-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B+34tF1RsWruz/JrUYS34s3Z+Fs0bVQdT4u9uavXESYuAsnpgDMA0vQw9XbqMdoB FYO25z2UWavfH2iUhq052Q== 0000950129-97-005000.txt : 19971124 0000950129-97-005000.hdr.sgml : 19971124 ACCESSION NUMBER: 0000950129-97-005000 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19971121 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PLAINS RESOURCES INC CENTRAL INDEX KEY: 0000350426 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 132898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-33092 FILM NUMBER: 97726584 BUSINESS ADDRESS: STREET 1: 1600 SMITH ST STE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136541414 MAIL ADDRESS: STREET 1: 1600 SMITH STREET STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SHELL LAND & ENERGY CO CENTRAL INDEX KEY: 0001050115 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 910 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77252 BUSINESS PHONE: 7132416161 MAIL ADDRESS: STREET 1: 910 LOUISIANA STREET CITY: HOUSTON STATE: TX ZIP: 77252 SC 13D 1 SHELL LAND & ENERGY COMPANY 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 Plains Resources Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.10 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 726540 50 6 -------------------- (CUSIP Number) J.B. Edrington, Corporate Secretary Shell Oil Company 910 Louisiana Street Houston, Texas 77252 (713) 241-6161 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 12, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]. NOTE: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 SCHEDULE 13D CUSIP NO. 726540 50 6 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Shell Land & Energy Company - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] N/A - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 1,082,000 ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON ------------------------------------------------ 10 SHARED DISPOSITIVE POWER WITH 1,082,000 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,082,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.1 - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- 3 SCHEDULE 13D CUSIP NO. 726540 50 6 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Shell Oil Company - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] N/A - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS AF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------- 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 1,082,000 ------------------------------------------------ EACH 9 SOLE DISPOSITIVE POWER REPORTING -0- PERSON ------------------------------------------------ 10 SHARED DISPOSITIVE POWER WITH 1,082,000 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,082,000 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.1 - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- -2- 4 ITEM 1. SECURITY AND ISSUER. This statement relates to the common stock, $.10 par value (the "Common Stock"), of Plains Resources Inc., a Delaware corporation (the "Issuer"). The address of the principal executive offices of the Issuer is 1600 Smith Street, Houston, Texas 77002. ITEM 2. IDENTITY AND BACKGROUND. This statement is being filed by Shell Land & Energy Company, a Delaware corporation ("SLEC"), and by Shell Oil Company, a Delaware corporation ("Shell"). Shell is wholly-owned by Shell Petroleum Inc., a Delaware corporation, whose shares are directly or indirectly owned 60% by Royal Dutch Petroleum Company, The Hague, The Netherlands, and 40% by The "Shell" Transport and Trading Company, p.l.c., London, England. Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company, p.l.c., are holding companies which together directly or indirectly own securities of companies of the Royal Dutch/Shell Group of Companies, the members of which are severally engaged throughout the greater part of the world in oil, natural gas, chemicals, coal and other businesses. Shell and its subsidiaries are engaged, principally in the United States in the exploration for, and development, production, purchase, transportation and marketing of, crude oil and natural gas, and the purchase, manufacture, transportation and marketing of oil and chemical products. In addition, Shell and its subsidiaries are engaged in the exploration for, and production of, crude oil and natural gas outside the United States. Also Shell and its subsidiaries are engaged in the development, production and marketing of sulfur and carbon dioxide. SLEC is an indirect subsidiary of Shell and is engaged primarily in the business of the exploration and production of oil. SLEC and Shell are referred to herein as the "Reporting Entities." -3- 5 The address of the principal business and the principal office of SLEC and Shell is One Shell Plaza, Houston, Texas 77002. Schedule I attached hereto sets forth certain additional information with respect to each director and each executive officer of SLEC and Shell. The filing of this statement on Schedule 13D shall not be construed as an admission that Shell or SLEC or any person listed on Schedule I hereto is, for the purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934, the beneficial owner of any securities covered by this statement. Neither of the Reporting Entities nor, to their knowledge, any person listed on Schedule I hereto, has been, during the last five years (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violation of, or prohibiting or mandating activities subject to, U.S. federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Under the terms of an Exchange Agreement executed November 12, 1997, between SLEC, Shell Western E&P Inc. and the Issuer (the "Exchange Agreement"), SLEC obtained from the Issuer in connection with an exchange of property the following securities: (a) 46,600 shares of Series D Cumulative Convertible Preferred Stock (initially convertible into an aggregate of 932,000 shares of Common Stock) (the "Preferred Stock"); and (b) a Warrant to purchase 150,000 shares of Common Stock (collectively, the "Securities"). SLEC acquired the Securities through an exchange of certain exploration and production property owned by SLEC and Shell Western E&P Inc., an indirect subsidiary of Shell, for (i) the Issuer's rights under a certain participation agreement involving an oil and gas lease and (ii) the Securities. -4- 6 ITEM 4. PURPOSE OF TRANSACTION. The transaction described in Item 3 above occurred as a result of negotiations with the Issuer. The Securities purchased by SLEC were acquired in connection with the property exchange described above and for investment purposes. SLEC intends to review its investment in the Issuer on an ongoing basis and, depending upon the price of, and other market conditions relating to, the Common Stock, subsequent developments affecting the Issuer, the Issuer's business and prospects, other investment and business opportunities available to SLEC, general stock market and economic conditions, tax considerations and other factors deemed relevant, may decide to increase or decrease the size of its investment in the Issuer. Other than as described above, neither of the Reporting Entities, nor, to their knowledge, any person listed on Schedule I hereto, has any plan or proposal that would result in any of the consequences listed in paragraphs (a) - (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. SLEC beneficially owns and has the power to vote and dispose of 1,082,000 shares of Common Stock, representing approximately 6.1% of the shares of Common Stock outstanding (determined in accordance with Rule 13d-3). Because SLEC is an indirect subsidiary of Shell, Shell may also be deemed to beneficially own such shares. Of these 1,082,000 shares, (a) 150,000 are issuable on exercise of the Warrant and, (b) 932,000 are issuable on the conversion of the 46,600 shares of Preferred Stock. The number of shares of Common Stock issuable upon conversion or exercise of the Warrant and the Preferred Stock is subject to adjustment pursuant to customary antidilution provisions included in the terms of such Securities. The rights and preferences of the Preferred Stock are set forth in the Issuer's Certificate of Designation. -5- 7 Except as described herein, neither of the Reporting Entities, nor, to their knowledge, any of the persons named in Schedule I hereto, has effected any transactions in the Common Stock during the past sixty days. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Upon the execution and closing of the Exchange Agreement pursuant to which the Securities were acquired, the Issuer and SLEC entered into a Service Agreement obligating SLEC to provide consulting services for a period of sixty days commencing November 12, 1997 unless earlier terminated by the Issuer to help familiarize the Issuer with the personnel and facilities and operation of certain properties exchanged by SLEC pursuant to the terms of the Exchange Agreement. SLEC is entitled to a fee for its services in an amount equal to a sum equivalent to the salary and wages paid by SLEC to the personnel performing the services, plus an amount equal to 33% of such salary and wages to cover payroll taxes, workers compensation expenses and pension and benefits expenses with respect to such personnel. SLEC shall provide a statement setting forth the amount due for the services within sixty days of termination of the Service Agreement. In addition, Exhibit A-3 of the Exchange Agreement, filed as Exhibit 6 hereto (the "Registration Rights Agreement"), provides SLEC certain registration rights relating to the underlying Common Stock of the Issuer received upon conversion of the Preferred Stock and the exercise of the Warrants. Pursuant to the Registration Rights Agreement, the Issuer is obligated to prepare and file as promptly as practicable, but in any event, within 90 days of November 10, 1997, with the Securities and Exchange Commission a shelf registration statement pursuant to Rule 415 of the Securities Act of 1933, as amended, with respect to the shares of Preferred Stock and the shares of Common Stock into which the Preferred Stock is convertible; and (ii) a shelf registration statement pursuant to Rule 415 of the Securities Act of 1933, as amended, with respect to the 150,000 shares of Common Stock to be received upon exercise of the Warrants. -6- 8 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1 - Agreement that the Schedule 13D is filed on behalf of each reporting person. Exhibit 2 - Certificate of Designation for 46,600 shares of Series D Cumulative Convertible Preferred Stock of the Issuer. Exhibit 3 - Warrant to purchase 150,000 shares of Common Stock. Exhibit 4 - Service Agreement dated November 12, 1997, between SLEC, Shell Western E&P Inc. and the Issuer. Exhibit 5 - Exchange Agreement dated as of November 12, 1997 between the Issuer, SLEC and Shell Western E&P Inc. Exhibit 6 - Registration Rights Agreement included at Exhibit A-3 of the Exchange Agreement. -7- 9 SIGNATURE After reasonable inquiry and to the best knowledge and belief of the undersigned, the undersigned certify that the information set forth in this statement is true, complete and correct. November 21, 1997 SHELL LAND & ENERGY COMPANY By: /s/ Jack E. Little ----------------------------------- Name: Jack E. Little --------------------------------- Title: President -------------------------------- SHELL OIL COMPANY By: /s/ Jack E. Little ----------------------------------- Name: Jack E. Little --------------------------------- Title: Executive Vice President -------------------------------- -8- 10 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS SHELL LAND & ENERGY COMPANY
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION Jack E. Little U.S.A. Director/Chairman, President 910 Louisiana Street Houston, Texas 77252 L. Z. Cook U.S.A. Director, Vice President 910 Louisiana Street Houston, Texas 77252 D. W. Strebel U.S.A. Vice President Tax 910 Louisiana Street Houston, Texas 77252
-9- 11 DIRECTORS AND EXECUTIVE OFFICERS SHELL OIL COMPANY
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION C.A.J. Herkstroter Netherlands Chairman Carel van Bylandtlaan 30 President and Managing Director, 2596 HR The Hague Royal Dutch Petroleum Company The Netherlands Joseph E. Antonini U.S.A. Director 1800 W. Maple Road Retired Chairman, President and Troy, Michigan 48084 CEO, KMart Corporation Rand V. Araskog U.S.A. Director 1330 Avenue of the Americas Chairman and CEO New York, New York 10019-5490 ITT Corporation Philip J. Carroll U.S.A. Director, President, Chief 910 Louisiana Street Executive Officer Houston, Texas 77252 Robert F. Daniell U.S.A. Director United Technologies Bldg. Retired Chairman, United Hartford, Connecticut 06101 Technologies Corporation Jack E. Little U.S.A. Director, Executive Vice 910 Louisiana Street President Houston, Texas 77252 Vilma S. Martinez U.S.A. Director 355 S. Grand Avenue Attorney (Partner) Los Angeles, California 90071-1560 Munger, Tolles & Olson Mark Moody-Stuart England Director Shell Centre Chairman and Managing Director 2 York Road The "Shell" Transport and Trading London SEI 7NA Company p.l.c. England Harold A. Poling U.S.A. Director Emeritus Regent Court Bldg. Retired Chairman and CEO, Ford 16800 Executive Place Drive Motor Company Dearborn, Michigan 48126 Gordon R. Sullivan U.S.A. Director 490 L'Enfont Plaza, S.W. President Washington, D.C. 20024 Coleman Federal John F. Woodhouse U.S.A. Director 1390 Enclave Parkway Chairman Houston, Texas 77077-2099 Sysco Corporation J. M. Morgan U.S.A. Senior Vice President - Oil 910 Louisiana Street Products Houston, Texas 77252
-10- 12
NAME AND BUSINESS ADDRESS CITIZENSHIP POSITION AND OCCUPATION J. P. Parrish U.S.A. Senior Vice President - Services 910 Louisiana Street Houston, Texas 77252 L. E. Sloan U.S.A. Senior Vice President - Chemical 910 Louisiana Street Houston, Texas 77252 D. Gardy France Vice President - Finance 910 Louisiana Street Houston, Texas 77252 S. A. Lackey U.S.A. Vice President and General 910 Louisiana Street Counsel Houston, Texas 77252 B. W. Levan U.S.A. Vice President - Human Resources 910 Louisiana Street Houston, Texas 77252 S. C. Stryker U.S.A. Vice President and General Tax 910 Louisiana Street Counsel Houston, Texas 77252 S. E. Ward U.S.A. Vice President - Government 1401 Eye Street, N.W., Suite 1030 Affairs Washington, D.C. 20005
-11- 13 INDEX TO EXHIBITS Exhibit 1 - Agreement that the Schedule 13D is filed on behalf of each reporting person. Exhibit 2 - Certificate of Designation for 46,600 shares of Series D Cumulative Convertible Preferred Stock of the Issuer. Exhibit 3 - Warrant to purchase 150,000 shares of Common Stock. Exhibit 4 - Service Agreement dated November 12, 1997, between SLEC, Shell Western E&P Inc. and the Issuer. Exhibit 5 - Exchange Agreement dated as of November 12, 1997 between the Issuer, SLEC and Shell Western E&P Inc. Exhibit 6 - Registration Rights Agreement included at Exhibit A-3 of the Exchange Agreement. EX-99.1 2 AGMT THAT SC 13D IS FILED ON BEHALF OF EACH PERSON 1 Exhibit 1 AGREEMENT The undersigned reporting persons hereby agree that the statements filed pursuant to this Schedule 13D dated November 21, 1997, to which this Agreement are filed as an exhibit, are filed on behalf of each of them. SHELL LAND & ENERGY COMPANY By: /s/ JACK E. LITTLE --------------------------------- Name: Jack E. Little Title: President SHELL OIL COMPANY By: /s/ JACK E. LITTLE --------------------------------- Name: Jack E. Little Title: Executive Vice President EX-99.2 3 CERTIFICATE OF DESIGNATION 1 EXHIBIT 2 PLAINS RESOURCES INC. Certificate of Designation, Preferences and Rights of a Series of Preferred Stock by Resolution of the Board of Directors Providing for an Issue of 46,600 Shares of Preferred Stock Designated Series D Cumulative Convertible Preferred Stock Plains Resources Inc., a Delaware corporation (hereinafter called the "Company"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Company by the Certificate of Incorporation, as amended, the Board of Directors, at a meeting thereof duly called and held on October 31, 1997, at which meeting a quorum was present and acting throughout, duly adopted the following resolutions providing for the issue of shares of Preferred Stock hereinafter referred to, and further providing with respect to such issue of shares of Preferred Stock for such powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, as are hereinafter set forth, in addition to those set forth in said Certificate of Incorporation; RESOLVED, that pursuant to Article FOURTH of the Certificate of Incorporation (which authorizes 2,000,000 shares of Preferred Stock, $1.00 par value) the Board of Directors hereby provides for the issue of a series of 46,600 shares of Preferred Stock designated "Series D Cumulative Convertible Preferred Stock"; and RESOLVED, that the powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of the shares of the Series D Cumulative Convertible Preferred Stock shall be as follows: Section 1. Designation and Rank. The designation of the series of Preferred Stock created by this resolution shall be "Series D Cumulative Convertible Preferred Stock", and the number of shares constituting this Series shall be 46,600. Shares of this Series shall have a stated value of $500.00 per share (the "Stated Value"). The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized. The shares of this Series shall rank prior to the Junior Stock (as defined in 2 Section 9) as to distribution of assets and payment of dividends. The shares of this Series shall be of equal rank as to distribution of assets and payment of dividends with all other series of Preferred Stock, except as provided in a certificate of designation with regard to such other series of Preferred Stock filed pursuant to Section 151 of the General Corporation Law of the State of Delaware with the Secretary of State of the State of Delaware. SECTION 2. Dividends. (a) Shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, a cash dividend at the dividend rate of six percent per annum (the "Dividend Rate") on the Stated Value per share of this Series, and no more. No such dividends shall accrue prior to January 1, 2000. Commencing January 1, 2000, such dividends shall be cumulative, shall accrue (whether or not declared and whether or not there shall be funds legally available for the payment of dividends) from such date and shall be payable in arrears, out of assets legally available therefor, when and as declared by the Board of Directors of the Company, on April 1, July 1, October 1, and January 1 of each year, commencing April 1, 2000 (except that if any such date is a Saturday, Sunday or a legal holiday then such dividend shall be payable without interest on the next day that is not a Saturday, Sunday or legal holiday) (each three-month period expiring on a dividend payment date being referred to herein as a "Dividend Period"). Each of such dividends shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Company on such record dates, not exceeding 30 days preceding the payment dates thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods (an "Arrearage") may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (b) At any time while there is an Arrearage on shares of this Series, such Arrearage shall be exchangeable, in full only, at the option of a majority in interest of the record holders thereof for shares of fully paid and nonassessable shares of Common Stock (an "Arrearage Exchange") by presentation to the Company of a written notice executed by such majority in interest (an "Exchange Notice") electing to make an Arrearage Exchange. The number of shares of Common Stock to be issued and delivered to the holders of shares of this Series upon an Arrearage Exchange shall be determined by dividing the total amount of the Arrearage by the Per Share Market Value on the date of the Company's receipt of the Exchange Notice. Upon the issuance and mailing of certificates representing such shares of Common Stock to the record holders of shares of this Series, such Arrearage shall be canceled and no holder of shares of this Series shall be entitled to any payment on account thereof. (c) No full dividends shall be declared or paid or set apart for payment on Parity Stock (as defined in Section 9) or Junior Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all Dividend Periods terminating on or prior to the date 3 of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and of any other series of Parity Stock, all dividends declared upon shares of this Series and of any other series of Parity Stock shall be declared pro rata so that the amount of dividends declared per share on this Series and such other series of Preferred Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other series of Preferred Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series that may be in arrears. (d) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Junior Stock or other than as provided in Section 2(c) shall be declared or paid or set aside for payment or other distribution declared or made upon the Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of Junior Stock) by the Company (except by conversion into or in exchange for Junior Stock) unless, in each case, the full cumulative dividends on all outstanding shares of this Series then payable shall have been paid. (e) Dividends payable on this Series for any period less than a full Dividend Period shall be computed on the basis of the ratio of the number of days in such partial period to the actual number of days in such full Dividend Period. SECTION 3. Redemption. (a) From and after November 12, 1998, the Company, at its option, may redeem Shares of this Series, as a whole or in part, at any time or from time to time, at a cash redemption price per share of this Series equal to the amount of any Arrearage plus (i) the Conversion Price (as defined in Section 6(b) multiplied by (ii) the number of shares of Common Stock into which a share of this Series is convertible as of the date of such redemption multiplied by (iii) the Agreed Percentage (as defined in Section 9). (b) In the event that fewer than all of the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board or by any other method as may be determined by the Board in its sole discretion to be equitable. (c) At such time as the Company shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 days prior to 4 the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Company. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. Prior to the redemption date specified in such notice, holders of shares of this Series may exercise the right to convert shares of this Series into shares of Common Stock pursuant to Section 6 hereof and the right to exchange Arrearage (if any) into shares of Common Stock pursuant to Section 2(b) hereof. (d) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Company in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Company (except the right to receive from the Company the redemption price) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Company at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (e) Any shares of this Series that shall at any time have been redeemed or purchased by the Company shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series, until such shares are once more designated as part of a particular series by the Board. SECTION 4. Voting. (a) Except as otherwise required by law and as specified in this Section 4, the holders of shares of this Series shall not have any right or power to vote on any question or in any proceeding or to be represented at or to receive notice of any meeting of holders of capital stock of the Company. Holders of shares of this Series shall be entitled to receive all reports filed by the Company with the Securities and Exchange Commission.. On any matters on which the holders of shares of this Series shall be entitled to vote, they shall be entitled to one vote for each share held. (b) So long as any shares of this Series remain outstanding, the affirmative vote or consent of the holders of a majority of the shares of this Series outstanding at the time, given in person or by proxy, either in writing or at a meeting, shall be necessary to permit, effect or validate (i) the authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of Senior Stock (as defined in Section 9) and (ii) the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation, as amended, which would materially and adversely affect any right, preference, privilege or voting power of shares 5 of this Series or of the holders thereof in a manner disproportionate to the effect thereof on the holders of any other shares of the Company's capital stock. However, the creation and issuance of other series of Parity Stock or Junior Stock shall not be deemed to affect materially and adversely such rights, preferences or privileges. (c) So long as at least 2,000 shares of this Series remain outstanding, the holders of shares of this Series outstanding at the time shall be entitled to vote to permit, effect or validate the authorization of a merger or consolidation of the Company or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property. The holders of shares of this Series shall be entitled to that number of votes equal to the aggregate of (i) the number of whole shares of Common Stock into which all shares of this Series held by such holders could be converted pursuant to the provisions of Section 6 hereof, plus (ii) the number of shares for which outstanding Arrearage (if any) may be exchanged pursuant to Section 2(b), at the record date for the determination of the stockholders entitled to vote on such matters or, if no record date is established, at the day prior to the date such vote is taken or any written consent of stockholders is first executed, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. SECTION 5. Liquidation. In the event of any complete liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of shares of this Series shall each be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of this Series a sum equal to the Stated Value plus the amount of any accrued and unpaid dividends on such share before any distribution shall be made to the holders of Junior Stock of the Company, and if the assets of the Company shall be insufficient to pay in full such amounts, then such assets shall be distributed among such holders and the holders of any Parity Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. In the event of any complete liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of shares of this Series shall not be entitled to receive the liquidation price of such shares held by them until the liquidation price of all Senior Stock shall have been paid in full. SECTION 6. Conversion. (a) Each share of this Series shall be convertible at the option of the record holder thereof at any time by presentation of the certificate representing such share by the record holder in person or by registered mail, return receipt requested with postage prepaid thereon, at the principal office of the Company, and at such other offices, if any, as the Board of Directors may determine, into the number of fully paid and nonassessable shares of Common Stock determined by dividing the Stated Value by the Conversion Price in effect on the Conversion Date. (b) The conversion price initially shall be $25.00 (the "Conversion Price") and shall be subject to adjustment from time to time as follows: 6 (i) If the Company, at any time while any shares of this Series are outstanding, shall (A) pay a stock dividend or stock dividends or otherwise make a distribution or distributions on shares of its capital stock payable in shares of Common Stock (or in securities convertible into shares of Common Stock), (B) except as set forth in clause (A) above, pay a stock dividend or make a distribution on shares of its capital stock payable in shares of its capital stock of any class other than Common Stock or a class convertible into Common Stock, (C) subdivide outstanding shares of Common Stock into a larger number of shares, (D) combine outstanding shares of Common Stock into a smaller number of shares, or (E) issue by reclassification of shares of Common Stock any shares of capital stock of the Company of any class or classes, the Conversion Price in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion shall be entitled to receive the number and class or classes of shares of the capital stock of the Company which he would have owned or have been entitled to receive immediately after the happening of any of the events described above, had such shares of this Series been converted on or immediately prior to the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification, as the case may be. An adjustment made pursuant to this subsection 6(b)(i) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (ii) If the Company, at any time while any shares of this Series are outstanding, shall issue rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the then Per Share Market Value of Common Stock at the record date mentioned below, the Conversion Price at which each share of this Series shall thereafter be convertible shall be reduced by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Conversion Price of the shares of this Series pursuant to this subsection 7 6(b)(ii), if any such right or warrant shall expire and shall not have been fully exercised, the Conversion Price per share of Common Stock at which each share of this Series shall thereafter be convertible shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this Section 6 after the issuance of such rights or warrants) had the adjustment of the Conversion Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants which were actually exercised. (iii) If the Company, at any time while shares of this Series are outstanding, shall distribute to all holders of Common Stock evidences of its indebtedness or assets (excluding cash dividends or cash distributions paid out of earned surplus) or rights or warrants to subscribe for or purchase any security (excluding those referred to in subsection 6(b)(ii) above) then in each such case the Conversion Price per share of Common Stock at which each share of this Series shall thereafter be convertible shall be determined by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction, of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock, less the then fair market value (as determined by the Board of Directors of the Company (the "Board") in good faith, whose determination shall be conclusive if made in good faith; provided, however that in the event of a distribution or series of related distributions exceeding 10% of the net assets of the Company, then such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) selected in good faith by the Board, and in either case shall be described in a statement provided to all registered holders of this Series) of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (iv) If the Company, at any time while any shares of this Series are outstanding, shall issue or sell shares of Common Stock (excluding stock issuances referred to in other provisions of this Section 6(b)) for a consideration per share which is less than the Per Share Market Value of Common Stock on the date of such issuance or sale, the Conversion Price at which each share of this Series shall thereafter be 8 convertible shall be reduced by multiplying the Conversion Price in effect immediately prior to the date of such issuance or sale by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of such issuance or sale plus the number of additional shares of Common Stock issued or sold, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of such issuance or sale plus the number of shares which the aggregate consideration received or receivable by the Company for the total number of shares so issued or sold would purchase at such Per Share Market Value. Such adjustment shall be made whenever such shares are issued, and shall become effective immediately after such issuance. If the consideration received or receivable by the Company for such issuance or sale of shares of Common Stock is not cash, the fair market value of such consideration shall be determined by the Board, an investment banking firm, or certified public accountants in the manner specified in subsection 6(b)(iii). (v) If the Company, at any time while any shares of this Series are outstanding, shall issue rights, options, or warrants (excluding those referred to in other provisions of this Section 6(b)) which entitle the holders thereof to purchase shares of Common Stock (such rights, options, or warrants collectively referred to as "Purchase Rights") at a price per share less than the then Per Share Market Value of Common Stock on the date of the issuance of such Purchase Rights, the Conversion Price at which each share of this Series shall thereafter be convertible shall be reduced by multiplying the Conversion Price in effect immediately prior to the date of issuance of such Purchase Rights by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such Purchase Rights plus the number of additional shares of Common Stock offered for purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such Purchase Rights plus the number of shares which the aggregate consideration received or receivable by the Company in connection with the grant as well as the exercise of such Purchase Rights would purchase at such Per Share Market Value. Such adjustment shall be made whenever such Purchase Rights are issued, and shall become effective immediately after the issuance of such Purchase Rights. However, upon the expiration of any such Purchase Right the issuance of which resulted in an adjustment in the Conversion Price of the shares of this Series pursuant to this subsection 6(b)(v), if any such Purchase Right shall expire and shall not have been fully exercised, the Conversion Price per share of Common Stock at which each share of this Series shall thereafter be convertible shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the price which it would have been (but reflecting any other adjustments in the Conversion Price made pursuant to the provisions of this 9 Section 6 after the issuance of such Purchase Rights) had the adjustment of the Conversion Price made upon the issuance of such Purchase Right been made on the basis of offering for purchase only that number of shares of Common Stock actually purchased upon the exercise of such Purchase Rights which were actually exercised. If the consideration for the Purchase Rights received or receivable by the Company for the grant or exercise of such Purchase Rights is not cash, the fair market value of such consideration shall be determined by the Board, an investment banking firm, or certified public accountants in the manner specified in subsection 6(b)(iii). (vi) Notwithstanding any other provision of this Section 6(b) to the contrary, no adjustment to the Conversion Price shall be made with respect to the issuance of shares of Common Stock or the grant of options to purchase shares of Common Stock (or the exercise of such options) which are issued or granted to directors, officers, or employees of the Company, or to the Company's 401(k) Plan while shares of this Series are outstanding, unless and until the aggregate number of such shares issued or issuable upon the exercise of such options exceeds 750,000 shares of Common Stock. (vii) No notification to the holders of any adjustment in the Conversion Price otherwise required by this Section 6 shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustment which by reason of this subsection 6(b)(vii) is not required to be made shall be carried forward and taken into account in any subsequent adjustments, and that upon presentment of shares of this Series for conversion, all adjustment shall be made calculating the conversion rights of such holder. All calculations under this Section 6 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (viii) Whenever the Conversion Price is adjusted, as herein provided, the Company shall promptly mail to each registered holder of shares of this Series a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment. Such notice prepared in good faith shall be conclusive evidence of the correctness of such adjustment absent manifest error. (ix) In case: (A) the Company shall declare a dividend (or any other distribution) on the Common Stock payable otherwise than in cash out of its earned surplus; or (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or 10 (C) the Company shall authorize the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) of the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the shares of this series, and shall cause to be mailed to the holders of record of the shares of this Series at their last addresses as they shall appear upon the stock books of the Company, at least 10 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). (c) In case of any reclassification of the Common Stock, then the holders of the shares of this Series then outstanding shall have the right thereafter to convert such shares only into the kind and amount of shares of stock and other securities and property receivable upon or deemed to be held following such reclassification by a holder of a number of shares of the Common Stock of the Company into which such shares of this Series could have been converted immediately prior to such reclassification. This provision shall similarly apply to successive reclassifications. (d) In case of any consolidation or merger of the Company with or into another Person in which the Company is not the surviving entity or any compulsory share exchange pursuant to any of which the Common Stock is converted into other securities, cash or property (any such event being hereinafter referred to as a "Reorganization"), then the terms of such Reorganization 11 shall provide that the holder of a share of this Series then outstanding shall have the right to receive in exchange therefor, at the option of the Company, either of the following or such combination of the following as the Company shall elect: (i) the kind and amount of shares of stock and other securities and property receivable upon such Reorganization ("Reorganization Consideration") by a holder of the number of shares of the Common Stock of the Company into which (x) a share of this Series could have been converted as of the effective date of the Reorganization multiplied by the Agreed Percentage in effect at the effective date of the Reorganization, plus (y) the Arrearage (if any) on a share of this Series could have been exchanged as of the effective date of the Reorganization; or (ii) an amount in cash equal to (x) the Agreed Percentage multiplied by the Stated Value, plus (y) the Arrearage (if any) on a share of this Series as of the effective date of the Reorganization. (e) In case at any time conditions shall arise by reason of action taken by the Company, which, in the opinion of the Board of Directors of the Company, are not adequately covered by the other provisions hereof and which might materially and adversely affect the rights of the holders of shares of this Series, or in case at any time any such conditions are expected to arise by reason of any action contemplated by the Company, the Board of Directors of the Company shall appoint a firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company), who shall give their opinion as to the adjustment, if any (not inconsistent with the standards established in this Section 6, of the Conversion Price (including, if necessary, any adjustment as to the securities into which shares of this Series may thereafter be convertible) which is or would be required to preserve without dilution the rights of the holders of shares of this Series. The Board of Directors of the Company shall make the adjustment recommended forthwith upon the receipt of such opinion or the taking of any such action contemplated, as the case may be; provided, however, that no such adjustment of the Conversion Price shall be made which in the opinion of the investment banking firm or firm of accountants giving the aforesaid opinion would result in an increase of the Conversion Price to more than the Conversion Price then in effect. Section 7. Matters Relating to Issuance of Common Stock. The following provisions shall be applicable to issuances of Common Stock upon conversion of shares of this Series or upon an Arrearage Exchange. (a) The Company covenants that it will at all times reserve and keep available, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Series or upon an Arrearage Exchange as herein provided, free from preemptive rights or any other actual or contingent purchase rights of Persons other than the holders of shares of this Series, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of this Series or the exchange of any Arrearage on shares of this Series. 12 The Company covenants that all shares of Common Stock that shall be so issuable shall upon issue be duly and validly issued and fully paid and nonassessable. (b) The Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may, if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the holder of a share of this Series shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (c) The issuance of certificates for shares of Common Stock on conversion of this Series or on an Arrearage Exchange shall be made without charge to the holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of this Series converted or upon which an Arrearage Exchange was made and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (d) The exercise by a holder of shares of this Series of the conversion or Arrearage Exchange rights granted herein is subject in all respects to and conditioned upon compliance by the parties with the HSR Act, and rules and regulations promulgated pursuant thereto, to the extent that said act, rules and regulations are applicable to such exercise. The Company and such holder agree to make such filings with and provide such information to the Federal Trade Commission and the Department of Justice with respect to such exercise as are required in connection with the HSR Act in a timely manner and to join each others request for early termination. The Company and such holder will use such reasonable efforts to obtain all governmental approval required to permit such exercise and to cause early termination of the waiting period under the HSR Act. SECTION 8. Maturity Date. If any or all shares of this Series have not been redeemed or converted prior to September 1, 2012, (i) such shares shall automatically be converted into the number of shares of Common Stock determined by dividing the Stated Value by the Conversion Price in effect at the time of conversion, and (ii) the Arrearage (if any) on such shares of this Series shall automatically be exchanged for the number of shares of Common Stock determined by dividing the Arrearage by the Per Share Market Value on such date. SECTION 9. Definitions. For the purposes hereof, the following terms shall have the following respective meanings: "Arrearage" has the meaning specified in Section 2(a). 13 "Arrearage Exchange" has the meaning specified in Section 2(b). "Common Stock" means shares now or hereafter authorized of the class of Common Stock, $.10 par value, of the Company presently authorized and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Date" means the date the stock certificate is received by the Company for conversion in accordance with Section 6(a). "Conversion Price" has the meaning specified in Section 6(b). "Dividend Period" has the meaning specified in Section 2(a). "Dividend Rate" has the meaning specified in Section 2(a). "Exchange Notice" has the meaning specified in Section 2(b). "Redemption Threshold" means the date on which the Per Share Market Value first exceeds 140% of the Conversion Price per share of Common Stock for any 20 out of any 30 consecutive Trading Days. "Junior Stock" means the Common Stock of the Company and any other stock of the Company over which shares of this Series has a preference as to distribution of assets and payment of dividends. "Agreed Percentage" means 140%, provided that if the Redemption Threshold has occurred at any time prior to the date of determination, then "Agreed Percentage" means 100%. "Parity Stock" means any stock of the Company ranking as to distribution of assets and payment of dividends on a parity with this Series. "Per Share Market Value" means on any particular date (a) the last sale price per share of the Common Stock on such date on the principal stock exchange on which the Common Stock has been listed or, if there is no such price on such date, then the last price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not listed on any stock exchange, the final bid price for a share of Common Stock in the over-the-counter market, as reported by the Nasdaq National Market at the close of business on such date, or the last sales price if such price is reported and final bid prices are not available, or (c) if the Common Stock is not quoted on the Nasdaq National Market, the bid price for a share of Common Stock in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices), or (d) if the Common Stock is no 14 longer publicly traded, as determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) selected in good faith by the Board of Directors of the Company, provided, that none of the transactions related to the foregoing shall include purchases by any "affiliate" (as such term is defined in the General Rules and Regulations under the Securities Act of 1933) of the Company. "Person" means a corporation an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Preferred Stock" means the Company's Preferred Stock, $1.00 par value. "Reorganization" has the meaning specified in Section 6(d). "Reorganization Consideration" has the meaning specified in Section 6(d). "Senior Stock" means any shares or class of the Company that are by their terms expressly given priority over this Series as to payment of dividends or distribution of assets on any liquidation of the Company. "Stated Value" has the meaning specified in Section 1. "Trading Day" means (a) a day on which the Common Stock is traded on the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Nasdaq Stock Market, or (c) if the Common Stock is not quoted on the Nasdaq Stock Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices). IN WITNESS WHEREOF, said Plains Resources Inc. has caused this Certificate to be signed by a duly authorized officer, this 11th day of November, 1997. PLAINS RESOURCES INC. By: /s/ Phillip D. Kramer ---------------------------------------- Name: Phillip D. Kramer Title: Senior Vice President ATTEST: By: /s/ Michael R. Patterson ----------------------------------- Name: Michael R. Patterson Title: Secretary EX-99.3 4 WARRANT TO PURCHASE COMMON STOCK 1 EXHIBIT 3 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE. PLAINS RESOURCES INC. WARRANT 1 WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK 150,000 shares FOR VALUE RECEIVED, PLAINS RESOURCES INC., a Delaware corporation (the "Company"), hereby certifies that SHELL LAND & ENERGY COMPANY, or its permitted assigns (the "Holder"), is entitled to purchase from the Company, at any time or from time to time commencing on the date hereof and prior to 5:00 P.M., Houston time then current, on November 12, 2002, 150,000 fully paid and non-assessable shares of the common stock, $.10 par value per share, of the Company for a purchase price per share of $25.00 (the "Per Share Warrant Price"). (Hereinafter, (i) said common stock, together with any other equity securities which may be issued by the Company with respect thereto or in substitution therefor, is referred to as the "Common Stock," (ii) the shares of the Common Stock purchasable hereunder are referred to as the "Warrant Shares," (iii) the aggregate purchase price payable hereunder for the Warrant Shares is referred to as the "Aggregate Warrant Price," and (iv) this Warrant and all warrants hereafter issued in exchange or substitution for this Warrant are referred to as the "Warrant".) The Aggregate Warrant Price is not subject to adjustment. The number of Warrant Shares and the Per Share Warrant Price is subject to adjustment as hereinafter provided. 10. Exercise of Warrant. This Warrant may be exercised, in whole at any time or in part from time to time, commencing on the date hereof, and prior to 5:00 P.M., Houston time then current, on November 12, 2002, by the Holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the Company's offices in Houston, Texas, together with proper payment of the Aggregate Warrant Price, or the proportionate part thereof if this Warrant is exercised in part. Payment for Warrant Shares shall be made by certified or cashier's bank check payable to the order of the Company. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised. Upon such surrender of this Warrant, the Company will (a) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled (no fractional shares being issuable upon exercise of this Warrant), and deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. The Company shall pay all taxes and other expenses payable in connection the preparation, execution and delivery of stock certificates pursuant to this Section 1. Unless and until the Warrant Shares are registered under the Securities Act of 1933, as 2 amended (the "Act") as provided for in Exhibit A-3 to the Exchange Agreement pursuant to which this Warrant has been issued, certificates evidencing the Warrant Shares issued upon exercise of this Warrant shall bear a restrictive legend regarding limitations on transferability of such shares. 11. Reservation of Warrant Shares; Listing. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times (a) have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the shares of the Common Stock and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, and (b) keep the shares of the Common Stock receivable upon the exercise of this Warrant listed upon notice of issuance on the American Stock Exchange or such other national securities exchange as the Common Stock of the Company may be listed from time to time. 12. Protection Against Dilution. 1. In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of its Common Stock other securities of the Company, the kind and amount of Common Stock and other securities shall be adjusted so that the Holder of this Warrant upon the exercise hereof shall be entitled to receive the number of shares of Common Stock or other securities of the Company which he would have owned immediately following such action had this Warrant been exercised immediately prior thereto. An adjustment made pursuant to this Subsection 3(a) shall become effective immediately after the record date in the case of a stock dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this Subsection 3(a), the Holder of this Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other securities of the Company, the Board of Directors (whose determination shall be made in its reasonable judgment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares of such classes or capital stock or shares of Common Stock and other securities. 2. In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is a continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to convert this Warrant into the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Warrant been converted immediately prior to the effective date of such 3 reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. In the event of a statutory merger, the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder of this Warrant not less than 20 days prior to such event. 3. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant is adjusted, as herein provided, the Per Share Warrant Price shall be adjusted by multiplying such Per Share Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Warrant Shares so purchasable immediately thereafter. 4. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or the Per Share Warrant Price is adjusted, as herein provided, the Company shall promptly mail by first class mail, postage prepaid to the Holder notice of such adjustment setting forth a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. 5. In the event that the Company issues securities, makes a distribution to its stockholders or undertakes some other capital change or transaction that the Company's Board of Directors in its reasonable judgment determines is an issuance, distribution, change or transaction that warrants an adjustment similar to those provided in this Section 3 based upon the intent hereof but with respect to which the provisions hereof are not specifically applicable, adjustments to the number of shares or other securities purchasable and the price of shares or other securities comparable to those provided in this Section 3 shall be made as a result of such issuance, distribution, change or transaction. 13. Fully Paid Stock. The Company agrees that the shares of the Common Stock represented by each and every certificate for Warrant Shares delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and non-assessable, and not subject to preemptive rights. 4 14. Limited Transferability. This Warrant is transferable or assignable by the Holder and is so transferable only upon the books of the Company which it shall cause to be maintained for the purpose. The Company may treat the registered Holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. Any Warrant issued upon the transfer or assignment of this Warrant will be dated the same date as this Warrant. Provided, however, this Warrant may not be transferred unless it is registered under the Act, or an exemption from such registration is available. 15. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver to the Holder a new Warrant of like date, tenor and denomination. 16. Warrant Holder Not Shareholder. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise hereof. 17. Headings. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 18. Applicable Law. This Warrant shall be governed by and construed in accordance with the law of the State of Delaware without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, PLAINS RESOURCES INC. has caused this Warrant to be signed by its President or Vice President this ____ day of November, 1997. PLAINS RESOURCES INC. By: ---------------------------- Name: Phillip D. Kramer Title: Senior Vice President 5 SUBSCRIPTION The undersigned, ___________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase ______________ shares of the Common Stock of PLAINS RESOURCES INC. covered by said Warrant, and makes payment therefor in full at the price per share provided by said Warrant. Dated: ------------------ Signature: ------------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- ASSIGNMENT FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers unto _________________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint __________________, attorney, to transfer said Warrant on the books of PLAINS RESOURCES INC. Dated: ------------------ Signature: ------------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- PARTIAL ASSIGNMENT FOR VALUE RECEIVED _________________________ hereby assigns and transfers unto ________________________ the right to purchase _________ shares of the Common Stock of PLAINS RESOURCES INC. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint ___________________, attorney, to transfer that part of said Warrant on the books of PLAINS RESOURCES INC. Dated: ------------------ Signature: ------------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- EX-99.4 5 SERVICE AGREEMENT DATED 11/12/97 1 EXHIBIT 4 SERVICE AGREEMENT In conjunction with the November 12, 1997 Exchange Agreement between Shell Land and Energy Company and Shell Western E&P Inc. (Hereinafter collective referred to as "Shell") and Plains Resources Inc. (hereinafter referred to as "Plains"), Plains requests and Shell agrees to provide consulting services ("Services") during a transition period to help familiarize Plains (or its affiliates or assigns) personnel with the facilities and operation of the Arroyo Grande field. The Services will be provided according to the following terms: 1. The transition period shall begin at 7:00 a.m. on November 11, 1997 and continue for the next ensuing 60 days, unless earlier terminated by Plains, upon seven (7) days written notice. The parties agree that this agreement may be extended for an additional 60 day period upon giving seven (7) days written notice prior to the end of the initial 60 day period. 2. a. The services shall consist of advice, information and hands on operations of the field, including but not limited to: (1), the logistics and physical placement of oil field facilities and controls; (2) an explanation of the mechanical operation of facilities located on the Arroyo Grande field and (3), such other field work as is reasonable and necessary for proper maintenance and operation of the field. b. It is the intent of the Parties that Services hereunder will be performed by Shell employees Robert Coons, John Bates, Tom Knotts, Brent Randolph, Bowman Lau, Paul De Lorenzo, Joanne Miller, and contractors Jim Bognuda, Dean Roberts, and Jim Leamons. If such employees or contractors are unable or refuse to perform the Services, Shell will use good faith efforts to substitute other employees or contractors at a comparable performance level are in compliance with Shell's personnel policies, who have prior experience and expertise as concerns operations at Arroyo Grande. Plains shall have the right to refuse the services of such substitutes, but if refused, Shell shall not be obligated to provide other employees or contractors. Plains reserves the right, but not the obligation, to make an offer of employment to an employee or contractors at any time during this Agreement. Shell and Area Energy LLC agree that it will not offer said employee(s) a competing offer of employment prior to January 1, 1998. It is understood that John Bates and Joanne Miller though currently performing duties in the Arroyo Grande Field have been offered employment opportunities with Aera Energy's organization. 3. Plains shall pay Shell an amount equal to the salary and wages paid by Shell to the personnel performing the services, plus an amount equal to 33% of such salary and wages to cover payroll taxes, workers' compensation expenses and pension and benefits expenses with respect to such 2 personnel. Shell shall provide a statement setting forth the amount due for the Services within sixty days of termination of the transition period. 4. Both Plains and Shell agree that the Services to be provided shall be performed by Shell as an independent contractor. 5. This Agreement is not intended and shall not be construed as creating a joint venture, partnership, agency or other association. 6. Plains agrees to defend, indemnify and hold harmless Shell, its affiliates and their representatives officers, directors, employees, contractors, agents or representatives, from and against any and all liability or loss that may be asserted by Plains or any third person, including Plains' employees, contractors, and agents, arising out of or in connection with actions of Shell in connection with performance of the Services; provided that this indemnity shall not apply to any loss or liability caused by Shell's gross or willful misconduct. 7. The obligations set for the in this Agreement shall survive the expiration of the Agreement. 8. This Agreement may be assigned by Plains to any of its affiliates or subsidiaries. If you are in agreement with the terms and provisions as stated above, please do so by signing and returning one copy of the Agreement. Plains Resources Inc. _______________________________ Title:_________________________ Accepted and agreed to this 12th day of November, 1997 Shell Land and Energy Company AERA Energy LLC By_________________________ By______________________________ Title______________________ Title___________________________ Shell Western E&P Inc. By__________________________ Title_________________________ -2- EX-99.5 6 EXCHANGE AGREEMENT DATED 11/12/97 1 EXHIBIT 5 EXCHANGE AGREEMENT SHELL LAND & ENERGY COMPANY SHELL WESTERN E&P INC. AND PLAINS RESOURCES INC. 2 TABLE OF CONTENTS 1. PROPERTIES BEING EXCHANGED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (a) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (b) Fee Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (c) Rights in Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (d) Rights; Working Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (e) Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (f) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (g) Wells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (h) Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (i) Equipment & Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (j) Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. CLOSING AND PERFORMANCE DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (a) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (b) At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5. EXCHANGE EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6. PRE-ACQUISITION REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (a) Review of the SHELL Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (b) Conditions to Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (c) Review Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7. DISCLAIMERS/ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (a) No Warranty, Express or Implied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 (b) Acknowledgments of Grantee at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 8. INDEPENDENT EVALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 9. CONSENTS; PREFERENTIAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (a) SHELL Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (b) PLAINS Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 10. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (a) Title Examination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (b) Significant Title Defect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 (c) Personal Property Inventory List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
i 3 11. REPRESENTATIONS BY SHELL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (a) Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (b) Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (c) Duly Executed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (d) No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (e) No Liens or Royalty Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 12. REPRESENTATIONS OF PLAINS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (a) Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (b) Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (c) Duly Executed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (d) No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (e) Hazardous Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (f) Environmental Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13. SHELL'S CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (a) Representations True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (b) No Pending Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (c) No Act of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (d) H-S-R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14. PLAINS' CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (a) Representations True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (b) No Pending Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (c) No Act of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (d) H-S-R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (e) No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 15. OPERATIONS AND PRODUCTION PRIOR TO CLOSING: SHELL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . 14 (a) Operations Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (b) Closing Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (c) Interim Accounting, Payment and Collection Services . . . . . . . . . . . . . . . . . . . . . . . . 14 16. TAXES, COSTS, AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (a) Taxes and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 (b) No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 17. OPERATIONS BY GRANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (a) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (b) Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 18. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (a) General Indemnity by GRANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (b) Environmental Indemnity by GRANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (c) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (d) Indemnified Party's Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ii 4 (e) GRANTEE'S Indemnification and Financial Obligations to GRANTOR to Survive Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (f) SHELL Acknowledgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 19. EXISTING CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (a) Assumption of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 20. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 21. PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 22. COMPLETE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 23. SHELL ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 24. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 25. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (a) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (b) Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (c) Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (d) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (f) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (g) Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (h) Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (i) No Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (j) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (k) Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 (l) Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 (m) H-S-R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 (n) No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (o) File Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 (p) Rule 430 Nox Reduction Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (q) Pismo Creek Pipeline Crossing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 (r) Operational Continuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 26. CALL ON PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
iii 5 EXCHANGE AGREEMENT SHELL Land & Energy Company, a Delaware corporation, and SHELL Western E&P Inc., a Delaware corporation, herein collectively referred to as "SHELL," and PLAINS RESOURCES INC., a Delaware corporation, herein referred to as "PLAINS," enter into this Exchange Agreement, herein called the "AGREEMENT," in consideration of the parties' agreement to exchange the SHELL Property (as defined below) for the PLAINS Property (as defined below), all pursuant to the terms and conditions of this AGREEMENT. SHELL also agrees that it may be referred to herein as the "GRANTOR" of the SHELL Property and the "GRANTEE" of the PLAINS Property. PLAINS agrees also that it may be referred to as the "GRANTOR" of the PLAINS Property and the "GRANTEE" of the "SHELL" Property. Additionally, PLAINS and SHELL agree that they may also be referred to herein individually as a "Party" or, collectively, as the "Parties." 1. PROPERTIES BEING EXCHANGED. Subject to the terms and conditions set forth hereinafter, SHELL conveys to PLAINS the SHELL Property (as defined below) and PLAINS conveys to SHELL the PLAINS Property (as defined below), and tenders additional consideration therefor, in the manner and of the type and amount as hereinafter required. For purposes of this AGREEMENT, the "SHELL Property", is the property set forth on Exhibit "A-1" attached hereto, and the "PLAINS Property" is the Participation Agreement dated November 10, 1997 (the "Murphy/Callon Agreement") with Murphy Oil Corporation and Callon Petroleum Operating Company (together, "Murphy/Callon") which is attached hereto as Exhibit "A-2". PROPERTY shall mean all of GRANTOR's right, title, and interest in and to (i) the property and property interests described in Exhibits "A-1", "A-2" or "A-3" hereto, and (ii) all property and property interests listed in subsections (a) through (i) of this section 1, to the extent such property or property interests are a part of, grant rights in, or with respect to, or are located on the property and property interests 1 6 described in Exhibits "A-1", "A-2" or "A-3"; but excluding the property specified in subsection (j). (a) Leases. Leasehold interests in oil, gas, or other minerals, including working interests, carried working interests, rights of assignment and reassignment, and other interests under or in oil, gas or mineral leases, and interests in rights to explore for and produce oil, gas, and other minerals. (b) Fee Interests. Fee interests to the surface and in oil, gas or other minerals, including rights under mineral deeds, conveyances, or assignments. (c) Rights In Production. Royalties, overriding royalties, production payments, rights to take royalties in kind, or other interests in production of oil, gas, or other minerals. (d) Rights; Working Interests. Rights and interests in or derived from unit agreements, orders or decisions of state and federal regulatory authorities establishing units, joint operating agreements, enhanced recovery and injection agreements, farmout agreements and farmin agreements, options, drilling agreements, exploration agreements, assignments of operating rights, working interests, subleases, and rights above or below certain footage depths, horizons or interests described in paragraphs a-c above except those contracts or agreements described in subsection (j) below. (e) Easements. To the extent transferable, rights-of-way, surface or ground leases, easements, servitudes, and franchises located on or granting rights to the property or property interests described in Exhibits "A-1" or "A-2" hereto and acquired or used in connection with operations for the exploration, production, processing, and transportation of oil, gas or other minerals with respect to the properties and interests described in subsections (a)-(d) above, and such other rights-of-way, surface or ground leases, easements, and servitudes specifically listed on SCHEDULE "1(e)" 2 7 hereto, which are not located on or grant rights to such property and property interests, but which were acquired or used in such operations with respect to such property and property interests. (f) Permits. To the extent transferable, permits and licenses of any nature owned, held, or operated in connection with operations for the exploration and production, processing and transportation of oil, gas, or other minerals. (g) Wells. Producing, non-producing, shut-in oil and abandoned oil and gas wells, salt water disposal wells, injection wells, and water wells located on the property or property interests described in Exhibits "A-1" or "A-2" hereto and used in connection with the properties or interests described in subsections (a)-(f) above. (h) Facilities. All facilities, buildings, improvements, gas plants, gathering lines, flow lines, injection lines, and pipelines and appurtenances located on the real property and on lands included in the property and property interests described on Exhibits "A-1" or "A-2". (i) Equipment and Personal Property. All surface and down-hole equipment, fixtures, inventory, and personal property located on the property and property interests described in Exhibits "A-1" or "A-2" hereto, and used in connection with the properties or interests described in subsections (a)-(h) above, but excluding all property described in subsection (j) below. (j) Exclusions. The PROPERTY shall not include any rights-of-way, surface or ground leases, easements, franchises, permits, licenses, or other contracts or agreements which by their own terms are not transferable, Proprietary Data (as defined in subsection 25(o)), rental equipment, computer software, televisions, VCRs, copy machines, and store stock left on consignment and belonging to third parties. 2. CONSIDERATION. As consideration for the exchange, SHELL conveys to PLAINS 3 8 the SHELL Property described on Exhibit "A-1" and PLAINS conveys to SHELL the Property described on Exhibit "A-2" and the Preferred Stock and the Warrant to Purchase Common Stock of PLAINS (the "Warrant") described on Exhibit "A-3". 3. CLOSING. (a) Closing. Closing is on November 10, 1997, (the "Closing Date"), at a time and place to be designated by SHELL. "Closing" shall mean the consummation of the exchange by transfer of SHELL'S and PLAINS' ownership in the PROPERTY, payment of all exchange consideration, and transfer of the operation and possession of the PROPERTY. (b) At Closing: Conveyance. SHELL will convey the SHELL PROPERTY to PLAINS and PLAINS will convey the PLAINS Property to SHELL by executing and delivering (i) an Assignment and Conveyance and Grant Deed, (ii) Assignment of Contractual Rights, and (iii) a Personal Property Agreement and Bill of Sale in substantially the form attached hereto as Exhibits "B-1", "B-2" and "C" respectively, and both shall deliver to the other a Non-Foreign Affidavit in substantially the form attached hereto as Exhibits "D" and "F". In addition, PLAINS will execute and deliver to SHELL a certificate for 46,600 Shares of Preferred Stock designated Series D Cumulative Convertible Preferred Stock and the Warrant to Purchase 150,000 Shares of Common Stock as described on Exhibit "A-3". 4. FURTHER ASSURANCES. GRANTOR and GRANTEE each agree to execute and deliver to the other Party all division orders, letters in lieu, transfer orders, and all other documents necessary to fully vest in GRANTEE the rights, obligations, and benefits acquired pursuant to this AGREEMENT. 4 9 5. EXCHANGE EFFECTIVE DATE. The exchange herein shall be effective as of November 1, 1997, at 12:00 a.m. Pacific Standard Time, herein called the "Effective Date." All revenues and expenses of the SHELL PROPERTY from November 1, 1997, to the Closing Date shall be for the account of PLAINS. 6. PRE-ACQUISITION REVIEW. SHELL acknowledges that PLAINS has no files, records or any information regarding the properties which are the subject of the Murphy/Callon Agreement. The following provisions of this Paragraph 6 relate to the SHELL Property only. (a) Review of the SHELL Property. PLAINS and its employees, agents, and contractors have had the right and opportunity, but not the obligation, to do the following (the "Pre-Acquisition Review"), at its sole cost and expense but with the cooperation and assistance of SHELL: (1) [omitted]* (2) To inspect and review at SHELL's and its affiliates' offices, all non-privileged and non-proprietary files, records, documents, and data related to the above matters, including, but not limited to, any of the following which SHELL may have: Original Well Record Files on all wells (i.e., all wells situated on the SHELL Property), Regulatory, Accounting, Marketing, Environmental, Land, Contracts, Pipeline, Maintenance, Transportation, Processing, Exploration, Production, and Engineering files and records. Non-proprietary files, records, documents, and data mean those which do not constitute Proprietary Data as described in subsection 25(o) below. (b) Conditions to Review. Prior to the commencement of the Pre-Acquisition Review, SHELL and PLAINS agreed that the following conditions were satisfied: * Note: The term "omitted" as used throughout this exhibit is in complete conformity to the executed agreement. 5 10 (1) PLAINS delivered a Pre-Acquisition Review plan to SHELL, including the identity of any party participating in or associated with the plan, and an estimated timetable for events under the plan. Such plan was approved in writing by SHELL; (2) PLAINS signed and delivered to SHELL an agreement for Indemnification and Responsibility for Damages in the form of Exhibit "E" attached hereto (the "Indemnification Agreement"); (3) PLAINS maintained the results of its investigation, testing, and evaluation and review of files and records, including title examination reviews, confidential in accordance with the provisions, terms, and conditions of that certain Confidentiality Agreement entered into on the SHELL Property between SHELL and PLAINS, dated February 26, 1997 a copy of which is attached hereto as Exhibit "K" (the "Confidentiality Agreement"); and (4) PLAINS provided SHELL a copy of final assessment reports of or about the SHELL Property, including reports, data, and conclusions developed pursuant to such reports and the Pre-Acquisition Review, and SHELL was permitted to discuss the contents of any such assessment reports with the party who prepared such reports. (5) [OMITTED] (c) Review Results. (1) [omitted] (2) [omitted] (3) [omitted] (4) [omitted] 6 11 7. DISCLAIMERS/ACKNOWLEDGMENTS. (a) No Warranty; Express Or Implied. CONVEYANCE OF THE PROPERTY SHALL BE WITHOUT WARRANTY WHATSOEVER, EXPRESS, STATUTORY, OR IMPLIED AS TO TITLE, DESCRIPTION, PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE PROPERTY), QUALITY, VALUE, FITNESS FOR PURPOSE, MERCHANTABILITY, OR OTHERWISE except that SHELL shall warrant title to the SHELL Property by, through and under SHELL, but not otherwise. With respect to the PLAINS Property, SHELL acknowledges that certain obligations under the Murphy/Callon Agreement must be satisfied in order to earn an interest in the title to the property covered thereby, that PLAINS shall have no responsibility whatsoever for any obligations under the Murphy/Callon Agreement, and that PLAINS makes no representations or warranties whatsoever for any obligations under the Murphy/Callon Agreement, and that PLAINS makes no representations or warranties whatsoever, express, statutory, or implied with respect to the property covered by such agreement. Grantee shall satisfy itself, prior to the Closing, as to the type, condition, quality, and extent of the property and property interests which comprise the PROPERTY it is receiving pursuant to this AGREEMENT and under this sale. GRANTEE shall have the right of full substitution and subrogation to any and all rights and actions of which GRANTOR has or may have against any and all preceding owners or vendors of the PROPERTY other than affiliates of GRANTOR. (b) Acknowledgments of GRANTEE at Closing. By closing on the transaction provided for in the AGREEMENT, GRANTEE shall be deemed to have acknowledged and does acknowledge and admit that: (i) GRANTEE has been given the opportunity to adequately inspect 7 12 the PROPERTY for all purposes prior to Closing; (ii) GRANTEE is aware that the PROPERTY has been used for the exploration, development, production, treating, and transporting of oil and gas, and that physical changes may have occurred as a result of such use and that GRANTOR has disclosed, and GRANTEE is further aware, that there exists the possibility that there could have occurred from such use one or more releases of hazardous substances or releases of Chemical Substances [as defined in subsection 18(c)(3) below] into, or other pollution or contamination of or into, the ambient air, surface water, groundwater, or land surface and subsurface strata of any real property included in the PROPERTY and of contiguous, or a series of contiguous, real properties not associated with the PROPERTY; (iii) GRANTEE has entered into this AGREEMENT on the basis of its own investigation of the physical condition of the PROPERTY and the land related thereto (including the environmental condition of the PROPERTY); (iv) GRANTEE, with full knowledge of the foregoing and after conducting the above-described investigation and evaluation, IS ACQUIRING THE PROPERTY ON A "WHERE IS" AND "AS IS" BASIS except as otherwise noted in 7(a) above; and GRANTEE, by acquiring the PROPERTY on a "WHERE IS" and "AS IS" basis, waives any other rights of indemnification, contribution, or recourse it may have against or from GRANTOR with respect to the condition of the PROPERTY, including, without limitation, the environmental condition of the PROPERTY and damage to natural resources associated with the PROPERTY; (v) GRANTEE shall further acknowledge that it has received from GRANTOR prior to Closing a written notice pursuant to section 25359.7(a) of the California Health and Safety Code and that a copy of such written notice is attached hereto as SCHEDULE "11(b)"; and (vi) GRANTEE shall further acknowledge that it has had the full opportunity to review and is aware of the matters with respect to the PROPERTY which are identified in SCHEDULE "11(c)" attached hereto. 8 13 8. INDEPENDENT EVALUATION. GRANTEE has made an independent evaluation of the PROPERTY and acknowledges that GRANTOR has made no statements or representations concerning the present or future value of the anticipated income, costs, or profits, if any, to be derived from the PROPERTY or the quantity and quality of any oil and gas or other minerals that may be produced from the PROPERTY and THAT GRANTOR DOES NOT IMPLIEDLY OR EXPRESSLY WARRANT DESCRIPTION, TITLE, VALUE, QUALITY, PHYSICAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, THE ENVIRONMENTAL CONDITION OF THE PROPERTY), MERCHANTABILITY, OR FITNESS FOR PURPOSE OF ANY OF THE PROPERTIES OR THE WELLS, EQUIPMENT, PIPELINES FACILITIES, OR OTHER PROPERTY LOCATED THEREON OR USED IN CONNECTION THEREWITH. GRANTEE further acknowledges that, in entering into this AGREEMENT, it has relied solely upon its independent examination of the PROPERTY and public records relating to the PROPERTY and its independent estimates, computations, evaluations, reports, and studies based thereon. All information and data furnished to GRANTEE by GRANTOR is believed to be accurate and correct to the best of GRANTOR's knowledge without investigation; however, GRANTOR makes no warranty or representation as to the accuracy or correctness of any information furnished to GRANTEE. Any reliance GRANTEE makes on such information is at GRANTEE's sole risk. GRANTEE acknowledges that it is aware that accounting reports, files, and records made available to GRANTEE during the Review Period specified in Section 6 hereof or otherwise furnished to or made available to GRANTEE for review may not incorporate all revenue and cost data up, to, and through the date of the accounting reports, files, records, or information provided, and further inquiry 9 14 by GRANTEE may be required to obtain such revenue and cost data. GRANTOR will provide a copy of such revenue and cost data upon written request of the GRANTOR. Notwithstanding the foregoing, SHELL acknowledges that all information regarding the PLAINS Property has been furnished to SHELL by Murphy/Callon and that PLAINS shall have no responsibility whatsoever with respect to the accuracy or completeness of such information. 9. CONSENTS; PREFERENTIAL RIGHTS. (a) [omitted] (b) [omitted] 10. TITLE. SHELL acknowledges that PLAINS has never held title to the property covered by the Murphy/Callon Agreement and has no records or information regarding title to such property and accordingly, that PLAINS makes no representations or warranties whatsoever, express, statutory or implied with respect to such property. The following provisions of this Paragraph 10 relate to the SHELL Property only. (a) Title Examination. PLAINS assumes the risk of description and title to the SHELL Property and has satisfied itself with respect thereto. SHELL has made available to PLAINS for examination by PLAINS such title information and abstract coverage as were in its and its affiliates' files. (b) Significant Title Defect. (1) [omitted] (2) With regard to the case styled Kerry Moremann vs. A.A. Cantin, et al. Case No. CV 0880364, Superior Court of the County of San Luis Obispo, the parties hereby agree that SHELL shall be responsible for the defense of this litigation, including the payment of attorney 10 15 fees, and shall be responsible for losses, penalties, fines, damages or other expenses associated with or arising out of the litigation, including but not limited to the loss of any mineral interest or leasehold interest in the lands subject to the litigation. Each party shall cooperate with each other in the litigation and SHELL shall keep PLAINS apprised of the status of the litigation, including but not limited to furnishing PLAINS with copies of the pleadings and other substantive court filings. For any settlement which requires PLAINS' consent, PLAINS will not unreasonably withhold its consent. (c) Personal Property Inventory List. [omitted] 11. REPRESENTATIONS BY SHELL. SHELL represents to PLAINS, each of which representations shall survive Closing, that as of the date of the AGREEMENT and as of Closing: (a) Due Organization. SHELL Land & Energy Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. SHELL Western E&P Inc. is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. (b) Power. SHELL has all requisite power and authority to carry on its business as presently conducted, to enter into the AGREEMENT, to perform its obligations under the AGREEMENT. The consummation of the transactions contemplated by the AGREEMENT will not violate, nor be in conflict with, (i) any provision of its charter, operating agreement, or bylaws, or (ii) any agreement or instrument to which it is a party or is bound (except for preferential rights to purchase and required Third Party consents to assignment, if any). (c) Duly Executed. The AGREEMENT has been duly executed and delivered on behalf of SHELL, and, at Closing, all documents and instruments required hereunder to be executed and delivered by it shall have been duly executed and delivered. 11 16 (d) No Litigation. There are no pending, or to the best of SHELL's knowledge, threatened claims, lawsuits, administrative proceedings, or governmental investigations or inquiries involving SHELL's right to consummate the sale contemplated hereunder or which have involved the Property, except those claims, lawsuits, administrative proceedings, and governmental investigations and inquires that SHELL has disclosed on attached Schedule "1(k)" and the Moremann vs. Cantin case described in Section 10(b) (2) above. (e) No Liens or Royalty Obligations. Except as disclosed to PLAINS in writing on Exhibit "J", SHELL, to the best of its knowledge, is not aware of any liens, charges, encumbrances, outstanding and past due royalties or rentals under the leases and agreements covering the Property. 12. REPRESENTATIONS OF PLAINS. PLAINS represents to SHELL, each of which representations shall survive Closing, that as of the date of the AGREEMENT and as of Closing: (a) Due Organization. Plains Resources Inc. 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 in California. (b) Power. PLAINS has all requisite corporate power and authority to carry on its business as presently conducted, to enter into the AGREEMENT, to purchase the PROPERTY on the terms described in the AGREEMENT, and to perform its other obligations under the AGREEMENT. The consummation of the transactions contemplated by the AGREEMENT will not violate, nor be in conflict with, (i) any provision of its charter or bylaws or formation and governing documents or (ii) any agreement or instrument to which it is a party or is bound. 12 17 (c) Duly Executed. The AGREEMENT has been duly executed and delivered on behalf of PLAINS, and, at Closing, all documents and instruments required hereunder to be executed and delivered by it shall have been duly executed and delivered and the transactions contemplated hereby shall have been duly and validly authorized by all requisite corporate action. (d) No Litigation. There are no pending, or to the best of PLAINS' knowledge, threatened claims, lawsuits, administrative proceedings, or governmental investigations or inquiries involving PLAINS' right to consummate the sale contemplated hereunder or which have involved the property set forth on Exhibit "A-3", except those claims, lawsuits, administrative proceedings, and governmental investigations and inquires that PLAINS has disclosed to SHELL on attached Schedule "1(n)". (e) Hazardous Releases. PLAINS has received and reviewed Schedules 11(b) and(c) attached hereto. (f) Environmental Conditions. PLAINS has received and reviewed Schedule "1(m)" attached hereto. 13. SHELL'S CONDITIONS. (a) Representations True. [omitted] (b) No Pending Suits. [omitted] (c) No Act of Termination. [omitted] (d) H-S-R. [omitted] 14. PLAINS' CONDITIONS. [omitted] (a) Representations True. [omitted] (b) No Pending Suits. [omitted] 13 18 (c) No Act of Termination. [omitted] (d) H-S-R. [omitted] (e) No Material Change. [omitted] 15. OPERATIONS AND PRODUCTION PRIOR TO CLOSING: SHELL PROPERTY (a) Operations Prior to Closing. [omitted] (b) Closing Settlement. At Closing, SHELL shall pay to PLAINS a Closing Settlement herein defined as the sum of $1,060,483.00 which reflects the mutually agreed upon net cash flow before tax generated by the SHELL Property between April 1, 1997 and October 31, 1997. Notwithstanding the above, the net cash flow before tax generated by the SHELL Property excludes the costs and expenses associated with the projects described in section 25(p) and 25(q) herein. Both SHELL and PLAINS agree that the Closing Settlement sum contained in this section 15(b) shall also serve as the entire Closing Settlement between the Parties, and no post-closing settlement will be provided for herein. (c) Interim Accounting, Payment and Collection Services. [omitted] 16. TAXES, COSTS, AND FEES. (a) Taxes and Fees. GRANTEE shall pay to GRANTOR at Closing, in addition to and separate from the Closing Settlement, an amount equal to all state and local taxes payable by GRANTOR on the transfer of ownership of any tangible personal property calculated at the then-current rates. GRANTEE shall indemnify GRANTOR and hold GRANTOR harmless from any liability, including, without limitation, penalties, interest, and attorney's fees arising out of GRANTEE's failure to pay to GRANTOR at Closing, in addition to and separate from the Closing Settlement, the amount equal to all state and local taxes payable by GRANTOR on the transfer of 14 19 ownership of any tangible personal property. GRANTEE shall pay all costs associated with documentary transfer taxes, other transfer taxes, and any recording costs assessed by any federal, state, county, or other governmental offices or other transfer fees, and shall indemnify and hold GRANTOR harmless for such transfer taxes, costs, and fees. (b) No Brokers. Each Party shall pay and indemnify and hold the other Party harmless from any commission or brokerage fee it has incurred in connection with this transaction. 17. OPERATIONS BY GRANTEE. (a) Compliance with Laws. GRANTEE shall comply with all applicable laws, ordinances, rules and regulations, orders, terms of permits, and authorizations of any governmental body which may have jurisdiction with respect to the PROPERTY to be transferred hereunder (including, without limitation, the filing with such governmental bodies of any and all compliance reports, notices, or other compliance documents which are due after the Closing Date regardless of the period covered by such reports, notices, or documents) and shall promptly obtain and maintain all permits and bonds required by public authorities in connection with the PROPERTY, including, without limitation, the bond required by California Public Resources Code, Section 3202, or similar statutes applicable to the PLAINS Property, if applicable, for wells which have not produced oil or gas or have not been used as injectors, for a period of five (5) years prior to Closing. Further to this obligation, with respect to the SHELL Property SHELL and PLAINS shall sign (or PLAINS shall cause the entity which is to assume operation to sign), prior to Closing, a notice or notices in the form attached hereto as SCHEDULE "21(a)" and within the time prescribed by the California Department of Conservation, Division of Oil and Gas, as required by California Resources Code, Sections 3201 and 3202, if applicable, giving notice of the transfer from SHELL to PLAINS' 15 20 designated operator of each well, including each idle well, currently operated by SHELL or its predecessors which is to be transferred under this AGREEMENT. The signed notice shall designate PLAINS or its designated operator as the current operator of each such well. (b) Assumption of Obligations. Upon Closing, GRANTEE shall assume, and agree to perform, at GRANTEE's sole cost and expense, whether the obligation was incurred prior to or after the Closing Date, (i) all obligations and implied covenants of GRANTOR relating to the PROPERTY (whether such obligations and covenants are to a lessor, a governmental body, or any other person or entity), including, but not limited to, (1) any obligations arising in respect to the plugging and abandonment of all existing wells (whether or not such wells are active, inactive, idle, or have been previously abandoned as of the Effective Date), (2) any obligations to file or submit compliance reports, notices, and documents required by governmental bodies, (3) the removal of related oil and gas equipment including, without limitation, pipelines, sumps, foundations, and other facilities, whether the existence of same is known or unknown to the Parties at Closing, and (4) the complete and lawful restoration and reclamation of the lands used in connection with such wells and related equipment, pipelines, sumps, and other facilities in compliance with all federal, state, and local laws, rules and regulations, including, without limitation, the California Department of Conservation, Division of Oil and Gas, with respect to such plugging and abandonment, removal and restoration and reclamation of associated lands; (ii) all obligations under licenses, permits, franchises, easements, and rights-of-way associated with or included in the PROPERTY; (iii) any obligations with respect to the reabandonment of previously abandoned wells on lands included in the PROPERTY; (iv) any obligations with respect to Deserted Wells as defined in California Public Resources Code, Section 3237, and (v) remediation and cleanup with respect to those matters 16 21 identified on SCHEDULE "11(c)" attached hereto. The assumption of obligations and liabilities by GRANTEE shall include GRANTOR's obligations and liabilities with respect to net proceeds from production attributable to interests in the PROPERTY as currently held in suspense because of a lack of identity or address of owners, title questions, change of ownership or similar reasons (as identified on SCHEDULE "18(b)" attached hereto). As set forth in section 18(a), GRANTEE shall defend, indemnify and hold GRANTOR harmless with respect to the performance or failure to perform of GRANTEE's obligations under this section 17. 18. INDEMNIFICATION. Capitalized terms used in this section 18 which are not defined elsewhere in this AGREEMENT are defined in subsection 18(c) below. (a) General Indemnity by GRANTEE. To the fullest extent permitted by law, but no further, GRANTEE shall indemnify and hold harmless GRANTOR, its Affiliates and their officers, directors, employees, and agents, from any and all Claims for which a Claim Notice is delivered to GRANTEE and such Claims directly or indirectly arise or result from or are caused by the use, operation, maintenance, occupation, ownership, or abandonment of the PROPERTY either prior to or after the Closing Date even though such Claims may have been contributed to or caused by the negligence or fault of GRANTOR prior to Closing. GRANTEE further covenants and agrees to defend any suits brought against GRANTOR, its Affiliates or their respective officers, directors, employees, and agents, on account of any such Claims indemnified hereunder and to pay or discharge the full amount or obligation of such Claims incurred by, accruing to, or imposed on GRANTOR, its Affiliates or their respective officers, directors, employees, and agents, resulting from any such suit or suits. In addition, GRANTEE shall pay to GRANTOR, its Affiliates or their respective officers, directors, employees, or agents, as applicable, all reasonable attorneys' fees 17 22 incurred by GRANTOR, its Affiliates or their respective officers, directors, employees, or agents, as applicable, in enforcing GRANTEE's indemnity in this subsection 18(a). (b) Environmental Indemnity by GRANTEE. To the fullest extent permitted by law, but no further, GRANTEE shall indemnify and hold harmless GRANTOR, its Affiliates and their respective officers, employees, and agents, from and against any and all Environmental Claims or Environmental Cleanup Liability for which a Claim Notice is delivered to GRANTEE and which Arises directly or indirectly from the use, operation, maintenance, occupation, ownership or abandonment of the PROPERTY either prior to or after the Closing Date, with respect to any Environmental Claim or Environmental Cleanup Liability initially made against or sought to be imposed upon GRANTOR, its Affiliates or their respective officers, directors, employees and agents even though caused, or contributed to, by the negligence or fault of GRANTOR, including any such Environmental Claims or Environmental Cleanup Liability caused by the willful misconduct or gross negligence of GRANTOR. GRANTEE further covenants and agrees to defend any suits or administrative proceedings brought against GRANTOR, its Affiliates and their respective officers, directors, employees, and agents on account of any such Environmental Claims or Environmental Cleanup Liability and to pay or discharge the full amount or obligation of such Environmental Claims or Environmental Cleanup Liability incurred by, accruing to, or imposed on GRANTOR, its Affiliates, or their respective officers, directors, employees, or agents, as applicable, resulting from any such suit or suits or any amounts resulting from the settlement or resolution of such suit or suits or administrative proceedings. In addition, GRANTEE shall pay to GRANTOR, its Affiliates, or their respective officers, directors, employees, or agents, as applicable, all attorneys' fees incurred by GRANTOR, its Affiliates, or their respective officers, directors, employees, or agents, as applicable, by GRANTOR in enforcing GRANTEE's indemnity in this subsection 18(b). 18 23 (c) Definitions. For purposes of this Agreement: (1) "Affiliate" shall mean a Party's "Parent Company" and "Affiliated Companies." "Parent Company," "Affiliated Companies," and "Controlling Interest" shall have the following meanings: (i) A Party's "Parent Company" shall mean an entity having a "Controlling Interest" in such Party; (ii) A Party's "Affiliated Companies" shall mean any and all entities in which the Party or the Parent Company of such Party has a direct or indirect "Controlling Interest;" and (iii) "Controlling Interest" shall mean a legal or beneficial ownership of fifty percent (50%) or more of the voting stock or other voting rights in an entity. (2) "Arises." An Environmental Claim or Environmental Cleanup Liability shall be deemed to Arise upon (i) each discrete, operationally-related Release of a Chemical Substance, as measured on a daily basis, or (ii) each discrete, operationally-related occurrence of pollution, contamination, or migration, as measured on a daily basis. (3) "Chemical Substances" shall mean any chemical substance, including, but not limited to, any sort of pollutants, contaminants, chemicals, raw materials, intermediates, products, industrial, solid, toxic, or hazardous substances, materials, wastes, or petroleum products, including crude oil or any component thereof. (4) "Claims" shall mean any and all claims, demands, loss, liability, liens, demands, judgments, settlements, suits, causes of action, fines, penalties, compliance, costs, and any 19 24 costs, expenses, and fees associated with the investigation, defense, and resolution of the foregoing, including without limitation, reasonable attorney's fees. Claims may be based on any theory of tort, contract, strict liability, statutory liability (including, without limitation, fines, penalties, obligations, or requirements), or any other basis for liability and shall include, without limitation, any Claims arising, occurring, or resulting from, related to, or based on the injury, disease, or death of any persons (including, without limitation, the Indemnifying Party's employees, agents and representatives), or damage to, loss or destruction of any property, real or personal (including, without limitation, the Indemnifying Party's property). (5) "Claim Notice" shall mean a notice delivered to either Party, in writing, that the other Party has received a claim or demand from a Third Party or been served with process by or on behalf of a Third Party asserting Claims, Environmental Claims, or Environmental Cleanup Liability which is indemnified hereunder. (6) "Environmental Claim" shall mean any claim, demand, action, suit, or proceeding for the injury, disease, or death of any person (including, without limitation, the Indemnifying Party's employees, agents, and representatives), property damage, damage to the environment, or damage to natural resources made, asserted, or prosecuted by or on behalf of any Third Party (whether based on negligent acts or omissions, statutory liability, or strict liability without fault or otherwise) arising or alleged to arise under any Environmental Law. Environmental Claim includes any damages, settlement amounts, fines, and penalties assessed or costs of complying with any orders or decrees of courts, administrative tribunals, or other governmental entities (other than such compliance costs related to Environmental Cleanup Liability) associated with resolving such claims, demands, actions, suits, or proceedings and any costs, expenses, and fees, including, 20 25 without limitation, reasonable attorney's fees incurred in the investigation, defense, and resolution of such claims, demands, actions, suits, and proceedings. (7) "Environmental Cleanup Liability" shall mean any cost or expense of any nature whatsoever incurred (in order to comply with the provisions of any Environmental Law or the provisions of any order or decree of any court or administrative or regulatory tribunal or agency enforcing any Environmental Law) to contain, remove, remedy, respond to, clean up, or abate any Release of Chemical Substances or other contamination or pollution of the air, surface water, groundwater, land surface, or subsurface strata related to the operation, use, maintenance and ownership of the PROPERTY, whether such Release, contamination or pollution is located on, within, under, or above real property included in the PROPERTY ("on site") or is located off site, including, but not limited to, any Release of Chemical Substances or other contamination or pollution arising out of or resulting from the manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, for on site or off site use, treatment, handling, storage, disposal, or transportation of any Chemical Substances. Environmental Cleanup Liability includes, without limitation, any judgments, damages, settlements, costs, or expenses (including, without limitation, attorneys', consultants', and experts' fees and expenses) incurred with respect to (i) any investigation, study, assessment, legal representation, cost recovery by a governmental agency or Third Party, or monitoring or testing in connection therewith, (ii) the PROPERTY as a result of actions or measures necessary to implement or effectuate any such containment, removal, remediation, response, cleanup, or abatement, and (iii) the resolution of such liabilities. (8) "Environmental Law" means any statutes, rules, regulations, controlling judicial decisions, or legal requirements relating to or regulating the pollution, protection, 21 26 or cleanup of the environment or damage to or remediation of damage to real property and natural resources (including, but not limited to, ambient air, surface water, groundwater, and land surface or subsurface strata) including, without limitation, legal requirements contained in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended (CERCLA); the Resources Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., as amended (RCRA); the Superfund Amendments and Reauthorization Act of 1986, Pub. L. 99- 499, as amended (SARA); the Clean Air Act, 42 U.S.C. Section 7401, et seq., as amended; Federal Water Pollution Control Act, 33 U.S.C. Section 2601 et seq., as amended; National Environmental Policy Act, 42 U.S.C. Section 4321, et seq., as amended (NEPA); and the Safe Drinking Water Act, 42 U.S.C., Section 300 j-l, et seq., as amended; and/or any other federal, state, or local laws, statutes, ordinances, rules, regulations, or orders (including decisions of any court or administrative body) relating to the pollution, protection, or cleanup of the environment as specified above. Environmental Law shall also mean the Toxic Substance Control Act, 25 U.S.C. Section 1502, et seq., as amended (TOSCA) and/or any other federal, state (including, without limitation, laws with respect to trespass, nuisance, and other torts or similar legal theories which may be applied to establish liability or responsibility for Environmental Cleanup or Environmental Claims) or local laws, statutes, ordinances, rules, regulations, or orders (including decisions of any court or administrative body) relating to (i) release, containment, removal, remediation, response, cleanup, or abatement of any sort of Chemical Substance, (ii) the manufacture, generation, formulation, processing, labeling, distribution, introduction into commerce, use, treatment, handling, storage, disposal, or transportation of any Chemical Substance, (iii) exposure of persons, including employees of GRANTOR or GRANTEE, to any Chemical Substance and other occupational safety or health 22 27 matters, or (iv) the physical structure or condition of a building, facility, fixture, or other structure, including, without limitation, those relating to the management, use, storage, disposal, cleanup, or removal of asbestos, asbestos- containing materials, polychlorinated biphenyls, or any other Chemical Substance. (9) "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, escaping, leaching, dumping, or disposing of any Chemical Substance into the environment (including, but not limited to, the ambient air, surface water, groundwater, and land surface or subsurface strata) of any kind whatsoever (including also the abandonment or discarding of barrels, containers, tanks, or other receptacles containing or previously containing any Chemical Substance). (10) "Third Party" shall mean any person (other than a Party or its Affiliates) including, without limitation, any such natural person, business entity (corporation, partnership, trust, sole proprietorship, or other business entity), any federal, state, or local governmental entity, agency, or administrative body, employee of GRANTEE or of GRANTOR, former employee of GRANTEE or of GRANTOR, or their respective legal representatives, heirs, beneficiaries, or estates. (d) Indemnified Party's Participation. Any indemnified Party shall have the right at all times, if it so elects and without relieving the indemnifying Party of its obligations to defend hereunder, to participate in the preparation for and conducting of any hearing or trial related to these indemnification provisions, as well as the right to appear on its own behalf at any such hearing or trial. Any such participation or appearance by an indemnified Party shall be at its sole cost and expense. 23 28 An indemnified Party shall not execute a consent order nor accept any settlement regarding an indemnified matter without the indemnifying Party's prior written approval. The indemnified Party shall cooperate fully with the indemnifying Party in the defense of any matter hereunder by the indemnifying Party and shall take those actions reasonably, within its power to take which are reasonably necessary to preserve any legal defenses to indemnified matters hereunder until the indemnifying Party has assumed the defense of the matter. (e) GRANTEE'S Indemnification and Financial Obligations to GRANTOR to Survive Assignment. All of GRANTEE's obligations hereunder, including, but not limited to, those contained in Sections 17 and 18 hereof, shall continue as between GRANTEE and GRANTOR even though GRANTEE assigns its interest in the PROPERTY or in this AGREEMENT to another party unless GRANTOR specifically consents in writing to the assignment of these obligations. GRANTOR shall have full and unfettered discretion to approve or disapprove the release of GRANTEE from such obligations in connection with an assignment, and shall in no event be required to approve the assignment of such obligations to a party less creditworthy than GRANTEE. (f) SHELL Acknowledgment. SHELL acknowledges that with respect to the PLAINS Property, PLAINS shall not have any obligations nor incur any liabilities under or in connection with the Murphy/Callon Agreement or the property which is subject thereto and that in accordance with this Paragraph 18 SHELL will indemnify and hold PLAINS harmless with respect to any Claims resulting from or arising in connection with PLAINS having been a party to the Murphy/Callon Agreement. 19. EXISTING CONTRACTS. (a) Assumption of Contracts. The exchange contemplated hereunder shall be 24 29 made subject to any and all existing operating agreements, unit agreements, gas purchase agreements, and gas processing agreements, as well as any and all other agreements, permits, franchises, leases, licenses, easements, and rights-of-way to which the PROPERTY is subject as identified on attached Exhibit "L". To the extent such agreements may be assigned and delegated, GRANTEE shall assume and be responsible for all obligations of GRANTOR accruing under such agreements. If such agreements may not be assigned or delegated, GRANTOR may, at its sole discretion, perform such agreements on behalf of GRANTEE and GRANTEE shall promptly, upon notice, reimburse GRANTOR for its respective costs, expenses, and obligations incurred in performing such agreements. (b) SHELL acknowledges that PLAINS has no information nor duty to inquire regarding any agreements or encumbrances relating to the property covered by the Murphy/Callon Agreement and that SHELL shall indemnify and hold PLAINS harmless with respect to any Claims relating to or arising in connection with such any such agreements or encumbrances. 20. NOTICES. All notices and communications required or permitted under this AGREEMENT shall be in writing, delivered to or sent by U. S. Mail or nationally recognized commercial courier service, postage or delivery charges prepaid, or by telecopy, addressed as follows (or such other address as may be specified by ten (10) days prior written notice to the other Party): SHELL Shell Land & Energy Company, and Shell Western E&P Inc. c/o Shell Exploration & Production Company 910 Louisiana St. P.O. Box 2463 Houston, Texas 77252 Attention: Bill Bliss, Investor Relations Telecopier: (713) 241-4764 25 30 With a copy to: Aera Energy LLC P. O. Box 11164 Bakersfield, CA 93389-1164 Attention: Strategic Development Group Telecopier No. (805) 326-5490 PLAINS C/O STOCKER RESOURCES INC. Attention: Larry Morton 5640 South Fairfax Avenue Los Angeles CA 90056 Telecopier No. (213) 296-9375 With a copy to: Plains Resources 1600 Smith Street Houston, Texas 77002 Attention: Don Trimble Telecopier No. (713) 654-1523 Notice shall be deemed to have been duly given when delivered to or sent to the other Party in the manner prescribed herein and actually received by the Party to whom the notice is given. 21. PARTIES IN INTEREST. Subject to subsection 25(d) below, this AGREEMENT shall inure to the benefit of and be binding upon SHELL and PLAINS and their respective successors and assigns. However, no assignment by any Party shall relieve any Party of any duties or obligations under this AGREEMENT. 22. COMPLETE AGREEMENT. When executed by the authorized representatives of SHELL and PLAINS, this AGREEMENT, together with the executed copies of the exhibits hereto and documents referred to herein, shall supersede all prior written or oral and all contemporaneous oral agreements and understandings between the Parties, including, without limitation, all and any 26 31 bid solicitation, bid offer, and bid acceptance letters, and shall constitute the complete agreement between the Parties regarding the purchase and sale of the PROPERTY. 23. SHELL ACTION. [omitted] 24. APPLICABLE LAW. THIS AGREEMENT, OTHER DOCUMENTS EXECUTED AND DELIVERED PURSUANT HERETO, AND THE LEGAL RELATIONS BETWEEN THE PARTIES WITH RESPECT TO THIS AGREEMENT, SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAWS; PROVIDED THAT THE VALIDITY OF THE VARIOUS CONVEYANCES TRANSFERRING TITLE TO REAL PROPERTY AND REAL PROPERTY INTERESTS UNDER THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH REAL PROPERTY OR REAL PROPERTY INTERESTS ARE LOCATED. 25. MISCELLANEOUS PROVISIONS. (a) Captions. Captions have been inserted for reference purposes only and shall not define or limit the terms of this AGREEMENT. (b) Partial Invalidity. If any provision of this AGREEMENT is held invalid, such invalidity shall not affect the remaining provisions. (c) Modification. This AGREEMENT cannot be modified or amended except by a written instrument duly executed by SHELL and PLAINS. (d) Assignment. Neither SHELL nor PLAINS, without the prior written consent of the other Party, shall assign any right or obligation under this AGREEMENT, or attempt to 27 32 delegate any duty to be performed under this AGREEMENT, except that either party may make such an assignment and/or delegation to an Affiliate without the consent of the other party. Consent to assign shall not be unreasonably withheld by either Party. Any attempted assignment or delegation without such consent shall be void and of no effect. No assignment or delegation shall release any party from its obligations under this Agreement. (e) Counterparts. This AGREEMENT may be executed in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. (f) Expenses. Except as otherwise expressly provided herein, all expenses incurred by each Party in connection with the transaction contemplated herein, including, without limitation, attorney's fees, are for the account of the Party incurring the same and the Party incurring such expenses shall defend, indemnify, and hold harmless the other Party from and against such expenses. (g) Signs. SHELL shall have the right, but not the obligation, to remove all of SHELL's signs, placards, notices, or other posted documents or information, and any other like property which refers to SHELL's ownership of the SHELL Property or responsibility for the operations conducted thereon. (h) Press Releases. No information in connection with this exchange shall be released to the public, including, without limitation, through press releases, without the express written permission of SHELL, unless required by applicable federal, state or local laws. (i) No Recording. This AGREEMENT shall not be recorded or filed by any Party or their successors or assigns, in or with any public or governmental office, officer, agency, or records repository without the prior written consent of the other Party. 28 33 (j) Survival. All representations, indemnifications, covenants, obligations, and promises of the Parties set forth in this AGREEMENT shall survive Closing. All documents conveying, transferring, or assigning the PROPERTY shall incorporate by reference the terms and conditions of this AGREEMENT. (k) Exhibits and Schedules. The Exhibits and Schedules listed below are attached to this AGREEMENT: EXHIBIT "A-1" The SHELL Property EXHIBIT "A-2" The PLAINS Property and Waiver(s) EXHIBIT "A-3" Preferred Stock and Warrant EXHIBIT "B-1" SHELL Assignment and Conveyance and Grant Deed EXHIBIT "B-2" Assignment EXHIBIT "C" Personal Property Agreement and Bill of Sale EXHIBIT "D" GRANTOR Non-foreign Affidavit EXHIBIT "E" Indemnification Agreement EXHIBIT "F" GRANTEE Non-foreign Affidavit EXHIBIT "J" Specifically Listed Liens, Encumbrances, Past Due Royalties and Rentals EXHIBIT "K" Confidentiality Agreement EXHIBIT "L" Specifically Listed Contracts SCHEDULE "1(e)" Specifically Listed Rights-of-Way, etc. 29 34 SCHEDULE "1(g)" Specifically Listed Salt Water Disposal and Water Wells SCHEDULE "1(h)" Specifically Listed Facilities and Equipment SCHEDULE "1(k)" SHELL Threatened Litigation SCHEDULE "1(m)" SHELL Environmental Conditions SCHEDULE "1(n)" PLAINS Threatened Litigation SCHEDULE "11(b)" Notice of Releases SCHEDULE "11(c)" List of Oil Spill Reports and Consultant's Reports SCHEDULE "12(d)" Pending Litigation SCHEDULE "18(b)" Suspense Items SCHEDULE "21(a)" Notice of Well Transfers SCHEDULE "25"(r) Service Contract SCHEDULE "26" Terms of Call on Production (l) Time of Essence. Time is of the essence in the performance of this AGREEMENT. (m) H-S-R. If either GRANTOR or GRANTEE determine that the Hart-Scott-Rodino Antitrust Improvements Act of 1976 is applicable to this transaction, then the Parties which are required to file shall file with the Federal Trade Commission and the Department of Justice the required notifications, reports, and supplemental information to comply in all respects with the requirements of said Act. (n) No Partnership. Nothing contained in this AGREEMENT shall be deemed to create a joint venture, partnership, tax partnership, or agency relationship between the Parties. 30 35 (o) File Transfers. Within a reasonable time after Closing, but no later than 45 days after Closing, SHELL will transfer to PLAINS, subject to SHELL's continuing right of access as hereinafter set forth, the following original SHELL files, records, documents, and data relating to the SHELL Property: oil, gas and mineral lease, division orders, transfer orders, letters-in-lieu, environmental, fee, easement and right-of-way, surface lease, operating agreement, farmout, unitization and pooling and land abstract files and records as well as original well record files on all wells including but not limited to production histories and well logs, (i.e., all wells situated on the SHELL Property geologic data, maps and accounting files) but save, less and except therefrom all Proprietary Data which shall include, without limitation, (i) all privileged or confidential data, (ii) any interpretive geological and geophysical information which may reveal the methods used by SHELL in interpreting geological and geophysical information, economic analysis, and any information or other similar proprietary data which might reveal SHELL's economic guidelines or other methods or systems by which SHELL conducts its economic analysis, and (iii) any similar proprietary data. SHELL retains the right of complete access to the above files and records, which right of access may be exercised by SHELL at reasonable times, upon giving PLAINS reasonable notice and which shall include, at SHELL's sole cost and expense, the right to copy or duplicate any and all contents therein. Should SHELL be required by a governmental rule or order to produce the original of any document described in this subsection, PLAINS will, to the best of its ability, make such document available to enable SHELL to comply with said rule or order upon receiving proper assurance that such document will be promptly returned to PLAINS. 31 36 After Closing, SHELL shall grant PLAINS the right of access to the following SHELL files, records, documents, and data relating to the SHELL Property: division order, transfer order, letters-in-lieu, regulatory, accounting, marketing, environmental, pipeline, maintenance, transportation, processing, production, and engineering files and records not conveyed and transferred to PLAINS; however, this right of access shall not extend to or cover Proprietary Data as defined herein. PLAINS' right of access may be exercised at reasonable times, upon giving SHELL reasonable notice and shall include, at PLAINS' sole cost and expense, the right to copy any and all contents therein not otherwise excluded subject to the following: (1) only division of interest sheets, division orders, transfer orders, letters-in-lieu, title opinions, and title curative material may be copied from division order files, and (2) only gas contracts and amendments or agreements relating thereto and pertinent outside correspondence may be copied from gas files. Should PLAINS be required by a governmental rule or order to produce the original of any document to which the right of access has been granted by this subsection, SHELL will, to the best of its ability, make such document available to enable PLAINS to comply with said rule or order upon receiving proper assurance that such document will be promptly returned to SHELL. SHELL acknowledges that PLAINS has no files or records on the PLAINS Property. (p) Rule 430 Nox Reduction Liability. SHELL agrees to be responsible for all costs, expenses, and equipment or facility modifications necessary to bring the equipment and facilities into compliance with Rule 430 (reduction of Nox to 30 ppm) as in effect on the Closing Date for all equipment associated with the SHELL Property prior to Closing. SHELL agrees to be liable and to hold PLAINS harmless for any penalties, fines or costs associated with any 32 37 noncompliance of Rule 430 by May 1, 1997. PLAINS agrees to provide access to such equipment as is necessary to perform any modification or repairs required to achieve compliance with such rule. (q) Pismo Creek Pipeline Crossing Expenses. SHELL agrees that it is solely responsible for the costs and expenses attributable to the construction of the pipeline crossing over Pismo Creek and the associated bridge work on the SHELL Property and will indemnify and hold PLAINS harmless for any such cost or expense. (r) Operational Continuity. SHELL agrees to work with PLAINS to ensure that the operations of the SHELL Property are efficiently transferred to PLAINS so that PLAINS has adequate manpower and the expertise necessary to operate the SHELL Property at the time of transfer. SHELL agrees with PLAINS to enter into the Services Contract set forth on Schedule 25(r). 26. CALL ON PRODUCTION. Until December 1, 1997, SHELL shall retain a call on all crude oil production from the SHELL Property. Pricing for such production shall be as set forth on Schedule 26. 33 38 EXECUTED by the Parties hereto as indicated below by the signatures of their respective representatives; however, for identification purposes, this AGREEMENT shall be deemed dated as of the date the last Party hereto signs this AGREEMENT. SHELL Land & Energy Company By: /s/ D. S. BRIDGES ------------------------------------ Title: Attorney-in-Fact --------------------------------- Date: November 12, 1997 --------------------------------- SHELL Western E&P Inc. By: /s/ CHRIS BOYD ------------------------------------ Title: Attorney-in-Fact --------------------------------- Date: November 12, 1997 --------------------------------- Plains Resources Inc. By: /s/ PHIL KRAMER ------------------------------------ Title: Senior Vice President --------------------------------- Date: November 12, 1997 --------------------------------- 34 EX-99.6 7 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 6 EXHIBIT A-3 PREFERRED STOCK and WARRANT TO PURCHASE COMMON STOCK The Preferred Stock to be issued and delivered to Shell Land & Energy Company ("Shell Shareholder") by Plains Resources Inc. ("Plains") pursuant to the Exchange Agreement to which this Exhibit A-3 is attached (the "Agreement") shall be 46,600 shares of Series D Cumulative Convertible Preferred Stock (the "Preferred Stock") of Plains, the terms and provisions of which are set forth in the Certificate of Designation, Preferences and Rights of a Series of Preferred Stock attached hereto as Attachment 1 (the "Certificate of Designation"). In addition, the Agreement provides for the issuance to Shell Shareholder of a warrant to purchase 150,000 shares (the "Warrant Shares") of Plains common stock, $.10 per share par value ("Common Stock"), upon the terms and conditions of which are set forth in that certain form of "Warrant for the Purchase of Shares of Common Stock" attached hereto as Attachment 2 (the "Warrant"). 1. REGISTRATION OBLIGATIONS. a. Shelf Registration. Plains shall, as promptly as reasonably practicable, but in any event within ninety (90) days of the date of Closing (as defined in the Agreement), prepare and file with the Securities and Exchange Commission ("SEC'): (i) a shelf registration statement (the "Preferred Stock & Conversion Shares Registration Statement") pursuant to Rule 415 of the Securities Act of 1933, as amended (the "Securities Act") with respect to the shares of preferred Stock and the shares of Common Stock of plains into which the Preferred Stock and any dividend arrearage thereon is convertible or exchangeable (the "Conversion, Shares") (the Preferred Stock and Conversion Shares collectively referred to as the "Shares") and use its best efforts to cause the Preferred Stock & Conversion Shares Registration Statement to become and remain effective until such time as all of the outstanding Shares can be resold pursuant to SEC Rule 144(k) (or any successor provision) under the Securities Act; and (ii) a shelf registration statement (the "Warrant Shares Registration Statement") pursuant to Rule 415 of the Securities Act with respect to the Warrant Shares and use its best efforts to cause the Warrant Shares Registration Statement to become and remain effective until the earlier of(x) the expiration of the Warrant or (y) such time as all of the Warrant Shares can be resold pursuant to SEC Rule 144(k) (or any successor provision) under the Securities Act. 2 The Preferred Stock & Conversion Shares Registration Statement and the Warrant Shares Registration Statement are collectively referred to herein as the "Registration Statements". Shell Shareholder shall, within ten (10) days of the Closing, notify Plains of its proposed method of distribution of the Shares and the Warrant Shares, and the plan(s) of the distribution in each of the Registration Statements shall be to sell the Shares only through the methods of distribution so specified by Shell Shareholder. In the absence of a contrary written indication by Shell Shareholder, the Plan of Distribution in each of the Registration Statements shall be deemed to be as follows: "The Shares or Warrant Shares may be sold from time to time by or for the account of holder thereof in the over-the-counter market, or otherwise at prices and on terms then prevailing or at prices related to then current market price, in negotiated transactions or, with respect to the Conversion Shares or Warrant Shares, on the American Stock Exchange ("AMEX"). The Shares or the Warrant Shares may be sold by any one or more of the following methods: (i) a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; (ii) purchase by broker or dealer as principal and resale by such broker or dealer for its account pursuant to the Prospectus; (iii) exchange distributions and/or secondary distributions of the Conversion Shares or the Warrant Shares in accordance with the rules of the AMEX; (iv) ordinary brokerage transactions and transactions in which the broker solicits purchasers; and (v) privately negotiated transactions. Shell Shareholder may effect any such transaction by selling Shares or Warrant Shares through broker-dealers, and such broker-dealers may receive compensation in the form of commissions from Shell Shareholder (which commissions will not exceed the customary in the types of transactions involved). Shell Shareholder and any broker-dealers that participate in the distribution of the Shares or the Warrant Shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales, and any profit on the sale of Shares by it and any commissions received by any such broker-dealers may be deemed to be underwriting discounts and commissions." 3 In addition to the foregoing, Shell Shareholder may sell the Shares under the Registration Statements through one underwritten offering under a plan of distribution which is acceptable to Plains in its reasonable discretion. b. Amendments. From time to time, Plains shall prepare and file with the SEC such amendments and supplements to each of the Registration Statements and each prospectus used in connection with the Registration Statements (a "Prospectus") as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the Registration Statements. c. Prospectus. Plains shall furnish to Shell Shareholder such numbers of copies of each Prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as Shell Shareholder may reasonably request in order to facilitate the disposition of the Shares or the Warrant Shares. d. Blue Sky. Plains shall use its best efforts to register and qualify the securities covered by each of the Registration Statements under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by each of the Registration Statements, provided that Plains shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, and further provided that (notwithstanding anything herein to the contrary with respect to the beating of expenses) if any jurisdiction in which the securities shall be qualified shall require that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by selling shareholders, then such expenses shall be payable by Shell Shareholder, to the extent required by such jurisdiction. e. Expenses. All expenses incurred in connection with each registration pursuant hereto (excluding underwriters' and brokers' discounts and commissions), including without limitation all registration and qualification fees, printers' and accounting fees, and fees and disbursements of counsel for Plains, shall be borne by Plains. Shell Shareholder shall be responsible for its own counsel fees. f. Other Documents. Plains shall file with the SEC in a timely manner all reports and other documents required of Plains under the Securities Act and the Securities Exchange Act of 1934, as amended. g. Current Prospectus. Shell Shareholder acknowledges that from time to time, events may occur which will require a Prospectus to be supplemented or amended in order to comply with federal securities laws. Upon the occurrence of such event, Plains shall notify Shell Shareholder of the need to supplement or amend a Prospectus. After receipt of such notice, Shell Shareholder shall not sell any Shares or Warrant Shares until receipt of such Prospectus supplement or amendment has been delivered by Plains. Plains shall use reasonable best efforts to deliver such Prospectus supplement or amendment; provided, however, Plains shall not be required to deliver such supplement or amendment until the earlier of. (i) the time disclosure of such event is required by federal securities laws; or, 4 (ii) such time as the management of Plains determines that in its good faith judgment such disclosure is in the best interests of Plains. h. Indemnification: Contribution. (i) Indemnification by Plains. Plains agrees to indemnify and hold harmless Shell Shareholder, its officers, directors, partners and agents and each person, if any, who controls Shell Shareholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages (whether in contract, tort or otherwise), liabilities and expenses (including reasonable costs of investigation) whatsoever (as incurred or suffered) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Shares or Warrant Shares or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of; or are based upon, any such untrue statement or omission or allegation thereof based upon information furnished in writing to Plains by Shell Shareholder or on Shell Shareholder's behalf expressly for use therein. Plains also agrees to indemnify any underwriters of the Shares, their officers, partners and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of Shell Shareholder provided in this paragraph 1 .h (i) or such other indemnification customarily obtained by underwriters at the time of offering. (ii) Conduct of Indemnification Proceedings If any action or proceeding (including any governmental investigation) shall be brought or asserted against Shell Shareholder (or its officers, directors, partners or agents) or any person controlling Shell Shareholder in respect of which indemnity may be sought from Plains, Plains shall assume the defense thereof, including the employment of counsel reasonably satisfactory to Shell Shareholder, and shall assume the payment of all expenses. Shell Shareholder or any controlling person of Shell Shareholder shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of Shell Shareholder or such controlling person unless (i) Plains has agreed to pay such fees and expenses or (ii) the named parties to any such action or proceeding (including any impleaded parties) include both Shell Shareholder or such controlling person and Plains, and Shell Shareholder or such controlling person shall have been advised by counsel that there may be one or more legal defenses available to Shell Shareholder or such controlling person which conflict with those available to Plains (in which case, if Shell Shareholder or such controlling person notifies Plains in writing that it elects to employ separate counsel at the expense of plains, Plains shall not have the right to assume the defense of such action or proceeding on behalf of Shell Shareholder or such controlling person; it being understood, however, that Plains shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the 5 fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for Shell Shareholder and such controlling persons, which firm shall be designated in writing by Shell Shareholder). Plains shall not be liable for any settlement of any such action or proceeding effected without Plains's written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, Plains agrees to indemnify and hold harmless Shell Shareholder and such controlling person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. (iii) Indemnification by Shell Shareholder. Shell Shareholder agrees to indemnify and hold harmless Plains, its directors and officers and each person, if any, who controls Plains within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, as amended, to the same extent as the foregoing indemnity from Plains to Shell Shareholder, but only with respect to information included in the prospectus in response to Item 508 (Plan of Distribution) of Regulation S-K under the Securities Act or any information furnished in writing by Shell Shareholder or on Shell Shareholder's behalf expressly for use in any registration statement or prospectus relating to the Shares or the Warrant Shares, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against Plains or its directors or officers, or any such controlling person, in respect of which indemnity may be sought against Shell Shareholder, Shell Shareholder shall have the rights and duties given to Plains, and Plains or its directors or officers or such controlling person shall have the rights and duties given to Shell Shareholder, by the preceding paragraph. Shell Shareholder also agrees to indemnify and hold harmless underwriters of the Shares, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of Plains provided in this paragraph 1 .h(iii). (iv) Contribution If the indemnification provided for in this paragraph 1 .h is unavailable to Plains, Shell Shareholder or the underwriters in respect of any losses, claims, damages, liabilities or judgments referred to herein, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) as between Plains and Shell Shareholder on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by Plains and Shell Shareholder on the one hand and the underwriters on the other from the offering of the Shares, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of plains and Shell Shareholder on the one hand and of the underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations and (ii) as between Plains, on the one hand, and Shell Shareholder on the other, in such proportion as is appropriate to reflect the relative fault of Plains and of Shell Shareholder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by Plains and Shell Shareholder on the one hand and the underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by Plains and Shell Shareholder bear to the total underwriting discounts and commissions received by the underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of Plains and Shell Shareholder on the one hand and of the underwriters on 6 the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Plains and Shell Shareholder or by the underwriters. The relative fault of plains on the one hand and of Shell Shareholder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Plains and Shell Shareholder agree that it would not be just and equitable if contribution pursuant to this paragraph 1 .h were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this paragraph 1 .h, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and Shell Shareholder shall not be required to contribute any amount in excess of the amount by which the total price at which the Shares of Shell Shareholder were offered to the public exceeds the amount of any damages which Shell Shareholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 1 l(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. i. Binding Effect: Assignment. The terms and provisions of this Section 1. Obligations shall be binding upon and inure to the benefit of and be enforceable by Plains and Shell Shareholder and their respective successors and assigns. 2. NOTICE. Plains will provide written notice to Shell Shareholder prior to the issuance of Parity Stock (as defined in the Certificate of Designation). 3. LISTING OF THE CONVERSION SHARES AND WARRANT SHARES. Plains shall cause the Conversion Shares and the Warrant Shares to be listed on the American Stock Exchange, when and as issued. 7 4. ASSISTANCE IN OFFERING. If Shell Shareholder desires to sell all of the Preferred Stock in a public offering or a private offering to a third party who is not an affiliate of Shell Shareholder, Plains shall cooperate with Shell Shareholder and its investment banking firm to facilitate such offering, including participating in road show presentations. If, in the written opinion of Shell Shareholder's investment banker (which shall be a firm of recognized standing), the gross proceeds from the sale of all of the Preferred Stock in such offering will be less than $23.3 million, Plains shall amend the Certificate of Designation to increase the annual dividend rate on the Preferred Stock to a percentage reasonably estimated in good faith by such investment banker to be required to enable Shell Shareholder to receive $23.3 million of gross proceeds in such offering; provided however, in no event shall the annual dividend rate exceed 7.5 percent. 5. RIGHT OF FIRST REFUSAL. a. Preferred Stock. If Shell Shareholder receives an offer to purchase all or any of the shares of Preferred Stock (other than in a public offering) from a nonaffiliated which it intends to accept (a "Preferred Stock Offer"), Shell Shareholder shall give written notice to Plains, with full information concerning the Preferred Stock Offer. Plains shall then have the optional prior right, which may be exercised by written notice to Shell Shareholder within seven business days after the notice is received, to purchase the shares of Preferred Shares for which the Preferred Stock Offer is made by payment of 105% of the purchase price proposed in the Preferred Stock Offer. If Plains exercises this right to purchase, the purchase price shall be paid to Shell Shareholder within three business days after its written notice of exercise is given to Shell Shareholder. Upon receipt of the purchase price Shell Shareholder shall deliver to Plains the certificate[s] for the Preferred Stock being sold, duly endorsed for transfer. b. Warrant. If Shell Shareholder receives an offer to purchase all or part of Warrant (other than in a public offering) from a non-affiliate which it intends to accept (a "Warrant Offer"), Shell Shareholder shall give written notice to Plains, with full information concerning the Warrant Offer. Plains shall then have the optional prior right, which may be exercised by written notice to Shell Shareholder within five business days after the notice is received, to purchase the Warrant or part thereof for which the Warrant Offer is made by payment of 105% of the purchase price proposed in the Warrant Offer. If plains exercises this right to purchase, the purchase price shall be paid to Shell Shareholder within three business days after its written notice of exercise is given to Shell Shareholder. Upon receipt of the purchase price Shell Shareholder shall deliver to Plains the certificate[s] for the Warrant or part thereof being sold, duly endorsed for transfer. 6. REPRESENTATIONS AND WARRANTIES OF PLAINS. Plains represents and warrants to Shell Shareholder as follows: a. The issuance, sale and delivery of the Preferred Stock in accordance with the Agreement, including this Exhibit A-3, have been duly authorized by all necessary corporate action on the part of Plains and its stockholders, and the Preferred Stock when so issued, sold and delivered against payment therefor in accordance with the Agreement and this Exhibit A-3 will be duly and validly issued, fully paid and nonassessable. b. The issuance and delivery of the Conversion Shares have been duly authorized and reserved for issuance by all necessary corporate action on the part of Plains and its stockholders, and the Conversion 8 Shares, when issued in accordance with the Certificate of Designation, will be duly and validly issued, fully paid and nonassessable. c. The issuance and delivery of the Warrant and the Warrant Shares have been duly authorized and the Warrant Shares have been duly reserved for issuance by all necessary corporate action on the part of plains and its stockholders, and the Warrant Shares, when issued in accordance with the Warrant, will be duly and validly issued, fully paid and nonassessable. -----END PRIVACY-ENHANCED MESSAGE-----