements, rights-of-way, servitudes, permits,
surface leases, and other rights in respect of surface operations;
(i) All other Liens, charges, contracts, agreements,
instruments, obligations, defects, and irregularities affecting
the Leases or Wells which taken individually or together (i) do not
interfere materially with the operation, value or use of any of the Oil
and Gas Assets, (ii) do not prevent a Presidio Party from receiving the
proceeds of production from any of the Major Assets attributable to the
net revenue interests reflected in Exhibit B or the ownership interests
of the Presidio Parties in the Acreage, as may be applicable, (iii) do
not adversely affect the net revenue interest of a Presidio Party as
reflected in Exhibit B or the ownership interests of the Presidio
Parties in the Acreage, as may be applicable, with respect to its share
of the oil and gas produced from any such Major Asset, or (iv) do not
increase the portion of the costs and expenses that a Presidio Party is
obligated to pay above the working interests reflected in Exhibit B or
the ownership interests of the Presidio Parties in the Acreage, as may
be applicable; such Liens, charges, contracts, agreements, instruments,
obligations, defects, and irregularities include the following:
(A) those created by the terms and conditions of
division orders, sales contracts, and other existing contracts
burdening the Oil and Gas Assets, including any and all terms
and conditions affecting or relating to production imbalances;
(B) those which have not prevented the receipt of
production proceeds by a Presidio Party or its predecessors in
title without suspense by a production purchaser and as to
which no challenge to title has been raised on the basis of
such defect, so long as it can reasonably be concluded either
that such challenge is highly unlikely or that such challenge
would be unsuccessful by reason of statutes of limitation,
waiver, estoppel, or other defenses;
(C) those described by an attorney's title
opinion as advisory or waivable as a matter of business
judgment; or
(D) those in the nature of customary defects
expected to be encountered in the area involved and
customarily acceptable to prudent operators and interest
owners in that area, including defects that have been cured by
possession under applicable statutes of limitation, defects in
the early chain of title such as failure to recite marital
status in documents, omission of heirship or succession
proceedings, lack of survey and failure to record releases of
liens, production payments, or mortgages that have expired of
their own terms or which through the
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passage of time or statute are no longer enforceable or other
defects that either as a practical matter have not resulted or
are not likely to result in a material claim or are considered
waivable under local bar association-approved title standards
or customary title practices in the area;
(j) All rights reserved to or vested in any Governmental
Authority to control or regulate any of the Leases or Wells in any
manner, and all applicable laws, rules, and orders of governmental
authorities;
(k) Any Title Defects, Liens or other defects affecting
the Oil and Gas Assets which are to be discharged at or prior to
Closing pursuant to the Plan of Reorganization;
(l) Permitted Claims; and
(m) The Liens securing the Bank Obligations and certain
Debt Obligations which are discharged at or prior to Closing pursuant
to the Plan of Reorganization.
"person" means an individual, a corporation, a partnership, an
association, a trust, an estate or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan Documents" means all documents and exhibits that aid in
effecting the Plan of Reorganization.
"Plan of Reorganization" means the plan of reorganization in the form
attached hereto as Exhibit C as such may be amended after the date of this
Agreement, which is to be proposed by the Plan Proponents and filed by the
Presidio Parties in accordance with the Bankruptcy Code as a part of the
Reorganization Cases of the Presidio Parties and which upon confirmation
implements the transactions contemplated by this Agreement.
"Plan Proponents" means the Presidio Parties and Tom Brown as the
joint plan proponents of the Plan of Reorganization.
"Presidio" means Presidio Oil Company, a Delaware corporation.
"Presidio Class A Common Stock" means the Class A Common Stock of
Presidio, par value $.10 per share.
"Presidio Class B Common Stock" means the Class B Common Stock of
Presidio, par value $.10 per share.
"Presidio Common Stock" means the Presidio Class A Common Stock and
the Presidio Class B Common Stock.
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"Presidio Common Stock Cash Consideration" means a cash payment to be
made pursuant to the Plan of Reorganization in an amount of $250,000 to the
holders of the Presidio Common Stock, as adjusted pursuant to Section 5.09 of
the Plan of Reorganization.
"Presidio Exploration" means Presidio Exploration, Inc., a Colorado
corporation.
"Presidio Financial Statements" means the audited and unaudited
consolidated financial statements of Presidio and its consolidated subsidiaries
(including the related notes) included (or incorporated by reference) in
Presidio's Annual Report on Form 10-K for the year ended December 31, 1995.
"Presidio Options or Warrants" has the meaning set forth in Section
5.11(b).
"Presidio Parties" means Presidio, Presidio Exploration, Presidio West
Virginia, and Palisade Oil.
"Presidio Representative" means any director, officer, employee,
agent, advisor (including legal, accounting, and financial advisors), or other
representative of a Presidio Party.
"Presidio SEC Documents" means each report, schedule, registration
statement and definitive proxy statement filed by Presidio with the SEC since
January 1, 1995 and prior to the date of this Agreement.
"Presidio Security" means the Presidio Common Stock, the promissory
notes evidencing the Bank Obligations, the Debt Obligations and the Presidio
Options or Warrants.
"Presidio Securityholders" has the meaning set forth in Section
4.6(a).
"Presidio Tax Affiliates" has the meaning set forth in Section 5.8(a).
"Presidio West Virginia" means Presidio West Virginia, Inc., a
Delaware corporation.
"Released Claims" has the meaning set forth in Section 8.2(i).
"Releasing Parties" has the meaning set forth in Section 8.2(i).
"Reorganization Cases" has the meaning set forth in Section 4.5(a).
"Reserve Report" means the engineering report prepared by Presidio
based on an SEC Case as of December 31, 1995 and reviewed by Huddleston & Co.,
Inc. on behalf of Presidio concerning certain of the Oil and Gas Assets.
"Schedule and Exhibit Volume" means the volume containing the
Schedules and Exhibits A and B to this Agreement to which has been attached a
cover page executed by the parties hereto for identification with this
Agreement.
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"SEC" means the Securities and Exchange Commission.
"SEC Case" means the present value of estimated future net revenues
from oil and gas properties discounted at ten percent (10%) before taxes and
determined in all material respects in accordance with the rules and
regulations of the SEC using prices and costs in effect on the valuation date.
"Senior Gas Indexed Notes" has the meaning set forth in the definition
of Debt Obligations.
"Senior Secured Notes" has the meaning set forth in the definition of
Debt Obligations.
"Severance Plan and Agreements" has the meaning set forth in Section
4.22.
"Subordinated Gas Indexed Notes" has the meaning set forth in the
definition of Debt Obligations.
"Tax Returns" means all federal and all material state, local, and
foreign returns, claims for refund, declarations, reports, estimates,
information returns and statements required to be filed with respect to any
Taxes.
"Taxes" means taxes of any kind, levies, or other like assessments,
customs, duties, imposts, charges, or fees, including income, gross receipts,
ad valorem, value added, excise, stamp, environmental (including taxes under
Code Section 59A), alternative or add-on minimum, real or personal property,
asset, sales, use, license, payroll, transaction, capital, net worth and
franchise taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and gains taxes,
or other governmental taxes imposed or payable to the United States or any
state, local, or foreign governmental subdivision or agency thereof, and in
each instance such term shall include any interest, penalties, or additions to
tax attributable to any such Tax, including penalties for the failure to file
any Tax Return or report.
"Termination Expenses" has the meaning set forth in Section 9.2(b).
"Termination Fee" has the meaning set forth in Section 9.2(a).
"Third Party Consent" has the meaning set forth in Section 4.11.
"Title Defects" means any defect adversely affecting any Major Asset
which causes a Presidio Party not to have Defensible Title to such Major Asset.
"Tom Brown" means Tom Brown, Inc., a Delaware corporation.
"Tom Brown Common Stock" means the common stock of Tom Brown, par
value $.10 per share.
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"Tom Brown Financial Statements" means the audited and unaudited
consolidated financial statements of Tom Brown and its consolidated
subsidiaries (including the related notes) included (or incorporated by
reference) in Tom Brown's Annual Report on Form 10-K for the year ended
December 31, 1995.
"Tom Brown SEC Documents" means each report, schedule, registration
statement, and definitive proxy statement filed by Tom Brown with the SEC since
January 1, 1995 and prior to the date of this Agreement.
"Tom Brown Trading Value" means the average of the closing sales
prices of the Tom Brown Common Stock on the NASDAQ (as reported by The Wall
Street Journal or, if not reported thereby, by another authoritative source)
over the twenty (20) trading days immediately preceding the date that is five
trading days prior to the Confirmation Date.
"Wells" has the meaning set forth in the definition of Oil and Gas
Assets.
1.2 References and Titles. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections,
subsections, and other subdivisions of this Agreement unless expressly provided
otherwise. Each of the Schedules referenced in this Agreement together with
Exhibits A and B are contained in the Schedule Volume. Titles appearing at the
beginning of any Articles, Sections, subsections, or other subdivisions of this
Agreement are for convenience only, do not constitute any part of such
Articles, Sections, subsections, or other subdivisions, and shall be
disregarded in construing the language contained therein. The words "this
Agreement," "herein," "hereby," "hereunder," and "hereof," and words of similar
import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section" and "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine, or neuter genders shall be
construed to state and include any other gender, and words, terms, and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires.
ARTICLE II
THE EXCHANGE
2.1 Exchange. Pursuant to this Agreement and the Plan of
Reorganization as confirmed by the Bankruptcy Court, on the Closing Date,
except to the extent already owned by Tom Brown or cancelled pursuant to the
Plan of Reorganization, all of (a) the Bank Obligations, (b) the Debt
Obligations and (c) the Presidio Common Stock shall be transferred absolutely
and unconditionally to Tom Brown in exchange for that portion and amount of the
Exchange Consideration (if any) allocated to the existing holders of such
claims and interests pursuant to the Plan of Reorganization. No Exchange
Consideration shall be issued or paid to Tom Brown in respect of its ownership
of (i) Senior Gas Indexed Notes or (ii) any other Presidio Securities which it
may acquire hereafter to
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the extent it would be entitled to receive Exchange Common Stock in exchange
therefor. Upon delivery of the Exchange Consideration to the Exchange Agent as
provided in Section 2.4 hereof, Tom Brown shall be deemed the sole equity
holder, and the sole holder of the Bank Obligations and Debt Obligations of
Presidio, and Presidio's obligations to the holders of the (a) Bank
Obligations, (b) the Debt Obligations and (c) the Presidio Common Stock under
the Plan of Reorganization shall be deemed to be satisfied in full and
discharged. As of the Closing Date, the Presidio Options and Warrants shall be
cancelled pursuant to the Plan of Reorganization. Tom Brown, as the sole
equity owner of Presidio, shall, immediately following the Exchange described
in this Section 2.1, contribute to Presidio all of the Bank Obligations and
Debt Obligations. No additional shares of Presidio capital stock shall be
issued to Tom Brown in exchange therefor. The Bank Obligations and Debt
Obligations shall thereupon be cancelled, terminated, and discharged.
2.2 Directors and Officers of the Presidio Parties. The directors
and officers of each of the Presidio Parties shall resign as of the Closing.
2.3 Exchange Consideration. At the Closing, Tom Brown shall pay
or issue (in accordance with Section 2.4 hereof) the Exchange Consideration.
2.4 Exchange Fund. At the Closing, Tom Brown shall deposit with
the Exchange Agent, for the benefit of each of the Distributees, the Exchange
Consideration including certificates representing the Exchange Common Stock.
The Cash Consideration shall be tendered and paid to the Exchange Agent in
immediately available funds. The Exchange Agent will distribute to the
Distributees the Exchange Consideration (together with any interest earned
thereon) in accordance with the Plan of Reorganization. The Exchange Agent
shall receive and hold all dividends or other distributions paid or distributed
with respect to the Exchange Common Stock held by it for the account of the
Distributees entitled thereto.
2.5 Tom Brown Distributions. A Distributee shall be entitled to
receive dividends and other distributions with respect to the Exchange Common
Stock to which such Distributee is entitled pursuant to the Plan of
Reorganization.
2.6 No Further Ownership Rights in Presidio Securities. Except
for the contribution to be made by Tom Brown pursuant to Section 2.1, if, after
the Closing, a certificate representing a Presidio Security registered in the
name of a Distributee (other than Tom Brown) is presented to Presidio or the
Exchange Agent for any reason, it shall be cancelled and exchanged for that
portion and amount, if any, of the Exchange Consideration allocated thereto
pursuant to the Plan of Reorganization.
2.7 No Fractional Shares. No fractional shares of the Exchange
Common Stock shall be issued to a Distributee. The Exchange Agent shall, on
behalf of all Distributees otherwise entitled to receive fractional shares of
Exchange Common Stock, promptly following the Closing, aggregate such
fractional shares of Exchange Common Stock and sell the resulting whole shares
of Exchange Common Stock for the account of such Distributees, and such
Distributees shall be entitled to receive their allocable portion of the net
proceeds of the sale thereof.
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2.8 Termination of Exchange Fund. Any portion of the Exchange
Consideration held by the Exchange Agent that is not distributed pursuant to
the Plan of Reorganization within ninety (90) days after the Closing shall,
upon Presidio's request, be delivered to Tom Brown. Thereafter, a Distributee
shall look only to Presidio for distribution of that portion and amount of the
Exchange Consideration (including any dividends or distributions made in
respect of Exchange Common Stock) that such Distributee is entitled to receive
pursuant to the Plan of Reorganization. Such amounts shall bear no interest.
2.9 No Liability. None of Presidio, Tom Brown, the Exchange
Agent, or any other person shall be liable to any Distributee for any amount
properly delivered to any public official pursuant to any applicable abandoned
property, escheat, or similar law. Any amounts remaining unclaimed by a
Distributee for a period of two years following the Closing (or such earlier
date immediately prior to the time at which such amounts would otherwise
escheat to or become the property of any governmental entity) shall, to the
extent permitted by applicable law, become the property of Tom Brown free and
clear of any claims or interest of any such Distributee or his successors,
assigns, or personal representative previously entitled thereto.
2.10 Lost, Stolen, or Destroyed Certificates. If any certificate
representing a Presidio Security shall have been lost, stolen, or destroyed,
upon the making of an affidavit of that fact by the Distributee claiming such
certificate to be lost, stolen, or destroyed and, if required by Tom Brown, the
issuance by such Distributee of such reasonable indemnity as Tom Brown may
require against any claim that may be made against it with respect to such
certificate, the Exchange Agent or Tom Brown, as applicable, shall issue in
exchange for such lost, stolen, or destroyed certificate that portion and
amount of the Exchange Consideration allocated to such Presidio Security in
accordance with the Plan of Reorganization.
2.11 Merger Alternative. If Tom Brown shall determine that the
transaction described in this Article II will not have the legal effects
described in the third sentence of Section 2.1, then the Exchange shall be
recast as a merger to be effected under the laws of the State of Delaware (the
"Merger"), pursuant to which a subsidiary of Tom Brown shall be merged with and
into Presidio, with Presidio to be the surviving corporation and a wholly-owned
subsidiary of Tom Brown. In such event, this Agreement shall constitute an
Agreement and Plan of Merger and the parties shall prepare and file all such
documents (including any Certificate of Merger) necessary to effect the Merger.
ARTICLE III
CLOSING AND PRE-CLOSING ACTIONS
3.1 Time and Place of Closing.
(a) Consummation of the Exchange as contemplated by this
Agreement (the "Closing"), shall, unless otherwise agreed to in
writing by Tom Brown and Presidio, take place at the offices of
Andrews & Kurth L.L.P., located at 425 Lexington Avenue, New York, New
York 10017 at 10:00 a.m., New York City time, on the fifth business
day
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following the date that the conditions specified in Article VIII have
been satisfied, unless another time, date and place is agreed to by
the parties.
(b) The date on which the Closing occurs is herein
referred to as the "Closing Date".
3.2 Adjustment to Common Share Value. If at any time or from time
to time after the date of this Agreement and on or before the Closing Date, Tom
Brown shall (a) pay a dividend in Tom Brown Common Stock or make a distribution
in Tom Brown Common Stock (or in securities convertible into Tom Brown Common
Stock), (b) subdivide the outstanding Tom Brown Common Stock, (c) combine the
outstanding Tom Brown Common Stock into a smaller number of shares of Tom Brown
Common Stock, or (d) issue any shares of its capital stock or other securities
by reclassification of the Tom Brown Common Stock, then the Common Share Value
(or if necessary the securities comprising the Exchange Common Stock) in effect
at the time of the record date for such dividend or distribution or as of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the aggregate number and kind of shares of
Exchange Common Stock shall be the aggregate number and kind of shares of Tom
Brown Common Stock or other securities of Tom Brown which, if the Exchange
Common Stock had been outstanding immediately prior to such time, the Exchange
Common Stock would represent by virtue of such dividend, distribution,
subdivision, combination or reclassification.
ARTICLE IV
COVENANTS
4.1 Access to Assets, Personnel, and Information. From the date
of this Agreement until the Closing, Presidio shall afford to Tom Brown and its
representatives, at Tom Brown's sole risk and expense, full access to any of
the assets, books, records (including files, Tax Returns, and accountants'
workpapers), contracts, employees, representatives, and agents (including
attorneys, accountants, and independent engineers) and facilities (including
office facilities) of the Presidio Parties, during normal business hours and
provided that such access does not unreasonably interfere with the ongoing
business or operations of any of the Presidio Parties. Presidio shall upon
request furnish promptly to Tom Brown (at Tom Brown's expense) a copy of any
file, book, record, contract, or other written information concerning a
Presidio Party (or any of their respective assets) that is within the
possession or control of a Presidio Party. During such period, Presidio will
make available to a reasonable number of Tom Brown representatives adequate
office space and facilities at the principal office facility of Presidio in
Denver, Colorado.
4.2 Confidentiality Obligations. Notwithstanding anything in this
Article IV to the contrary, Presidio shall not be obligated under the terms of
this Article IV to disclose to Tom Brown or its representatives, or grant Tom
Brown or its representatives access to, information that is within Presidio's
possession or control but subject to a valid and binding confidentiality
agreement with a third party without first obtaining the consent of such third
party, and Presidio, to the extent reasonably requested by Tom Brown, will use
its reasonable efforts to obtain any such consent.
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4.3 Indemnity Regarding Access. Tom Brown agrees to indemnify,
defend, and hold harmless each Presidio Party, their respective directors,
officers, employees, agents, and representatives from and against any and all
claims, liabilities, losses, costs, and expenses (including court costs,
expenses of litigation and reasonable attorneys' fees) in connection with
personal injuries to personnel of Tom Brown or its representatives, including
death or property damage arising out of or relating to the access to the
business, property, and records afforded to Tom Brown.
4.4 Tom Brown to Vote for Plan of Reorganization. Tom Brown shall
vote, or shall cause to be voted, all Presidio Securities beneficially owned by
Tom Brown or any Affiliate thereof in favor of the Plan of Reorganization.
4.5 Petition Under the Bankruptcy Code.
(a) Each of the Presidio Parties (other than Presidio
West Virginia) shall, on or before August 1, 1996, commence their respective
Chapter 11 cases (together with Presidio West Virginia's pending Chapter 11
case, collectively, the "Reorganization Cases"). If prior to the voluntary
commencement of the Reorganization Cases by the Presidio Parties (other than
Presidio West Virginia) there should be commenced an involuntary case against
Presidio or Presidio Exploration, and such Presidio Party consents to the entry
of an order for relief in such involuntary case, then each of the Presidio
Parties that are not subject to the involuntary case shall promptly commence a
Reorganization Case. Each of the foregoing voluntary filings or consents by
the Presidio Parties (other than Presidio West Virginia) is hereinafter
referred to as a "Bankruptcy Event".
(b) Upon the occurrence of a Bankruptcy Event, the
Presidio Parties will file, or will cause to be filed, all pleadings, requests,
and other items and information required to be filed with the Bankruptcy Court
in a form reasonably acceptable to Tom Brown. The Presidio Parties will use
their reasonable efforts to file the Plan of Reorganization and a Disclosure
Statement by no later than thirty (30) days following the occurrence of a
Bankruptcy Event. The Presidio Parties hereto shall use their reasonable
efforts to cause the Bankruptcy Court to confirm the Plan of Reorganization and
approve the Disclosure Statement and approve, authorize, and order assumption
of this Agreement and all other agreements contemplated by, or related to, this
Agreement.
(c) Not later than three (3) business days after the
occurrence of a Bankruptcy Event, Presidio shall file a motion in form and
substance reasonably acceptable to Tom Brown and seek a prompt hearing thereon
before the Bankruptcy Court for an order reasonably satisfactory in form and
substance to Tom Brown approving the provisions of Section 9.2 of this
Agreement (the "Initial Order").
(d) Not later than three (3) business days after the
occurrence of a Bankruptcy Event, Presidio shall file a motion in form and
substance reasonably acceptable to Tom Brown and seek a prompt hearing thereon
before the Bankruptcy Court for an order establishing a claims bar date setting
the last date for filing prepetition claims and administration claims (in each
case, other than claims in respect of trade obligations for services,
materials, or goods incurred or arising in the ordinary course of business, the
Bank Obligations, the Debt Obligations, or the Presidio Securities),
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including claims described in Section 510(b) of the Bankruptcy Code, which date
shall not be less than twenty (20) days prior to the Confirmation Date (the
"Bar Date Order").
(e) The parties acknowledge that Presidio West Virginia
currently has its Reorganization Case pending and that notwithstanding the
execution and delivery of this Agreement by Presidio West Virginia or any
provision contained herein to the contrary, this Agreement shall not be
effective as to Presidio West Virginia until such time as the Bankruptcy Court
shall have entered an order authorizing Presidio West Virginia to execute and
deliver this Agreement. After the date of this Agreement, Presidio shall cause
Presidio West Virginia to promptly seek entry of an order of the Bankruptcy
Court in Presidio West Virginia's Reorganization Case approving Presidio West
Virginia's execution and delivery of this Agreement.
4.6 Preparation of Disclosure Statement.
(a) Prior to the date of this Agreement, the parties
hereto have prepared the Disclosure Statement in a form necessary to
obtain lawful and enforceable acceptances or rejections of the Plan of
Reorganization from the appropriate impaired classes of creditors and
equity securityholders (the "Presidio Securityholders") and to
implement and to obtain a Final Order confirming the Plan of
Reorganization and to cause the issuance and distribution of the
Exchange Common Stock in accordance with the Plan of Reorganization to
be effected in compliance with all applicable provisions of the
Bankruptcy Code, the 1933 Act, the 1934 Act, and any other federal or
state law relating to the transactions contemplated by this Agreement.
(b) The solicitation of acceptances or rejections of the
Plan of Reorganization shall be conducted in accordance with the
requirements of Chapter 11 of the Bankruptcy Code (including Sections
1125 and 1145 thereof), the attendant bankruptcy rules of practice,
and those federal or state securities laws which are not preempted or
rendered moot by the applicability of the Bankruptcy Code and
attendant bankruptcy rules of practice.
(c) The parties heretofore have furnished and will
continue to furnish to each other such information with respect to
themselves, their respective associates and Affiliates and their
respective assets and businesses (including such separate financial
information of or relating to each party hereto) as shall be required
for the Disclosure Statement and all additional filings as required by
the Bankruptcy Code, the 1933 Act, the 1934 Act, state securities
laws, the rules and regulations under such laws, and the rules and
regulations of any applicable securities exchanges. All information
that may be hereafter included in the Disclosure Statement and such
additional filings, as applicable, relating to Tom Brown shall be
approved by Tom Brown and all information that may be hereafter
included in the Disclosure Statement and such additional filings, as
applicable, relating to the Presidio Parties shall be approved by
Presidio.
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4.7 Disclosure Statement.
(a) Presidio hereby covenants and agrees with Tom Brown
that the Disclosure Statement (at the time it is first mailed to the
Presidio Securityholders and at the Closing) will not contain an
untrue statement of a material fact or omit 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 are
made, not misleading (provided, however, that this clause shall only
apply to information contained in the Disclosure Statement that was
supplied by Presidio specifically for inclusion therein). If, at any
time prior to the Closing, any event with respect to Presidio, or with
respect to other information supplied by Presidio specifically for
inclusion in the Disclosure Statement occurs and such event is
required by the Bankruptcy Code to be described in an amendment or
supplement to the Disclosure Statement, then Presidio shall promptly
notify Tom Brown of such occurrence and the parties shall cooperate
with each other in the preparation and filing and obtaining Bankruptcy
Court approval of such amendment or supplement, and, after obtaining
Bankruptcy Court approval thereof, its dissemination.
(b) Tom Brown hereby covenants and agrees with Presidio
that the Disclosure Statement (at the time it is first mailed to the
Presidio Securityholders, and at the Closing) will not contain an
untrue statement of a material fact or omit 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 are
made, not misleading (provided, however, that this clause shall only
apply to information contained in the Disclosure Statement that was
supplied by Tom Brown specifically for inclusion therein). If, at any
time prior to the Closing, any event with respect to Tom Brown, or
with respect to other information supplied by Tom Brown specifically
for inclusion in the Disclosure Statement occurs and such event is
required by the Bankruptcy Code to be described in an amendment or
supplement to the Disclosure Statement, then Tom Brown shall promptly
notify Presidio of such occurrence and the parties shall cooperate
with each other in the preparation and filing and obtaining Bankruptcy
Court approval of such amendment or supplement, and, after obtaining
Bankruptcy Court approval thereof, its dissemination.
(c) No amendment or supplement to the Disclosure
Statement will be filed or otherwise disseminated to the Presidio
Securityholders without the approval of both Tom Brown and Presidio.
4.8 Solicitation of Presidio Securityholders. Presidio will use
its good faith efforts to cause to be solicited from the Presidio
Securityholders their acceptance of the Plan of Reorganization, and except as
the board of directors of Presidio may otherwise determine appropriate in order
to properly discharge its fiduciary duties, Presidio will recommend acceptance
of the Plan of Reorganization to the Presidio Securityholders; provided,
however, that no solicitation of the Presidio Securityholders with respect to
the Plan of Reorganization shall be made until:
(a) The Bankruptcy Court has entered an order determining
and finding that (i) the Disclosure Statement complies with the
provisions of Section 1125 of the Bankruptcy
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Code, (ii) the solicitation of the Presidio Securityholders with
respect to their approval of the Plan of Reorganization may be made by
means of the Disclosure Statement pursuant to Section 1125 of the
Bankruptcy Code, and (iii) each of Tom Brown and Presidio will be
afforded the protection granted by Section 1125(e) of the Bankruptcy
Code with respect to such solicitation; and
(b) The written opinion of Presidio's investment bankers
or financial advisors referred to in Section 5.18 shall have been
reconfirmed and shall not have been withdrawn or revised in any
material respect.
4.9 Cooperation; Notification of Certain Changes. The parties
hereto will cooperate and use their reasonable efforts to (a) obtain (and will
prepare all registrations, filings, applications, requests, and notices
required to obtain) all permits, approvals, and consents of governmental bodies
or third parties which may be necessary to consummate the transactions
contemplated by this Agreement, including but not limited to all filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended from time to time (the "Hart Scott Act"), and the rules and regulations
promulgated thereunder and (b) to cure existing title defects. The parties
hereto will otherwise cooperate and provide each other with such assistance as
may reasonably be required to perform or satisfy all covenants and conditions
required to be performed or satisfied hereunder. Each party will promptly
notify the other parties hereto of any event of which they obtain knowledge
which has or might reasonably be expected to have a material adverse effect on
their respective businesses or which, if known on the date of this Agreement,
would have been required to be disclosed pursuant to this Agreement.
4.10 Listing Application. On or before the date of filing of the
Disclosure Statement, Tom Brown will file a listing application with NASDAQ for
the approval of the listing thereon of the Exchange Common Stock.
4.11 Third Party Consents. Promptly after the commencement of a
case under the Bankruptcy Code as contemplated herein, Presidio will use its
reasonable efforts to obtain each Third Party Consent, or if not otherwise
obtained, to file, or cause to be filed, all pleadings, requests, and other
items and information required to be filed with, the Bankruptcy Court (to the
extent applicable), seeking to obtain a Final Order or determination from the
Bankruptcy Court establishing that such Third Party Consent is not applicable
to or necessary in connection with the transactions contemplated by this
Agreement. As used in this Agreement, "Third Party Consent" means any
third-party consents relating to the Oil and Gas Assets that would be required
in respect of the transactions contemplated by this Agreement.
4.12 Agreements of Affiliates. At least thirty (30) days prior to
the Closing Date, Presidio shall cause to be prepared (and updated from time to
time as may be necessary) and delivered to Tom Brown a list identifying all
persons who, at that time, may be deemed to be "affiliates" of Presidio as that
term is used in paragraph (a) of Section 1145 of the Bankruptcy Code and
paragraphs (c) and (d) of Rule 145 under the 1933 Act. Presidio shall use its
reasonable efforts to cause each person who is identified as an affiliate of
Presidio in such list to execute and deliver to Tom Brown, on or prior to the
Closing Date, a written agreement, in the form attached hereto as Exhibit E.
Tom Brown
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shall be entitled to place legends as specified in such agreements on the
certificates representing any Exchange Common Stock to be distributed to such
persons in the Exchange.
4.13 Amendment to Plan. Without the prior consent of Tom Brown,
which shall not be unreasonably withheld, no Presidio Party shall amend the
terms and provisions of the Plan of Reorganization.
4.14 Costs and Expenses. Except as set forth in Section 9.2(b),
each party to this Agreement will be responsible for and will pay all costs,
fees, and expenses incurred by such party in connection with the preparation,
negotiation, and execution of this Agreement, the Plan of Reorganization, the
Disclosure Statement and all other documents and instruments contemplated
herein, including:
(a) all fees, costs, and expenses of its counsel,
engineers, accountants, financial advisors, and others engaged by such
party; and
(b) all fees, costs and expenses incurred by such party
in connection with filings made by it relating to the transactions
contemplated by this Agreement under the Hart Scott Act, the 1933 Act,
the 1934 Act, the Bankruptcy Code, or any other federal or state laws,
rules, and regulations.
4.15 New D&O Insurance.
(a) At the Closing, Tom Brown shall take all reasonable
actions necessary to acquire or to cause (which shall include the
payment of the required premium in the amount described in the policy
attached to the letter identified below to the extent not previously
paid) Presidio to acquire for the benefit of each of the Directors and
Officers the policy of directors and officers liability insurance in
the form attached to that certain letter of even date herewith from
Presidio to Tom Brown and identified therein as being provided
pursuant to this Section 4.15 (the "New D&O Insurance"). For the time
period commencing as of the Closing Date and ending as of the sixth
anniversary of the Closing Date, Tom Brown shall take all reasonable
actions required by the terms of the New D&O Insurance policy
necessary to keep in full force and effect the New D&O Insurance.
(b) From and after the Closing neither Tom Brown nor any
Presidio Party shall take any action to modify any provision contained
in the certificate of incorporation or bylaws of any Presidio Party or
any contract or agreement which exculpates, limits, or restricts the
liability of any of the Directors and Officers to any Presidio Party;
any Presidio Securityholder or any other person arising out of or
pertaining to acts or omissions, by such person in his capacity as a
director, officer, employee or agent of a Presidio Party.
(c) On or before the Closing, Presidio shall (i) use its
reasonable efforts to obtain waivers and releases effective as of the
Closing, in form and substance reasonably satisfactory to Tom Brown,
of all rights to indemnity which may exist in favor of any officers or
directors of any of the Presidio Parties (and from any other persons
who may be
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entitled to indemnity from any of the Presidio Parties) under the
respective charters, by-laws or agreements of any of the Presidio
Parties or under applicable law or (ii) obtain a Final Order of the
Bankruptcy Court which discharges all such obligations of indemnity.
(d) From and after the Closing, Tom Brown shall use its
best efforts or shall take all actions necessary to cause Presidio to
use its best efforts to give each Director and Officer notice (within
five (5) business days) of the assertion or threatened (in writing)
assertion of any claims, actions, suits, or proceedings that name or
threaten (in writing) to name any Director or Officer as a party or
which relates to acts or omissions by any such person in his capacity
as a director, officer, employee or agent of a Presidio Party.
(e) The provisions of this Section 4.15 are intended to
be for the benefit of, and shall be enforceable by, the parties hereto
and each of the Directors and Officers and their respective heirs and
representatives.
4.16 Information Kept Confidential. Except as otherwise
contemplated in this Agreement, Tom Brown shall hold in strict confidence all
aspects of the transactions contemplated by this Agreement and all information
and data concerning the Oil and Gas Assets which has been obtained from
Presidio in connection with the transactions contemplated by this Agreement in
accordance with the terms and provisions of the Confidentiality Agreement,
which Confidentiality Agreement is hereby ratified and adopted by the parties
hereto and incorporated by reference herein.
4.17 Pre-Closing Action. Presidio and Tom Brown shall use all
reasonable efforts to cause all of the conditions precedent to the consummation
of the transactions contemplated by this Agreement applicable to each of them
to be met as promptly as possible and to take all such other actions as may be
reasonably necessary to effect the consummation of the transactions
contemplated by this Agreement.
4.18 Public Announcements. Each party hereto shall consult with
the other party hereto prior to any public announcement by such party regarding
the existence of this Agreement, the contents hereof or the transactions
contemplated hereby; provided, however, the foregoing shall not restrict
disclosures by Tom Brown or Presidio made in order to comply with applicable
securities or other laws or made in order to comply with judicial decrees or
orders or existing loan or other agreements binding such party (or its
Affiliates), as determined in such party's discretion.
4.19 Conduct of Presidio's Business Pending Closing. Except as
otherwise contemplated by this Agreement, Presidio covenants and agrees with
Tom Brown that, from the date of this Agreement until the Closing, each
Presidio Party will conduct its business only in the ordinary and usual course
consistent with past practices. Notwithstanding the preceding sentence,
Presidio covenants and agrees with Tom Brown that, except as otherwise
contemplated in this Agreement or the Plan of Reorganization, from the date of
this Agreement until the Closing, without the prior written consent of Tom
Brown:
(a) No Presidio Party will engage in any type of business
in which it is not engaged as of the date of this Agreement;
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(b) No Presidio Party will (i) amend its certificate or
articles of incorporation or bylaws, (ii) split, combine, or
reclassify any of its outstanding capital stock or other securities or
make any other changes in its capital structure, (iii) except for
dividends or distributions made to another Presidio Party, declare,
set aside, or pay any dividends or other distributions (whether
payable in cash, property, or securities) with respect to its capital
stock, (iv) issue, sell, or agree to issue or sell any securities,
including its capital stock, any rights, options, or warrants to
acquire its capital stock, or securities convertible into or
exchangeable or exercisable for its capital stock (other than shares
of Presidio Common Stock issued pursuant to the exercise of any
Presidio Options or Warrants), (v) purchase, cancel, retire, redeem,
or otherwise acquire any of its outstanding capital stock or other
securities, (vi) merge or consolidate with, or transfer all or
substantially all of its assets to, another corporation or other
business entity, (vii) liquidate, wind-up, or dissolve (or suffer any
liquidation or dissolution), or (viii) enter into any contract,
agreement, commitment, or arrangement with respect to any of the
foregoing;
(c) Except as set forth in Schedule 4.19, no Presidio
Party will (i) acquire any corporation, partnership, or other business
entity or any interest therein (other than interests in joint
ventures, joint operation or ownership arrangements, or tax
partnerships acquired in the ordinary course of business), (ii) sell,
lease or sublease, transfer, or otherwise dispose of or mortgage,
pledge, or otherwise encumber or grant any rights or interests with
respect to any Oil and Gas Assets that, individually or in the
aggregate, were assigned a value in the Reserve Report of $100,000 or
more or any other assets that, individually or in the aggregate, have
a value at the time of such sale, lease, sublease, transfer, or
disposition of $100,000 or more (except that this clause shall not
apply to the sale of severed oil, gas and other minerals produced and
sold in the ordinary course of business or the expenditure of the
Presidio Parties' cash and cash items in the ordinary course of
business), (iii) farm-out any Oil and Gas Assets or interest therein,
(iv) sell, transfer, or otherwise dispose of or mortgage, pledge, or
otherwise encumber any securities of any other person, (v) enter into
any agreement requiring a payment or expenditure thereunder by a
Presidio Party in excess of $100,000 and not terminable by a Presidio
Party upon notice of thirty (30) days or less and without penalty or
other obligation, (vi) enter into any transaction (x) pursuant to
which a Presidio Party will make a payment or incur an expenditure in
excess of $100,000 or (y) not in the ordinary course of business and
not contemplated by this Agreement, (vii) agree with any person to
limit or otherwise restrict in any manner the ability of a Presidio
Party to compete or otherwise conduct its business, or (viii) enter
into any contract, agreement, commitment, or arrangement with respect
to any of the foregoing;
(d) No Presidio Party shall make any payments in respect
of the Debt Obligations; provided, however, that the Presidio Parties
may make interest payments accruing on the Subordinated Gas Indexed
Notes not to exceed $8,000 per quarter;
(e) No Presidio Party will (i) except for loans extended
by another Presidio Party, incur any additional indebtedness for
borrowed money or any other obligation or liability (other than
interest accruing on existing indebtedness and liabilities incurred in
the ordinary course of business and consistent with past practices),
(ii) assume, endorse (other than
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endorsements of negotiable instruments in the ordinary course of
business), guarantee, or otherwise become liable or responsible
(whether directly, contingently, or otherwise) for the liabilities or
obligations of any person not a Presidio Party, (iii) make any
material loans, advances or capital contributions to, or investments
in any person (other than loans or advances in the ordinary course of
business and consistent with past practices, advances for business
expenses made to officers and employees of such Presidio Party,
short-term investments made pursuant to customary cash management
systems of such Presidio Party in the ordinary course and consistent
with past practices and loans, advances, capital contributions to, or
investments in, another Presidio Party) or (iv) enter into any
contract, agreement, commitment, or arrangement with respect to any of
the foregoing;
(f) Each Presidio Party will operate, maintain, and
otherwise deal with the Oil and Gas Assets in accordance with good and
prudent oil and gas field practices (including the making of all
appropriate repairs, renewals, and replacements of equipment
associated therewith) and in material compliance with all applicable
oil and gas leases and other contracts or agreements and all
applicable laws, rules, and regulations;
(g) No Presidio Party will pay or incur drilling or other
capital expenditures in excess of $100,000 with respect to any well
(other than in accordance with the expenditures listed in Schedule
4.19 or, under emergency circumstances, expenditures necessary for the
preservation or protection of a Presidio Party's assets or the
preservation or protection of the public safety or health);
(h) No Presidio Party shall voluntarily resign, transfer
or otherwise relinquish any right it has as of the date of this
Agreement, as operator of any of the Oil and Gas Assets;
(i) No Presidio Party will (i) enter into, or otherwise
become liable or obligated under or pursuant to (x) any employee
benefit, pension, or other plan (whether or nor subject to ERISA), (y)
any stock option, stock purchase, incentive, or deferred compensation
plans or arrangements or fringe benefit plan, or (z) any consulting,
employment, severance, termination, or similar agreement with any
person, except for the Existing Plans, (ii) hire any key employee,
(iii) grant, or otherwise become liable for or obligated to pay, any
severance or termination payments, bonuses, or increases in
compensation or benefits to, or forgive any indebtedness of, any
director, officer, employee, or consultant (other than payments,
bonuses or increases in compensation or benefits or forgiveness of
indebtedness that are required by the terms of the Existing Plans as
in effect as of the date of this Agreement), or (iv) enter into any
contract, agreement, commitment, or arrangement to do any of the
foregoing;
(j) Presidio will keep and maintain accurate consolidated
books, records, and accounts in accordance with GAAP;
(k) Each Presidio Party, as appropriate, will (i) pay all
Taxes, assessments, and other governmental charges imposed upon any of
its assets or with respect to its franchises, business, income, or
assets before any penalty or interest accrues thereon, (ii) pay all
claims (including claims for labor, services, materials, and supplies)
that have become due and
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payable and which by law have or may become a Lien upon any of its
assets prior to the time when any penalty or fine shall be incurred
with respect thereto or any such Lien shall be imposed thereon, and
(iii) comply in all material respects with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental
Authority (provided, however, that a Presidio Party may contest the
imposition of any Taxes, assessments, and other governmental charges,
any such claim, or the requirements of any applicable law, rule,
regulation, or order if done so in good faith by appropriate
proceedings and if adequate reserves are established in accordance
with GAAP or as may be determined as sufficient by Presidio's board of
directors);
(l) Each Presidio Party will use its reasonable efforts
to maintain in full force and effect the policies or binders of
insurance currently maintained by it and shall promptly notify Tom
Brown if any are not so maintained;
(m) Each Presidio Party will use its reasonable efforts
to preserve intact its assets and business organization and to
preserve the goodwill of those having business relationships with it;
provided, however, that a Presidio Party shall not be required to make
any payments (other than as may be contractually committed and due) or
enter into or amend any contractual arrangements to satisfy the
foregoing obligation; and
(n) Each Presidio Party will at all times preserve and
keep in full force and effect its corporate existence and rights and
franchises material to its performance under this Agreement.
4.20 No Solicitation.
(a) From and after the date of this Agreement, no
Presidio Party will (and each Presidio Party will use its reasonable
efforts to cause the Presidio Representatives not to), directly or
indirectly, make, solicit, initiate, engage or participate in
discussions or negotiations with or provide information to, any person
(other than Tom Brown or any of its representatives) or enter into any
agreement or agreement in principle, or announce any intention to do
any of the foregoing, with respect to any offer or proposal to acquire
all or any part of the outstanding capital securities of any Presidio
Party or all or any material portion of the assets or business of a
Presidio Party, whether by merger, purchase of assets, tender offer,
exchange offer, business combination, sale of substantial assets, sale
of securities, liquidation, dissolution, or otherwise (an "Alternative
Transaction"), other than the transactions contemplated by this
Agreement.
(b) Promptly following the execution of this Agreement,
each Presidio Party will (and will cause the Presidio Representatives
to) terminate any existing activities, discussions, or negotiations
with third parties (other than Tom Brown) with respect to any possible
Alternative Transaction.
(c) Notwithstanding the provisions of Section 4.20(a) and
Section 4.20(b), (i) a Presidio Party and the Presidio Representatives
may furnish information to and negotiate and
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have discussions with any person who has made an unsolicited bona fide
proposal in regard to an Alternative Transaction if the board of
directors of Presidio determines, after consultation with its outside
legal counsel, that the failure to furnish such information to or
negotiate or have discussions with such person conflicts with the
proper discharge of their fiduciary duties and (ii) the board of
directors of Presidio shall not be prohibited from taking and publicly
disclosing a position with respect to an Alternative Transaction if
required to do so pursuant to Rule 14d-9 and Rule 14e-2 under the 1934
Act or from making such disclosure which, in the judgment of the board
of directors of Presidio, may be required under applicable law.
Presidio will promptly notify Tom Brown in the event of any
discussion, negotiation, proposal or offer of the type referred to
above or any decision to furnish information or take any other action
referred to in this Section 4.20(c).
4.21 Employees. Within sixty (60) days of the date of this
Agreement, Tom Brown shall provide Presidio with a list of the employees of the
Presidio Parties who as of that date, Tom Brown intends not to be employed
after the Closing by either Tom Brown, Presidio, or an Affiliate thereof,
together with the proposed date that each such employee's employment will be
terminated. From and after such date, Tom Brown shall use its reasonable
efforts to provide Presidio with one or more supplements to such list and, at
least thirty (30) days prior to the Closing, Tom Brown shall use its reasonable
efforts to provide Presidio with a final supplement to such list. The
provisions of this Section 4.21 are not intended to create and shall not be
construed as creating any right in favor of any such employee of the Presidio
Parties, including any continuing right of employment on the part of any
employee who is not named on such list or supplement thereto.
4.22 Severance Plan and Agreements. Tom Brown shall take all
actions necessary to cause (which, if necessary, shall include making
additional capital contributions to Presidio consisting of cash or shares of
Tom Brown Common Stock, as appropriate) Presidio to pay at the Closing to all
employees who are either named in the list or any supplement thereto to be
provided pursuant to Section 4.21 or whose employment is otherwise terminated
at Closing, all amounts which such employees would be due (at or within thirty
(30) days of the time of their termination of employment) under the Severance
Plan and Key Employee Severance Agreements set forth in Schedule 4.22,
including all amendments and modifications thereto (collectively, the
"Severance Plan and Agreements"). From and after the Closing, Tom Brown shall
take all actions necessary to cause (which, if necessary, shall include making
additional capital contributions to Presidio consisting of cash or shares of
Tom Brown Common Stock, as appropriate) Presidio to assume and make all other
payments, and to assume and provide all benefits, required to be paid or
provided to the employees and officers of the Presidio Parties in accordance
with the provisions of the Severance Plan and Agreements. Tom Brown hereby
acknowledges that the obligations under the Key Employee Severance Agreements
set forth in Schedule 4.22 include the obligation arising under Section 2
thereof to provide the rights and benefits described in Section 3 thereof to
any such employee whose employment is terminated at any time within two years
following the Closing Date. Tom Brown shall take all actions necessary to
cause Presidio to not amend or modify the terms and provisions of the Severance
Plan and Agreements without the prior consent of the beneficiaries or
beneficiary, as applicable, of such Severance Plan and Agreements. Tom Brown
shall take all actions necessary to cause (which, if necessary, shall include
making additional cash capital contributions to Presidio) Presidio to provide
insurance coverage for the time period required under
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the Severance Plan and Agreements, under one or more insurance plans providing
substantially comparable benefits to those provided under Presidio's current
insurance plans and at no employee cost, to all employees of Presidio who are
entitled to such benefits under the Severance Plan and Agreements. Nothing in
this Section 4.22 shall be construed to limit the right of any employee to any
benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
4.23 Presidio ESOP. Prior to the Closing, Presidio shall terminate
the Employee Stock Ownership Plan of Presidio Oil Company (the "ESOP"), cause
all current participants in the ESOP to become 100% vested in their accounts
under the ESOP, and file an application for a favorable determination letter
with the Internal Revenue Service that the termination of the ESOP does not
adversely affect the qualification of the ESOP. At the Closing, Presidio shall
cause the ESOP accounts (then consisting of Exchange Common Stock) to be
distributed to the participants and beneficiaries pursuant to the terms of the
ESOP.
4.24 Presidio 401K. Subsequent to the Closing, Tom Brown may cause
Presidio to terminate the Presidio Oil Company 401k Plan (the "401k Plan") or
merge the 401k Plan into another qualified plan of Tom Brown. From and after
the Closing, Tom Brown shall take all actions necessary to cause Presidio to
cause each employee of a Presidio Party who is not employed by Tom Brown or an
Affiliate thereof after the Closing or any such employee who is employed by Tom
Brown or an Affiliate thereof after the Closing but whose employment is
subsequently terminated to receive a distribution of all benefits under the
401k Plan of such person as soon after such termination of employment as is
administratively possible.
4.25 Other Plans. Except to the extent already provided in Section
4.22, at the Closing, Tom Brown shall take all actions necessary to cause
(which, if necessary, shall include making additional cash contributions to
Presidio) Presidio to pay at the Closing to the employees and officers of the
Presidio Parties all amounts which such employees and officers would be due (at
or within thirty (30) days of the time of their termination of employment) in
accordance with the provisions of the Employee Benefit Plans. Except to the
extent already provided in Sections 4.22, 4.23 and 4.24, from and after the
Closing, Tom Brown shall take all actions necessary to cause (which, if
necessary, shall include making additional cash capital contributions to
Presidio) Presidio to assume and make all vested payments, and provide all
benefits, required to be paid or provided to the employees and officers of the
Presidio Parties in accordance with the provisions of the Employee Benefit
Plans.
4.26 Letters of Credit. At the Closing, Tom Brown shall or shall
cause Presidio to have issued by a commercial bank or banks a substitute letter
of credit for each of the letters of credit set forth in Schedule 4.26 in form
and substance acceptable to each of the beneficiaries of each such letter of
credit.
4.27 Certain Tom Brown Transactions. Except as otherwise
contemplated by this Agreement, Tom Brown covenants and agrees with Presidio
that, from the date of this Agreement until the Closing, Tom Brown and its
Affiliates who are controlled by it will, taken as a whole, remain primarily
engaged in the businesses relating to the exploration and production of oil,
gas and other minerals and the treatment, processing, storage, transportation
and marketing of oil, gas and
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other minerals. Prior to the Exchange and until the Closing or termination of
this Agreement, Tom Brown shall not and it shall not allow any Affiliate
thereof to directly or indirectly sell, transfer, or otherwise dispose of
(except to an Affiliate) any Presidio Securities beneficially owned as of the
date of this Agreement by Tom Brown or any Affiliate thereof or any Presidio
Securities hereafter acquired by Tom Brown or any Affiliate thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PRESIDIO
5.1 Disclaimers.
(a) Prior to the execution of this Agreement, Tom Brown
has been afforded the opportunity to inspect the Oil and Gas Assets
and to examine the records of Presidio at Presidio's offices with
respect to the Oil and Gas Assets, and has been afforded access to all
information in Presidio's possession with respect to the Oil and Gas
Assets. TOM BROWN ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
THIS ARTICLE V, PRESIDIO, ITS OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS HAVE MADE NO, AND PRESIDIO HEREBY EXPRESSLY
DISCLAIMS ANY, REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OR
COMPLETENESS OF SUCH INFORMATION, AS TO A PRESIDIO PARTY'S TITLE TO
THE OIL AND GAS ASSETS, OR AS TO ANY OTHER INFORMATION, DATA OR OTHER
MATERIALS (WRITTEN OR ORAL) FURNISHED TO TOM BROWN BY OR ON BEHALF OF
PRESIDIO (INCLUDING THE EXISTENCE OR EXTENT OF OIL, GAS OR OTHER
MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING ANY
SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCTION PRICING
ASSUMPTIONS, PRESENT OR PAST PRODUCTION RATES, COMPLIANCE WITH LEASE
TERMS, THE CONDITION OF ANY WELL, AND THE ABILITY TO SELL OIL OR GAS
PRODUCTION AFTER CLOSING).
(b) PRESIDIO EXPRESSLY DISCLAIMS ANY WARRANTY AS TO THE
CONDITION OF ANY PERSONAL PROPERTY, FIXTURES AND ITEMS OF MOVABLE
PROPERTY COMPRISING ANY PART OF THE OIL AND GAS ASSETS INCLUDING (i)
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED
OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY
IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS, (iv) ANY RIGHTS OF TOM BROWN UNDER APPLICABLE STATUTES TO
CLAIM DIMINUTION OF CONSIDERATION, AND (v) ANY CLAIM BY TOM BROWN FOR
DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING
EXPRESSLY UNDERSTOOD BY TOM BROWN THAT THE PERSONAL PROPERTY, FIXTURES
AND ITEMS ARE TO BE ACCEPTED AS IS, WHERE IS, WITH ALL FAULTS, AND IN
THEIR PRESENT CONDITION AND STATE OF REPAIR AND THAT TOM BROWN HAS
MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS TOM BROWN DEEMS
APPROPRIATE.
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(c) NOTWITHSTANDING ANY PROVISIONS CONTAINED HEREIN TO
THE CONTRARY, NO REPRESENTATION AND WARRANTY CONTAINED IN THIS ARTICLE
V MAY BE BREACHED BY REASON OF ANY PERMITTED CLAIM.
(d) All information and data set forth in each of the
separately numbered Schedules hereto shall be deemed by this reference
to be set forth in all such other Schedules delivered pursuant to this
Agreement; provided, that the information and data set forth in
Schedule 5.25 shall not be deemed pursuant to this Section 5.1(d) to
be set forth in Schedule 5.12. Except as otherwise provided in this
Section 5.1(d), it is the intent of the parties that once particular
information and data is disclosed in a Schedule hereto, that the same
information and data need not be contained in another Schedule hereto.
(e) Subject to this Section 5.1, and the information and
data disclosed on any Schedule hereto, Presidio hereby makes the
representations and warranties contained in the remaining Sections of
this Article V.
5.2 Existence. Each of Presidio Exploration and Palisade Oil is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado and each of Presidio and Presidio West Virginia
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Each Presidio Party is duly qualified to do
business as a foreign corporation in the state(s) where the character of the
properties owned or leased by such Presidio Party or the nature of its
activities make such qualification necessary. Each of the Presidio Parties has
full corporate power and authority to own its properties and assets and to
carry on its business as now being conducted.
5.3 Authorization and Enforceability. Each Presidio Party has the
corporate power and authority to enter into and, subject to the requisite
approval of the Bankruptcy Court and the Presidio Securityholders and the
issuance of the Confirmation Order, perform this Agreement and the transactions
contemplated by this Agreement. The execution, delivery, and performance of
this Agreement, and the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of each
Presidio Party except for the requisite approval of the Presidio
Securityholders. This Agreement constitutes the valid and binding obligation
of Presidio enforceable in accordance with its terms.
5.4 No Violations. Subject to the requisite approval of the
Presidio Securityholders and the issuance of the Confirmation Order, the
execution, delivery and performance of this Agreement by each Presidio Party
and the consummation of the transactions contemplated by this Agreement, will
not (a) violate, conflict with or result in a breach of any provision of the
certificates of incorporation or bylaws of any Presidio Party, (b) violate,
conflict with or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation of any Lien upon any of
the assets of any Presidio Party under, any contract, agreement, note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, lease, plan,
instrument or other document ("Contract") binding on any Presidio Party, (c)
violate any judgment, injunction, order, ruling, or decree applicable to any
Presidio Party
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as a party in interest, or the assets of any Presidio Party, or (d) violate any
law, rule, or regulation applicable to any Presidio Party or relating to its
assets.
5.5 Claims and Litigation. Except for the claims, actions, suits,
or proceedings expressly set forth in the Presidio SEC Documents or in Schedule
5.5, there are no claims, actions, suits, or proceedings pending (including
claims described in Section 510(b) of the Bankruptcy Code and new claims
asserted or new actions arising after the date of this Agreement that form a
part of suits or proceedings set forth in Schedule 5.5), or to the Knowledge of
Presidio, threatened against a Presidio Party.
5.6 Consents and Approvals. No consent, approval, order, or
authorization of, registration, declaration, or filing with, or permit (other
than filings required under the 1933 Act, the 1934 Act, the Hart Scott Act and
filings required by and the approval of the Bankruptcy Court) from any
Governmental Authority is required by or with respect to the Presidio Parties
in connection with the execution and delivery of this Agreement by the Presidio
Parties or the consummation by the Presidio Parties of the transactions
contemplated hereby, except for the approval of the Presidio Securityholders
and those otherwise expressly contemplated herein.
5.7 Presidio SEC Documents. Presidio has made available to Tom
Brown a true and complete copy of the Presidio SEC Documents, which are all the
documents (other than preliminary material) that Presidio was required to file
with the SEC since January 1, 1995. As of their respective dates, the Presidio
SEC Documents complied in all material respects with the requirements of the
1933 Act or the 1934 Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Presidio SEC Documents, and
none of the Presidio SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5.8 Taxes.
(a) Each Presidio Party and any affiliated, combined, or
unitary group of which any such corporation is or was a member
("Presidio Tax Affiliates") has timely filed all Tax Returns that are
required to be filed by it. All such Tax Returns were correct and
complete in all material respects.
(b) Each Presidio Party and each Presidio Tax Affiliate
has timely paid all Taxes that are due and payable (except for Taxes
that are being contested in good faith by appropriate proceedings as
of the date of this Agreement and for which reserves, which are
adequate under GAAP, have been established in the Presidio Financial
Statements).
(c) Each Presidio Party and each Presidio Tax Affiliate
has complied in all material respects with all applicable laws, rules,
and regulations relating to the withholding and payment of Taxes and
has in all material respects timely withheld and paid to the proper
governmental authorities all amounts required to have been withheld
and paid in connection
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with amounts paid or owing to any employee, independent contractor,
creditor, or stockholder.
(d) Except as set forth in Schedule 5.8, (i) no audits or
other administrative or court proceedings are currently pending
against a Presidio Party with regard to any Taxes for which a Presidio
Party could be liable, (ii) no dispute or claim concerning any Taxes
for which a Presidio Party could be liable either (A) has been claimed
or raised by any taxing authority in writing or (B) is known by the
directors and officers (and employees responsible for Tax matters) of
a Presidio Party, (iii) with respect to each Presidio Party, there are
no pending requests for rulings from any taxing authority with respect
to any Taxes, (iv) with respect to each Presidio Party, there are no
proposed reassessments by any taxing authority of any of the assets of
a Presidio Party, (v) with respect to each Presidio Party, there are
no agreements in effect to extend the time to file any material Tax
Return or to extend or waive the period of limitations for the
assessment or collection of any Taxes for which a Presidio Party may
be liable, and (vi) to the Knowledge of each Presidio Party, no claim
has been made by any taxing authority in a jurisdiction where a
Presidio Party does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction.
(e) Except as set forth in Schedule 5.8, none of the
Presidio Parties has made any payments, is obligated to make any
payments or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(f) Each of the Presidio Parties has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6662.
(g) No Presidio Party (i) is a party to any Tax
allocation or sharing agreement with any member of an Affiliated Group
filing a consolidated federal income Tax Return with such Presidio
Party, (ii) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return other than the group of which
Presidio is the parent or (iii) has liability for the federal income
taxes of any Person under Treas. Reg. Section 1.1502-6, as a
transferee or successor, by contract, or otherwise.
(h) Prior to the Closing, no material election with
respect to future Taxes will be made after the date of this Agreement
without the written consent of Tom Brown.
(i) The Presidio Parties have not filed a consent
pursuant to the collapsible corporation provisions of Section 341(f)
of the Code (or any corresponding provisions of state, local, or
foreign income tax law) or agreed to have Section 341(f)(2) of the
Code (or any corresponding provision of state, local, or foreign
income tax law) apply to any disposition of any asset owned by it.
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(j) None of the Major Assets is property that the
Presidio Parties are required to treat as being owned by any other
person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code.
(k) None of the Major Assets directly or indirectly
secures any debt the interest on which is tax- exempt under Section
103(a) of the Code.
(l) None of the Major Assets is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(m) No Presidio Party has agreed to make nor to the
Knowledge of any of the Presidio Parties is it required to make any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(n) The Presidio Parties have not participated in and
will not participate in any international boycott within the meaning
of Section 999 of the Code.
(o) The Presidio Parties are not and have not been a
United States real property holding corporation as defined in Section
897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(p) The Presidio Parties do not have and have not had a
permanent establishment in any foreign country, as defined in any
applicable tax treaty or convention between the United States and such
foreign country.
(q) The Presidio Parties have not made or will not make a
consent dividend election under Section 565 of the Code.
5.9 Employee Benefit Plans.
(a) Notwithstanding any other provision of this Agreement
to the contrary, this Section 5.9 contains the exclusive
representations and warranties of Presidio with respect to matters
governed by ERISA. Except for the Severance Plan and Agreements,
Schedule 5.9 sets forth a complete and accurate list of all "employee
benefit plans," as defined in Section 3(3) of ERISA, and any other
material employee compensation or benefit arrangement, including
severance pay, sick leave, vacation pay, salary continuation for
disability, consulting, or other compensation agreements, retirement,
supplemental executive retirement agreements, deferred compensation,
bonus, long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, dental insurance, life insurance,
and educational assistance programs maintained by a Presidio Party or
to which a Presidio Party is obligated to contribute, or with respect
to which any Presidio Party has any liability, and each employment
related agreement under which a Presidio Party is obligated (the
"Employee Benefit Plans"). Except for the Employee Benefit Plans and
the Severance Plan and Agreements, no Presidio Party maintains or has
any obligation under any other compensation
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based or related arrangement. Copies of each Employee Benefit Plan
have been furnished to Tom Brown.
(b) There is no material violation of ERISA with respect
to any of the Employee Benefit Plans.
(c) The Employee Benefit Plans have been maintained, in
all material respects, in accordance with their terms and with all
applicable federal and state law, each Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code is so qualified, and
no Presidio Party nor any "party in interest" or "disqualified person"
with respect to the Employee Benefit Plans has engaged in any
"prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA for which there is no exemption.
(d) No Employee Benefit Plan is subject to Title IV of
ERISA and no Presidio Party has any obligation, including any
contingent liability, to contribute to a "multiemployer plan" within
the meaning of Section 3(37) of ERISA.
(e) Except as set forth in Schedule 5.9, no Presidio
Party has any liability under any group health plan with respect to
any current or former employees beyond their termination of
employment, other than as required by Section 4980B of the Code or
pursuant to the Severance Plan and Agreements.
5.10 Financial Statements. The Presidio Financial Statements were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Rule 10-01 of Regulation S-X of
the SEC) and fairly present in accordance with applicable requirements of GAAP
(subject, in the case of the unaudited statements, to normal, recurring
adjustments, none or which will be material) the consolidated financial
position of Presidio and its consolidated subsidiaries as of their respective
dates and the consolidated results of operations and the consolidated cash
flows of Presidio and its consolidated subsidiaries for the periods presented
therein.
5.11 Capital Structure.
(a) As of the date of this Agreement, the authorized
capital stock of each Presidio Party is as set forth in Schedule 5.11.
(b) As of the close of business on June 30, 1996, there
were issued and outstanding (i) 25,318,085 shares of Presidio Class A
Common Stock and 3,216,585 shares of Presidio Class B Common Stock and
(ii) options and warrants relating to 1,268,000 shares of Presidio
Class A Common Stock and 1,025,981 shares of Presidio Class B Common
Stock as set forth in Schedule 5.11 (the "Presidio Options or
Warrants"). Except as set forth in this Section 5.11(b) or as
otherwise disclosed in the Presidio SEC Documents, there are
outstanding as of the date of this Agreement (i) no shares of capital
stock or other equity securities of Presidio, (ii) no securities of
Presidio or any other person convertible into or exchangeable or
exercisable for shares of capital stock or other equity securities of
Presidio,
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and (iii) no subscriptions, options, warrants, calls, rights
(including preemptive rights), commitments, understandings, or
agreements to which Presidio is a party or by which it is bound
obligating Presidio to issue, deliver, sell, purchase, redeem, or
acquire shares of capital stock or other equity securities of Presidio
(or securities convertible into or exchangeable or exercisable for
shares of capital stock or other equity securities of Presidio) or
obligating Presidio to grant, extend, or enter into any such
subscription, option, warrant, call, right, commitment, understanding,
or agreement.
(c) All outstanding shares of Presidio Common Stock are
validly issued, fully paid, and nonassessable and not subject to any
preemptive right.
(d) Presidio directly or indirectly owns all outstanding
shares of capital stock and other equity securities of each of the
other Presidio Parties, free and clear of all liens, claims, and
options of any nature (except for Permitted Encumbrances set forth in
clause (m) of the definition thereof). Except as set forth in
Schedule 5.11, there are outstanding as of the date of this Agreement
(i) no securities of a Presidio Party, or any other person convertible
into or exchangeable or exercisable for shares of capital stock or
other equity securities of a Presidio Party and (ii) no subscriptions,
options, warrants, calls, rights (including preemptive rights),
commitments, understandings, or agreements to which either a Presidio
Party is a party or by which it is bound obligating a Presidio Party
to issue, deliver, sell, purchase, redeem, or acquire shares of
capital stock or other equity securities of a Presidio Party or
securities convertible into or exchangeable or exercisable for shares
of capital stock or other equity securities of a Presidio Party or
obligating a Presidio Party to grant, extend, or enter into any such
subscription, option, warrant, call, right, commitment, understanding,
or agreement.
5.12 No Undisclosed Liabilities. No Presidio Party has any direct
or indirect liabilities, indebtedness, obligations, expenses, claims (including
claims as defined in Section 101(5) of the Bankruptcy Code, and disputed
claims, obligations or liens as defined in Section 101(37) of the Bankruptcy
Code), deficiencies, guarantees or endorsements of or by any person (other than
endorsements of notes, bills and checks presented to banks for collection or
deposit in the ordinary course of business) of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable, or otherwise
("Liabilities"), other than (a) Liabilities reflected in the Presidio Financial
Statements in accordance with GAAP or disclosed in the Presidio SEC Documents,
(b) Liabilities incurred in the ordinary course of business subsequent to
December 31, 1995, (c) Liabilities arising under or otherwise disclosed in this
Agreement (except for disclosures made pursuant to Section 5.25), (d)
Liabilities set forth in Schedule 5.12, (e) Liabilities that have been
reimbursed or paid under insurance coverage maintained by the Presidio Parties
or any other person or as to which an insurance company or other insuring
entity has acknowledged its obligation to reimburse or pay such Liabilities,
and (f) Liabilities arising from any agreement, fact, event, or action that is
the subject matter of any other representation and warranty contained in this
Article V (other than Section 5.25).
5.13 Absence of Certain Changes or Events. Except as otherwise set
forth in either Schedule 5.13, or the Presidio SEC Documents, or as
contemplated by this Agreement, since
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December 31, 1995, the Presidio Parties have used all reasonable efforts to
preserve and retain the business, employees, properties, suppliers, and
goodwill of the Presidio Parties and have operated their respective operations
and conducted business generally only in the ordinary and usual course
consistent with past practice, and no Presidio Party has done any of the
following:
(a) Discharged or satisfied any Lien or paid any
obligation or liability, absolute or contingent, other than current
liabilities incurred and paid in the ordinary course of business and
consistent with past practices;
(b) Except for transactions between the Presidio Parties,
paid or declared any dividends or distributions, purchased, redeemed,
acquired, or retired any indebtedness, stock, or other securities from
its stockholders or other securityholders, made any loans or advances
or guaranteed any loans or advances to any person, or otherwise
incurred any liabilities (other than current liabilities incurred in
the ordinary course of business and consistent with past practices);
(c) Except for Permitted Encumbrances and Permitted
Claims, suffered or permitted any Lien to arise or be granted or
created against or upon any of its assets;
(d) Cancelled, waived, or released any rights or claims
against, or indebtedness owed by, third parties;
(e) Amended its certificate or articles of incorporation
or by-laws;
(f) Made or permitted any amendment, supplement,
modification, or termination of any material agreement;
(g) Paid or made any agreement to pay any bonuses,
severance or termination payment to any employee or consultant;
(h) (i) Sold, leased or subleased, transferred, or
otherwise disposed of or mortgaged, pledged, or otherwise encumbered
or granted any rights or interests with respect to any Oil and Gas
Assets that, individually or in the aggregate, were assigned a value
in the Reserve Report of $100,000 or more or any other assets that,
individually or in the aggregate, have a value at the time of such
sale, lease, sublease, transfer, or disposition of $100,000 or more
(except that this clause shall not apply to the sale of severed oil,
gas and other minerals produced and sold in the ordinary course of
business or the expenditure of the Presidio Parties' cash and cash
items in the ordinary course of business), (ii) farmed-out any Oil and
Gas Assets or interest therein, (iii) sold, transferred, or otherwise
disposed of or mortgaged, pledged, or otherwise encumbered any
securities of any other person, (iv) made any material loans,
advances, or capital contributions to, or investments in, any person
(other than loans or advances in the ordinary course of business and
consistent with past practices or loans, advances or capital
contributions to, or investments in, another Presidio Party), (v)
entered into any agreement requiring a payment or expenditure
thereunder by a Presidio Party in excess of $100,000 and not
terminable upon notice of thirty (30) days or less and without
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penalty or other obligation (other than agreements entered into in the
ordinary course of business and consistent with past practices), (vi)
entered into any transaction (x) pursuant to which a Presidio Party
will make a payment or incur an expenditure in excess of $100,000 or
(y) which is not in the ordinary course of business and not
contemplated by this Agreement, (vii) other than areas of mutual
interest commonly set forth in operating agreements, agreed with any
person to limit or otherwise restrict in any manner the ability of a
Presidio Party to compete or otherwise conduct its business, or (viii)
entered into any contract, agreement, commitment, or arrangement with
respect to any of the foregoing;
(i) Made any investment in or contribution, payment, or
advance to any person (other than investments, contributions,
payments, or advances made in the ordinary course of business and
consistent with past practices);
(j) (i) entered into or amended any material employment,
compensation or severance agreements, (ii) changed or established any
new bonuses, (iii) increased the level of compensation or benefits,
including under any Employee Benefit Plans, of any officer, director,
or other executive personnel or any consultant, (iv) established,
entered into or amended in any material respect any pension, employee
benefit or health plans or any other plans, policies, programs,
practices, or arrangements relating to employee benefits or
compensation other than to maintain compliance with any applicable law
or regulation or (v) paid any bonuses to any officer, director, or
other executive personnel or any consultant; provided, however,
Presidio shall terminate its Employee Stock Ownership Plan as provided
in Section 4.23; or
(k) Made any change in any of the accounting principles
followed by it or the method of applying such principles other than in
accordance with GAAP.
5.14 Governmental Regulation. No Presidio Party is subject to
regulation under the Public Utility Holding Company Act of 1935 or the
Investment Company Act of 1940.
5.15 Labor Matters.
(a) No employees of a Presidio Party are represented by
any labor organization. To the Knowledge of Presidio, there are no
organizing activities involving a Presidio Party pending with any
labor organization or group of employees of a Presidio Party.
(b) Except as set forth in Schedule 5.15, each Presidio
Party is in material compliance with all laws, rules, regulations, and
orders relating to the employment of labor, including all such laws,
rules, regulations, and orders relating to wages, hours, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation, and the collection and payment of withholding or Social
Security Taxes and similar Taxes.
5.16 Accounts Receivable. Except as otherwise set forth in
Schedule 5.16, all of the accounts, notes, and loans receivable that have been
recorded on the Presidio Financial Statements are bona fide and represent
accounts, notes, and loans receivable validly due for goods sold or
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services rendered and are reasonably expected to be collected in full within
ninety (90) days after the applicable invoice or note maturity date (other than
to the extent of the allowance or reserve for uncollectible accounts, notes,
and loan receivables contained in the Presidio Financial Statements). Except
for Permitted Encumbrances set forth in clause (m) of the definition thereof,
all of such accounts, notes, and loans receivable are free and clear of any and
all Liens. None of the obligors on such accounts, notes, or loans receivable
has given notice to a Presidio Party that it will or may refuse to pay the full
amount or any portion thereof.
5.17 Intangible Property. There are no material trademarks, trade
names, patents, service marks, brand marks, brand names, computer programs,
databases, industrial designs, copyrights, or other intangible property that
are necessary for the operation, or continued operation, of the business of a
Presidio Party or the ownership and operation, or continued ownership and
operation, of any of their assets, for which such Presidio Party does not hold
valid and continuing authority and consent in connection with the use thereof.
5.18 Presidio's Title. The Presidio Parties have Defensible Title
to the Major Assets.
5.19 Reserve Report. The historical production and operating cost
data in respect of the Wells provided in the lease operating statements and
historical oil and gas price information provided in the data room were true
and correct in all material respects. To the Knowledge of Presidio, the
Reserve Report was prepared in accordance with generally accepted engineering
and evaluation principles and is true and correct as of such date in all
respects to the extent applicable to the business of the Presidio Parties.
Except as set forth in Schedule 5.19, to the Knowledge of Presidio, no fact or
circumstance has occurred since the date of the Reserve Report that results in
any material adverse change, determined in the aggregate and after
consideration of all favorable changes, in the reserves of Presidio as set
forth in the Reserve Report, other than changes attributable to normal
depletion by subsequent production, general economic conditions in the oil and
gas industry or subsequent drilling, reworking or recompletion activities.
Except as set forth in Schedule 5.19, in all respects, the net revenue
interests and the working interests of the Presidio Parties shown on Exhibit B
hereto are the same net revenue interests and working interests used in the
preparation of the Reserve Report, and the information contained in Exhibit B
regarding payout and similar events that cause adjustments to said net revenue
interests and working interests is the information used in the preparation of
the Reserve Report. OTHER THAN AS EXPRESSLY SET FORTH ABOVE IN THIS SECTION
5.19, PRESIDIO MAKES NO WARRANTY AND HEREBY DISCLAIMS ANY WARRANTY THAT THE
RESERVE ESTIMATES, CASH FLOW ESTIMATES, PRICE ESTIMATES, OR PRODUCTION OR FLOW
RATE ESTIMATES CONTAINED IN THE RESERVE REPORT OR IN ANY SUPPLEMENT THERETO OR
UPDATE THEREOF ARE IN ANY WAY COMPLETE, ACCURATE OR NOT MISLEADING, THE SAME
BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE INHERENTLY SUBJECT TO
INCOMPLETENESS AND INACCURACY.
5.20 Oil and Gas Operations. Except as otherwise set forth in
Schedule 5.20:
(a) None of the Wells has been overproduced such that it
is subject or liable to being shut-in or to any other overproduction
penalty;
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(b) There have been no changes proposed in the production
allowables for any Wells;
(c) All Wells have been drilled and (if completed)
completed, operated, and produced in accordance with good oil and gas
field practices and in compliance in all material respects with
applicable oil and gas leases and applicable laws, rules, and
regulations except where permit applications or requests for
exceptions are pending;
(d) Proceeds from the sale of oil, gas and other minerals
produced from the Oil and Gas Assets are being received by the
applicable Presidio Party in a timely manner and are not being held in
suspense for any reason, except for (i) amounts held in suspense as of
the date of this Agreement that individually or in the aggregate are
not in excess of $100,000, (ii) amounts held in suspense in the
ordinary course of business after the date of this Agreement, and
(iii) amounts held in suspense after the date of this Agreement
because of the occurrence of a Bankruptcy Event or because of concerns
regarding the financial condition of a Presidio Party;
(e) Except as may be required under any "non-consent"
penalty, none of the Leases or Wells is subject to any production
payment or prepayment arrangement arising under any contract for the
purchase or sale of oil, gas or other minerals to deliver, or to
suffer the delivery of, any oil, gas or other minerals at some future
time without then or thereafter receiving full payment therefor;
(f) No person has any call upon, option to purchase or
similar right to obtain oil, gas or other hydrocarbons production from
the Oil and Gas Assets other than rights contained in existing
production sales contracts, call contracts, farmouts, assignments or
similar contracts;
(g) None of the Presidio Parties are obligated to deliver
a material quantity of gas to any pipeline or other party as make-up
for any net under-deliveries of gas from the Oil and Gas Assets for
transportation, nor is any Presidio Party liable for any material
scheduling or imbalance penalties or charges imposed by any pipeline
or other party for transportation of gas produced from any of the Oil
and Gas Assets;
(h) Subject to Permitted Encumbrances, each of the
Presidio Parties has the necessary easements and rights-of-way to
install, maintain, and operate the gathering systems that are owned by
such Presidio Party as of the date of this Agreement;
(i) As of June 30, 1996, none of the Presidio Parties is
obligated to deliver any quantity of gas or make any payment by virtue
of any common law, statutory or contractual balancing arrangement with
respect to the Oil and Gas Assets; and
(j) Except for monies properly held in suspense, paid
into escrow, or paid to a Governmental Authority in accordance with
applicable laws, all royalties, shut-in royalties and similar payments
payable in connection with the Oil and Gas Assets have been timely
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paid and in the correct amount. All delay rental payments payable in
connection with the Leases have been timely paid and in the correct
amount, except to the extent that a Presidio Party has determined, in
the ordinary course of business, not to make such payment.
5.21 Environmental Matters. Notwithstanding any other provision of
this Agreement to the contrary, this Section 5.21 contains the exclusive
representations and warranties of Presidio with respect to "Environmental
Matters." Except as set forth in Schedule 5.21:
(a) Each Presidio Party has conducted its business and
operated its assets, and is conducting its business and operating its
assets, in material compliance with all applicable Environmental Laws;
(b) To the Knowledge of Presidio, no Presidio Party and
none of the operations or assets of any Presidio Party are the subject
of any pending investigation or inquiry by any governmental authority
evaluating whether any material Environmental Response Action is
needed to respond to a release of any Environmental Material or to the
improper storage, generation, transportation, treatment, or disposal
of any Environmental Material;
(c) No Presidio Party has filed any notice under federal,
state, or local law indicating that a Presidio Party is responsible
for the improper release into the environment or the improper storage,
generation, transportation, treatment, or disposal of any
Environmental Material;
(d) No Presidio Party has received any claim, complaint,
notice, inquiry, or request for information, which remains unresolved,
with respect to any alleged violation of any applicable Environmental
Law or regarding potential liability under any applicable
Environmental Law or under any common law theories relating to
operations or conditions of any facilities or property owned, leased,
or operated by a Presidio Party;
(e) To the Knowledge of Presidio, no property now or
previously owned, leased, or operated by a Presidio Party is listed on
the National Priorities List pursuant to CERCLA or on the CERCLIS or
on any other similar federal or state list as a site requiring an
Environmental Response Action;
(f) To the Knowledge of Presidio, there are no sites,
locations, or operations at which a Presidio Party is now required to
undertake any material Environmental Response Action under any
applicable Environmental Law;
(g) To the Knowledge of Presidio, all underground and
aboveground storage tanks and solid waste disposal facilities owned or
operated by a Presidio Party are used and operated in material
compliance with applicable Environmental Laws;
(h) To the Knowledge of Presidio, there are no existing
financial assurances given by any Presidio Party under any
Environmental Law that would require monetary funding by a Presidio
Party after the date of Closing; and
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(i) To the Knowledge of Presidio, there are no claims,
complaints, notices, inquiries, requests for information, or
Environmental Response Actions for which the Presidio Parties may be
responsible that relate to properties, assets, or entities previously
owned by the Presidio Parties.
5.22 Brokers. Except as set forth in Schedule 5.22, no broker,
finder, investment banker, or other similar person is or will be, in connection
with the transactions contemplated by this Agreement, entitled to any
brokerage, finder's, or other similar fee or compensation based on any
arrangement or agreement made by or on behalf of a Presidio Party.
5.23 Compliance with Law; Governmental Authorizations. Except as
set forth in Schedule 5.23, the Presidio Parties are not in violation of any
order, injunction, judgment, ruling, law, or regulation of any Governmental
Authority applicable to the property or business of the Presidio Parties. The
licenses, permits, and other governmental authorizations held by the Presidio
Parties are valid and sufficient for the conduct of the Presidio Parties'
businesses as currently conducted.
5.24 Insurance. Schedule 5.24 lists all material insurance
policies covering the Oil and Gas Assets, employees and operations of the
Presidio Parties as of the date of this Agreement. Such policies are in full
force and effect and except for the bankruptcy proceeding contemplated herein,
to the Knowledge of Presidio, as of the date of this Agreement, there does not
exist any event that, with the giving of notice or the lapse of time, or both,
would constitute a default by a Presidio Party under any such policies.
5.25 Contracts, Agreements, Commitments and Other Matters.
(a) Schedule 5.25 is a true, correct, and complete list
of all of the following described items (whether written or oral),
including all amendments thereto, existing as of the date of this
Agreement to which any Presidio Party is a party ("Material
Contracts"):
(i) any note, agreement, mortgage, indenture,
security agreement, and other instruments relating to the
borrowing of money or evidence of credit for the deferred
purchase price of property, or the direct or indirect
guarantee by a Presidio Party of any such indebtedness or
deferred purchase price in excess of $50,000, in each case
other than the Bank Obligations and the Debt Obligations;
(ii) any lease of real property and material
personal property providing for annual payments by a Presidio
Party under any such lease or group of related leases in
excess of $25,000, other than the Oil and Gas Assets;
(iii) any partnership agreement requiring a
Presidio Party to make capital contributions or expenditures
at an annual rate in excess of $100,000;
(iv) any management, employment, and consulting
agreement or other contract for personal services that is not
terminable on not more than one month's notice without
penalty, in each case other than the Severance Plan and
Agreements;
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(v) any agreement providing for severance pay,
collective bargaining agreements, labor contracts, or labor or
personnel policies, in each case other than the Employee
Benefit Plans and the Severance Plan and Agreements;
(vi) any surety, performance and maintenance bond
in excess of $50,000;
(vii) any agreement or commitment requiring a
Presidio Party to make capital expenditures in excess of
$100,000 for any single project, other than customary
operating agreements;
(viii) any plan, contract, or arrangement providing
for bonuses, pensions, deferred compensation, retirement plan
payments, profit sharing, incentive pay, or for any other
employee benefit plan, in each case other than the Employee
Benefit Plans and the Severance Plan and Agreements;
(ix) other than as set forth in Schedule 5.22, any
brokerage or finder's agreement obligating a Presidio Party to
make a payment thereunder in excess of $50,000;
(x) any noncompetition agreement (other than
areas of mutual interest commonly set forth in operating
agreements) that restricts the right of any Presidio Party to
engage in any place in any line of business;
(xi) any contract, commitment, or agreement
between any of the Presidio Parties or between any Presidio
Party and any Affiliate thereof involving a payment thereunder
in excess of $100,000, in each case other than the Bank
Obligations, the Debt Obligations, the Employee Benefit Plans
and Severance Plan and Agreements;
(xii) any contract (x) for the sale of oil or other
liquid hydrocarbons produced or to be produced from the Oil
and Gas Assets that is not terminable by a Presidio Party
thereto or its respective successor without penalty on no more
than ninety (90) days' notice or (y) for the sale of gas
produced or to be produced from the Oil and Gas Assets that
has a term exceeding six (6) months;
(xiii) any advance payment agreement or any oil and
gas balancing agreement, or any other similar agreements,
under which a Presidio Party has a net obligation, as of the
most recent date available, which shall be no more than ninety
(90) days prior to the date of this Agreement, in excess of
$50,000 in cash or market value in oil or gas;
(xiv) other than the Bank Obligations and the Debt
Obligations, any contract or agreement relating to the Oil and
Gas Assets under which a Presidio Party has outstanding
indebtedness, obligations or liability for borrowed money, or
liability for the deferred purchase price of property,
excluding normal trade payables due in
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less than ninety (90) days, or has the obligation to incur any
such indebtedness, obligation or liability;
(xv) any contract, commitment, or agreement that
involves commodity or interest rate swaps, floors, caps,
collars, futures, options, or other similar transactions; and
(xvi) any contract, commitment or agreement that
involves the disposition of any assets of any Presidio Party
having a value of $50,000 or more not entered into in the
ordinary course of business consistent with past practice.
(b) Presidio has provided Tom Brown with access to true,
correct and complete copies of all written Material Contracts and has
provided Tom Brown with accurate descriptions of all oral Material
Contracts.
(c) Except with respect to past due accounts payable or
outstanding indebtedness to the suppliers disclosed in Schedule 5.25
and as such may be affected by the Reorganization Cases, to the
Knowledge of Presidio, as of the date of this Agreement, the Presidio
Parties' relationships are generally satisfactory with their
respective suppliers who are material to the conducting of their
respective businesses.
(d) Other than as set forth in Schedule 5.25, as of the
date of this Agreement, the Presidio Parties do not have outstanding
any powers of attorney with any person who is not as of the date of
this Agreement an employee of a Presidio Party, including powers of
attorney with respect to representation before Governmental Agencies,
customers, agents, and brokers or given in connection with
qualification to conduct business in any jurisdiction.
(e) Except as set forth in Schedule 5.25 and as such may
be affected by the Reorganization Cases, each of the Material
Contracts to which a Presidio Party is a signatory thereto has been
duly executed by the applicable Presidio Party thereto and is in full
force and effect and to the Knowledge of Presidio, as of the date of
this Agreement, except in respect of the Bank Obligations and the Debt
Obligations, no Presidio Party is in breach of any such Material
Contract.
5.26 Fairness Opinion. Presidio has received a written opinion
from Jefferies & Company, Inc., a financial advisor to Presidio, to the effect
that the Exchange Consideration to be received pursuant to the Plan of
Reorganization is fair to the Presidio Securityholders, in the aggregate, from
a financial point of view and as of the date of this Agreement such opinion has
not been withdrawn, revoked, or modified.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF TOM BROWN
Tom Brown represents and warrants to Presidio the following:
6.1 Existence. Tom Brown is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly qualified to do business as a foreign corporation in the states where the
properties owned or leased by it or the nature of its activities make such
qualification necessary.
6.2 Authorization and Enforceability. Tom Brown has the
corporate power to enter into and perform this Agreement and the transactions
contemplated by this Agreement, including the necessary corporate power
regarding the issuance and payment of the Exchange Consideration as
contemplated herein. The execution, delivery and performance of this
Agreement, and the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Tom Brown. This
Agreement constitutes the valid and binding obligations of Tom Brown,
enforceable in accordance with its terms.
6.3 No Violations. The execution, delivery and performance of
this Agreement by Tom Brown, and the transactions contemplated by this
Agreement, will not violate (a) any provision of the certificate of
incorporation or bylaws of Tom Brown, (b) any material agreement or instrument
to which Tom Brown is a party or by which Tom Brown or any of its properties
are bound, (c) any judgment, order, ruling, or decree applicable to Tom Brown
as a party in interest, or (d) any law, rule, or regulation applicable to Tom
Brown.
6.4 Consents and Approvals. No consent, approval, order, or
authorization of, registration, declaration, or filing with, or permit (other
than any filings required under the 1933 Act, the 1934 Act or the Hart Scott
Act) from any Governmental Authority is required other than Bankruptcy Court
approval by or with respect to Tom Brown in connection with the execution and
delivery of this Agreement by Tom Brown or the consummation by Tom Brown of the
transactions contemplated hereby, except for those expressly contemplated
herein.
6.5 Tom Brown SEC Documents. Tom Brown has made available to
Presidio a true and complete copy of the Tom Brown SEC Documents, which are all
the documents (other than preliminary material) that Tom Brown was required to
file with the SEC since January 1, 1995. As of their respective dates, the Tom
Brown SEC Documents complied in all material respects with the requirements of
the 1933 Act or the 1934 Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Tom Brown SEC Documents,
and none of the Tom Brown SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.6 Financial Statements. The Tom Brown Financial Statements were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be
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indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject, in the case of the
unaudited statements, to normal, recurring adjustments, none of which will be
material) the consolidated financial position of Tom Brown and its consolidated
subsidiaries as of their respective dates and the consolidated results of
operations and the consolidated cash flows of Tom Brown and its consolidated
subsidiaries for the periods presented therein.
6.7 Capital Structure.
(a) The authorized capital stock of Tom Brown is as set
forth in Schedule 6.7.
(b) At the close of business on June 30, 1996, (i) there
were issued and outstanding 21,124,694 shares of Tom Brown Common
Stock and (ii) no shares of Tom Brown Common Stock were held by Tom
Brown as treasury stock. Except as set forth in this Section 6.7(b)
or as otherwise disclosed in the Tom Brown SEC Documents or set forth
in Schedule 6.7, and except for 1,000,000 issued and outstanding
shares of preferred stock of Tom Brown and options to acquire shares
of common stock of Tom Brown issued to officers, directors and
employees of Tom Brown or its subsidiaries (covering not more than
1,924,800 shares of Tom Brown Common Stock), there are outstanding as
of the date of this Agreement (i) no shares of capital stock or other
equity securities of Tom Brown, (ii) no securities of Tom Brown or any
other person convertible into or exchangeable or exercisable for
shares of capital stock or other equity securities of Tom Brown, and
(iii) no subscriptions, options, warrants, calls, or rights (including
preemptive rights, commitments, understandings, or agreements) to
which Tom Brown is a party or by which it is bound obligating Tom
Brown to issue, deliver, sell, purchase, redeem, or acquire shares of
capital stock or other equity securities of Tom Brown (or securities
convertible into or exchangeable or exercisable for shares of capital
stock or other equity securities of Tom Brown) or obligating Tom Brown
to grant, extend, or enter into any such subscription, option,
warrant, call, right, commitment, understanding, or agreement.
(c) All outstanding shares of Tom Brown capital stock
are, and (when issued) the Exchange Common Stock will be, validly
issued, fully paid, and nonassessable and not subject to any
preemptive right.
(d) As of the date of this Agreement, there is no
stockholder agreement, voting trust, or other agreement or
understanding to which Tom Brown is a party or by which it is bound
relating to the voting of any shares of the capital stock of Tom Brown
except as set forth in Schedule 6.7.
6.8 Claims and Litigation. Except as set forth in the Tom Brown
SEC Documents or in Schedule 6.8, there is no suit, action, claim, or inquiry
by any person or entity or by any administrative agency or governmental body
and no legal, administrative or arbitration proceeding pending or, to Tom
Brown's knowledge, threatened against Tom Brown or any affiliate of Tom Brown
which has or will materially affect Tom Brown's ability to consummate the
transactions contemplated by this Agreement.
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6.9 Financing. Tom Brown has, or has obtained commitments to
obtain, funds or other consideration, as required, sufficient to pay the Cash
Consideration in accordance with this Agreement. True and complete copies of
such commitments have been furnished to Presidio.
ARTICLE VII
NATURE OF REPRESENTATIONS AND WARRANTIES
7.1 Limited Recourse. If prior to the Closing, there is
discovered a breach of any of the representations and warranties contained in
Articles V and VI of this Agreement, then the only recourse that a party shall
have for such breach is an exercise of the rights provided in Article X.
7.2 Nonsurvival of Representations, Warranties, Covenants, and
Agreements. None of the representations, warranties, covenants, and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing, except for the agreements contained in
Sections 4.15, 4.22, 4.23, 4.24, and 4.25 and the agreements delivered pursuant
to Section 4.12.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to the Obligations of Presidio. The
obligations of Presidio to consummate the transactions contemplated by this
Agreement are subject to satisfaction at or prior to Closing of each of the
following conditions (any one or more of which may be waived in writing by
Presidio):
(a) The Confirmation Order, in form and substance
reasonably acceptable to Presidio, confirming the Plan of
Reorganization shall have been entered by the Bankruptcy Court and the
Confirmation Order shall have become a Final Order.
(b) The Confirmation Order shall recognize and declare
Tom Brown as a "successor" to Presidio pursuant to Sections 1125(e)
and 1145(a)(1) of the Bankruptcy Code.
(c) All Plan Documents and other applicable corporate
documents necessary or appropriate to the implementation of the Plan
of Reorganization shall have been executed, delivered, and where
applicable, filed with the appropriate Governmental Authorities.
(d) On the Closing Date, each of the representations and
warranties of Tom Brown contained in this Agreement shall be true and
correct in all material respects at and as of such time; and on the
Closing Date Tom Brown shall deliver to Presidio a certificate to such
effect signed by an authorized officer of Tom Brown, except that such
certificate may
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state that the information provided therein is given to the best
information, knowledge, and belief of the authorized representative
signing the same.
(e) Each of the obligations of Tom Brown to be performed
on or before the Closing Date pursuant to the terms of this Agreement
shall have been duly performed in all material respects on the Closing
Date; and on the Closing Date Tom Brown shall have delivered to
Presidio a certificate to such effect signed by an authorized officer
of Tom Brown, except that such certificate may state that the
information provided therein is given to the best information,
knowledge, and belief of the authorized representative signing the
same.
(f) The necessary and material consents and approvals of
all Governmental Authorities and others shall have been obtained and
remain in effect, and all required waiting periods under the Hart
Scott Act and the rules and regulations promulgated thereunder
relating to this Agreement and the transactions contemplated hereby
shall have expired.
(g) No Governmental Authority shall have issued an
injunction, order, decree, or ruling or taken any other action
restraining or preventing the consummation of the transactions
contemplated hereby that shall not have been vacated, withdrawn,
cancelled, or otherwise voided.
(h) The Exchange Common Stock shall have been authorized
for listing on NASDAQ, subject only to official notice of issuance.
(i) The written opinion of Presidio's financial advisors
referred to in Section 5.26 shall have been reconfirmed in writing as
of the Closing Date as if given as of such date and shall not have
been withdrawn or revoked or modified in any material respect.
(j) The New D&O Insurance shall be in full force and
effect.
8.2 Conditions Precedent to the Obligations of Tom Brown. The
obligations of Tom Brown to consummate the transactions contemplated by this
Agreement are subject to satisfaction at or prior to Closing of the following
conditions (any one or more of which may be waived in writing by Tom Brown):
(a) The Confirmation Order, in form and substance
reasonably acceptable to Tom Brown, confirming the Plan of
Reorganization shall have been entered by the Bankruptcy Court and the
Confirmation Order shall have become a Final Order.
(b) The Confirmation Order shall recognize and declare
Tom Brown as a "successor" to Presidio pursuant to Sections 1125(e)
and 1145(a)(1) of the Bankruptcy Code.
(c) All Plan Documents and other applicable corporate
documents necessary or appropriate to the implementation of the Plan
of Reorganization shall have been executed, delivered, and where
applicable, filed with the appropriate Governmental Authorities.
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(d) On the Closing Date, each of the representations and
warranties of Presidio contained in this Agreement shall be true and
correct in all material respects at and as of such time and each of
the obligations of Presidio to be performed on or before the Closing
Date pursuant to the terms of this Agreement shall have been duly
performed in all material respects on the Closing Date, except to the
extent that any such breach or failure to perform does not give rise
to the right of Tom Brown to terminate this Agreement pursuant to
clause (iii) of Section 9.1(c). On the Closing Date Presidio shall
have delivered to Tom Brown a certificate regarding such
representations, warranties and obligations signed by an authorized
representative of Presidio, except that such certificate may state
that the information provided therein is given to the best
information, knowledge, and belief of the authorized representative
signing the same.
(e) The necessary and material consents and approvals of
all Governmental Authorities, the Presidio Securityholders (to the
extent required under the Plan of Reorganization or applicable law)
and others shall have been obtained and remain in effect, and all
required waiting periods under the Hart Scott Act and the rules and
regulations promulgated thereunder relating to this Agreement and the
transactions contemplated hereby shall have expired.
(f) No Governmental Authority shall have issued an
injunction, order, decree, or ruling or taken any other action
restraining or preventing the consummation of the transactions
contemplated hereby, that shall not have been vacated, withdrawn,
cancelled, or otherwise voided.
(g) This Agreement and all other agreements and letter
agreements contemplated under this Agreement or otherwise entered into
between Tom Brown or any Affiliate of Tom Brown and Presidio or any
Affiliate of Presidio in connection with the transactions contemplated
by this Agreement shall have been assumed in their entirety and
without modification thereto (except to the extent such modification
shall have been consented to in writing by Tom Brown) pursuant to
Section 365 or Section 1123(b)(2), as applicable, of the Bankruptcy
Code on or before the Confirmation Date.
(h) On the Closing Date, none of the Major Assets shall
be subject to any Liens other than (i) Permitted Encumbrances and (ii)
Liens arising through Tom Brown or as a result of Tom Brown's actions.
(i) The Plan of Reorganization and the Confirmation Order
shall provide that as of the Closing Date each of the Presidio Parties
and their respective creditors and holders of equity interests (the
"Releasing Parties") will be deemed to forever release, waive and
discharge, and to be enjoined from asserting, to the fullest extent
permitted under applicable law, all claims (as defined in Section
101(5) of the Bankruptcy Code), demands, debts, rights, causes of
action, and liabilities (collectively, the "Released Claims") in
connection with or related to this Agreement, the Reorganization
Cases, the Presidio Parties, or the Plan of Reorganization whether
such Released Claims are liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or
unforeseen, then existing
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or thereafter arising, that are based in whole or in part on any act,
omission, or other occurrence taking place on or prior to the Closing
Date and that may be asserted by or on behalf of the Releasing Parties
against Tom Brown or its respective agents, advisors, attorneys and
representatives (including current and former directors, officers,
employees, members and professionals) acting in such capacity.
(j) Presidio shall, upon application or motion therefor
filed with the Bankruptcy Court, have obtained a Final Order (which
may be a part of the Confirmation Order) authorizing the assumption by
the applicable Presidio Party under Section 365 or Section 1123(b)(2)
of the Bankruptcy Code of the Designated Contracts and such Final
Order shall provide (as contemplated in the Plan of Reorganization)
that (i) the mere occurrence of a Bankruptcy Event (which for purposes
of this Section 8.2(j) shall include Presidio West Virginia) and (ii)
the insolvency or financial condition of a Presidio Party prior to the
Closing, shall not constitute a basis for the removal of a Presidio
Party as operator under any of the Designated Contracts.
(k) The Bar Date Order, in a form and substance
reasonably acceptable to Tom Brown, shall have been entered by the
Bankruptcy Court and shall have become a Final Order.
ARTICLE IX
TERMINATION
9.1 Termination Rights. This Agreement may be terminated and the
Exchange may be abandoned at any time prior to the Closing (provided that the
right of Tom Brown to terminate pursuant to clause (iii) of Section 9.1(c)
shall not be exercisable by Tom Brown subsequent to the fifth day following the
date on which the Confirmation Order becomes a Final Order), whether before or
after the approval of the Exchange or Plan of Reorganization by the Presidio
Securityholders as follows:
(a) By mutual written consent of Tom Brown and Presidio;
(b) By either Tom Brown or Presidio if:
(i) the Closing has not occurred on or before the
first anniversary of the commencement of Presidio's
Reorganization Case (provided, however, that the right to
terminate this Agreement pursuant to this clause (i) shall not
be available to any party whose breach of this Agreement has
been the cause of or resulted in the failure of the Closing to
occur on or before such date); or
(ii) any Governmental Authority shall have issued
an injunction, order, decree, or ruling or taken any other
action restraining or preventing the
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consummation of the transactions contemplated by this
Agreement and such order, decree, ruling, or other action
shall have become final and non-appealable;
(c) By Tom Brown if:
(i) the board of directors of Presidio shall fail
to recommend approval of the Exchange at the time the
Disclosure Statement is first mailed to the Presidio
Securityholders or if such recommendation of approval, if
made, is amended in a manner adverse to Tom Brown or withdrawn
thereafter or if Presidio elects not to consummate the
Exchange as a result of the condition set forth in Section
8.1(i) not having been satisfied;
(ii) Presidio has notified Tom Brown that it is
prepared to enter into a binding agreement to effect an
Alternative Transaction described in Section 4.20(c);
(iii) (x) there has been one or more breaches of
the representations and warranties made by Presidio in Article
V of this Agreement or a failure of Presidio to perform or
comply with one or more covenants or agreements contained in
this Agreement, (y) Tom Brown has given Presidio written
notice of the existence of each such breach or failure at
least ten (10) business days prior to the then scheduled
Confirmation Date and such breach or failure is not resolved
or cured on or before the Confirmation Date and (z) if the
Exchange were to be consummated without such breaches or
failures (individually or together with any other breaches or
failures) being so resolved or cured and, as a result thereof,
such breach or failure would cause Tom Brown to suffer or
sustain damages in an amount greater than $3,000,000, (for
purposes of this clause (iii), the amount of damages that
would be suffered or sustained by Tom Brown shall be
calculated (1) after taking into consideration and reducing
(to the extent that such have not previously been considered
in determining the existence of such breach or failure) such
damages for (A) amounts that have been reimbursed or paid
under insurance coverage maintained by the Presidio Parties or
any other person or amounts as to which an insurance company
or other insuring entity has acknowledged its obligation to
reimburse or pay and (B) the amount of any reserves
established in the Presidio Financial Statements for the
Liability or event giving rise to damages and (2) by netting
against the aggregate of all such damages (A) the amount by
which (I) the actual recovery (through the date of any such
determination of aggregate damages) of accounts receivable
reflected on the balance sheet forming a part of the Presidio
Financial Statements exceeds (II) the stated value of such
accounts receivable on such balance sheet, and (B) the amount
by which (I) any Liability reflected on such balance sheet
exceeds (II) the amount for which such Liability is liquidated
prior to the date of any such determination of aggregate
damages);
(iv) INTENTIONALLY LEFT BLANK;
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(v) the Tom Brown Trading Value is more than 120%
of the Common Share Value; provided, however, Tom Brown shall
not have the right to terminate this Agreement pursuant to
this clause (v) if prior to the Closing Date Presidio elects
to reduce the number of shares of Exchange Common Stock to a
number of shares equal to the quotient obtained by dividing
(A) the Aggregate Common Share Value by (B) 120% of the Common
Share Value;
(vi) the Initial Order (A) shall not have been
entered within fifteen (15) business days after the occurrence
of a Bankruptcy Event and (B) shall not have become a Final
Order within twenty-five (25) business days after a Bankruptcy
Event; or
(vii) the Confirmation Order, in form and substance
reasonably acceptable to Tom Brown and confirming the Plan of
Reorganization, shall not have been entered by the Bankruptcy
Court on or before November 15, 1996 or the Confirmation Order
shall not have become a Final Order on or before December 13,
1996 (as either of such dates shall be extended by the number
of days, if any, that Presidio's solicitation of the
acceptance by the Presidio Securityholders of the Plan of
Reorganization may be delayed or extended by reason of (x) any
material change in or material events regarding Tom Brown and
which occur after the date of this Agreement and which are
required to be disclosed in the Disclosure Statement or in any
amendment or supplement to the Disclosure Statement or (y) the
providing of any additional disclosure concerning Tom Brown or
concerning the post-Closing business or financial condition of
any Presidio Party); provided, that Tom Brown shall not be
entitled to terminate this Agreement pursuant to this clause
(vii) unless Tom Brown has given Presidio prior written notice
of its intention to terminate this Agreement pursuant to this
clause (vii) within thirty (30) days after the above
applicable described date; or
(viii) the Reorganization Cases shall not have been
commenced on or before August 6, 1996.
(d) By Presidio if:
(i) there has been a breach of the
representations and warranties made by Tom Brown in Article VI
of this Agreement which is material to the financial condition
of Tom Brown or its ability to perform its obligations under
this Agreement or which adversely affects the benefits to be
received by Presidio under this Agreement at Closing or a
failure to perform or comply with any covenant or agreement
contained in this Agreement which adversely affects Presidio
or its ability to obtain the benefits contemplated by this
Agreement or which adversely affects the benefits to be
received by Presidio under this Agreement at Closing; provided
that Presidio shall not be entitled to terminate this
Agreement pursuant to this clause (i) unless (A) Presidio has
given Tom Brown written notice of the existence of such
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breach or failure and (B) Tom Brown has not resolved or cured
such breach or failure within ten (10) days of such notice;
(ii) Presidio has notified Tom Brown that Presidio
is prepared to enter into a binding definitive agreement to
effect an Alternative Transaction described in Section
4.20(c);
(iii) the Tom Brown Trading Value is less than 80%
of the Common Share Value; provided, however, Presidio shall
not have the right to terminate this Agreement pursuant to
this clause (iii) if prior to the Closing Date Tom Brown
elects to increase the number of shares of Exchange Common
Stock to a number of shares equal to the quotient obtained by
dividing (A) the Aggregate Common Share Value by (B) 80% of
the Common Share Value; or
(iv) Presidio has notified Tom Brown that the
board of directors of Presidio, in the exercise of their
fiduciary duties, has determined not to recommend or to
withdraw their prior recommendation of the Exchange to the
Presidio Securityholders or if Presidio elects not to
consummate the Exchange as a result of the condition set forth
in Section 8.1(i) not having been satisfied.
9.2 Payment of Termination Expenses and Fee.
(a) If this Agreement is terminated pursuant to either
clause (i) or (ii) of Section 9.1(c) or clauses (ii) or (iv) of
Section 9.1(d), then Presidio shall pay Tom Brown an amount equal to
$6,000,000 (the "Termination Fee").
(b) If this Agreement is terminated pursuant to either
clauses (i), (ii), (iii) or (vi) of Section 9.1(c) or clauses (ii) or
(iv) of Section 9.1(d), then Presidio shall pay Tom Brown an amount
equal to the documented out-of-pocket costs and expenses (including
attorneys', financial advisors', accountants', engineers' and other
consultants' fees) incurred by Tom Brown from and after November 15,
1995 (the "Termination Expenses") in connection with (x) the
preparation, negotiation of the Plan of Reorganization, the Disclosure
Statement and this Agreement, (y) the due diligence efforts of Tom
Brown and their professionals and advisors in connection with the
contemplated transactions and (z) the pursuit of the transactions
contemplated hereby and thereby; provided, however, that the
aggregated amount of Termination Expenses that Tom Brown shall be
entitled to recoup herein shall not exceed $3,000,000.
(c) Subject to the approval of the Bankruptcy Court, the
Termination Expenses and Termination Fee shall constitute first
priority administrative expenses of Presidio pursuant to section
364(c)(1) of the Bankruptcy Code and shall be secured by a lien on
property of the Presidio estate pursuant to section 364(c)(2) of the
Bankruptcy Code and shall be paid upon the earlier of (i) the closing
of the transactions contemplated by an accepted Alternative
Transaction and (ii) entry of any order of the Bankruptcy Court
directing payment by Presidio of such amounts. From and after a
termination by Presidio
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pursuant to Section 9.1(d)(ii) until payment in full of the
Termination Fee and the Termination Expenses, interest shall accrue on
any unpaid portion of the Termination Fee and the Termination Expenses
at a rate per annum equal to the prime commercial lending rate
announced from time to time by the Chase Manhattan Bank, N.A.
(d) If the Initial Order has not been entered by the
Bankruptcy Court as contemplated in Section 4.5(c), then Tom Brown
shall be entitled to assert as liquidated damages the Termination Fee
and the Termination Expenses as a claim under section 502 and/or
503(b) of the Bankruptcy Code.
9.3 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no further
force or effect (except for the provisions of Sections 4.14 and 9.2 which shall
continue in full force and effect).
ARTICLE X
MISCELLANEOUS
10.1 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument, but all
such counterparts together shall constitute but one agreement.
10.2 Notice. All notices which are required or may be given
pursuant to this Agreement shall be sufficient in all respects if given in
writing and delivered personally, by telecopy or by registered or certified
mail, postage prepaid, as follows:
IF TO PRESIDIO PARTIES:
Presidio Oil Company
5613 DTC Parkway, Suite 750
P.O. Box 6525
Englewood, Colorado 80155-6525
Attention: Robert L. Smith
Telephone: (303) 773-0100
Fax: (303) 850-1111
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IF TO TOM BROWN:
Tom Brown, Inc.
508 West Wall, Suite 500
Midland, Texas 79702
Attention: Donald L. Evans
Telephone: (915) 682-9715
Fax: (915) 683-9327
All notices shall be deemed to have been duly given at the time of receipt by
the party to which such notice is addressed.
10.3 Governing Law. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
10.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
10.5 Assignment. No party shall assign all or any part of this
Agreement, nor shall any party assign or delegate any of its rights or duties
hereunder, without the prior written consent of the other party and any
assignment made without such consent shall be void. Subject to the preceding
sentence, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
10.6 Entire Agreement; Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and the documents and instruments
delivered by the parties in connection with this Agreement) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written or oral, among the parties with respect to the subject matter
hereof and (b) except for Sections 4.15, 4.22, 4.24 and 4.25, is solely for the
benefit of the parties hereto and their respective successors, legal
representatives, and assigns and does not confer on any other person any rights
or remedies hereunder. The provisions of Sections 4.15, 4.22, 4.24 and 4.25
are intended to be for the benefit of, and shall be enforceable by, the parties
hereto and each of the other parties who are beneficiaries of the rights and
obligations arising thereunder and their respective heirs and representatives.
10.7 Amendment.
(a) At any time prior to the Closing Date this Agreement
may be amended or modified in any respect by the parties by an
agreement in writing executed in the same manner as this Agreement.
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(b) No supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by the
party to be bound thereby.
10.8 Exhibits and Schedules. All Exhibits and Schedules attached
to or referred to in this Agreement are incorporated into and made a part of
this Agreement.
10.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREO, this Agreement has been signed by each of the
parties hereto, all as of the date above written.
PRESIDIO OIL COMPANY
By:
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Name:
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Title:
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PRESIDIO EXPLORATION, INC.
By:
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Name:
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Title:
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PRESIDIO WEST VIRGINIA, INC.
By:
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Name:
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Title:
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PALISADE OIL, INC.
By:
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Name:
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Title:
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TOM BROWN, INC.
By:
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Name:
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Title:
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