-----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, GojA/1e6n2ZBctGdUq+lBn4ccmiIVJ1hUVyryVhEpVrRwrAhfNMl+eQd1PFrZTIQ g/Hw+LAxEdD8prhVnNRvRg== 0000950134-01-000381.txt : 20010125 0000950134-01-000381.hdr.sgml : 20010125 ACCESSION NUMBER: 0000950134-01-000381 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 20010124 GROUP MEMBERS: OCEAN ENERGY INC /TX/ GROUP MEMBERS: OEI ACQUISITION CORP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TEXOIL INC /NV/ CENTRAL INDEX KEY: 0000748856 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 880177083 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-37792 FILM NUMBER: 1514031 BUSINESS ADDRESS: STREET 1: 110 CYPRESS STATION DRIVE STREET 2: SUITE 220 CITY: HOUSTON STATE: TX ZIP: 77090 BUSINESS PHONE: 2815379920 MAIL ADDRESS: STREET 1: 110 CYPRESS STATION DRIVE STREET 2: SUITE 220 CITY: HOUSTON STATE: TX ZIP: 77090 FORMER COMPANY: FORMER CONFORMED NAME: COMET ENTERTAINMENT INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STAR AMUSEMENT CO INC DATE OF NAME CHANGE: 19860915 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: OCEAN ENERGY INC /TX/ CENTRAL INDEX KEY: 0000320321 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 741764876 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 1001 FANNIN STE 1600 CITY: HOUSTON STATE: TX ZIP: 77002-6714 BUSINESS PHONE: 7132656000 MAIL ADDRESS: STREET 1: 1001 FANNIN, SUITE 1600 CITY: HOUSTON STATE: TX ZIP: 77002-6714 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL ENERGY CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SEAGULL PIPELINE CORP DATE OF NAME CHANGE: 19830815 SC TO-T 1 h83324tscto-t.txt SCHEDULE TO 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE TO TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 TEXOIL, INC. (Name of Subject Company (Issuer)) OEI ACQUISITION CORP. OCEAN ENERGY, INC. (Offerors) COMMON STOCK, $.01 PAR VALUE PER SHARE (Title of Class of Securities) 882906-20-9 (CUSIP Number of Class of Securities) --------------------- Copy to: ROBERT K. REEVES MICHAEL E. DILLARD, P.C. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL AKIN, GUMP, STRAUSS, HAUER & FELD L.L.P. OCEAN ENERGY, INC. 1700 PACIFIC AVENUE 1001 FANNIN, SUITE 1600 SUITE 4100 HOUSTON, TEXAS 77002 DALLAS, TEXAS 75201 (713) 265-6000 (214) 969-2800 (Name, address, and telephone number of persons authorized to receive notices and communications on behalf of filing persons)
--------------------- CALCULATION OF FILING FEE
- ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ TRANSACTION VALUATION* AMOUNT OF FILING FEE** - ------------------------------------------------------------------------------------------------------------------ $120,163,203.60 $24,032.64 - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
* Estimated for purposes of calculating the filing fee only. Calculated by adding (i) the product of $8.25, the per share tender offer price for all the outstanding shares of common stock, par value $.01 per share, of Texoil, Inc. (the "Common Shares"), multiplied by 8,023,900, the sum of the 6,724,939 currently outstanding Common Shares sought in the Offer, the 751,165 Common Shares issuable pursuant to outstanding stock options and the 547,796 Common Shares issuable upon exercise of outstanding warrants, and (ii) the product of $18.04, the per share tender offer price for all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share, of Texoil, Inc. (the "Preferred Shares"), multiplied by 2,991,465, the total number of outstanding Preferred Shares. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate value of cash offered by OEI Acquisition Corp. for such number of Shares. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid.................. Form or Registration No. ............... Filing Party............................ Date Filed..............................
[ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 This Tender Offer Statement on Schedule TO is filed by OEI Acquisition Corp., a Nevada corporation ("Offeror") and a direct wholly-owned subsidiary of Ocean Energy, Inc., a Texas corporation ("Parent"). This Schedule TO relates to the offer by Offeror to purchase (i) all the outstanding shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc., a Nevada corporation (the "Company"), at a purchase price of $8.25 per share, net to the seller in cash, without interest, and (ii) all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares"), of the Company at a purchase price of $18.04 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1)(i), and in the related Letters of Transmittal, copies of which are attached hereto as Exhibits (a)(1)(ii) and (a)(i)(iii) (the "Letters of Transmittal," which, together with the Offer to Purchase, as each may be amended and supplemented from time to time, constitute the "Offer"). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Offer to Purchase. ITEM 1. SUMMARY TERM SHEET. The information set forth under "Summary Term Sheet" of the Offer to Purchase is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the subject company is Texoil, Inc., a Nevada corporation. The address of its principal executive offices is 110 Cypress Station Drive, Suite 220, Houston, Texas 77090, and its telephone number at such address is (281) 537-9920. (b) The information set forth in the section entitled "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 of the Offer to Purchase is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a)-(c) The information set forth in the Introduction, Section 9 and Schedule I of the Offer to Purchase is incorporated herein by reference. The names of the filing persons are Ocean Energy, Inc., a Texas corporation, and its wholly-owned subsidiary OEI Acquisition Corp., a Nevada corporation. Their principal executive offices are located at 1001 Fannin Street, Suite 1600, Houston, Texas 77002, and the telephone number at such address is (713) 265-6000. ITEM 4. TERMS OF THE TRANSACTION. The information set forth in the sections of the Offer to Purchase entitled "Summary Term Sheet" and "Introduction," Sections 1, 2, 3, 4, 5, 12, 14 and 15 of the Offer to Purchase, and the Letters of Transmittal are incorporated herein by reference. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a) The information set forth in Section 9 of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in the "Introduction" and in Sections 11, 12 and 13 of the Offer to Purchase is incorporated herein by reference. 1 3 ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. The information set forth in Sections 12 and 13 of the Offer to Purchase is incorporated herein by reference. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in Section 10 of the Offer to Purchase is incorporated herein by reference. (b) There are no alternative financing arrangements or financing plans. (d) The information set forth in Section 10 of the Offer to Purchase is incorporated herein by reference. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth under "Introduction" and in Sections 9, 12 and 13 of the Offer to Purchase is incorporated herein by reference. ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. The information set forth under "Introduction" and in Section 16 of the Offer to Purchase is incorporated herein by reference. ITEM 10. FINANCIAL STATEMENTS. (a) The financial statements of the Parent and the Offeror are not material and therefore have not been included because (i) the consideration offered to the stockholders of the Company consists solely of cash, (ii) the Offer is not subject to any financing condition, (iii) the Offer is for all outstanding Shares of the Company, and (iv) any Shares to be acquired in the Merger will be for the same cash consideration. (b) Pro forma financial information has not been included in this Schedule TO because the holders of Shares who do not tender their Shares in the Offer will receive the same cash consideration in the subsequent merger of Offeror with and into the Company. ITEM 11. ADDITIONAL INFORMATION. (a)-(b) The information set forth in Sections 7, 13, and 15 of the Offer to Purchase is incorporated herein by reference. ITEM 12. EXHIBITS. (a)(1)(i) -- Offer to Purchase, dated January 24, 2001. (a)(1)(ii) -- Letter of Transmittal for Common Stock. (a)(1)(iii) -- Letter of Transmittal for Series A Convertible Preferred Stock. (a)(1)(iv) -- Notice of Guaranteed Delivery for Common Stock. (a)(1)(v) -- Notice of Guaranteed Delivery for Series A Convertible Preferred Stock. (a)(1)(vi) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vii) -- Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(viii) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
2 4 (a)(1)(ix) -- Text of Joint Press Release issued by the Company and Parent on January 18, 2001. (a)(1)(x) -- Form of summary advertisement. (a)(2) -- Not applicable. (a)(3) -- Not applicable. (a)(4) -- Not applicable. (a)(5) -- Not applicable. (b) -- Revolving Credit Agreement, dated as of March 30, 1999, among the Company, Chase Bank of Texas, National Association, The Chase Manhattan Bank, Bank of America National Trust and Savings Association, Bank One Texas, N.A., Societe Generale, Southwest Agency, the Bank of Montreal, and the other Banks signatory thereto (incorporated by reference to Exhibit 4.1 to Parent's Form 10-Q for the period ended March 31, 1999). (d)(1) -- Agreement and Plan of Merger, dated as of January 18, 2001, by and among the Company, the Parent and the Offeror. (d)(2) -- Tender and Voting Agreement, dated January 18, 2001, by and among the Parent, Purchaser and certain stockholders of the Company. (d)(3) -- Tender Agreement, dated January 18, 2001, by and among the Parent, Purchaser and certain stockholders of the Company. (d)(4) -- Confidentiality Agreement, dated October 30, 2000, between Parent and the Company. (d)(5) -- Confidentiality Agreement, dated December 18, 2000, between Parent and the Company. (g) -- None. (h) -- None.
3 5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. OEI ACQUISITION CORP. By: /s/ ROBERT K. REEVES ---------------------------------- Name: Robert K. Reeves --------------------------------- Title: Executive Vice President, General Counsel & Secretary --------------------------------- Dated: January 24, 2001 After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. OCEAN ENERGY, INC. By: /s/ ROBERT K. REEVES ---------------------------------- Name: Robert K. Reeves --------------------------------- Title: Executive Vice President, General Counsel & Secretary --------------------------------- Dated: January 24, 2001 4 6 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- (a)(1)(i) -- Offer to Purchase, dated January 24, 2001. (a)(1)(ii) -- Letter of Transmittal for Common Stock. (a)(1)(iii) -- Letter of Transmittal for Series A Convertible Preferred Stock. (a)(1)(iv) -- Notice of Guaranteed Delivery for Common Stock. (a)(1)(v) -- Notice of Guaranteed Delivery for Series A Convertible Preferred Stock. (a)(1)(vi) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(vii) -- Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(1)(viii) -- Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(ix) -- Text of Joint Press Release issued by the Company and Parent on January 18, 2001. (a)(1)(x) -- Form of summary advertisement. (a)(2) -- Not applicable. (a)(3) -- Not applicable. (a)(4) -- Not applicable. (a)(5) -- Not applicable. (b) -- Revolving Credit Agreement, dated as of March 30, 1999, among the Company, Chase Bank of Texas, National Association, The Chase Manhattan Bank, Bank of America National Trust and Savings Association, Bank One Texas, N.A., Societe Generale, Southwest Agency, the Bank of Montreal, and the other Banks signatory thereto (incorporated by reference to Exhibit 4.1 to Parent's Form 10-Q for the period ended March 31, 1999). (d)(1) -- Agreement and Plan of Merger, dated as of January 18, 2001, by and among the Company, the Parent and the Offeror. (d)(2) -- Tender and Voting Agreement, dated January 18, 2001, by and among the Parent, Purchaser and certain stockholders of the Company. (d)(3) -- Tender Agreement, dated January 18, 2001, by and among the Parent, Purchaser and certain stockholders of the Company. (d)(4) -- Confidentiality Agreement, dated October 30, 2000, between Parent and the Company. (d)(5) -- Confidentiality Agreement, dated December 18, 2000, between Parent and the Company. (g) -- None. (h) -- None.
EX-99.(A)(1)(I) 2 h83324tex99-a1i.txt OFFER TO PURCHASE, DATED JANUARY 24, 2001 1 Offer to Purchase for Cash All Outstanding Shares of Common Stock and All Outstanding Shares of Series A Convertible Preferred Stock of TEXOIL, INC. at $8.25 NET PER SHARE OF COMMON STOCK and $18.04 NET PER SHARE OF SERIES A CONVERTIBLE PREFERRED STOCK by OEI ACQUISITION CORP., a wholly-owned subsidiary of OCEAN ENERGY, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JANUARY 18, 2001, BY AND AMONG OCEAN ENERGY, INC. ("PARENT"), OEI ACQUISITION CORP. (THE "OFFEROR") AND TEXOIL, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT (AS EACH SUCH TERM IS DEFINED HEREIN), HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, EACH CLASS OF THE COMPANY'S STOCKHOLDERS, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE (AS DEFINED HEREIN) AND NOT WITHDRAWN (A) AT LEAST THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON SHARES"), OF THE COMPANY WHICH WOULD CONSTITUTE A MAJORITY OF THE OUTSTANDING COMMON SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (EXCLUDING FOR THIS PURPOSE COMMON SHARES ISSUABLE BUT NOT YET ISSUED AS OF SUCH DATE UPON CONVERSION OF OUTSTANDING PREFERRED SHARES) AND (B) AT LEAST THAT NUMBER OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE (THE "PREFERRED SHARES," AND, TOGETHER WITH THE COMMON SHARES, THE "SHARES"), OF THE COMPANY WHICH WOULD CONSTITUTE A MAJORITY OF THE OUTSTANDING PREFERRED SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"), AND (II) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 14 -- "CERTAIN CONDITIONS TO OUR OBLIGATIONS," WHICH SETS FORTH IN FULL THE CONDITIONS OF THE OFFER. THE OFFER IS NOT CONDITIONED UPON THE OFFEROR OR PARENT OBTAINING FINANCING. --------------------- If you wish to tender all or any part of your Shares you should either (i) complete and sign the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions in the Letter of Transmittal, have your signature thereon guaranteed, if required by Instruction 1 to the Letter of Transmittal, and mail or deliver it, together with the certificates evidencing tendered shares and any other required documents, to the Depositary (as defined herein) or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 -- "Procedure for Tendering Shares" prior to the expiration date of the Offer or (ii) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. If you have Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact such broker, dealer, commercial bank, trust company or other nominee if you desire to tender such Shares. If you desire to tender your Shares and your certificates for such Shares are not immediately available, or if you cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, you may tender such Shares by following the guaranteed delivery procedures set forth in Section 3 -- "Procedure for Tendering Shares". A summary of the principal terms of the Offer appears on pages 1-3 hereof. If you have questions about the Offer, you can call Georgeson Shareholder Communications Inc., the information agent for the Offer, at the address and telephone number set forth on the back cover of this Offer to Purchase. You can also obtain additional copies of this Offer to Purchase, the related Letter of Transmittal and the Notice of Guaranteed Delivery from Georgeson Shareholder Communications Inc., or your broker, dealer, commercial bank, trust company or other nominee. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. January 24, 2001 2 --------------------- TABLE OF CONTENTS ---------------------
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE OFFER................................................... 8 1. Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment............................ 8 2. Acceptance for Payment and Payment for Shares........... 10 3. Procedure for Tendering Shares.......................... 11 4. Withdrawal Rights....................................... 13 5. Certain United States Federal Income Tax Considerations............................................ 14 6. Price Range of Common Shares; Dividends on Common Shares.................................................... 15 7. Certain Effects of the Transaction...................... 15 8. Certain Information Concerning the Company.............. 16 9. Certain Information Concerning Parent and the Offeror... 17 10. Source and Amount of Funds.............................. 18 11. Background of the Offer; Past Contacts, Transactions or Negotiations with the Company........................... 18 12. Purpose of the Offer and the Merger; Plans for the Company................................................. 20 13. The Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and the Confidentiality Agreements.............................................. 22 14. Certain Conditions to Our Obligations................... 36 15. Certain Legal Matters................................... 38 16. Fees and Expenses....................................... 40 17. Miscellaneous........................................... 41 Schedule I -- Directors and Executive Officers of Parent and the Offeror............................................... I-1
3 SUMMARY TERM SHEET We, OEI Acquisition Corp., are a wholly-owned subsidiary of Ocean Energy, Inc., and we are offering to acquire all the outstanding shares of common and preferred stock of Texoil, Inc. The following are some questions you, as a stockholder of Texoil, may have and answers to those questions. This summary sheet is not meant as a substitute for the information contained in the remainder of this offer to purchase and the related letters of transmittal, and the information contained in the summary sheet is qualified in its entirety by the more detailed descriptions and explanations contained in this offer to purchase and the related letters of transmittal. We urge you to carefully read the entire offer to purchase and the related letters of transmittal prior to making any decision regarding whether to tender your shares. WHO IS OFFERING TO BUY MY SHARES OF TEXOIL? We are OEI Acquisition Corp., a Nevada corporation. We are a wholly-owned subsidiary of Ocean Energy, Inc. and we were formed for the purpose of making this Offer. See Section 9 -- "Certain Information Concerning Parent and the Offeror" and Schedule I. HOW MANY SHARES ARE YOU SEEKING TO PURCHASE, AT WHAT PRICE, AND DO I HAVE TO PAY ANY BROKERAGE OR SIMILAR FEES TO TENDER? We are offering to purchase (1) all the outstanding shares of common stock of Texoil at a purchase price of $8.25 per share, net to you, in cash, without interest, and (2) all the outstanding shares of Series A Convertible Preferred Stock of Texoil at a purchase price of $18.04 per share, net to you, in cash, without interest, upon the terms and subject to the conditions contained in this offer to purchase and in the related letters of transmittal. Any shares acquired in the offer will include all rights associated with such shares, including but not limited to all cash and non-cash dividends, distributions, rights, other shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof on or after the date of the merger agreement among us, our parent and Texoil (including, without limitation, with respect to the preferred shares, rights to certain dividends). If you tender your shares directly to the depositary that we have hired to complete this transaction, you will not have to pay any brokerage fees or any similar expenses. If you own your shares through a broker or other nominee, and your broker or other nominee tenders your shares for you, your broker or other nominee may charge you a fee. You should check whether your broker or other nominee will charge you any fee to tender your shares for you. See "Introduction" and Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment". WHY ARE YOU MAKING THIS OFFER? We are making this offer because our parent Ocean Energy, Inc., a Texas corporation, wants to acquire Texoil. If the offer is completed, we intend to merge with and into Texoil, and Texoil will become a direct wholly-owned subsidiary of Ocean Energy, Inc. DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? Yes. We have the funds available to acquire the shares in the offer. See Section 10 -- "Source and Amount of Funds". IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION ON WHETHER TO TENDER MY SHARES IN THE OFFER? No. Since we are paying cash for your shares and the offer is not subject to a financing condition, we do not think our financial condition is important to your decision to tender your shares. See Section 10 -- "Source and Amount of Funds". 1 4 HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES? You will have until at least 12:00 midnight, New York City time, on Thursday, February 22, 2001, to tender your shares. Such date is the "Expiration Date" for the offer. We have the right to extend the offer, without the consent of Texoil if at the Expiration Date (or any extension of the Expiration Date) any condition to the offer is not satisfied or waived. We also have agreed to extend the offer from time to time until May 31, 2001 if at the then scheduled Expiration Date all of the tender offer conditions have not been satisfied or waived as permitted by the merger agreement. We will not be required to extend the offer under this provision unless, in the reasonable judgment of Ocean Energy, Inc., (i) each such condition is reasonably capable of being satisfied; (ii) Texoil is in material compliance with all of its covenants in the merger agreement; and (iii) the failure of such condition to be satisfied shall not result from a breach by Texoil of any of its covenants and agreements contained in the merger agreement. If we extend the time period of the offer, this will extend the time that you will have to tender your shares. We may elect to provide a "subsequent offering period" for the offer. A subsequent offering period, if one is included, will be an additional period of time beginning after we have purchased shares tendered during the offer, during which time stockholders may tender, but not withdraw, their shares and receive the offer consideration. We do not currently intend to include a subsequent offering period, although we reserve the right to do so. See Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment". HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If the offer is extended, we will issue a press release announcing the extension on or before 9:00 a.m. New York City time on the first business day following the date the offer was scheduled to expire. See Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment" and Section 3 -- "Procedure for Tendering Shares". HOW DO I TENDER MY SHARES? To tender your shares, you must complete and sign the related letter of transmittal, which we have enclosed with this offer to purchase, indicating that you want to sell your shares to us. Then send the letter of transmittal along with the certificates representing your shares to the depositary prior to the expiration of the offer. If your common shares are held in street name by your broker, dealer, bank, trust company or other nominee, such nominee can tender your common shares through The Depository Trust Company. If you cannot deliver all necessary documents to the depositary in time, you may be able to complete and deliver to the depositary the enclosed notice of guaranteed delivery in lieu of the missing documents, provided you are able to comply fully with its terms. See Section 3 -- "Procedure for Tendering Shares". IF I TENDER MY SHARES, WHEN WILL I GET PAID? If the conditions to the offer are satisfied and we complete the offer and accept your shares for payment, you will receive payment for the shares you tendered as promptly as practicable following the expiration of the offer. IF I TENDER MY SHARES, CAN I CHANGE MY MIND? Yes. You can withdraw your shares at any time prior to the expiration of the offer and, if we have not agreed to accept your shares for payment by March 24, 2001, you can withdraw your shares at any time thereafter until we accept your shares for payment. The right to withdraw tendered shares will not apply to any subsequent offering period, if one is included. In order to withdraw your shares, you must send written notice of the withdrawal to the depositary before the expiration of the offer. Be sure to specify the name of the registered holder(s) of the shares, the name of the person who tendered the shares and the number of shares that are being withdrawn. If you tendered your shares by giving instructions to a broker or nominee, you must instruct your broker or nominee to arrange for the withdrawal of your shares. See Section 4 -- "Withdrawal Rights". 2 5 WHAT DOES TEXOIL'S BOARD OF DIRECTORS THINK OF THE OFFER? Texoil's board of directors has approved the offer and has determined that the offer is fair to you and in your best interests. Texoil's board of directors recommends that stockholders accept the offer and tender their shares. See Section 11 -- "Background of Offer; Past Contacts; Transactions or Negotiations with the Company". WILL THE OFFER BE FOLLOWED BY A MERGER? We and our parent have entered into a merger agreement with Texoil that provides that if we acquire at least a majority of the common shares and a majority of the preferred shares in the offer, we will be merged into Texoil as soon as practicable after the acquisition and the satisfaction of certain other conditions contained in the merger agreement. If we acquire at least a majority of the common shares and a majority of the preferred shares, we will have sufficient voting power to approve the merger without the approval of any other Texoil stockholders. IF I OBJECT TO THE PRICE BEING OFFERED, WILL I HAVE APPRAISAL RIGHTS? No. Appraisal rights are not available in the offer. However, if the proposed merger between us and Texoil is completed, then you would have certain rights under Nevada law to dissent and demand appraisal of, and payment in cash of the fair value of, your shares. See Section 12 -- "Purpose of the Offer and the Merger; Plans for the Company" and Section 15 -- "Certain Legal Matters". WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF TENDERING MY SHARES? Your sale of shares pursuant to this offer is a taxable event for United States federal income tax purposes and in all likelihood for state and local income tax purposes. To the extent that the proceeds that you receive from the sale of your shares pursuant to this offer exceed your basis in the shares sold, you may realize a capital gain. If your basis in the shares sold exceeds the proceeds you received pursuant to the sale, you may realize a capital loss. Because tax matters are complicated, we encourage you to contact your own tax advisor to determine the particular tax consequences of our offer to you. See Section 5 -- "Certain United States Federal Income Tax Considerations". WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On January 23, 2001, the last trading day before the commencement of this offer, the common shares closed on the Nasdaq Small Cap Market at 8.16 per share. On January 17, 2001, the last trading day before the public announcement of our intention to purchase the shares, the common shares closed on the Nasdaq Small Cap Market at $7.56 per share. The average closing price of the common shares over the thirty trading days prior to January 17, 2001 was $7.15 per share. Please obtain a recent quotation for your common shares prior to deciding whether or not to tender. The preferred shares are not quoted on any exchange and there is no established market for the preferred shares. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? The completion of this offer is most significantly conditioned upon us purchasing at least a majority of the outstanding common shares determined on a fully diluted basis (excluding for this purpose common shares issuable upon conversion of the preferred shares) and at least a majority of the outstanding preferred shares determined on a fully diluted basis. We call this condition the "Minimum Condition." In addition, we are not obligated to purchase shares that are validly tendered if, among other things, there is a material adverse change affecting the business of Texoil. The offer is also subject to certain other conditions. See Section 14 -- "Certain Conditions to Our Obligations". 3 6 HAVE ANY STOCKHOLDERS AGREED TO TENDER THEIR SHARES? Yes. We have entered into agreements with certain stockholders who own in the aggregate 54.8% of the common shares and 100% of the preferred shares outstanding as of January 18, 2001. These shares represent as of such date 45.9% of the common shares on a fully diluted basis (excluding for this purpose common shares issuable upon conversion of preferred shares) and 100% of the preferred shares on a fully diluted basis. These stockholders also own, as of such date, options and warrants exercisable for common shares representing approximately 12.5% of the common shares on a fully diluted basis (excluding for this purpose common shares issuable upon conversion of preferred shares). These stockholders have agreed, subject to the terms of those agreements, to tender in the offer all shares that they currently own as well as any shares they may subsequently acquire, including upon any exercise of options or warrants. See the "Introduction" to this offer to purchase and Section 13 -- "The Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and the Confidentiality Agreements." IF SUFFICIENT SHARES TO SATISFY THE MINIMUM CONDITION ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL TEXOIL CONTINUE AS A PUBLIC COMPANY? Yes. However, if and when the merger takes place, Texoil will no longer be publicly owned. It is possible that, following the purchase of shares pursuant to the offer and prior to the merger, there may be so few remaining stockholders and publicly held common shares that the common shares will no longer be eligible to be traded on the Nasdaq Small Cap Market or any other securities exchange, there may not be an active public trading market (or, possibly, any public trading market) for the common shares and Texoil may cease making filings with the United States Securities and Exchange Commission or otherwise cease being required to comply with its rules relating to publicly held companies. IF I DECIDE NOT TO TENDER MY SHARES, HOW WILL THE OFFER AFFECT MY SHARES? As indicated above, if the offer is successful, we expect to complete a merger transaction in which all stockholders not tendering in the offer will receive (i) for each common share they hold, $8.25 in cash, without interest, and (ii) for each preferred share they hold, $18.04 in cash, without interest, subject to their appraisal rights as described above. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? If you have any questions about the offer, you can call Georgeson Shareholder Communications Inc., the information agent for the offer, at (800) 223-2064 (toll free). 4 7 To the Holders of Common Stock, par value $.01 per share, and Series A Convertible Preferred Stock, par value $.01 per share, of Texoil, Inc.: INTRODUCTION We, OEI Acquisition Corp., a Nevada corporation (the "Offeror") and a direct wholly-owned subsidiary of Ocean Energy, Inc., a Texas corporation ("Parent"), hereby offer to purchase (i) all the outstanding shares of common stock, par value $.01 per share (the "Common Shares") of Texoil, Inc., a Nevada corporation (the "Company"), at a purchase price of $8.25 per share, net to you, in cash, without interest (such price referred to herein as the "Common Share Offer Price"), and (ii) all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares," and, together with the Common Shares, the "Shares"), of the Company at a purchase price of $18.04 per share, net to you, in cash, without interest (such price referred to herein as the "Preferred Share Offer Price"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letters of Transmittal (which, together with this Offer to Purchase and any amendments or supplements hereto or thereto, collectively constitute the "Offer"). If you hold your Shares directly, you will not be obligated to pay brokerage fees or commissions or, except as set forth in the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. If you hold your Shares through a broker, dealer, bank, trust company or other nominee, you should check with such broker, dealer, bank, trust company or other nominee as to whether they charge any service fees. We will pay all charges and expenses of EquiServe Trust Company, N.A., which is acting as depositary for the Offer (the "Depositary") and Georgeson Shareholder Communications Inc., which is acting as information agent for the Offer (the "Information Agent"), incurred in connection with the Offer. See Section 16 -- "Fees and Expenses". The Board of Directors of the Company has approved the Offer, the Merger (as defined below) and the Merger Agreement (as defined below), has determined that the Offer and the Merger are fair to, and in the best interests of, each class of the Company's stockholders, and recommends that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. The Offer is conditioned upon, among other things, there being validly tendered by the Expiration Date (as defined below) and not withdrawn (a) at least that number of Common Shares which would constitute a majority of the total number of outstanding Common Shares on a fully diluted basis on the date of purchase, and (b) at least that number of Preferred Shares which would constitute a majority of the total number of outstanding Preferred Shares on a fully diluted basis on the date of purchase (clauses (a) and (b) together, the "Minimum Condition"). The Offer is also conditioned upon the satisfaction of other terms and conditions. See Section 14 -- "Certain Conditions to Our Obligations." As used in this Offer to Purchase, "fully diluted" means in reference to the Common Shares, all outstanding Common Shares on a fully diluted basis, after giving effect to the exercise and conversion of all outstanding options (including the Company Options (as hereinafter defined), whether or not currently exercisable), warrants and securities exercisable for or convertible (but excluding Preferred Shares) into Common Shares. When used in reference to the Preferred Shares, "fully diluted" means all outstanding Preferred Shares on a fully diluted basis, after giving effect to the exercise and conversion of any outstanding options, warrants and securities exercisable for or convertible into Preferred Shares. The Company has represented to us in the Merger Agreement that its Board of Directors has received the opinion of Dain Rauscher Wessels, a division of Dain Rauscher Incorporated, dated as of January 17, 2001, to the effect that, as of the date of such opinion, the consideration to be received by the holders of Common Shares and Preferred Shares was fair from a financial point of view to such holders. A copy of such opinion is contained in the Company's Statement on Schedule 14D-9, which the Company is distributing to its stockholders. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of January 18, 2001 (the "Merger Agreement"), by and among Parent, us and the Company. The Merger Agreement provides that, among other things, as soon as practicable after the purchase of Shares pursuant to the 5 8 Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Nevada Revised Statutes, we will be merged with and into the Company (the "Merger"). See Section 12 -- "Purpose of the Offer and the Merger; Plans for the Company." Following consummation of the Merger, the Company will continue as the surviving corporation (the "Surviving Corporation") and will be a wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Common Share and Preferred Share that is issued and outstanding (other than Shares owned by the Company as treasury stock, any Shares owned by us, Parent, or any other wholly-owned subsidiary of Parent, which shall be cancelled, and Shares held by stockholders who have properly exercised appraisal rights under the Nevada Revised Statutes, if any), will be converted into the right to receive the Common Share Offer Price (or any higher price paid for Common Shares pursuant to the Offer) and Preferred Share Offer Price (or any higher price paid for Preferred Shares pursuant to the Offer), respectively, without interest, upon surrender of the certificates formerly representing such Shares. See Section 5 -- "Certain United States Federal Income Tax Considerations" for a description of certain tax consequences of the Offer and the Merger. See Section 13 -- "The Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and the Confidentiality Agreements". The Merger Agreement provides that, promptly upon the payment by us for the Shares pursuant to the Offer (provided that as a result thereof we own a majority of the Common Shares and a majority of the Preferred Shares) and from time to time thereafter, we will be entitled to designate (i) such number of Class A directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class A directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this provision) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent, us and any other affiliates of Parent (calculated on an as converted basis) bears to the total number of Shares then outstanding (calculated on an as converted basis), and (ii) such number of Class B directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class B directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Preferred Shares beneficially owned by Parent, us and any other affiliates of Parent bears to the total number of Preferred Shares then outstanding. Notwithstanding the foregoing, until the Effective Time, the Company will have on its Board of Directors at least two members who were directors of the Company on the date of the Merger Agreement and not employees of the Company (such members, the "Independent Directors"), provided, however, that if no Independent Directors remain, the other directors shall designate one person to fill one of the vacancies who shall be neither an employee of the Company nor an affiliate of Parent and such person shall be deemed to be an Independent Director for purposes of the Merger Agreement. The Company has advised us that as of January 18, 2001, there were (i) 25,000,000 authorized shares of Common Stock, par value $.01 per share, of which 6,724,939 shares were issued and outstanding, (ii) 10,000,000 authorized shares of Class B Common Stock, par value $.01 per share, of which no shares were issued and outstanding, (iii) 10,000,000 authorized shares of Preferred Stock, of which 5,000,000 shares were authorized as Series A Convertible Preferred Stock, par value $.01 per share, of which 2,991,465 shares were issued and outstanding, (iv) outstanding stock options ("Company Options") under the Company's 1994 Stock Option Plan and certain predecessor stock option plans (collectively, the "Company Option Plans") for not in excess of 751,165 Common Shares, and (v) 547,796 Common Shares reserved for issuance upon exercise of certain warrants ("Company Warrants") to purchase Common Shares. We, together with Parent, have entered into a Tender and Voting Agreement, dated as of January 18, 2001, with the stockholders of the Company identified therein (such stockholders, together with the stockholders party to the Tender Agreement discussed below, being referred to herein as the "Selling Stockholders") beneficially owning an aggregate of 3,386,796 outstanding Common Shares and 2,801,055 outstanding Preferred Shares (representing approximately 42.2% of the Common Shares and 93.6% of the Preferred Shares outstanding on January 18, 2001, on a fully diluted basis). Such Selling Stockholders also own, as of such date, Company Options and Company Warrants exercisable for an 6 9 aggregate of 757,529 Common Shares. Pursuant to the Tender and Voting Agreement, each such Selling Stockholder has agreed, among other things, (i) to validly tender in the Offer all of such Selling Stockholder's Shares now owned or which may hereafter be acquired by such Selling Stockholder (including pursuant to the exercise of Company Warrants and Company Options), (ii) to appoint Parent as such Selling Stockholder's proxy under certain circumstances to vote such Selling Stockholder's Shares in connection with the Merger Agreement, (iii) with respect to certain questions put to stockholders of the Company for a vote, to vote such Selling Stockholder's Shares, in each case, in accordance with the terms and conditions of the Tender and Voting Agreement and (iv) to restrict transfers or exercises of Company Options and Company Warrants, if any, held by such Selling Stockholder except as provided in the Tender and Voting Agreement. In addition, each holder of Preferred Shares agreed that it would not (A) elect, under Section 3(C) of the Designation of Preferences, Limitations and Rights of Series A Convertible Preferred Stock of the Company (the "Designation"), to have the Offer or Merger or any of the transactions contemplated hereby or thereby treated as a Liquidation (as defined in the Designation) or (B) convert any Preferred Share held by such Stockholder into any other series or class of securities of the Company. We, together with Parent, have also entered into a Tender Agreement, dated as of January 18, 2001, with the Selling Stockholders of the Company identified therein. Such Selling Stockholders of the Company identified in the Tender Agreement beneficially own an aggregate of 300,779 outstanding Common Shares and 190,460 outstanding Preferred Shares (representing approximately 3.7% of the Common Shares and 6.4% of the Preferred Shares outstanding on January 18, 2001, on a fully diluted basis). Such Selling Stockholders also own as of such date Company Options exercisable for an aggregate of 242,200 Common Shares. The provisions of the Tender Agreement are substantially similar to the terms and conditions of the Tender and Voting Agreement, except that the stockholders party to the Tender Agreement make no representations or agreements regarding the voting of, or the granting of an irrevocable proxy in connection with the voting of, the Tender Shares in favor of the Offer, the Merger and other transactions. As of the date hereof, neither we nor Parent beneficially own any Shares. If we acquire at least a majority of each class of the outstanding Common Shares and Preferred Shares on a fully diluted basis in the Offer, the Minimum Condition will be satisfied, and we would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder. Based on the information provided to us by the Company as of January 18, 2001, the Minimum Condition will be satisfied if 4,011,951 Common Shares and 1,495,733 Preferred Shares are validly tendered and not withdrawn prior to the expiration of the Offer. Accordingly, based on the foregoing, if the Selling Stockholders validly tender and do not withdraw all Shares that they currently own pursuant to the Tender Agreement and the Tender and Voting Agreement, then clause (B) of the Minimum Condition (which relates to the Preferred Shares) will be satisfied, and clause (A) of the Minimum Condition (which relates to the Common Shares) will be satisfied if 324,376 additional Common Shares are tendered and not withdrawn prior to the expiration of the Offer. THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF STOCKHOLDERS OF THE COMPANY. ANY SUCH SOLICITATION WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. YOU SHOULD READ BOTH DOCUMENTS CAREFULLY IN THEIR ENTIRETY BEFORE YOU MAKE A DECISION WITH RESPECT TO THE OFFER. 7 10 THE OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), we will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore properly withdrawn in accordance with Section 4 -- "Withdrawal Rights." The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, February 22, 2001, unless we shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by us, shall expire. The Offer is conditioned upon satisfaction of the Minimum Condition. If the Minimum Condition or any of the other conditions referred to in Section 14 -- "Certain Conditions to Our Obligations" are not satisfied or any of the events specified in Section 14 -- "Certain Conditions to Our Obligations" have occurred or are determined by us to have occurred prior to the Expiration Date, then we, subject to the terms of the Merger Agreement, expressly reserve the right to (i) decline to purchase any of the Shares tendered in the Offer and terminate the Offer, and return all tendered Shares to the tendering stockholders, (ii) waive or amend any or all conditions to the Offer and, to the extent permitted by the Merger Agreement and applicable law and applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), purchase all Shares validly tendered or (iii) subject to the limitations described below, extend the Offer and, subject to the right of a tendering stockholder to withdraw its Shares until the Expiration Date, retain the Shares which have been tendered during the period or periods for which the Offer is extended; provided, however, that the Minimum Condition may not be waived by us without the Company's prior written consent. Under the terms of the Merger Agreement, we have the right, in our sole discretion, to modify or make changes to the terms and conditions of the Offer, provided, however, that without the prior written consent of the Company, we shall not amend or waive the Minimum Condition, decrease the Common Share Offer Price or the Preferred Share Offer Price, decrease the number of Shares sought, change the form of consideration to be paid pursuant to the Offer, impose conditions to the Offer in addition to those set forth in Section 14 -- "Certain Conditions to Our Obligations" or amend any other term of the Offer in any manner materially adverse to the holders of the Shares or reduce the time period during which the Offer shall remain open. Subject to the terms of the Offer and the Merger Agreement and the satisfaction or waiver of all the conditions to the Offer as of any Expiration Date, we will accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the Expiration Date of the Offer. Notwithstanding the foregoing, we shall be entitled to extend the Offer, without the consent of the Company if at the initial Expiration Date, or any extension thereof, any condition to the Offer is not satisfied or waived, and we agree to extend the Offer from time to time until May 31, 2001 if at the then scheduled Expiration Date all of the conditions to the Offer have not been satisfied or waived as permitted by the Merger Agreement; provided, however, that we shall not be required to extend the Offer as provided in this sentence unless, in Parent's reasonable judgment, (i) each such condition is reasonably capable of being satisfied; (ii) the Company is in material compliance with all of its covenants in the Merger Agreement; and (iii) the failure of such condition to be satisfied shall not result from a breach by the Company of any of its covenants and agreements contained in the Merger Agreement. Any extension of the Offer shall not, without the written consent of the Company, exceed the number of days that we reasonably believe will be necessary so that the conditions will be satisfied. In addition, we may, without the consent of the Company, extend any then scheduled Expiration Date of the Offer for any period required by applicable rules, regulations, interpretations or positions of the Commission or the staff thereof applicable to the Offer or for any period required by applicable law. We may also provide for a subsequent offering period (as described below). In addition, the Common Share Offer Price and the Preferred Share Offer Price may be increased and the Offer may be extended to the extent required by law in connection with such increase, in each case without the consent of the Company. Subject to the applicable rules and regulations of the Commission and subject to the limitations set forth in the Merger Agreement, we also expressly reserve the right, at any time and from time to time, 8 11 (i) to extend the period of time during which the Offer is open and thereby delay payment for any Shares, regardless of whether such Shares were theretofore accepted for payment, or to terminate the Offer and not to accept for payment or pay for any Shares not theretofore accepted for payment or paid for, upon the occurrence of any of the conditions set forth in Section 14 -- "Certain Conditions to Our Obligations," by giving written notice of such delay or termination to the Depositary, and (ii) at any time or from time to time, to amend the Offer in any respect, although as discussed above certain amendments require the written consent of the Company. Our right to delay payment for any Shares or not to pay for any Shares theretofore accepted for payment is subject to the applicable rules and regulations of the Commission, including Rule l4e-l(c) under the Exchange Act, relating to our obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer. Under no circumstances will interest be paid on the purchase price for tendered Shares, whether or not we exercise our right to extend the Offer. There can be no assurance that we will exercise our right to extend the Offer. Any extension of the period during which the Offer is open, delay in acceptance for payment or termination or any amendment of the Offer will be followed, as promptly as practicable, by public announcement thereof, such announcement, in the case of an extension, to be issued not later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rules 14d-4(c) and 14e-l(d) under the Exchange Act. Without limiting our obligations and the obligations of Parent under such rules or the manner in which we may choose to make any public announcement, we currently intend to make announcements by issuing a press release to the Dow Jones News Service and making any appropriate filing with the Commission. If, subject to the terms of the Merger Agreement, we make a material change in the terms of the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will disseminate additional tender offer materials and extend the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum period during which a tender offer must remain open following material changes in the terms of the Offer or the information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the terms or information changed. With respect to a change in price or a change in percentage of securities sought, a minimum period of ten business days is generally required to allow for adequate dissemination to stockholders and investor response. Pursuant to the Merger Agreement and Rule 14d-11 under the Exchange Act, and subject to certain conditions, we may elect to make available a subsequent offering period by extending the Offer for up to 20 business days (the "Subsequent Offering Period") if, on the Expiration Date, the Shares tendered and not withdrawn pursuant to the Offer plus any shares we already own equal less than ninety percent (90%) of the outstanding Shares on a fully diluted basis. In order to extend the Offer in this way, the Minimum Condition must have been satisfied and all other conditions to the Offer must have been satisfied or waived. Under the Exchange Act, no withdrawal rights may apply to Shares tendered during the Subsequent Offering Period, and no withdrawal rights may apply during the Subsequent Offering Period with respect to Shares previously tendered and accepted for payment in the Offer. If a Subsequent Offering Period is commenced, we will promptly purchase and pay for any Shares tendered at the same per share price paid in the Offer. We do not currently intend to provide a Subsequent Offering Period, although we reserve the right to do so. The Company has provided us with the Company's list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 9 12 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), we will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 -- "Withdrawal Rights" promptly after the later to occur of (a) the Expiration Date and (b) subject to compliance with Rule 14e-l(c) under the Exchange Act, the satisfaction or waiver of the conditions set forth in Section 14 -- "Certain Conditions to Our Obligations." Subject to compliance with Rule 14e-l(c) under the Exchange Act, we expressly reserve the right to delay payment for Shares in order to comply in whole or in part with any applicable law. See Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment" and Section 15 -- "Certain Legal Matters." In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares, or in the case of Common Shares, timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Common Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section 3 -- "Procedure for Tendering Shares," (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with all required signature guarantees or, in the case of a book-entry transfer of Common Shares, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Common Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that we may enforce such agreement against the participant. For purposes of the Offer, we will be deemed to have accepted for payment, and thereby to have purchased, Shares validly tendered and not withdrawn as, if and when we give written notice to the Depositary of our acceptance of such Shares for payment. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from us and transmitting such payment to tendering stockholders. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or we are unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to our rights under Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment," the Depositary may, nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering stockholders are entitled to withdrawal rights as described in Section 4 -- "Withdrawal Rights" and as otherwise required by Rule 14e-l(c) under the Exchange Act. Under no circumstances will we pay interest on the purchase price for tendered Shares because of any delay in making such payment. If any tendered Shares are not accepted for payment pursuant to the terms and conditions of the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for such unpurchased or untendered Shares will be returned, without expense, to the tendering stockholder (or, in the case of Common Shares delivered by book-entry transfer to the Depositary's account at the Book-Entry Transfer Facility, such Common Shares will be credited to an account maintained with the Book-Entry Transfer Facility), as promptly as practicable after the expiration, termination or withdrawal of the Offer. If, prior to the Expiration Date, we increase the price being paid for Common Shares accepted for payment pursuant to the Offer, we will pay such increased consideration for all Common Shares purchased pursuant to the Offer, whether or not such Common Shares were tendered prior to such increase in consideration. Similarly, if, prior to the Expiration Date, we increase the price being paid for Preferred Shares accepted for payment pursuant to the Offer, we will pay such increased consideration for all 10 13 Preferred Shares purchased pursuant to the Offer, whether or not such Preferred Shares were tendered prior to such increase in consideration. 3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. To tender Shares pursuant to the Offer, a stockholder must comply with one of the following: (a) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) in accordance with the instructions of the Letter of Transmittal, with any required signature guarantees, certificates for the Shares to be tendered and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, (b) in the case of Common Shares, such Common Shares must be properly delivered pursuant to the procedures for book-entry transfer, as described below, and a confirmation of such delivery received by the Depositary, which confirmation must include an Agent's Message if the tendering stockholder has not delivered a Letter of Transmittal, prior to the Expiration Date, or (c) the tendering stockholder must comply with the guaranteed delivery procedures set forth below. No alternative, conditional or contingent tenders will be accepted. Delivery of documents to the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. Book-Entry Transfer. The Depositary will make a request to establish an account with respect to the Common Shares at the Book-Entry Transfer Facility for purposes of the Offer within two Business Days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Common Shares by causing the Book-Entry Transfer Facility to transfer such Common Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for transfer. Although delivery of Common Shares may be effected through book-entry at the Book-Entry Transfer Facility prior to the Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by the Letter of Transmittal, must, in any case, be transmitted to and received by the Depositary at the address set forth on the back cover of this Offer to Purchase or (ii) the guaranteed delivery procedures described below must be complied with. Signature Guarantee. Signatures on the Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) which is a member in good standing of the Securities Transfer Agents Medallion Program, The New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (an "Eligible Institution" and collectively "Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Delivery Instructions" or the box labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of any Eligible Institution. If the certificates evidencing Shares are registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made, or delivered to, or certificates for unpurchased Shares are to be issued or returned to, a person other than the registered owner or owners of such Shares, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Date or the procedure for book-entry transfer 11 14 cannot be completed on a timely basis, such Shares may nevertheless be tendered if all of the following guaranteed delivery procedures are duly complied with: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by us, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or in the case of Common Shares, a Book-Entry Confirmation), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any required signature guarantees, or, in the case of a book-entry transfer of Common Shares, an Agent's Message, and any other documents required by the Letter of Transmittal, are received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery. The term "trading day" is any day on which the Nasdaq Small Cap Market is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and risk of the tendering stockholder. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or in the case of Common Shares, the Book-Entry Confirmation, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with all required signature guarantees, or, in the case of a book-entry transfer of Common Shares, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Backup Federal Income Tax Withholding. To prevent "backup" withholding with respect to payment of the purchase price of Shares purchased pursuant to the Offer or pursuant to the Merger, each tendering stockholder must either provide the Depositary with such stockholder's correct Taxpayer Identification Number ("TIN") and certify that such stockholder is not subject to backup federal income tax withholding by completing the Substitute Form W-9 included in the Letter of Transmittal or establish some other exemption to backup withholding. Foreign holders must submit a completed Form W-8 to avoid backup withholding. This form may be obtained from the Depositary. See Instructions 8 and 9 set forth in the Letter of Transmittal and Section 5 -- "Certain United States Federal Income Tax Considerations". Examination of Validity. We will determine, in our sole discretion, all questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares and our determination will be final and binding on all parties. We reserve the absolute right to reject any or all tenders of any Shares that we determine not to be in proper form or the acceptance of or payment for which may, in our opinion, be unlawful. We also reserve the absolute right to waive any of the conditions of the Offer, subject to the limitations set forth in the Merger Agreement, or any defect or irregularity in the tender of any Shares. Our interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions to the Letter of Transmittal) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. Neither we nor Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. 12 15 Other Requirements. By executing the Letter of Transmittal as set forth above (including through delivery of an Agent's Message), you irrevocably appoint our designees as your attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of your rights associated with such Shares tendered and accepted for payment by us (including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof on or after January 18, 2001 (including, without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement dated October 12, 1997 by and among the Company and Selling Stockholders, as amended to the date of the Merger Agreement (the "Preferred Stock Purchase Agreement")). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. This appointment is effective when, and only to the extent that, we accept for payment the Shares deposited with the Depositary. Upon acceptance for payment, all prior powers of attorney and proxies granted by you with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent proxies may be given or written consent executed (and, if given or executed, will not be deemed effective). Our designees will, with respect to the Shares and other securities or rights, be empowered to exercise all your voting and other rights as they in their sole judgment deem proper in respect of any annual or special meeting of the Company's stockholders, or any adjournment or postponement thereof. We reserve the right to require that, in order for Shares to be deemed validly tendered, immediately upon our payment for such Shares, we must be able to exercise full voting and other rights with respect to such Shares and the other securities or rights issued or issuable in respect of such Shares, including voting at any meeting of stockholders (whether annual or special or whether or not adjourned) in respect of such Shares. A tender of Shares pursuant to any one of the procedures described above will constitute your acceptance of the terms and conditions of the Offer, as well as your representation and warranty that (i) you have the full power and authority to tender, sell, assign and transfer the tendered Shares (and any and all other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect of such Shares on or after January 18, 2001) and (ii) when we accept for payment the same we will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. Our acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between you and us upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4 -- "Withdrawal Rights," tenders of Shares made pursuant to the Offer are irrevocable. You may withdraw tenders of Shares made pursuant to the Offer at any time prior to the Expiration Date. If purchase of or payment for Shares is delayed for any reason, or if we are unable to purchase or pay for Shares for any reason, then, without prejudice to our rights under the Offer, tendered Shares may be retained by the Depositary on our behalf and may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as set forth in this Section 4 -- "Withdrawal Rights," subject to Rule 14e-1(c) under the Exchange Act, which provides that no person who makes a tender offer shall fail to pay the consideration offered or return the securities deposited by or on behalf of security holders promptly after the termination or withdrawal of the Offer. To withdraw Shares tendered pursuant to the Offer, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at the address set forth on the back cover of this Offer to Purchase and must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder(s), if different from the name of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3 -- "Procedure for Tendering Shares," any notice of withdrawal must 13 16 also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. We will determine, in our sole discretion, all questions as to the form and validity (including time of receipt) of notices of withdrawal, and our determination will be final and binding on all parties. None of the Offeror, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3 -- "Procedure for Tendering Shares". If we provide a Subsequent Offering Period following the Offer, no withdrawal rights will apply to Shares tendered during such Subsequent Offering Period or to Shares tendered in the Offer and accepted for payment. 5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS. The following is a summary of certain United States federal income tax considerations of the Offer and the Merger to holders whose Shares are purchased pursuant to the Offer or whose Shares are converted to cash in the Merger (including pursuant to the exercise of appraisal rights). The discussion is for general information only and does not purport to consider all aspects of United States federal income taxation that may be relevant to holders of Shares. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed and temporary regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change. The discussion applies only to holders of Shares in whose hands Shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to certain types of holders of Shares (such as insurance companies, tax-exempt organizations and broker-dealers) who may be subject to special rules under the United States federal income tax laws. This discussion does not discuss the United States federal income tax consequences to a holder of Shares who, for United States federal income tax purposes, is a non- resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. Because individual circumstances may differ, each holder of Shares should consult such holder's own tax advisor to determine the applicability of the rules discussed below to such holder and the particular tax effects to such holder of the Offer and the Merger, including the application and effect of state, local and other income tax laws. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for United States federal income tax purposes. In general, for United States federal income tax purposes, a holder of Shares will recognize gain or loss equal to the difference between (i) the holder's adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger and (ii) the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Assuming that Shares are held as a capital asset, such gain or loss will be a capital gain or loss. Any such capital gain will be a long-term capital gain taxable to a non-corporate holder at a maximum rate of 20% if the holder's Shares have been held for more than one year on the date of sale (in the case of the Offer) or the Effective Time of the Merger (in the case of the Merger); and a short-term capital gain taxable to a non-corporate holder at a maximum rate of up to 39.6% if the Shares have been held for one year or less on the date of sale (or the Effective Time of the Merger). Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%, unless a holder of Shares (i) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact or (ii) provides a correct TIN to the payor, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder who does not provide a correct TIN may be subject to penalties imposed by 14 17 the Internal Revenue Service. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against the holder's United States federal income tax liability. Each holder of Shares should consult with his or her own tax advisor as to his or her qualification for exemption from backup withholding and the procedure for obtaining such exemption. Holders tendering their Shares in the Offer may prevent backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. See Section 3 -- "Procedure for Tendering Shares." Similarly, holders who convert their Shares into cash in the Merger may prevent backup withholding by completing a Substitute Form W-9 and submitting it to the paying agent for the Merger. 6. PRICE RANGE OF COMMON SHARES; DIVIDENDS ON COMMON SHARES. The Common Shares are traded principally on the Nasdaq Small Cap Market. They are also traded on the Boston Stock Exchange. The following table sets forth for the periods indicated the high and low closing sales price per Common Share on the Nasdaq Small Cap Market as reported by published financial sources. Historical amounts have been adjusted for a 1 for 6 reverse stock split, effective June 25, 1999. No dividends have been declared or paid on the Common Shares during the quarters indicated.
HIGH LOW -------- -------- 1999 First Quarter............................................. $ 6.5628 $ 3.375 Second Quarter............................................ 5.0628 2.75 Third Quarter............................................. 4.875 3.00 Fourth Quarter............................................ 5.8125 3.875 2000 First Quarter............................................. $ 7.00 $ 4.25 Second Quarter............................................ 7.00 5.3125 Third Quarter............................................. 8.9688 6.1875 Fourth Quarter............................................ 7.5625 6.3125 2001 First Quarter (1)......................................... $ 8.1562 $ 7.125
- --------------- (1) Through January 23, 2001. On January 17, 2001, the last full trading day prior to the announcement of the Offer, the last reported closing sales price per Common Share as reported on the Nasdaq Small Cap Market was $7.56. On January 23, 2001, the last full trading day prior to the date of this Offer to Purchase, the last reported closing sales price per Common Share as reported on the Nasdaq Small Cap Market was $8.156. 7. CERTAIN EFFECTS OF THE TRANSACTION. Market for Common Shares. Our purchase of the Common Shares pursuant to the Offer will reduce the number of Common Shares that might otherwise trade publicly and will reduce the number of holders of Common Shares. This could adversely affect the liquidity and market value of the remaining Common Shares held by stockholders other than us. Depending upon the aggregate market value and per share price of any Common Shares not purchased pursuant to the Offer, the Common Shares may no longer meet the standards for continued inclusion on the Nasdaq Small Cap Market, which requires that an issuer have at least 500,000 publicly held shares with a market value of $1 million held by at least 300 stockholders holding round lots and have net tangible assets of at least $2 million. If these standards are not met, the Common Shares might nevertheless continue to be included on the Nasdaq Stock Market with quotations published on the Nasdaq's "additional list" or in one of the "local lists." However, if the number of holders of Common Shares falls below 300, or if the number of publicly held Common Shares falls below 500,000, or if there are not at least two market makers for such Common Shares, NASD rules provide that the Common Shares would no longer be "qualified" for Nasdaq Stock Market reporting, and Nasdaq Stock Market would cease to provide any quotations. Common Shares held directly or indirectly by an officer or director of the Company, or by any beneficial owner of more than 10% of the Common Shares, ordinarily will not 15 18 be considered as being publicly held for this purpose. If, as a result of the purchase of Common Shares pursuant to the Offer or otherwise, the Common Shares no longer meet the requirements for continued inclusion in any other tier of the Nasdaq Stock Market, and the Common Shares are no longer included in any tier of Nasdaq Stock Market, the market for such Common Shares could be adversely affected. Depending upon the aggregate market value and per share price of any Common Shares not purchased pursuant to the Offer, the Common Shares also may no longer meet the standards for continued inclusion on the Boston Stock Exchange, which requires that an issuer have at least 150,000 publicly held shares with a market value of $500,000 held by at least 250 beneficial holders and have total assets of at least $1 million. The Boston Stock Exchange reserves the right to deny the listing of any company, and to suspend trading or delist a company based on the failure to meet any of these requirements. In the event the Common Shares no longer meet the requirements for inclusion in any tier of the Nasdaq Stock Market or the Boston Stock Exchange, quotations might still be available from other sources. The extent of the public market for such Common Shares and availability of such quotations would, however, depend upon the number of holders of such Common Shares remaining at such time, the interest in maintaining a market in the Common Shares on the part of securities firms, the possible termination of registration of the Common Shares under the Exchange Act, as described below, and other factors. The Company intends to delist the Common Shares from the Nasdaq Small Cap Market and the Boston Stock Exchange as soon as practicable following the consummation of the Offer and in any event following the consummation of the Merger. Exchange Act Registration. The Common Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if the Common Shares are not listed on a "national securities exchange" and there are fewer than 300 record holders of Common Shares. It is our intention to seek to cause an application for such termination to be made as soon after consummation of the Offer as the requirements for termination of registration of the Common Shares are met. If such registration were terminated, the Company would no longer legally be required to disclose publicly in proxy materials distributed to stockholders the information which it now must provide under the Exchange Act or to make public disclosure of financial and other information in annual, quarterly and other reports required to be filed with the Commission under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to going private transactions would no longer apply to the Company, and the officers, directors and 10% stockholders of the Company would no longer be subject to the "short-swing" insider trading reporting and profit recovery provisions of the Exchange Act. Furthermore, if such registration were terminated, persons holding "restricted securities" of the Company may be deprived of their ability to dispose of such securities under Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Margin Regulations. The Common Shares are presently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which status has the effect, among other things, of allowing brokers to extend credit on the collateral of the Common Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Common Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In addition, if registration of the Common Shares under the Exchange Act were terminated, the Common Shares would no longer constitute "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Although we have no knowledge that would indicate that statements contained herein based upon such information or documents are untrue, we do not, nor does Parent or the Information Agent, assume any responsibility for the accuracy or completeness of the information concerning the Company, furnished by the Company, or contained in such 16 19 documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to us. The Company is a Nevada corporation with its principal executive offices located at 110 Cypress Station Drive, Suite 220, Houston, Texas. The Company is an independent oil and gas company engaged in the acquisition of oil and gas reserves through a program which includes purchases of reserves, reengineering, development and exploration activities currently focused in Texas and Louisiana. The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street (Suite 400), Chicago, Illinois 60661. Copies of such material may also be obtained by mail, at prescribed rates, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site on the internet at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the Commission. Such material should also be available for inspection at the offices of Nasdaq, 1735 K Street, N.W., Washington D.C. 20006. Nothing contained in any website is incorporated by reference herein. 9. CERTAIN INFORMATION CONCERNING PARENT AND THE OFFEROR. We are a Nevada corporation that was formed as an acquisition vehicle in connection with the Offer, the Merger and the other transactions contemplated by the Merger Agreement and we will be merged with and into the Company pursuant to the Merger. We are a wholly-owned subsidiary of Parent. Parent is an independent energy company engaged in the exploration, development, production and acquisition of crude oil and natural gas. North American operations are focused in the shelf and deepwater areas of the Gulf of Mexico, the Permian Basin, Mid-continent and Rocky Mountain regions. Internationally, Ocean Energy holds a leading position among U.S. independents in West Africa with oil and gas activities in Cote d'Ivoire, Equatorial Guinea and Angola. The company also conducts operations in the republics of Egypt, Tatarstan, Pakistan and Indonesia. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of our directors and executive officers as well as those of Parent are set forth in Schedule I hereto. Except as provided in the Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and as otherwise described in this Offer to Purchase, neither Parent nor us, nor, to the best of our knowledge and the best knowledge of Parent, any of the persons listed on Schedule I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of Parent or us, or, to the best of our knowledge and the best knowledge of Parent, none of the persons listed on Schedule I hereto, has had, within the past two years, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission applicable to this Offer to Purchase. Except as set forth in this Offer to Purchase, within the past two years, there have been no contacts, negotiations or transactions between Parent or us or any of Parent's respective subsidiaries, or, to the best of our knowledge and the best knowledge of Parent, any of the persons listed on Schedule I hereto, and the Company or its affiliates, concerning a merger, consolidation 17 20 or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Except as set forth in this Offer to Purchase, neither we nor Parent, nor, to the best of our knowledge and the best knowledge of Parent, any of the persons listed on Schedule I hereto, beneficially owns any Shares or has effected any transactions in the Shares during the past sixty days. 10. SOURCE AND AMOUNT OF FUNDS. The Offer is not conditioned on any financing arrangements. We estimate that the total amount of funds required to consummate the Offer and the Merger, make the Company Option Payments and Company Warrant Payments and pay related fees and expenses will be approximately $121 million. We will obtain the required funds from Parent in the form of capital contributions or loans from Parent. Parent will provide such funds from borrowings under its $500 Revolving Credit Agreement (the "Credit Facility"), dated as of March 30, 1999, among Parent, Chase Bank of Texas, National Association, The Chase Manhattan Bank, Bank of America National Trust and Savings Association, Bank One Texas, N. A., Societe Generale, Southwest Agency, the Bank of Montreal, and the other Banks signatory thereto. The Credit Facility bears interest, at Parent's option, at a competitive bid or LIBOR or prime rates plus applicable margins ranging from zero to 1.7% or at a competitive bid. Parent expects to use funds generated from its operations to repay its borrowings under the Credit Facility. The foregoing summary of the Credit Facility is qualified in its entirety by reference to the Credit Facility, which is incorporated herein by reference, and a copy of which has been filed as an exhibit to the Schedule TO filed by Parent and us with the Commission in connection with the Offer. The Credit Facility may be examined and copies may be obtained at the places described in Section 8. 11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE COMPANY. On September 14, 2000, at a charity event held in Houston, Texas, Mr. John D. Schiller, Jr., Parent's executive vice president of operations, Mr. William L. Transier, Parent's executive vice president and chief financial officer, and Mr. Thomas A. Reiser, a member of the Company's board of directors, had initial discussions regarding the possibilities of Parent's acquisition of the Company. On October 20, 2000, an initial meeting was held at Mr. Schiller's office to further discuss such acquisition possibilities. Attendees at the meeting included Mr. Schiller, Mr. Jerry M. Crews, an executive vice president of the Company, and Mr. Reiser. The attendees agreed that the process of evaluation should begin by means of a limited due diligence review of the Company by Parent's representatives. On October 30, 2000, Parent and the Company executed a Confidentiality Agreement pursuant to which the Company agreed to supply certain information to Parent and Parent agreed to treat such information as confidential and to use such information solely in connection with the evaluation of a possible transaction with the Company. On November 6, 2000, Parent's technical team of exploration, land, legal and business development personnel reviewed data concerning the Company's assets with certain members of the Company's management, including Mr. Frank A. Lodzinski, the Company's President, Mr. Crews, Mr. Tom Campbell, the Company's manager of acquisitions, and Mr. Francis M. Mury, an executive vice president of the Company. On November 14, 2000, an initial internal presentation was made by Parent's technical team to Mr. Schiller regarding the information provided by the Company. On November 20, 2000, Messrs. Schiller, Transier, John H. Campbell, Vice President, Reservoir Engineering -- North America of Parent, and Alan Smith, Manager of Business Development -- North America of Parent, met with Messrs. Lodzinski, Crews and Reiser at Parent's offices in Houston, Texas to discuss potential valuation and projects. On November 28, 2000, Parent's technical team reviewed the Company's major fields with representatives of the Company and W.D. vonGonten & Co, consulting petroleum reservoir engineers for the Company. On November 28, 2000, Mr. Lodzinski, Ms. Adriene Bond, Company counsel, Mr. Robert K. Reeves, Parent's general counsel, Mr. Transier and Mr. Andrew J. Sheu, Parent's vice president of tax, met at Parent's offices to discuss the potential deal structure, tax issues, and the due diligence process. 18 21 On December 11, 2000, Parent's technical team completed asset evaluations of the Company and its operations and made an internal presentation to Parent's senior management, which in turn decided to recommend to Parent's Board of Directors that Parent pursue a possible transaction with the Company. On December 13, 2000, senior management communicated its findings to the Parent's Board of Directors, and the Board gave its approval to proceed with a possible transaction with the Company. On December 13, 2000, Parent and the Company exchanged bullet-point outlines of certain proposed terms of the transaction. As proposed by Parent, the transaction was to be structured as a merger in which a newly-formed subsidiary of Parent would be merged with the Company and the Company's stockholders would receive in exchange for their shares aggregate consideration of $115 million ($8.25 per Common Share) consisting of 50% stock of Parent and 50% cash, with the receipt of Parent stock to be tax-free to the Company's stockholders. Other terms included the cash-out of options and warrants at the closing of the merger, a requirement that management, directors and significant stockholders of the Company agree to vote in favor of the merger, and certain other terms and conditions. On December 18, 2000, Parent and the Company executed an additional Confidentiality Agreement pursuant to which Parent agreed to supply certain information to the Company and the Company agreed to treat such information as confidential and to use such information solely in connection with the evaluation of a possible transaction with Parent. On December 18, 2000, Parent's outside counsel distributed to the parties for their review and comment a preliminary draft of a merger agreement. On December 26 and 27, 2000 and January 2 and 3, 2001, representatives of Parent made field visits to certain of Company's operated oil and gas fields. On January 3, 2001, Parent's outside counsel, Mr. Transier and Mr. Reeves met with Mr. Lodzinski, Mr. Will VanLoh, Principal of Quantum Energy Partners LP, and Mr. Michael P. Dalton, Associate of Quantum Energy Partners LP, at Parent's offices to discuss the purchase price for the Common Shares and Preferred Shares, various alternative structures for the acquisition, including a possible all cash transaction, the timing of the transaction and various other agreement terms. At this meeting, Parent indicated that it would be willing to do an all cash acquisition if the transaction were structured as a tender offer and merger and a majority of stockholders committed to tender their shares and vote for the transaction. On January 4, 2001, Mr. VanLoh met with Mr. Reeves at Parent's offices to further discuss potential structure and share price. On January 7, 2001, revised agreements reflecting an all-cash tender offer and merger were distributed to Parent, the Company and their respective representatives. Between January 7 and January 16, 2001, there were various telephone conferences between Mr. Reeves, Mr. Lodzinski and outside counsel to negotiate provisions of the merger agreement, the Tender and Voting Agreement and the Tender Agreement, and additional due diligence was conducted by Parent's outside counsel. On January 17, 2001, at a special telephonic meeting of Parent's Board of Directors in which all but one of Parent's directors participated, members of Parent's senior management presented Parent's Board with details regarding the Company, results of the due diligence investigation and the terms of the merger agreement. At the conclusion of the meeting, Parent's Board approved and authorized the execution of the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement, and the commencement of the Offer. The Company's Board of Directors held a telephonic special meeting on January 17, 2001, at which eight of the Company's nine directors were present. At the meeting, the Company's Board considered the final terms of the Offer, the Merger, the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement. The Company's legal advisors summarized the final terms of the proposed transaction. The Company's Board also received and participated in a presentation by Dain Rauscher Wessels with respect to the financial terms of the proposed transaction. At the conclusion of its presentation, the representative of Dain Rauscher Wessels delivered the oral opinion of Dain Rauscher Wessels to the Company's Board that, as of such date, the Common Share 19 22 Offer Price and the Preferred Share Offer Price in the Offer and pursuant to the Merger Agreement were fair, from a financial point of view, to the Company's stockholders. Dain Rauscher Wessels subsequently confirmed its oral opinion by letter dated January 17, 2001. At the conclusion of the January 17 meeting, the Company's Board approved and authorized the execution of the Merger Agreement and approved the transactions contemplated thereby, including the Offer, the Merger, the Tender and Voting Agreement and the Tender Agreement, and recommended that the Company's stockholders accept the Offer, tender their Common Shares and Preferred Shares pursuant to the Offer and approve the Merger Agreement, the Tender and Voting Agreement, the Tender Agreement, and the Merger. On January 18, 2001, the respective parties to the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement executed and delivered such agreements, and Parent and the Company issued a joint press release announcing the signing of the Merger Agreement. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. The purpose of the Offer, the Merger, the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement is to enable us to acquire control of, and the entire equity interest in, the Company. The Offer, the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement are intended to increase the likelihood that the Merger will be effected as promptly as practicable. Consummation of the Merger requires the approval of the Merger Agreement by holders of a majority of the votes entitled to be cast by holders of (a) the Common Shares and the Preferred Shares, voting together as a single class, with each Preferred Share entitling the holder thereof to the number of votes equal to the full number of Common Shares into which such Preferred Share is convertible on the record date for such vote, (b) the Common Shares, voting as a single class, and (c) the Preferred Shares, voting as a single class. The Company's Board of Directors has approved the Offer, the Merger and the Merger Agreement and the transactions contemplated thereby. The Company has agreed (if required by applicable law to consummate the Merger) to take all action necessary to convene a meeting of its stockholders as promptly as practicable after the consummation of the Offer for the purpose of obtaining stockholder approval of the Merger. We have agreed that, subject to applicable law, all Shares we own, and all Shares owned by Parent or any of Parent's other subsidiaries will be voted in favor of the Merger. The stockholders' meeting shall be held as soon as practicable (subject to any statutory or other restrictions) following the purchase of Shares pursuant to the Offer. Shares outstanding immediately prior to the Effective Time and which are (i) held by holders of Shares who shall have not voted in favor of the Merger or consented to the Merger in writing and (ii) who shall have demanded properly in writing payment of the fair market value of such Shares in accordance with Section 92A.420 of the Nevada Revised Statutes (collectively, the "Dissenting Shares") shall be cancelled and terminated and shall represent solely the right to receive payment from the Surviving Corporation of the fair market value of such Shares held by them in accordance with the provisions of the Nevada Revised Statutes. However, holders of Shares who shall have failed to perfect or who effectively shall have withdrawn or lost their rights for an appraisal of such shares under the Nevada Revised Statutes shall thereupon have such shares be deemed to have been cancelled and terminated, as of the Effective Time, and shall represent solely the right to receive the Common Share Offer Price or the Preferred Share Offer Price as provided in Section 3.06 of the Merger Agreement, as applicable, upon surrender of the certificate or certificates that formerly evidenced such Shares in the manner provided in Section 3.07 of the Merger Agreement. The Company will give to Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the Nevada Revised Statutes and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment of fair market value under the Nevada Revised Statutes. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any such demands, or offer to settle, or settle, any such demands. Any amount payable to any holder of Shares exercising dissenters' rights shall be paid solely by the Surviving Corporation out of its own funds. 20 23 The foregoing summary of the rights of objecting stockholders does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise their dissenters' appraisal rights. The preservation and exercise of dissenters' rights are conditioned on strict adherence to the applicable provisions of the Nevada Revised Statutes. See Section 15 -- "Certain Legal Matters" for additional information regarding appraisal rights. Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions and which may, under certain circumstances, be applicable to the Merger or another business combination following the purchase of Shares pursuant to the Offer or otherwise in which we seek to acquire the remaining Shares not held by us. We believe, however, that Rule 13e-3 will not be applicable to the Merger if the Merger is consummated within one year after the termination of the Offer at the same per Share price as paid in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. Plans for the Company. As described herein, if we purchase Shares pursuant to the Offer, the Merger Agreement provides that we will be entitled to designate representatives to serve on the Board of Directors of the Company in proportion to our ownership of Shares following such purchase; provided, however, that, until the Effective Time, there must be at least two Independent Directors. Promptly upon the consummation of the Offer, we currently intend to seek maximum representation on the Company's Board of Directors permitted by the Merger Agreement. We expect that our representation on the Company's Board of Directors would permit us to exert substantial influence over the Company's conduct of its business and operations. As a result of the Merger, our directors and officers immediately prior to the Effective Time will become the directors and officers, respectively, of the Company, as the Surviving Corporation. See Section 13 -- "The Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and the Confidentiality Agreements". We and Parent expect that, initially following the Merger, the business and operations of the Company will, except as described in this Offer to Purchase, be continued substantially as they are currently being conducted. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger and will take such actions as it deems appropriate under the circumstances then existing. Parent intends to seek additional information about the Company during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of the Company's business, assets, operations, capitalization, dividend policy, management and personnel, with a view to optimizing development of the Company's potential in conjunction with Parent's current and future business. Except as described above or elsewhere in this Offer to Purchase, we and Parent have no present plans or proposals that would relate to or result in (i) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company, (ii) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any and all corporations, partnerships, joint ventures, associations, limited liability companies and other entities controlled by the Company, directly or indirectly through one or more intermediaries (the "Company Subsidiaries"), (iii) a sale or transfer of a material amount of assets of the Company or of any Company Subsidiaries, (iv) any change in the present board of directors or management of the Company (v) any material change in the present capitalization or dividend policy of the Company, (vi) any other material change in the Company's business or corporate structure, (vii) changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person, (viii) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (ix) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act, or (x) any action similar to any of those enumerated above. 21 24 13. THE MERGER AGREEMENT, THE TENDER AND VOTING AGREEMENT, THE TENDER AGREEMENT AND THE CONFIDENTIALITY AGREEMENTS. The following is a summary of certain material provisions of the Merger Agreement, the Tender and Voting Agreement, the Tender Agreement and the Confidentiality Agreement, copies of which are attached as exhibits to the Schedule TO we filed in connection with the Offer. These summaries do not purport to be complete and are qualified in their entirety by reference to the respective texts of the Merger Agreement, the Tender and Voting Agreement and the Tender Agreement. Capitalized terms used in this Section 13 and not otherwise defined in this Offer to Purchase shall have the meanings set forth in the Merger Agreement. THE MERGER AGREEMENT The Offer. The Merger Agreement provides that not later than the fifth business day from the public announcement by Parent and the Company of the execution of the Merger Agreement, we shall commence the Offer to purchase all outstanding Common Shares at the Common Share Offer Price and all outstanding Preferred Shares at the Preferred Share Offer Price. Any Shares acquired pursuant to the Offer will include, by way of amplification and not limitation, all rights associated with such Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date of the Merger Agreement (including, without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). Our obligation to accept for payment and to pay for any Shares pursuant to the Offer is subject only to the satisfaction of the Minimum Condition as set forth on Annex I to the Merger Agreement and other conditions set forth in Section 14 -- "Certain Conditions to Our Obligations" (the "Tender Offer Conditions"). In addition to our agreement to file with the Commission a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the "Schedule TO") with respect to the Offer, which contains or incorporates by reference this Offer to Purchase and forms of the related letters of transmittal and other ancillary offer documents (collectively, together with all supplements and amendments thereto, being referred to as the "Offer Documents"), we shall also disseminate to holders of Shares the Offer Documents to the extent required by law, and otherwise shall comply in all material respects with the Exchange Act. The Common Share Offer Price and Preferred Share Offer Price shall be net to the seller in cash, without interest, subject to reduction only for any applicable withholding taxes or stock transfer taxes payable by the seller. The Company agrees that no Shares held by the Company or any of its subsidiaries will be tendered in the Offer. We specifically reserve the right to waive any condition of the Offer, to increase the Common Share Offer Price and Preferred Share Offer Price and to make any other changes in the terms and conditions of the Offer, provided that without the prior written consent of the Company, we shall not decrease the Common Share Offer Price or the Preferred Share Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased in the Offer, impose additional conditions to the Offer or amend any other term of the Offer in any manner materially adverse to the holders of Shares or reduce the time period during which the Offer shall remain open. Subject to the terms of the Offer and the Merger Agreement and the satisfaction or waiver of all the Tender Offer Conditions as of any Expiration Date, we will accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such Expiration Date of the Offer. Notwithstanding the foregoing, we shall be entitled to extend the Offer, without the consent of the Company if at the Expiration Date of the Offer, which will be 12:00 midnight eastern standard time twenty business days following commencement of the Offer (the "Expiration Date"), or any extension thereof, any condition to the Offer is not satisfied or waived, and we agree to extend the Offer from time to time until May 31, 2001 if at the then scheduled Expiration Date all of the conditions to the Offer have not been satisfied or waived as permitted by the Merger Agreement; provided, however, we shall not be required to extend the Offer under this provision unless, in Parent's reasonable judgment, (i) each such condition is reasonably capable of being satisfied; (ii) the Company is in material compliance with all of its covenants in the Merger Agreement; and (iii) the failure of such condition to be satisfied shall not result from a breach by the Company of any of its covenants and agreements contained in the Merger Agreement. Any extension of the Offer pursuant to this provision of the Merger Agreement shall not, 22 25 without the written consent of the Company, exceed the number of days that we reasonably believe will be necessary so that the conditions to the Offer will be satisfied. In addition, we may, without the consent of the Company, extend any then scheduled Expiration Date of the Offer for any period required by applicable rules, regulations, interpretations or positions of the Commission or the Commission's staff applicable to the Offer or for any period required by applicable law. If the Minimum Condition has been satisfied and all other conditions to the Offer have been satisfied or waived but fewer than 90% of the Shares have been validly tendered and not withdrawn as of the Expiration Date, we shall accept and purchase all of the Shares tendered in the initial offer period and may provide for a subsequent offering period (as contemplated by Rule 14d-11 under the Exchange Act) as long as providing for the subsequent offering period does not require the extension of the initial offer period under applicable rules and regulations of the Commission, which subsequent offering period shall not exceed twenty business days. In addition, the Common Share Offer Price and Preferred Share Offer Price may be increased and the Offer may be extended to the extent required by law in connection with such increase in each case without the consent of the Company. On or prior to the dates that we become obligated to accept for payment and pay for Shares pursuant to the Offer, Parent shall provide or cause to be provided to us the funds necessary to pay for all Shares that we become so obligated to accept for payment and pay for pursuant to the Offer. Company Actions. Pursuant to the Merger Agreement, the Company has agreed that on the date of the filing by Parent and us of the Offer Documents, it will file with the Commission and mail to its stockholders a Solicitation/Recommendation Statement on Schedule 14D-9 reflecting the recommendation of the Board of Directors of the Company that the holders of Shares tender their Shares pursuant to the Offer. The Schedule 14D-9 will set forth, and the Company represents, that the Company's Board of Directors, at a meeting duly called and held, has unanimously (i) determined by vote of its directors present at the meeting at which the Merger Agreement was approved that the transactions contemplated by the Merger Agreement, including each of the Offer, the Merger, the Tender Agreement and the Tender and Voting Agreement, are fair to and in the best interests of the Company and its stockholders, (ii) approved the Offer and approved and adopted the Merger Agreement and declared its advisability in accordance with the Nevada Revised Statutes, and (iii) recommended acceptance of the Offer and approval of the Merger Agreement by the Company's stockholders (if such approval is required by applicable law). The Company also represents that prior to the execution of the Merger Agreement, the Company's financial advisor has delivered to the Company's Board of Directors its written opinion that the consideration to be received for Shares pursuant to the Offer and the Merger is fair to the Company's stockholders from a financial point of view. Board Representation. The Merger Agreement provides that, promptly upon the payment by us for the Shares pursuant to the Offer and from time to time thereafter (provided, however, that we shall not be entitled to designate any members to the Board of Directors of the Company without owning a majority of the Common Shares and a majority of the Preferred Shares), we will be entitled to designate (i) such number of Class A directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class A directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this provision) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its Affiliates (calculated on an as converted basis) bears to the total number of Shares then outstanding (calculated on an as converted basis), and (ii) such number of Class B directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class B directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Preferred Shares beneficially owned by Parent or its Affiliates bears to the total number of Preferred Shares then outstanding, and the Company shall, upon our request, promptly take all actions necessary to cause our designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors, increasing the number of authorized directors or amending its bylaws; provided, however, that until the Effective Time, the Company's Board of Directors shall have at least two members who were directors of the Company on the date of the Merger Agreement and not employees of the Company (the "Independent Directors"), provided that if no Independent Directors remain, the other directors shall 23 26 designate one person to fill one of the vacancies who shall be neither an employee of the Company nor an Affiliate of Parent and such person shall be deemed to be an Independent Director for purposes of the Merger Agreement. Upon our written request, the Company shall cause our designees to constitute the same percentage of representation as is on the Board of Directors of the Company after giving effect to this provision on (i) each committee of the Board of Directors of the Company; (ii) the Board of Directors of each Company Subsidiary (defined in the Merger Agreement as any and all corporations, partnerships, joint ventures, associations, limited liability companies and other entities controlled by the Company, directly or indirectly through one or more intermediaries); and (iii) each committee of each such board. These provisions shall not limit any rights that we, Parent or any of our Affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. The Company's obligations to appoint our designees to the Board of Directors of the Company shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this provision of the Merger Agreement and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or an amendment thereof or an information statement pursuant to Rule 14f-1 if we have not prior to the mailing of the Schedule 14D-9 designated directors or timely provided the requisite information) such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this provision. We and Parent will supply any information with respect to itself and its officers, directors and Affiliates required by such Section and Rule to the Company. Following the election or appointment of Parent's designees and prior to the Effective Time, any amendment or termination of the Merger Agreement by the Company, any extension of time for performance of any of the obligations of Parent or us under the Merger Agreement, any waiver of any condition or any of the Company's rights thereunder or other action by the Company adversely affecting the rights of the stockholders of the Company (other than us or our affiliates), requires the concurrence of the Independent Directors. The Merger. The Merger Agreement provides that at the Effective Time, we shall be merged with and into the Company. As a result of the Merger, our separate corporate existence shall cease and the Company shall continue as the Surviving Corporation and shall succeed to and assume all of our rights and obligations in accordance with the Nevada Revised Statutes. At the Effective Time, the Articles of Incorporation and Bylaws of the Surviving Corporation shall be amended to be identical to our Articles of Incorporation and Bylaws as in effect immediately prior to the Effective Time (except that the name of the Surviving Corporation shall be "OEI Resources, Inc."), in each case until duly amended in accordance with applicable law. Our directors and officers shall become the directors and officers of the Surviving Corporation at the Effective Time. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares, each Share that is issued and outstanding (other than Shares owned by the Company as treasury stock, and any Shares owned by Parent, us, or any other wholly-owned subsidiary of Parent, which shall be cancelled, and Shares held by stockholders who have properly exercised appraisal rights under the Nevada Revised Statutes, if any) shall be cancelled and terminated and shall represent solely the right to receive from the Surviving Corporation in cash, without interest, the Common Share Offer Price (or any higher price paid for Common Shares in the Offer) or the Preferred Share Offer Price (or any higher price paid for Preferred Shares in the Offer) as applicable. Each share of our stock issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, by virtue of the Merger and without any action on the part of the holder of any of our shares, be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. Shares of Dissenting Stockholders. Notwithstanding any provision of the Merger Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by holders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing payment of the fair market value of such Shares in accordance with the 24 27 Nevada Revised Statutes (collectively, the "Dissenting Shares") shall be cancelled and terminated and shall represent solely the right to receive payment from the Surviving Corporation of the fair market value of such Shares held by them in accordance with the provisions of the Nevada Revised Statutes, except that all Dissenting Shares held by holders of Shares who shall have failed to perfect or who effectively shall have withdrawn or lost their rights for an appraisal of such Shares under the Nevada Revised Statutes shall thereupon be deemed to have been cancelled and terminated, as of the Effective Time, and shall represent solely the right to receive the Common Share Offer Price or the Preferred Offer Share Price, as applicable, upon surrender in the manner provided in Section 3.07 of the Merger Agreement of the certificate or certificates that formerly evidenced such Shares. The Company shall give to Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the Nevada Revised Statutes and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment of fair market value under the Nevada Revised Statutes. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any such demands, or offer to settle, or settle, any such demands. Any amount payable to any holder of Shares exercising dissenters' rights shall be paid solely by the Surviving Corporation out of its own funds. See Section 15 -- "Certain Legal Matters" for additional information regarding appraisal rights. Stock Options. Each outstanding and unexercised option to purchase Common Shares ("Company Option") pursuant to each stock option and incentive plan of or sponsored by the Company (the "Company Option Plans"), that is fully vested and exercisable as of the consummation of the Offer shall be converted into an obligation of the Company to pay, and a right of the holder thereof to receive in full satisfaction of such Company Option, an amount in cash equal to the product of (i) the excess, if any, of the Common Share Offer Price over the exercise price thereof and (ii) the number of Common Shares subject to such Company Option (such payment to be net of withholding taxes) (the "Company Option Payments"). The Company shall take all actions necessary to cause the Company's employees and directors to consent, to the extent required, to the transactions contemplated by this provision no later than immediately prior to the time we accept Shares for payment pursuant to the Offer. Except as may be otherwise agreed to by Parent or us and the Company, as of the Effective Time, (A) the Company Option Plans shall terminate, (B) the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of the Company Subsidiaries shall be deleted and (C) no holder of Company Options or any participant in the Company Option Plans or any other plans, programs or arrangements shall have any rights thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. The Company and Parent agree that the Company Option Payments are the sole payments that will be made with respect to or in relation to the Company Options. With respect to each Company Option granted pursuant to the terms of a Company Option Plan that is not vested and exercisable as of the consummation of the Offer, the Company or the Surviving Corporation, as applicable, shall make the payment of the amount determined above at the time each such unvested Company Option would otherwise have become vested and exercisable subject to the satisfaction of the terms and conditions set forth in the applicable option award agreement and the Company Option Plan pursuant to which such Company Option was granted, or at such earlier date as may be determined by Parent in its sole and absolute discretion. Warrants. At the Effective Time, each warrant to purchase Common Shares that is then outstanding and exercisable (each a "Company Warrant"), shall be cancelled and converted into the right to receive cash in an amount equal to the product of (i) the excess, if any, of the Common Share Offer Price over the exercise price of such Company Warrant and (ii) the number of Common Shares previously subject to such Company Warrant immediately prior to its cancellation (such payment to be net of withholding taxes) (the "Company Warrant Payments"). The Company shall take all actions necessary to cause the holders of the Company Warrants to consent, to the extent required, to the transactions contemplated by this provision no later than immediately prior to the time we accept Shares for payment pursuant to the 25 28 Offer. The Company and Parent agree that the Company Warrant Payments are the sole payments that will be made with respect to or in relation to the Company Warrants. Representations and Warranties. In the Merger Agreement, the Company has made customary representations and warranties to us and to Parent, including, but not limited to, representations and warranties as to organization and qualification, subsidiaries, capital structure, authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby, required consents and approvals, filings made by the Company with the Commission under the Exchange Act (including financial statements included in the documents filed by the Company under that act), absence of material adverse changes, absence of litigation, material contracts, title to property, oil and gas operations, wells and equipment, reserve reports, hedging, employee benefit plans, environmental laws and regulations, intellectual property, tax matters, liability insurance, the inapplicability of certain state takeover statutes, engagement of brokers and finders and absence of bankruptcy. Some of the Company's representations are qualified by the limitation that, in order for the representation to have been breached, the event breaching the representation must have a Material Adverse Effect. A "Material Adverse Effect" means any event, circumstance, condition, development or occurrence causing, resulting in or having (or with the passage of time likely to cause, result in or have) a material adverse effect on the financial condition, business, assets, properties or results of operations of the Company and the Company Subsidiaries taken as a whole; provided, that such term shall not include (i) changes in the market price and trading volume of the Company's securities or (ii) effects that are not applicable primarily to the Company resulting from market conditions generally in the oil and gas industry (including without limitation changes in commodities prices). We and Parent have also made customary representations and warranties to the Company, including, but not limited to, representations and warranties as to organization and authority of us and Parent to enter into the Merger Agreement and to consummate the transactions contemplated thereby, required consents and approvals, financing and engagement of brokers and finders. Required Stockholder Vote or Consent. The Company has represented to us that the only vote of the holders of any class or series of the Company's capital stock that will be necessary or required under the Merger Agreement, Nevada Revised Statutes or under applicable law to consummate the Merger and the other transactions contemplated by the Merger Agreement is the approval and adoption of the Merger Agreement by the holders of a majority of the votes entitled to be cast by holders of (a) the Common Shares and the Preferred Shares, voting together as a single class, with each Preferred Share entitling the holder thereof to the number of votes equal to the full number of Common Shares into which such Preferred Share is convertible on the record date for such vote, (b) the Common Shares, voting as a single class, and (c) the Preferred Shares, voting as a single class (the "Company Stockholders' Approval"). In the Merger Agreement, the Company also agreed that within four business days of the date of the Merger Agreement it would by action of its Board of Directors amend its bylaws such that the Company elects not to be subject to Sections 78.378 through 78.3793 of the NRS (which relate to "control shares"). See Section 15 -- "Certain Legal Matters". Stockholder Action. Following consummation of the Offer, if required by applicable law in order to consummate the Merger, the Company shall, in accordance with applicable law, give notice of, convene and hold a special meeting of its stockholders (the "Company Stockholders' Meeting") for the purpose of securing the Company Stockholders' Approval. The date of any Company Stockholders' Meeting shall be set by the Board of Directors of the Company after consultation with, and on a date approved by, Parent, whose approval shall not be unreasonably withheld. The Board of Directors of the Company shall (i) distribute to its stockholders a proxy statement pursuant to Regulation 14A under the Exchange Act or, if applicable law and regulations do not so require, an information statement pursuant to Regulation 14C under the Exchange Act (the "Proxy Statement") in accordance with applicable federal and state law and with its Articles of Incorporation and Bylaws, which Proxy Statement shall contain (A) the recommendation of the Board of Directors of the Company that its stockholders approve the Merger and adopt the Merger Agreement and the transactions contemplated hereby if proxies are solicited by the Company with respect to such vote and (B) the written opinion of Dain Rauscher Wessels, a 26 29 division of Dain Rauscher Incorporated, that the consideration to be received for the Shares pursuant to the Offer and the Merger is fair to the Company's stockholders from a financial point of view, (ii) cause the Company to use all reasonable efforts to solicit from its stockholders proxies in favor of the approval of the Merger and adoption of the Merger Agreement and the transactions contemplated hereby and to secure the Company Stockholders' Approval, unless, in accordance with applicable law and the regulations of the Nasdaq Small Cap Market, such solicitation is not required to achieve approval of the Merger, (iii) take all other action in their judgment necessary and appropriate to secure the Company Stockholders' Approval, and (iv) cooperate and consult with Parent with respect to each of the foregoing matters, all subject to the right of the Board of Directors of the Company to modify or withdraw its recommendation in the exercise of its fiduciary duties to the Company and its stockholders. Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, us or any other Company Subsidiaries in favor of the approval of the Merger and of the Merger Agreement. Covenants Relating to the Conduct of Business. During the period from the date of the Merger Agreement until the time of the closing of the Merger (except as provided in the Disclosure Letter or otherwise contemplated by the Merger Agreement), the Company has agreed that the businesses of the Company and the Company Subsidiaries will be conducted only in, and the Company and the Company Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice, and shall use reasonable efforts to preserve substantially intact their current business organization, keep available the services of their current employees and preserve their relationships with customers, contractholders and other persons having significant business relationships with the Company or any Company Subsidiary. The Company has also agreed that, except as otherwise expressly contemplated by the Merger Agreement or as reflected in the Disclosure Letter, during such period, the Company or any Company Subsidiary will not directly or indirectly do, or propose to do, any of the following, without the prior written consent of Parent: (i) amend, propose to amend, or otherwise change its Articles of Incorporation or Bylaws or similar organizational documents; (ii) issue, sell, pledge, dispose of, grant, encumber, amend the terms of, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (A) any shares of capital stock of the Company or any Company Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest) of the Company or any Company Subsidiary except the sale of capital stock of the Company in connection with the exercise of outstanding options or warrants or (B) any assets or properties of the Company or any Company Subsidiary, except the sales of Hydrocarbons in the ordinary course of business and in a manner consistent with past practice; (iii) declare, set aside, make or pay any dividend or other distribution payable in cash, stock, property or otherwise, with respect to any of its capital stock except for Preferred Shares to be issued and cash to be paid as dividends on the Preferred Shares in accordance with the Company's Articles of Incorporation and Section 4.17 of the Preferred Stock Purchase Agreement; (iv) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (v) (A) acquire or sell, lease, license, surrender, relinquish or otherwise dispose of (including, without limitation, by merger, consolidation or acquisition or disposition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets, other than sales of Hydrocarbons in the ordinary course of business, consistent with past practice, and any other acquisitions for consideration which is not, in the aggregate, in excess of $250,000; (B) incur any Indebtedness for borrowed money, incur any trade debt, or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any individual, partnership, corporation, limited liability company, trust, incorporated or unincorporated organization or other legal entity of any kind (a "Person") (other than the 27 30 Company or a wholly owned Company Subsidiary), except for Indebtedness incurred in the ordinary course of business, consistent with past practice, in amounts not in excess of $250,000 in the aggregate; (C) make any loans or advances to any Person other than the Company or a wholly owned Company Subsidiary; (D) authorize or commit to any capital expenditure in excess of $250,000 in the aggregate per month, other than pursuant to any commitment as of January 18, 2001 disclosed in the Disclosure Letter; or (E) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this subsection (v); (vi) enter a new line of business or commence business operations in any country outside the United States; (vii) increase the compensation payable or to become payable to its officers or employees, except in the ordinary course of business and consistent with past practice, or grant any severance or termination pay to, or modify or enter into any employment or severance agreement with, any director, officer, employee or former employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; (viii) change any method of accounting or accounting practice by the Company or any Company Subsidiary, except for any such change required by U.S. GAAP; (ix) pay, discharge or satisfy any material claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the consolidated balance sheet of the Company, dated as of September 30, 2000, included in the Financial Statements, or subsequently incurred in the ordinary course of business and consistent with past practice or in accordance with this provision, provided however, that in no event shall payments under this provision exceed individually, or in the aggregate, $250,000 without the express written consent of Parent. (x) settle any material Audit, make or change any material Tax election or file any material amended Tax Return; (xi) take any action that would give rise to a claim under the WARN Act or any similar state law or regulation because of a "plant closing" or "mass layoff" (each as defined in the WARN Act); (xii) enter into any futures, hedge, swap, collar, put, call, floor, cap, option or other contracts that are intended to benefit from or reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons, or securities; (xiii) enter into any fixed price commodity sales agreements with a duration of more than three months; (xiv) take, or agree or commit to take, any action that would make any representation and warranty of the Company or any Company Subsidiary hereunder inaccurate in any respect at, or as of any time prior to, the closing of the Merger, or omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any time; (xv) (A) engage in any transaction (either acting alone or in conjunction with any Employee Plan or trust created thereunder) in connection with which the Company or any Company Subsidiary could be subjected (directly or indirectly) to either a civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code, (B) terminate any Employee Plan in a manner, or take any other action with respect to any Employee Plan, that could result in the liability of the Company or any Company Subsidiary to any person, (C) take any action that could adversely affect the qualification of any Employee Plan or 28 31 its compliance with the applicable requirements of ERISA, (D) fail to make full payment when due of all amounts which, under the provisions of any Employee Plan, any agreement relating thereto or applicable law, the Company or any Company Subsidiary are required to pay as contributions thereto or (E) fail to file, on a timely basis, all reports and forms required by federal regulations with respect to any Employee Plan; or (xvi) other than the consummation of the Merger, take any action that would cause adjustment to the conversion price of the Preferred Shares. No Solicitation. The Company has agreed in the Merger Agreement that, from the date of the Merger Agreement until its termination, the Company and the Company Subsidiaries will not and will not authorize their respective officers, directors, employees or other agents to, directly or indirectly, (i) take any action to solicit, initiate or encourage any offer or proposal for, or any indication of interest in, a merger or other business combination directly or indirectly involving the Company or any Company Subsidiary or the acquisition of a substantial equity interest in, or a substantial portion of the assets of, any such party, other than transactions contemplated by the Merger Agreement (an "Acquisition Proposal") or (ii) engage in negotiations with, or disclose any nonpublic information relating to the Company or the Company Subsidiaries, respectively, or afford access to their respective properties, books or records to any Person that may be considering making, or has made, an Acquisition Proposal. Nothing contained in this provision shall prohibit the Company and its Board of Directors from (i) taking and disclosing a position with respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated by the Commission under the Exchange Act, or (ii) furnishing information, including without limitation nonpublic information to, or entering into negotiations with any Person that has indicated its willingness to make an unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A) such unsolicited bona fide Acquisition Proposal is made by a third party that the Board of Directors of the Company determines in good faith has the good faith intent to proceed with negotiations or consider, and financial and other capability to consummate, such Acquisition Proposal (taking into account among other things the legal, financial, regulatory and other aspects of such Acquisition Proposal and the Person making such Acquisition Proposal), (B) the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that such action is required for the Board of Directors of the Company to comply with its fiduciary duties to stockholders imposed by applicable law, (C) contemporaneously with furnishing such information to, or entering into discussions or negotiations with, such Person, the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person and (D) the Company uses all reasonable efforts to keep Parent informed in all material respects of the status and terms of any such negotiations or discussions (including without limitation the identity of the Person with whom such negotiations or discussions are being held) and provides Parent copies of such written proposals and any amendments or revisions thereto or correspondence related thereto. The Company, the Company Subsidiaries, and their respective officers, directors, employees or other agents shall immediately cease any existing discussions or negotiations, if any, with any Persons conducted prior to the date of the Merger Agreement with respect to any Acquisition Proposal. Expenses. Except as set forth below under "Effect of Termination; Termination Fee," all Expenses (as defined in the Merger Agreement) incurred by the parties to the Merger Agreement shall be borne solely and entirely by the party that has incurred such Expenses; provided, however, that if the Merger Agreement is terminated for any reason, then the allocable share of Parent and the Company for all Expenses (including any fees and expenses of accountants, experts, and consultants, but excluding the fees and expenses of legal counsel and investment bankers) related to preparing, printing, filing and mailing the Offer Documents, the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Offer Documents and the Proxy Statement shall be allocated one-half each. Indemnification. For six years after the Effective Time, Parent and the Surviving Corporation shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, an officer or director of the Company or any 29 32 Company Subsidiary (each, an "Indemnified Party") against all losses, claims, damages, liabilities, fees and expenses (including reasonable fees and disbursements of counsel and judgments, fines, losses, claims, liabilities and amounts paid in settlement (provided that any such settlement is effected with the prior written consent of the Surviving Corporation, which consent will not be unreasonably withheld)) arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the Effective Time to the fullest extent permitted under Nevada law and the Surviving Corporation's Articles of Incorporation and Bylaws and the Company's written indemnification agreements in effect on the date of the Merger Agreement and listed in the Disclosure Letter, including provisions therein relating to the advancement of expenses incurred in the defense of any action or suit; provided, that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims, provided that in no event shall the liability of Parent and the Surviving Corporation in the aggregate under this provision exceed $115 million. The Surviving Corporation shall also maintain the Company's existing officers' and directors' liability insurance policy ("D&O Insurance") for a period of not less than six years after the Effective Time, but only to the extent related to actions or omissions prior to the Effective Time. The Surviving Corporation has the option to substitute for the existing D&O Insurance policies of substantially similar coverage and amounts containing terms no less advantageous to such former directors or officers, provided that the annual premiums to be paid with respect to the maintenance of such D&O Insurance during such six-year period shall not exceed two hundred percent (200%) of the premium paid by the Company for such D&O Insurance during the year ended December 31, 2000, it being agreed and understood that if such policies cannot be obtained at such cost, Parent shall cause the Surviving Corporation to obtain as much of such policies as can be obtained at a cost equal to such amount. The Articles of Incorporation and Bylaws of the Surviving Corporation and its subsidiaries shall contain provisions no less favorable with respect to indemnification than are currently set forth in the Bylaws of the Company and any Company Subsidiary, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were Indemnified Parties, unless such modification shall be required by Law. Notwithstanding the foregoing, the Surviving Corporation shall not be obligated to maintain the provisions of the Company's and the Company's Subsidiaries' Bylaws and Articles of Incorporation that provide for indemnification of directors and officers in their capacities as stockholders. Conditions Precedent. The obligations of the Company, Parent and us to consummate the Merger are subject to the satisfaction or waiver, in whole or in part (where permissible by applicable law), at or prior to the closing of the Merger, of each of the following conditions: (a) no Governmental Authority or court of competent jurisdiction located or having jurisdiction in the United States shall have enacted, issued, promulgated, enforced or entered any Laws or Governmental Order which is then in effect making the consummation of the Merger illegal or otherwise prohibit the consummation of the Merger; (b) if required by applicable law in order to consummate the Merger the Company Stockholders' Approval shall have been obtained, (c) Parent, us or our Affiliates shall have purchased Shares pursuant to the Offer; and (d) all approvals of Governmental Authorities necessary to consummate the Merger and other transactions contemplated therein shall have been received and shall be in effect at the Effective Time. Termination. The Merger Agreement provides that it may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after approval by the Company's stockholders: (i) by the mutual written consent of Parent and the Company; (ii) by either Parent or the Company if the Effective Time shall not have occurred on or before May 31, 2001; provided that the party seeking to terminate the Merger Agreement shall not have breached in any material respect its obligations under the Merger Agreement in any manner that shall have proximately contributed to the failure to consummate the Merger on or before May 31, 2001; 30 33 (iii) by the Company if there has been a material breach by us or Parent of any representation, warranty, covenant or agreement set forth in the Merger Agreement which breach (if susceptible to cure) has not been cured in all material respects within five business days following receipt by us or Parent of notice of such breach; (iv) by either Parent or the Company if any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, the Common Shares or Preferred Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate the Merger Agreement shall have used its reasonable best efforts to remove or lift such order, decree or ruling; (v) by Parent, if (i) the Board of Directors of the Company (A) withdraws, modifies or changes (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or the Merger in a manner adverse to Parent or shall have resolved to do any of the foregoing, (B) shall have recommended to the stockholders of the Company any Acquisition Proposal or resolved to do so or (C) shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's stockholders that they tender their Shares in the Offer, which public reaffirmation must be made within five days after Parent's written request to do so; or (ii) the Minimum Condition shall not have been satisfied by the Expiration Date and (A) a third party shall have made or caused to be made an Acquisition Proposal, or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or Person (including the Company or any of its Affiliates), other than Parent or any of its Affiliates, shall have become the beneficial owner of more than 50% of the Common Shares or 50% of the Preferred Shares; provided, however, the current ownership of Shares by the Company's stockholders who are party to either the Tender Agreement or the Tender and Voting Agreement shall not be deemed to trigger this clause (B); (vi) by the Company, if, prior to the acceptance of and payment for the Shares pursuant to the Offer, the Company's Board of Directors shall have determined to recommend a Superior Proposal and the Company makes the payment of the Termination Fee and Expense Fee (each as defined below) as required under the Merger Agreement. For purposes of the Merger Agreement, "Superior Proposal" means an unsolicited bona fide proposal made by a third party relating to an Acquisition Proposal on terms that the Board of Directors of the Company determines it cannot reject in favor of the Offer and the Merger, based on applicable fiduciary duties and after consultation with the Company's outside counsel (taking into account among other things the legal, financial, regulatory and other aspects of the Acquisition Proposal, the Person making such Acquisition Proposal, the likelihood of consummation and the time required to complete such transaction); provided, however, that the Company shall not be permitted to terminate the Merger Agreement pursuant to this provision unless it has complied with Section 6.08 of the Merger Agreement (relating to non-solicitation) and used all reasonable efforts to provide Parent with two business days prior written notice of its intent to so terminate the Merger Agreement together with a detailed summary of the terms and conditions of such Acquisition Proposal; provided further, that prior to any such termination, the Company shall, and shall cause its respective financial and legal advisors to, negotiate in good faith with Parent to make such adjustments in the terms and conditions of the Merger Agreement as would enable the Company to proceed with the transactions contemplated herein, and it is acknowledged by Parent that such negotiations with Parent shall be conducted in a manner consistent with the fiduciary duties of the Company's Board of Directors; (vii) by the Company if (i) we fail to commence the Offer in violation of the Merger Agreement (relating to the Offer), provided, however, that the Company may not terminate the Merger Agreement pursuant to this provision if the Company has materially breached the Merger Agreement, or (ii) we fail to purchase validly tendered Shares in violation of the terms of the Merger Agreement; 31 34 (viii) by Parent or the Company if the Offer is terminated or withdrawn or shall have expired pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither Parent nor the Company may terminate the Merger Agreement pursuant to this provision if such party (or in the case of Parent, we) shall have materially breached the Agreement; or (ix) by Parent if the Company shall have breached any of its representations or warranties in the Merger Agreement which breach would give rise to the failure of the condition set forth in clause (e) of the conditions of the Offer (see Section 14 -- "Certain Conditions to Our Obligations") to be satisfied or if, prior to consummation of the Offer, the Company shall have failed to perform its covenants or other agreements contained in the Merger Agreement which failure to perform would give rise to the failure of the condition set forth in clause (e) of the conditions of the Offer (see Section 14 -- "Certain Conditions to Our Obligations") to be satisfied, which breach or failure to perform is incapable of being cured or has not been cured by the date that is five business days following written notice thereof to the Company from Parent. Effect of Termination; Termination Fee. In the event of termination of the Merger Agreement pursuant to the above provisions, all obligations of the parties shall terminate, except the obligations of the parties pursuant to certain provisions of the Merger Agreement, provided that nothing shall relieve any party from liability for any breaches of the Merger Agreement. In the event that the Merger Agreement is terminated pursuant to clause (v)(i) under "Termination" above (other than clause (v)(i)(A) if no Acquisition Proposal shall have been publicly announced or disclosed) or clause (vi) under "Termination" above, then the Company shall promptly (and in any event within one Business Day after such termination or, in the case of any such termination by the Company, prior to such termination) pay Parent an amount equal to (i) a termination fee of $5,200,000 (the "Termination Fee"), provided, however, that in no event shall more than one Termination Fee be payable by the Company plus (ii) Parent's aggregate Expenses up to $500,000 (the "Expense Fee"). In the event that the Merger Agreement is terminated pursuant to clause (v)(i)(A) under "Termination" above (if no Acquisition Proposal shall have been publicly announced or disclosed) and within 12 months of the date of termination of the Merger Agreement a transaction constituting an Acquisition Proposal is consummated, the Company shall, prior to or simultaneously with the consummation of such transaction, pay Parent the Termination Fee and the Expense Fee. In the event that the Merger Agreement is terminated pursuant to clause (v)(ii) hereof and within 12 months of the date of termination of the Merger Agreement either (A) a transaction constituting an Acquisition Proposal is consummated or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or Person (including the Company or any of its Affiliates), other than Parent or any of its Affiliates, shall have become the beneficial owner of more than 50% of the Common Shares or 50% of the Preferred Shares, the Company shall, prior to or simultaneously with the consummation of such transaction or the acquisition of such Common Shares or Preferred Shares, pay Parent the Termination Fee and the Expense Fee; provided, however, the current ownership of Shares by the Company's stockholders who are party to either the Tender Agreement or the Tender and Voting Agreement shall not be deemed to trigger this clause (B); and provided further that the acquisition of additional Preferred Shares by any of the current holders of Preferred Shares by virtue of a transfer or purchase of such Preferred Shares from another current holder of Preferred Shares shall not be deemed to trigger this clause (B). In no event shall the Company be obligated to pay more than one Termination Fee and Expense Fee pursuant to this provision of the Merger Agreement. Amendment. The Merger Agreement may not be amended or modified except (a) by an instrument in writing signed by each of, or on behalf of each of, the parties or (b) by a waiver in accordance with the waiver provisions of the Merger Agreement. TENDER AND VOTING AGREEMENT General. As a condition of our willingness to enter into the Merger Agreement, we required that each of the Selling Stockholders set forth therein enter into the Tender and Voting Agreement. Such Selling Stockholders beneficially own an aggregate of 3,386,796 outstanding Common Shares and 32 35 2,801,055 outstanding Preferred Shares (representing approximately 42.2% of the Common Shares and 93.6% of the Preferred Shares outstanding on January 18, 2001, on a fully diluted basis). Such Selling Stockholders also own, as of such date, Company Options and Company Warrants exercisable for an aggregate of 757,529 Common Shares. The following Selling Stockholders, together with their respective numbers of outstanding Shares subject thereto, are the parties to the Tender and Voting Agreement: V&C Energy Limited Partnership -- 1,378,050 Common Shares and 456,250 Preferred Shares; Quantum Energy Partners, LP -- 2,075,663 Preferred Shares; Jerry M. Crews -- 279,903 Common Shares and 6,250 Preferred Shares; Francis M. Mury -- 110,582 Common Shares; Robert E. LaJoie -- 140,417 Common Shares; Richard J. Glover -- 158,584 Common Shares; The Lincoln National Life Insurance Co. -- 516,942 Common Shares; EnCap Equity 1996 Limited Partnership -- 320,904 Common Shares and 159,059 Preferred Shares; Energy Capital Investment Company PLC -- 106,968 Common Shares and 103,783 Preferred Shares; and First Union Capital Partners, Inc. -- 374,446 Common Shares. In addition, as of January 18, 2001, Mr. Crews holds Company Options exercisable for 121,000 Common Shares, Mr. Mury holds Company Options exercisable for 121,100 Common Shares and Mr. LaJoie holds Company Options exercisable for 33,700 Common Shares. Also as of such date, The Lincoln National Life Insurance Co. holds Company Warrants exercisable for 293,471 Common Shares and First Union Capital Partners, Inc. holds Company Warrants exercisable for 188,158 Common Shares. Mr. Crews is an executive vice president, secretary and director of the Company. Mr. Mury is an executive vice president of the Company. Mr. LaJoie is a director of the Company. Agreement to Tender. Pursuant to the Tender and Voting Agreement, each Selling Stockholder has agreed, severally (and not jointly), to validly tender (or cause the record owner of such Tender Shares to validly tender), pursuant to and in accordance with the terms of the Offer, as soon as practicable after commencement of the Offer but in no event later than ten business days after the date of commencement of the Offer, all Common Shares and Preferred Shares legally or beneficially owned by such Selling Stockholder on the date of the Tender and Voting Agreement, together with any Shares acquired after such date and prior to the termination of the Offer, whether upon the exercise of the Company Options, Company Warrants, conversion of convertible securities or otherwise (collectively, the "Tender Shares") by physical delivery of the certificates for such Tender Shares and to not withdraw such Tender Shares, except following termination of the Offer pursuant to its terms. Any Preferred Shares tendered pursuant to this provision and acquired pursuant to the Offer include all rights associated with such Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued, paid or distributed, issuable, payable or distributable in respect thereof on or after the date of the Tender and Voting Agreement (including without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). Each Selling Stockholder has agreed and acknowledged that it will have no rights to dividends on its Preferred Shares payable on or at any time subsequent to the purchase of such Preferred Shares pursuant to the Offer. Voting Agreement. During the time the Tender and Voting Agreement is in effect, each Selling Stockholder has agreed (severally and not jointly) that at any meeting of the stockholders of the Company, however called, or in any other circumstance in which the vote, consent or approval of stockholders of the Company is sought, such Selling Stockholder shall (i) vote the Tender Shares to approve and vote in favor of the Merger Agreement; (ii) vote the Tender Shares against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (iii) vote the Tender Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer, including, but not limited to: (1) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (2) a sale or transfer of a material amount of assets of the Company or any of the Company Subsidiaries or a reorganization, recapitalization or liquidation of the Company and the Company Subsidiaries; (3) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by Purchaser; (4) any material change in the present capitalization or dividend policy of the Company; or (5) any other material change in the Company's corporate structure or business. 33 36 Grant of Irrevocable Proxy. Each Selling Stockholder has irrevocably granted to, and appointed Parent such Selling Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Selling Stockholder, to vote the Tender Shares to approve and vote in favor of the Offer, the Merger Agreement and the transactions contemplated by the Merger Agreement, against any Acquisition Proposal and otherwise as contemplated by the provisions of the Tender and Voting Agreement relating to voting. No Disposition of Selling Stockholders' Shares and No Acquisition of Shares. Each Selling Stockholder severally (and not jointly) covenants and agrees that, except as contemplated by the Tender and Voting Agreement and the Merger Agreement, such Selling Stockholder will not (i) except to us, transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (ii) except with Parent, enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Company Options, Company Warrants or Tender Shares, (iv) deposit any Company Options, Company Warrants or Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares, (v) with respect to any Selling Stockholder that is a holder of Preferred Shares, (A) elect, under Section 3(C) of the Designation of Preferences, Limitations and Rights of Series A Convertible Preferred Stock of the Company (the "Designation"), to have the Offer or Merger or any of the transactions contemplated hereby or thereby treated as a Liquidation (as defined in the Designation) or (B) convert any Preferred Shares held by such Selling Stockholder into any other series or class of securities of the Company or (vi) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of such Selling Stockholder hereunder untrue or incorrect. No Solicitation. Each Selling Stockholder severally (and not jointly) has agreed that it shall not, and shall not permit or authorize any of its affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any Person or group (other than Parent, us or any of our affiliates or representatives) concerning any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Offer, the Merger or any other transactions contemplated by the Merger Agreement. Each Stockholder has also agreed to immediately cease any existing activities, discussions or negotiations with any parties conducted prior to the execution of the Tender and Voting Agreement with respect to any Acquisition Proposal. From and after the execution of the Tender and Voting Agreement, each Stockholder shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Proposal, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Proposal. Such Selling Stockholder shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, any representative of any Selling Stockholder acting in such capacity, in accordance with the second sentence of Section 6.08 of the Merger Agreement (relating to non-solicitation) shall be deemed not to violate this provision of the Tender and Voting Agreement. Waiver of Appraisal Rights. Each Stockholder has waived any rights of appraisal or rights to dissent from the Merger that it may have. Payment for Tender Shares in Excess of the Common Share Offer Price or the Preferred Share Offer Price. Each Selling Stockholder has severally (and not jointly) agreed that, if the Merger Agreement is terminated pursuant to Section 8.01(e) or (f) of the Merger Agreement, fifty percent (50%) of any incremental value such Stockholder actually receives for its equity in the Company (including but not limited to any Shares, Company Options and Company Warrants beneficially owned by such Stockholder) 34 37 resulting from or attributable to an Acquisition Proposal (other than with us or Parent) that is entered into or consummated within six months of the termination of the Merger Agreement that exceeds $8.25 per Common Share or $18.04 per Preferred Share (100% of such excess amount with respect to the Common Shares, Company Options, Company Warrants and the Preferred Shares, as applicable, collectively referred to as the "Excess Amount") shall belong to Parent. Each Selling Stockholder severally (and not jointly) accordingly agrees to hold in trust for the benefit of Parent, and to remit to Parent (in the same form of consideration as received by Stockholder) within three business days of any receipt thereof, fifty percent (50%) of any Excess Amount or Amounts that such Stockholder actually receives from any Person. Transfer of Options and Warrants. The Tender and Voting Agreement also provides that each Selling Stockholder holding Company Options or Company Warrants has agreed severally (and not jointly) that so long as the Tender and Voting Agreement remains in effect, such Selling Stockholder (for purposes of this section an "Optionholder") will not transfer or exercise any Company Options or Company Warrants held by such Optionholder except to an Affiliate of such Stockholder that becomes a party to the Tender and Voting Agreement or a similar agreement; provided, however, that at the Effective Time each Optionholder has agreed to accept an amount in respect of such Company Options equal to the Company Option Payments, and each such Company Option will thereafter be cancelled; and an amount in respect of such Company Warrants equal to the Company Warrant Payments, and each such Company Warrant will thereafter be cancelled. Nothing in the Tender and Voting Agreement will limit the ability of the holders of the Company Options or Company Warrants to exercise such securities in accordance with their terms, provided that such holder tenders the Common Shares issued upon exercise thereof in the Offer. Waiver of Certain Put Rights. Certain Selling Stockholders of the Company, Energy Capital Investment Company, PLC, EnCap Equity 1996 Limited Partnership, and First Union Capital Partners, Inc., have the right to require the Company to repurchase certain securities of the Company pursuant to agreements with the Company. Subject to the termination provisions of the Voting and Tender Agreement, such Selling Stockholders have waived such put rights. Waiver of Management Rights. One of the Selling Stockholders, V&C Energy Limited Partnership, who may have certain special rights relating to the management and future activities of the Company and its Affiliates (the "Management Rights"), including but not limited to the right to participate in acquisitions and dispositions of the Company, its Affiliates, and of various assets, interests or other properties by the Company or its Affiliates, has, subject to the termination provisions of the Voting and Tender Agreement, irrevocably waived the Management Rights and agreed that neither Parent, us nor the Surviving Corporation will have any continuing obligation to such stockholder with respect to such Management Rights or any similar special right to control or effect the affairs or activities of the Surviving Corporation or its Affiliates. Representations and Warranties. The Tender and Voting Agreement contains customary representations and warranties by each Selling Stockholder severally (and not jointly) to Parent and us, including those relating to (i) the ownership and title to Shares, and the absence of liens or encumbrances, (ii) authority to enter into and perform obligations under the Tender and Voting Agreement, (iii) noncontravention and enforceability, and (iv) the absence of finder's fees. TENDER AGREEMENT As a condition of our willingness to enter into the Merger Agreement, we required that each of the Selling Stockholders set forth therein enter into the Tender Agreement. Such Selling Stockholders beneficially own an aggregate of 300,779 outstanding Common Shares and 190,460 outstanding Preferred Shares (representing approximately 3.7% of the Common Shares and 6.4% of the Preferred Shares outstanding on January 18, 2001, on a fully diluted basis). In addition, as of January 18, 2001, such Selling Stockholders own Company Options exercisable for an aggregate of 242,200 Common Shares. The provisions of the Tender Agreement are substantially similar to the terms and conditions of the Tender and 35 38 Voting Agreement, except that the Selling Stockholders party to the Tender Agreement make no representations or agreements regarding the voting of, or the granting of an irrevocable proxy in connection with the voting of, the Tender Shares in favor of the Offer, the Merger and other transactions. The following Selling Stockholders, together with their respective numbers of outstanding Shares subject thereto, are parties to the Tender Agreement: El Paso Capital Investment Company LLC -- 152,291 Preferred Shares; Thomas A. Reiser -- 48,304 Common Shares and 6,919 Preferred Shares; Paul B. David -- 57,257 Common Shares and 18,750 Preferred Shares; Peggy C. Simpson -- 50,646 Common Shares; Frank A. Lodzinski -- 40,000 Common Shares; T.W. Hoehn, III -- 104,572 Common Shares; and Arthur L. Smith -- 12,500 Preferred Shares. In addition, as of January 18, 2001, Mr. Reiser holds Company Options for 28,083 Common Shares, Mr. David holds Company Options for 22,467 Common Shares, Ms. Simpson holds Company Options for 59,317 Common Shares and Mr. Lodzinski holds Company Options for 132,333 Common Shares. Mr. Reiser is a director of the Company. Mr. Lodzinski is President, Chief Executive Officer and a director of the Company. Mr. Hoehn is a director of the Company. CONFIDENTIALITY AGREEMENTS On October 30, 2000, Parent and the Company entered into a Confidentiality Agreement (the "October Confidentiality Agreement") pursuant to which the Company agreed to supply certain information to Parent and Parent agreed to treat such information as confidential and to use such information solely in connection with the evaluation of a possible transaction with the Company. Parent and the Company entered into an additional Confidentiality Agreement dated December 18, 2000 (together with the October Confidentiality Agreement, the "Confidentiality Agreements,"), pursuant to which Parent agreed to supply certain information to the Company and the Company agreed to treat such information as confidential and to use such information solely in connection with the evaluation of a possible transaction with Parent. Under the Merger Agreement, Parent and the Company agreed to hold in confidence all nonpublic information until such time as such information is otherwise publicly available. If the Merger Agreement is terminated, each party will deliver to the other all documents, work papers and other materials (including copies) obtained by such party or on its behalf from the other party as a result of the Merger Agreement or in connection with the Merger Agreement, whether so obtained before or after the execution of the Merger Agreement. Notwithstanding the foregoing, the Confidentiality Agreements shall survive the execution and delivery of this Agreement. 14. CERTAIN CONDITIONS TO OUR OBLIGATIONS. Notwithstanding any other provisions of the Offer, we shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to our obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), pay for any tendered Shares and, subject to the terms of the Merger Agreement, may terminate or amend the Offer, if (i) the Minimum Condition has not been satisfied, or (ii) at any time on or after the date of the Merger Agreement and prior to the time of payment for any Shares any of the following conditions shall exist or be determined by us to have occurred: (a) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, ruling, judgment, order or injunction enacted, enforced, promulgated, proposed, amended, issued or deemed applicable to the Offer by any United States federal, state, local or any foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body (each, a "Governmental Authority") that could reasonably be expected to directly or indirectly: (1) make the acceptance for payment of, or payment for or purchase of all or a substantial number of the Shares pursuant to the Offer, illegal, or otherwise restrict or prohibit the making of the Offer or the consummation of the Offer or the Merger, (2) result in a significant delay in or restrict our ability to accept for payment, pay for or purchase all or a substantial number of the Shares pursuant to the Offer or to effect the Merger, (3) render us unable to accept for payment or pay for or purchase all or a substantial number of the Shares pursuant to the Offer, (4) prohibit or 36 39 materially limit the ownership or operation by Parent or us of all or a portion of the business or assets of the Company and the Company Subsidiaries or compel Parent or us to dispose of or hold separately all or a portion of the business or assets of Parent or any of its subsidiaries or us or the Company and the Company Subsidiaries, or seek to impose a limitation on the ability of Parent, any of its subsidiaries or us to conduct our business or own such assets, (5) impose a limitation on the ability of Parent or us effectively to acquire, hold or exercise full rights of ownership of the Shares, including the right to vote any Shares acquired or owned by us or Parent on an equal basis with all other Shares on all matters properly presented to the Company's stockholders, (6) require divestiture by Parent or us of Shares, (7) impose any limitations on the ability of Parent or us effectively to control the business or operations of the Company and the Company Subsidiaries or (8) which would otherwise reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or Parent Material Adverse Effect (as defined below); or (b)(i) there shall be instituted or pending any action, proceeding or counterclaim seeking any of the consequences referred to in clauses (1) through (8) of paragraph (a) above, or (ii) there shall have been threatened any action, proceeding or counterclaim seeking any of the consequences referred to in clauses (1) through (8) of paragraph (a) above that, in the good faith judgment of Parent, has a reasonable probability of success, or (c)(i) it shall have been publicly disclosed or we shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph (c) as set forth in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the outstanding Common Shares or more than 50% of the outstanding Preferred Shares has been acquired by any Person other than Parent and us and except for any Person having such beneficial ownership as of the date of the Merger Agreement, (ii) the Board of Directors of the Company (A) withdraws, modifies or changes (including by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or the Merger in a manner adverse to Parent, (B) shall have recommended to the stockholders of the Company any Acquisition Proposal, or (C) shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's stockholders that they tender their Shares in the Offer, which public reaffirmation must be made within five days after Parent's written request to do so, (iii) a third party shall have entered into a definitive agreement or a written agreement in principle with the Company with respect to an Acquisition Proposal, or (iv) the Board of Directors of the Company or any committee thereof shall have resolved to do any of the foregoing; or (d) the Merger Agreement shall have been terminated in accordance with its terms, or the Company and we and Parent shall have reached an agreement that the Offer or the Merger Agreement be terminated; or (e)(i) any of the representations and warranties of the Company set forth in Sections 4.02 and 4.03 of the Merger Agreement (relating to capitalization and Company subsidiaries, respectively) shall not be true and correct as if such representations and warranties were made at the time of such determination (except as to any such representation or warranty that speaks as of a specific date, which must be untrue or incorrect as of such date); (ii) the representations and warranties of the Company set forth in Section 4.16 of the Merger Agreement (relating to environmental matters) shall not be true and correct as if such representations and warranties were made at the time of such determination and the cost of correcting the breach of such representations and warranties shall be in excess of $6.0 million in the aggregate; (iii) any of the other representations and warranties of the Company set forth in the Merger Agreement, when read without any exception or qualification as to materiality or reference to Material Adverse Effect, shall not be true and correct as if such representations and warranties were made at the time of such determination (except as to any such representation and warranty which speaks as of a specific date, which must be untrue or incorrect as of such date) except where the failure to be so true and correct would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or (iv) the Company shall have breached or failed to observe or perform in any material respect any of its material covenants under 37 40 the Merger Agreement, which breach has not been cured in all material respects within five business days following receipt by the Company of written notice of such breach; or (f) any approvals or consents (other than the filing of a certificate of merger or approval by the stockholders of the Company of the Merger if required by the Nevada Revised Statutes) required to be filed, or obtained by the Company or any of its subsidiaries in connection with the execution and delivery of the Merger Agreement, the Offer and the consummation of the transactions contemplated by the Merger Agreement shall not have been filed or obtained except where the failure to obtain such approval or consent would not reasonably be expected to have a Material Adverse Effect; or (g) there shall have occurred, and continued to exist, (1) any general suspension of, or limitation on prices for, trading in securities on the Nasdaq Small-Cap Market, (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, or a material limitation (whether or not mandatory) by any Governmental Authority on the extension of credit by banks or other lending institutions, or (3) in the case of any of the foregoing clauses existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (h) since the date of the Merger Agreement there shall have occurred any event, change, effect or development that, individually or when considered together with any other event, change, effect or development, has had or would have a Material Adverse Effect; or (i) There shall exist any Material Title Failure (as defined in the Merger Agreement) having a value in excess of $6.0 million. The foregoing conditions (including those set forth in clauses (i), (ii) and (iii) of the initial paragraph) are for our benefit and the benefit of Parent and may be asserted by us or by Parent regardless of the circumstances giving rise to any such conditions and other than clauses (i) and (ii) may be waived by us or Parent, in whole or in part, at any time and from time to time in their reasonable discretion, in each case, subject to the terms of the Merger Agreement. The conditions in clauses (i) and (ii) of the initial paragraph may not be waived without the written consent of the Company. The failure by us or Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A "Parent Material Adverse Effect" means any event, circumstance, condition, development or occurrence causing, resulting in or having (or with the passage of time likely to cause, result in or have) a material adverse effect on the financial condition, business, assets, properties, or results of operations of Parent and Parent's subsidiaries taken as a whole; provided, that such term shall not include effects that are not applicable primarily to Parent resulting from market conditions generally in the oil and gas industry (including without limitation changes in commodities prices). 15. CERTAIN LEGAL MATTERS. General. Except as set forth in this Section 15, we are not aware of any approval or other action by any governmental or administrative agency which would be required for the acquisition or ownership of Shares as contemplated herein. Should any such approval or other action be required, it will be sought, but we have no current intention to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of any such matter, subject, however, to our right to decline to purchase Shares if any of the conditions specified in Section 14 -- "Certain Conditions to Our Obligations" shall have occurred. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions, or that adverse consequences might not result to the Company's business or that certain parts of the Company's business might not have to be disposed of if any such approvals were not obtained or other action taken. Appraisal Rights. Appraisal rights are not available in connection with the Offer. Shares outstanding immediately prior to the Effective Time and which are (i) held by holders of Shares who shall have not voted in favor of the Merger or consented to the Merger in writing and (ii) who shall have demanded 38 41 properly in writing payment of the fair market value of such Shares in accordance with Section 92A.420 of the Nevada Revised Statutes (collectively, the "Dissenting Shares") shall be cancelled and terminated and shall represent solely the right to receive payment from the Surviving Corporation of the fair market value of such Shares held by them in accordance with the provisions of the Nevada Revised Statutes. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Dissenting Shares immediately before the effectuation of the Merger (excluding any appreciation or depreciation in anticipation of the Merger unless exclusion would be inequitable), required to be paid in cash to such dissenting holders for their Shares. In addition, such dissenting stockholders would be entitled to receive payment of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Dissenting Shares at the average rate currently paid by the Company on its principal bank loans or, if it has no bank loans, at the rate that is fair and equitable under all of the circumstances. However, holders of Shares who shall have failed to perfect or who effectively shall have withdrawn or lost their rights for an appraisal of such shares under the Nevada Revised Statutes shall thereupon have such shares be deemed to have been cancelled and terminated, as of the Effective Time, and shall represent solely the right to receive the Common Share Offer Price or the Preferred Share Offer Price as provided in Section 3.06 of the Merger Agreement, as applicable, upon surrender of the certificate or certificates that formerly evidenced such Shares in the manner provided in Section 3.07 of the Merger Agreement. The Company will give to Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the Nevada Revised Statutes and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment of fair market value under the Nevada Revised Statutes. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any such demands, or offer to settle, or settle, any such demands. Any amount payable to any holder of Shares exercising dissenters' rights shall be paid solely by the Surviving Corporation out of its own funds. Nevada State Takeover Laws. Chapter 78 of the Nevada Revised Statutes contains two separate "anti-takeover" statutory provisions: the "Acquisition of Controlling Interest" statutes (NRS 78.378 through 78.3793, inclusive) and the "Combinations with Interested Stockholders" statutes (NRS 78.411 through 78.444, inclusive). The Acquisition of Controlling Interests statutes generally provide that "control shares" of an "issuing corporation" acquired by any "acquiring person" shall have voting rights in those "control shares" only to the extent conferred by a vote of the stockholders of the issuing corporation. An "issuing corporation" is a corporation that is organized under the laws of Nevada, has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation, and does business in Nevada directly or through an affiliated corporation. The Acquisition of Controlling Interests statutes do not apply if the Articles of Incorporation or Bylaws of the issuing corporation in effect on the tenth day following the acquisition of a controlling interest by an acquiring person provide that said provisions do not apply. The Company, pursuant to the Merger Agreement, amended its Bylaws to provide that the provisions of the Acquisition of Controlling Interest statutes do not apply to the Company. The Combinations with Interested Stockholders statutes generally prohibit the merger of a "resident domestic corporation" (i.e., a Nevada corporation that has 200 or more stockholders of record) with an "interested stockholder" for a three-year period unless the board of directors approves such stockholder's "acquisition" of shares in advance. One becomes an "interested stockholder" of a corporation by beneficially owning, directly or indirectly, ten percent (10%) or more of the voting power of the outstanding voting shares of that corporation. Pursuant to NRS 78.414(3), a person or entity (and its affiliates and associates) will be considered a "beneficial owner" of shares beneficially owned by another person or entity if there is any written or other agreement, arrangement, or understanding for the purpose of acquiring, holding, voting, or disposing of the shares. However, the prohibitions of the Combinations with Interested Stockholders Statutes do not apply to the Offer, the Merger Agreement, the Tender and 39 42 Voting Agreement or the Tender Agreement or the transactions contemplated thereby, since the Company's board of directors has approved the Offer, the Merger, the Tender and Voting Agreement and the Tender Agreement, and the transactions contemplated thereby prior to the date of such agreements and the commencement of the Offer. Other State Takeover Laws. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In Edgar v. MITE Corp., in l982, the Supreme Court of the United States (the "U.S. Supreme Court") invalidated on constitutional grounds the Illinois Business Takeover statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the U.S. Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the U.S. Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. Subsequently, a number of federal courts have ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. The Company conducts business in a number of states throughout the United States, some of which have enacted takeover laws. We do not know whether any of these laws will, by their terms, apply to the Offer or the Merger and we have not attempted to comply with any such laws. Should any person seek to apply any state takeover law, we will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that such laws are inapplicable or invalid as applied to the Offer, we might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, we might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, we may not be obligated to accept for payment any Shares tendered. See Section 14 -- "Certain Conditions to Our Obligations." Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares pursuant to the Offer and the subsequent Merger are not subject to such requirements. 16. FEES AND EXPENSES. Neither we nor Parent, nor any officer, director, stockholder, agent or other representative of Parent or us, will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by us for customary mailing and handling expenses incurred by them in forwarding materials to their customers. We have retained Georgeson Shareholder Communications Inc., as Information Agent, and EquiServe Trust Company, N.A., as Depositary, in connection with the Offer. The Information Agent and the Depositary will receive reasonable and customary compensation for their services hereunder and reimbursement for their reasonable out-of-pocket expenses. The Information Agent and the Depositary will also be indemnified by us against certain liabilities in connection with the Offer. The Information Agent may contact holders of Shares by mail, telex, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners of Shares. 40 43 17. MISCELLANEOUS. We are not aware nor is Parent aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action pursuant to any valid state statute. If either we or Parent become aware of any valid state statute prohibiting the making of the Offer or the acceptance of the Common Shares and Preferred Shares, we and Parent will make a good faith effort to comply with that state statute. If, after a good faith effort, we and Parent cannot comply with the state statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, the holders of the Common Shares and Preferred Shares in that state. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON OUR BEHALF OR ON PARENT'S BEHALF OTHER THAN AS CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF ANY SUCH INFORMATION OR REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. We have filed with the Commission a Schedule TO, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, furnishing certain information with respect to the Offer. Such Schedule TO, and any amendments thereto, including exhibits, may be examined and copies may be obtained at the same places and in the same manner as set forth with respect to the Company in Section 8 -- "Certain Information Concerning the Company" (except that they will not be available at the regional offices of the Commission). OEI ACQUISITION CORP. January 24, 2001 41 44 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR 1. Directors and Executive Officers of Parent. The following table sets forth the name, business address and present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each Director and Executive Officer of Parent. Unless otherwise indicated, each such person is a citizen of the United States, and each occupation set forth opposite an individual's name refers to employment with Parent. Neither Parent nor any of the individuals listed below has been convicted in a criminal proceeding in the past five years. In addition, neither Parent nor any of the individuals listed below was a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining that person from future violations of, or prohibiting activities subject to federal or state securities laws, or a finding of any violation of federal and state securities laws.
INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- James T. Hackett Chairman of the Board, Chairman of the Board, President and Chief c/o Ocean Energy, Inc. Director, President and Executive Officer of the Company. Director, 1001 Fannin, Suite 1600 Chief Executive Officer New Jersey Resources Corporation, Kaiser Houston, Texas 77002-6714 Aluminum Corp. and Temple-Inland Corp. Director of the Company since 1998. President and Chief Executive Officer since March 1999 and Chairman of the Board since January 2000; President and Chief Executive Officer of Parent from September 1998 and Chairman of the Board of Parent from January 1999 to March 1999; Group President of Duke Energy's unregulated operations and Executive Vice President of Panenergy from January 1996 to September 1998. Prior to joining Duke Energy, he was Senior Vice President of NGC Corporation (formerly Natural Gas Clearinghouse) and President of NGC's gathering, processing and liquids marketing division. He became Executive Vice President, partner and a member of the management committee of Natural Gas Clearinghouse in 1993. William L. Transier Executive Vice President Executive Vice President and Chief c/o Ocean Energy, Inc. and Chief Financial Financial Officer since March 1999; 1001 Fannin, Suite 1600 Officer Executive Vice President and Chief Houston, Texas 77002-6714 Financial Officer of Parent from September 1998 to March 1999; Senior Vice President and Chief Financial Officer of Parent from May 1996 to September 1998; For the previous 20 years, he held a variety of positions at KPMG LLP including partner from July 1986 until April 1996.
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INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- Robert K. Reeves Executive Vice Executive Vice President, General Counsel c/o Ocean Energy, Inc. President, General and Secretary since March 1999; Executive 1001 Fannin, Suite 1600 Counsel and Secretary Vice President, General Counsel and Houston, Texas 77002-6714 Secretary of OEI (predecessor to Parent) from June 1997 to March 1999; Senior Vice President, General Counsel and Secretary of OEI (predecessor to Parent) from May 1994 to June 1997. John D. Schiller, Jr. Executive Vice Executive Vice President, Operations since c/o Ocean Energy, Inc. President, Operations March 2000; Senior Vice President, North 1001 Fannin, Suite 1600 America Onshore and International Houston, Texas 77002-6714 Operations from March 1999 to March 2000; Senior Vice President, Operations of Parent from September 1998 to March 1999; Production Manager -- Gulf Coast Division of Burlington Resources from October 1997 to August 1998; Engineering Manager - Offshore Division of Burlington Resources from April 1994 to September 1997. William S. Flores, Jr. Senior Vice President, Senior Vice President, Drilling since March c/o Ocean Energy, Inc. Drilling 1999; Vice President, Drilling of OEI 1001 Fannin, Suite 1600 (predecessor to Parent) from March 1998 to Houston, Texas 77002-6714 March 1999; Vice President, Operations of OEI (predecessor to Parent) from August 1993 to March 1998. Scott A. Griffiths Senior Vice President of Senior Vice President of International c/o Ocean Energy, Inc. International Exploration since March 1999; Senior Vice 1001 Fannin, Suite 1600 Exploration President Domestic Exploration of Parent Houston, Texas 77002-6714 from September 1998 to March 1999; Vice President Domestic Exploration of Parent from May 1997 to September 1998; Vice President of Domestic Exploration of Parent from October 1996 to May 1997; Vice President of Exploration of Global Natural Resources from 1992 to October 1996. Stephen A. Thorington Senior Vice President, Senior Vice President, Finance, Treasury c/o Ocean Energy, Inc. Finance, Treasury and and Corporate Development since March 1999; 1001 Fannin, Suite 1600 Corporate Development Vice President, Finance and Treasurer of Houston, Texas 77002-6714 Parent from May 1996 to March 1999; Managing Director of Chase Securities Inc. from April 1994 to May 1996. Bruce W. Busmire Vice President, Investor Vice President, Investor Relations since c/o Ocean Energy, Inc. Relations February 2000; Controller of Altura Energy 1001 Fannin, Suite 1600 Ltd. From March 1997 to January 2000; For Houston, Texas 77002-6714 the previous 16 years, Mr. Busmire held a variety of positions in finance, accounting and investor relations at Amoco Corporation.
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INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- Mario M. Coll, III Vice President, Vice President, Operational Planning and c/o Ocean Energy, Inc. Operational Planning and Chief Information Officer since October 1001 Fannin, Suite 1600 Chief Information 1999; Vice President, Operational Planning Houston, Texas 77002-6714 Officer from March 1999 to October 1999; Vice President, Planning -- Corporate and International of OEI (predecessor to Parent) from April 1998 to March 1999; Business Planning Coordinator of OEI (predecessor to Parent) from September 1996 to April 1998; From March 1987 to September 1996, Mr. Coll held a variety of positions in engineering and business development at Mobil Exploration and Producing U.S., Inc and Mobil New Business Development. Peggy T. d'Hemecourt Vice President, Human Vice President, Human Resources since March c/o Ocean Energy, Inc. Resources 1999; Director, Human Resources of OEI 1001 Fannin, Suite 1600 (predecessor to Parent) from March 1998 to Houston, Texas 77002-6714 February 1999; Vice President, Human Resources of UMC Petroleum Corporation from April 1997 to February 1998; Director, Human Resources of United Meridian Corporation ("UMC") from January 1996 to March 1997; From 1974 to 1994, Ms. d'Hemecourt held a variety of positions in Human Resources at Baroid Corporation. Gordon L. McConnell Vice President and Vice President and Controller of the c/o Ocean Energy, Inc. Controller Company since March 1999; Vice President 1001 Fannin, Suite 1600 and Controller of Parent from November 1996 Houston, Texas 77002-6714 to March 1999; Vice President -- Accounting of Global Natural Resources from January 1996 to November 1996; Controller of Global Natural Resources from July 1993 to January 1996. John J. Patton Vice President and Vice President and Associate General c/o Ocean Energy, Inc. Associate General Counsel, since September 1999; Vice 1001 Fannin, Suite 1600 Counsel President and Assistant General Houston, Texas 77002-6714 Counsel -- International of OEI (predecessor to Parent) from March 1998 to March 1999; Senior Vice President and General Counsel of UMC from April 1995 to March 1998. Janice Aston White Vice President, Vice President, Corporate Communications c/o Ocean Energy, Inc. Corporate Communications since December 2000; Director, Corporate 1001 Fannin, Suite 1600 Communications of Parent from November 1999 Houston, Texas 77002-6714 to December 2000. From January 1997 to November 1999, Ms. White owned an independent public relations firm, Acclaim Communications. From September 1983 to September 1996, Ms. White held various corporate communications positions at Tenneco Inc. and its subsidiaries.
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INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- Andrew J. Sheu Vice President, Tax Vice President, Tax since March 1999; c/o Ocean Energy, Inc. Assistant Vice President, Tax of Parent 1001 Fannin, Suite 1600 from January 1998 to March 1999; Director, Houston, Texas 77002-6714 Tax of Torch Energy Advisors, Inc. from December 1995 to January 1998. Tax Senior Manager at KPMG LLP from July 1991 to November 1995. Winston M. Talbert Assistant Treasurer, Assistant Treasurer, Corporate Finance c/o Ocean Energy, Inc. Corporate Finance since October 1999; Assistant Treasurer of 1001 Fannin, Suite 1600 PennzEnergy Company from November 1998 to Houston, Texas 77002-6714 October 1999; Manager, International Finance of Pennzoil Company from December 1996 to November 1998; Manager, Corporate Development & Finance of Brown & Root from February 1996 to December 1996; Business Development Manager of Destec Europe March 1994 to February 1996. Frank D. Willoughby Vice President, Vice President, Financial Planning since c/o Ocean Energy, Inc. Financial Planning March 1999; Prior to the merger of Parent 1001 Fannin, Suite 1600 and Ocean Energy, Inc., a Delaware Houston, Texas 77002-6714 corporation, Mr. Willoughby held various financial positions with OEI (predecessor to Parent), including Treasurer and Controller. Carl E. Volke Vice President, Vice President, Administration since March c/o Ocean Energy, Inc. Administration 1999; Vice President, Administration of 1001 Fannin, Suite 1600 Parent from November 1996 to March 1999; Houston, Texas 77002-6714 Director, Administration of Parent from November 1986 to November 1996. J. Evans Attwell Director Director of the Company since 1974; Retired Managing Partner, Vinson & Elkins L.L.P; Director, American General Corporation. Barry J. Galt Director Director of the Company since 1983; Director, StanCorp Financial Group, Inc., Trinity Industries, Inc. and Friede Goldman Halter, Inc. Elvis L. Mason Director Principal, Elvis Mason & Associates, Inc. Consulting and Advisory Services. Director of OEI and a predecessor entity, United Meridian Corporation ("UMC"), from 1987 until election as a director of the Company in March 1999. David K. Newbigging Director Chairman, Friends' Provident Life Office, Thistle Hotels plc and Faupel Trading Group plc. Director, Merrill Lynch & Co., Inc. and Paccar Inc. Director of OEI and a predecessor entity, UMC, from 1987 until election as a director of the Company in March 1999. Dee S. Osborne Director Director of the Company since 1983; President, Crest Investment Company (investments); Director, EOTT Energy Corp. (the general partner of EOTT Energy Partners, L.P.).
I-4 48
INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- Milton Carroll Director Director of the Company since 1997; Chairman of the Board and Chief Executive Officer, Instrument Products, Inc.; Director, Health Care Service Corporation, Reliant Energy, Inc. and TEPPCO Partners, LP. Thomas D. Clark, Jr. Director Ourso Distinguished Professor of Business and Dean of College of Business Administration at Louisiana State University. Director of OEI from 1997 until election as a director of the Company in March 1999. Peter J. Fluor Director Director of the Company since 1980; President and Chief Executive Officer, Texas Crude Energy, Inc. (independent oil and gas company); Director, Fluor Corporation. Robert L. Howard Director Retired Vice President of Domestic Operations, Exploration and Production, Shell Oil Company. Director, Southwestern Energy Company and McDermott International Inc. Director of OEI and a predecessor entity, UMC, from 1996 until election as a director of the Company in March 1999. Charles F. Mitchell, M.D. Director Otolaryngologist and facial plastic surgeon. Director of OEI from 1995 until election as a director of the Company in March 1999. John B. Brock Director Director, Southwest Bank of Texas, Southwest Bancorporation of Texas, Inc., St. Luke's Episcopal Health System and St. Luke's Episcopal Hospital. Director of OEI and a predecessor entity, UMC, from 1989 until election as a director of the Company in March 1999.
2. Directors and Executive Officers of the Offeror. The following table sets forth the name, business address and present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each Director and Executive Officer of the Offeror. Unless otherwise indicated, each such person is a citizen of the United States. Neither the Offeror nor any of the individuals listed below has been convicted in a criminal proceeding in the past five years. In addition, neither the Offeror nor any of the individuals listed below was a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining that person from future violations of, or prohibiting activities subject to federal or state securities laws, or a finding of any violation of federal and state securities laws. I-5 49
INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- James T. Hackett Chairman of the Board, Chairman of the Board, President, Director c/o Ocean Energy, Inc. Director, President and and Chief Executive Officer of Offeror 1001 Fannin, Suite 1600 Chief Executive Officer since 2001. Chairman of the Board, Houston, Texas 77002-6714 President and Chief Executive Officer of Parent. Director, New Jersey Resources Corporation, Kaiser Aluminum Corp. and Temple-Inland Corp. Director of Parent since 1998. President and Chief Executive Officer of Parent since March 1999 and Chairman of the Board of Parent since January 2000; President and Chief Executive Officer of Parent from September 1998 and Chairman of the Board of Parent from January 1999 to March 1999; Group President of Duke Energy's unregulated operations and Executive Vice President of Panenergy from January 1996 to September 1998. Prior to joining Duke Energy, he was Senior Vice President of NGC Corporation (formerly Natural Gas Clearinghouse) and President of NGC's gathering, processing and liquids marketing division. He became Executive Vice President, partner and a member of the management committee of Natural Gas Clearinghouse in 1993. William L. Transier Executive Vice Executive Vice President, Chief Financial c/o Ocean Energy, Inc. President, Chief Officer and Director of Offeror since 2001. 1001 Fannin, Suite 1600 Financial Officer, and Executive Vice President and Chief Houston, Texas 77002-6714 Director Financial Officer of Parent since March 1999; Executive Vice President and Chief Financial Officer of Parent from September 1998 to March 1999; Senior Vice President and Chief Financial Officer of Parent from May 1996 to September 1998; For the previous 20 years, he held a variety of positions at KPMG LLP including partner from July 1986 until April 1996. Robert K. Reeves Executive Vice Executive Vice President, General Counsel, c/o Ocean Energy, Inc. President, General Secretary and Director of Offeror since 1001 Fannin, Suite 1600 Counsel, Secretary and 2001. Executive Vice President, General Houston, Texas 77002-6714 Director Counsel and Secretary of Parent since March 1999; Executive Vice President, General Counsel and Secretary of OEI (predecessor to Parent) from June 1997 to March 1999; Senior Vice President, General Counsel and Secretary of OEI (predecessor to Parent) from May 1994 to June 1997.
I-6 50
INDIVIDUAL PRINCIPAL OCCUPATION OR NAME AND BUSINESS ADDRESS OFFICE EMPLOYMENT (PRESENT/PAST) - ------------------------- ------ ---------------------------------- John D. Schiller, Jr. Executive Vice Executive Vice President -- Operations and c/o Ocean Energy, Inc. President -- Operations Director of Offeror since 2001. Executive 1001 Fannin, Suite 1600 and Director Vice President -- Operations of Parent Houston, Texas 77002-6714 since March 2000; Senior Vice President, North America Onshore and International Operations of Parent from March 1999 to March 2000; Senior Vice President, Operations of Parent from September 1998 to March 1999; Production Manager -- Gulf Coast Division of Burlington Resources from October 1997 to August 1998; Engineering Manager - Offshore Division of Burlington Resources from April 1994 to September 1997.
I-7 51 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates evidencing Shares and any other required documents should be sent or delivered by each stockholder or its broker, dealer, commercial bank or other nominee to the Depositary as follows: The Depositary for the Offer is: EQUISERVE TRUST COMPANY, N.A. By Mail: By Hand: EquiServe Trust Company, N.A. Boston EquiServe LP Corporate Actions c/o Securities Transfer & Reporting Services, P.O. Box 43014 Inc. Providence, RI 02940-3014 100 William Street, Galleria New York, NY 10038 By Facsimile Transmission: By Overnight Courier: (781) 575-2233 EquiServe Trust Company, N.A. Investor Relations Telephone: Corporate Actions (781) 575-3120 150 Royall Street Canton, MA 02021
Questions or requests for assistance may be directed to the Information Agent at the addresses and telephone number set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent and will be furnished promptly at the Offeror's expense. A stockholder may also contact its broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: [GEORGESON SHAREHOLDER COMMUNICATIONS INC. LOGO] 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers Call Collect (212) 440-9800 All Others Call Toll-Free (800) 223-2064 EX-99.(A)(1)(II) 3 h83324tex99-a1ii.txt LETTER OF TRANSMITTAL FOR COMMON STOCK 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF TEXOIL, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JANUARY 24, 2001 BY OEI ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF OCEAN ENERGY, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: EQUISERVE TRUST COMPANY, N.A. By Mail: By Hand: EquiServe Trust Company, N.A. Boston EquiServe LP Corporate Actions c/o Securities Transfer & Reporting Services, Inc. P.O. Box 43014 100 William Street, Galleria Providence, RI 02940-3014 New York, NY 10038 By Facsimile Transmission: By Overnight Courier: (781) 575-2233 EquiServe Trust Company, N.A. Investor Relations Telephone: Corporate Actions (781) 575-3120 150 Royall Street Canton, MA 02021
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED BY HOLDERS OF SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE ("COMMON SHARES"), OF TEXOIL, INC. EITHER IF CERTIFICATES EVIDENCING COMMON SHARES ARE TO BE FORWARDED HEREWITH OR, UNLESS AN AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE (AS DEFINED BELOW)) IS UTILIZED, IF A TENDER OF SUCH SHARES IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT OF EQUISERVE TRUST COMPANY, N.A., AS DEPOSITARY (THE "DEPOSITARY"), AT THE DEPOSITORY TRUST COMPANY (THE "BOOK-ENTRY TRANSFER FACILITY"), IN EACH CASE PURSUANT TO THE PROCEDURES SET FORTH IN SECTION 3 -- "PROCEDURE FOR TENDERING SHARES" OF THE OFFER TO PURCHASE. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. 2
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF COMMON SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) COMMON SHARE(S) TENDERED APPEAR(S) ON COMMON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF COMMON NUMBER SHARES OF COMMON CERTIFICATE EVIDENCED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Common Shares - ------------------------------------------------------------------------------------------------------------------------ * Need not be completed by stockholders delivering Common Shares by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Common Shares evidenced by each certificate delivered to the Depositary are being tendered. See Instruction 4 of this Letter of Transmittal. - ------------------------------------------------------------------------------------------------------------------------
The names and addresses of the registered holders should be printed, if not already printed above, exactly as they appear on the certificates representing Common Shares tendered hereby. The certificates and the number of Common Shares that the undersigned wishes to tender should be indicated in the appropriate boxes. Holders of Common Shares whose certificates are not immediately available, or who are unable to deliver their certificates and all other documents required by this Letter of Transmittal to the Depositary on or prior to the Expiration Date (as defined in Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment" of the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer on a timely basis and who wish to tender their Common Shares must tender their Common Shares pursuant to the guaranteed delivery procedures set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY. [ ] I HAVE LOST MY CERTIFICATES THAT REPRESENTED COMMON SHARES AND REQUIRE ASSISTANCE IN OBTAINING A REPLACEMENT CERTIFICATE. I UNDERSTAND THAT I MUST CONTACT MELLON INVESTOR SERVICES LLC (THE "TRANSFER AGENT") TO OBTAIN INSTRUCTIONS FOR REPLACING LOST CERTIFICATES. SEE INSTRUCTION 10. [ ] CHECK HERE IF COMMON SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution ------------------------------------------------- Account Number ---------------------------------------------------------------- Transaction Code Number ------------------------------------------------------- [ ] CHECK HERE IF COMMON SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING (please enclose a photocopy of such guaranteed delivery): Name(s) of Registered Holder(s) ------------------------------------------------- Window Ticket Number (if any) -------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ----------------------------- Name of Institution Which Guaranteed Delivery --------------------------------- If delivery is by book-entry transfer, give the following information: Name of Tendering Institution -------------------------------------------- Account Number ----------------------------------------------------------- Transaction Code Number -------------------------------------------------- 3 4 Ladies and Gentlemen: The undersigned hereby tenders to OEI Acquisition Corp., a Nevada corporation (the "Offeror") and a wholly-owned subsidiary of Ocean Energy, Inc., a Texas corporation (the "Parent"), the above described shares of common stock, par value $.01 per share (the "Common Stock"), of Texoil, Inc., a Nevada corporation (the "Company"), pursuant to the Offeror's offer to purchase (a) all of the outstanding shares of the Company's Common Stock (the "Common Shares"), at a purchase price of $8.25 per Common Share, net to the seller in cash, without interest (such price for Common Shares, referred to herein as the "Common Share Offer Price"), and (b) all of the outstanding shares of the Company's Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares"), at a purchase price of $18.04 per Preferred Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and this Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"). Subject to, and effective upon, the acceptance for payment of the Common Shares tendered herewith, in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Offeror all right, title and interest in and to all of the Common Shares tendered hereby and all rights associated with such Common Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Common Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof on or after January 18, 2001, and prior to the transfer to the name of the Offeror (or nominee or transferee of the Offeror) on the Company's stock transfer records of the Common Shares tendered herewith (collectively, a "Distribution") and irrevocably constitutes and appoints the Depositary as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Common Shares (and any Distribution) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver certificates for such Common Shares (and any Distribution) or transfer ownership of such Common Shares (and any Distribution) on the account books maintained by the Book-Entry Transfer Facility, together, in either case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, (ii) present such Common Shares (and any Distribution) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Common Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of Offeror as such undersigned's agents, attorneys-in-fact and proxies, with full power of substitution, to the full extent of the undersigned's rights with respect to the Common Shares (and any Distribution) tendered by the undersigned and accepted for payment by Offeror. All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest. Such appointment will be effective when, and only to the extent that, Offeror accepts such Common Shares for payment. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the undersigned with respect to such Common Shares (and any Distribution) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Offeror will, with respect to the Common Shares (and any Distribution) for which such appointment is effective, be empowered to exercise all voting and other rights of the undersigned as they in their sole discretion may deem proper at any annual or special meeting of Company stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Offeror reserves the right to require that, in order for the Common Shares to be deemed validly tendered, immediately upon Offeror's acceptance of such Common Shares, Offeror must be able to exercise full voting rights with respect to such Common Shares (and any Distribution), including, without limitation, voting at any meeting of stockholders. The undersigned hereby represents and warrants that: (i) the undersigned has full power and authority to tender, sell, assign and transfer the Common Shares tendered hereby (and any Distribution) and (ii) when the same are accepted for payment by the Offeror, the Offeror will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances, and the same will not be subject to any adverse claim and will not have been transferred to the Offeror in violation of any contractual or other restriction on the transfer thereof. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the Common Shares tendered hereby (and any Distribution). In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Offeror any and all Distributions in respect of the Common Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Offeror shall be entitled, subject to applicable law, to all rights and privileges as owner of each such Distribution and may withhold the 4 5 entire Common Share Offer Price or deduct from the Common Share Offer Price the amount or value of such Distribution as determined by the Offeror in its sole discretion. No authority conferred herein or agreed to be conferred herein shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, executors, administrators, trustees in bankruptcy, personal and legal representatives, successors and assigns of the undersigned. Tenders of Common Shares made pursuant to the Offer are irrevocable, except that Common Shares tendered pursuant to the Offer may be withdrawn at any time prior the Expiration Date, and, unless theretofore accepted for payment by the Offeror pursuant to the Offer, may also be withdrawn at any time after March 24, 2001. See Section 4 -- "Withdrawal Rights" of the Offer to Purchase. The undersigned understands that tenders of Common Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Common Shares being tendered. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Offeror may not be required to accept for payment any of the Common Shares tendered hereby. See Section 14 -- "Certain Conditions to Our Obligations" of the Offer to Purchase. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please issue the check for the Common Share Offer Price for all Common Shares purchased and return any certificates for Common Shares not tendered or not purchased, in the name(s) of the registered holder(s) appearing above under "Description of Common Shares Tendered". Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions", please mail the check for the Common Share Offer Price for all Common Shares purchased and return any certificates for any Common Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Common Shares Tendered". If the boxes entitled "Special Delivery Instructions" and "Special Payment Instructions" are both completed, please issue the check for the Common Share Offer Price for all Common Shares purchased and return any certificates for Common Shares not tendered or not purchased in the name(s) of, and deliver said check and/or certificate(s) to, the person(s) so indicated. Unless otherwise indicated in the box entitled "Special Payment Instructions", in the case of a book-entry delivery of Common Shares, please credit the account maintained at the Book-Entry Transfer Facility with any Common Shares not purchased. The undersigned recognizes that the Offeror has no obligation, pursuant to the "Special Payment Instructions", to transfer any Common Shares from the name(s) of the registered holder(s) thereof if the Offeror does not accept for payment any of the Common Shares tendered hereby. 5 6 - ---------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the Common Share Offer Price of Common Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Common Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned, or if Common Shares tendered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than that shown on page 1. Issue [ ] Check [ ] Certificate(s) to: Name -------------------------------------------------- (Please Print) Address ----------------------------------------------- -------------------------------------------------------- (Include Zip Code) -------------------------------------------------------- (Recipient's Tax Identification or Social Security No.) (See Substitute W-9 below) [ ] Credit Common Shares tendered by book-entry transfer that are not accepted for payment to the Book-Entry Transfer Facility account designated below. ----------------------------------- ----------------------------------- (Depositary Account Number) - ----------------------------------------------------------------
- ---------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the Common Share Offer Price of Common Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Common Shares not tendered or not purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Common Shares Tendered". Issue [ ] Check [ ] Certificate(s) to: Name ------------------------------------------------ (Please Print) Address ----------------------------------------------- -------------------------------------------------------- (Include Zip Code) -------------------------------------------------------- (Recipient's Tax Identification or Social Security No.) (See Substitute W-9 below) - ----------------------------------------------------------------
6 7 IMPORTANT STOCKHOLDERS: SIGN HERE (Also Complete Substitute Form W-9 Below) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Signature(s) of Stockholder(s)) (See guarantee requirement below) Dated: -------------------------------------------------------------------------- (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificates or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity (Full Title) ----------------------------------------------------------- Address ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ------------------------------------------------- Tax Identification or Social Security Number ----------------------------------- (See Substitute Form W-9 below) GUARANTEE OF SIGNATURE(S) (If Required -- See Instructions 1 and 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN THE SPACE BELOW. Authorized Signature(s) - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- (Please Print) Title ------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ------------------------------------------------- Dated: ------------------------------------ 7 8 PAYER'S NAME: EQUISERVE TRUST COMPANY, N.A. - -------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Social Security Number FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW. Employer Identification Number DEPARTMENT OF THE TREASURY (if awaiting TIN write INTERNAL REVENUE SERVICE "Applied For") PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") -------------------------------------------------------------------------------------------- PART 2 -- Certification -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. [ ]. -------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item PART 3 -- (2) above if you have been notified by the IRS that AWAITING TIN [ ] you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup, do not cross out item (2). Signature Date --------------------- ------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a taxpayer identification number within 60 days. Signature Date --------------------------------- ------------------ Name (Please print) ------------------------------------------------------- 8 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Signature Guarantee. No signature guarantee on this Letter of Transmittal is required if (i) this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Common Shares) tendered herewith, unless such holder(s) have completed either the box entitled "Special Delivery Instructions" or "Special Payment Instructions" on this Letter of Transmittal or (ii) such Common Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. 2. Delivery of Letter of Transmittal and Certificates or Book-Entry Confirmations. This Letter of Transmittal is to be completed by stockholders either if Common Share certificates are to be forwarded herewith, or unless an Agent's Message (as defined in Section 2 -- "Acceptance for Payment and Payment for Shares" of the Offer to Purchase) is utilized, if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Certificates for all physically tendered Common Shares, or timely confirmation of a book-entry transfer (a "Book Entry Confirmation") into the Depositary's account at the Book-Entry Transfer Facility of all Common Shares delivered by book-entry transfer, together with this Letter of Transmittal (or manually signed facsimile hereof) properly completed and duly executed with all required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message), and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment" of the Offer to Purchase), or the tendering stockholder must comply with the guaranteed delivery procedures set forth below. If certificates are forwarded to the Depositary in multiple deliveries, this Letter of Transmittal (or manually signed facsimile hereof) properly completed and duly executed with all required signature guarantees must accompany each such delivery. Stockholders whose certificates for Common Shares are not immediately available, who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Common Shares pursuant to the guaranteed delivery procedures set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror, must be received by the Depositary, either by hand delivery, mail or facsimile transmission, on or prior to the Expiration Date and (iii) the certificates for all physically tendered shares, in proper form for transfer (or a Book-Entry Confirmation) together with this Letter of Transmittal (or manually signed facsimile thereof) properly completed and duly executed with all required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three trading days after the date of the execution of the Notice of Guaranteed Delivery. A trading day is any day on which the Nasdaq Small Cap Market is open for business. The method of delivery of this Letter of Transmittal, the certificates for Common Shares and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the option and risk of the tendering stockholder. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed for such documents to reach the Depositary. Except as otherwise provided in this Instruction 2, delivery will be deemed made only when actually received by the Depositary (including, in the case of book-entry transfer, by Book-Entry Confirmation). 9 10 No alternative, conditional or contingent tenders will be accepted and no fractional Common Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Common Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Common Shares Tendered" is inadequate, the certificate numbers, the number of Common Shares evidenced by such certificates and the number of Common Shares tendered should be listed on a separate signed schedule and attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all the Common Shares evidenced by any certificate delivered to the Depositary herewith are to be tendered, fill in the number of Common Shares that are to be tendered in the box entitled "Number of Shares Tendered". In such case, as soon as practicable after the Expiration Date, new certificate(s) evidencing the remainder of the Common Shares that were evidenced by the certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions". All Common Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Common Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the certificates without alteration, enlargement or any other change whatsoever. If any Common Shares tendered hereby are held of record by two or more holders, all such holders must sign this Letter of Transmittal. If any of the Common Shares tendered hereby are registered in names of different holders on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Common Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made, or certificates for Common Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case the certificate(s) tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such certificate(s), and the signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Common Shares tendered hereby, the certificates tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed as the name(s) of the registered holder(s) appear(s) on such certificates. Signatures on such certificates and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Offeror of such person's authority to so act must be submitted. 6. Special Payment and Delivery Instructions. If a check for the Common Share Offer Price of any Common Shares tendered hereby is to be issued, or certificate(s) not tendered or not purchased are to be issued, in the name of a person other than the person signing this Letter of Transmittal, or if the check or any certificate for Common Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal, or to the person(s) signing this Letter of Transmittal but at an address other than that shown above, the appropriate boxes on this Letter of Transmittal must be completed. A stockholder tendering by book-entry transfer may request that Common Shares not accepted for payment be credited to such account maintained at the Book-Entry Transfer Facility as such stockholder may designate under "Special Payment Instructions." If no such instructions are given, such Common Shares not accepted for payment will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 10 11 7. Stock Transfer Taxes. Except as set forth in this Instruction 7, the Offeror will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of the purchased Common Shares to it, or to its order, pursuant to the Offer. If, however, payment of the Common Share Offer Price of any Common Shares purchased is to be made to, or certificate(s) for Common Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), or if tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the Common Share Offer Price of such Common Shares purchased, unless evidence satisfactory to the Offeror of the payment of such taxes or exemption therefrom is submitted. Except as otherwise provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the certificate(s) listed in this Letter of Transmittal. 8. Waiver of Conditions. Subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), the conditions of the Offer may be waived by the Offeror, in whole or in part, at any time and from time to time in the Offeror's sole discretion. 9. Substitute Form W-9. Each tendering stockholder is required to provide the Depositary with a correct taxpayer identification number ("TIN"), generally the stockholder's social security or federal employer identification number, and with certain other information, on the Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such number is correct and that the stockholder is not subject to backup withholding of federal income tax. If a tendering stockholder has been notified by the Internal Revenue Service that such stockholder is subject to backup withholding, such stockholder must cross out item (2) of the Certification box (Part 2) of the Substitute Form W-9, unless such stockholder has since been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding on the payment of the Common Share Offer Price of all Common Shares purchased from such stockholder. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the Depositary is not provided with the TIN within 60 days, the Depositary will withhold 31% on all payments of the Common Share Offer Price to such stockholder until a TIN is provided to the Depositary. 10. Lost, Mutilated, Destroyed or Stolen Certificates. If any certificate(s) representing shares has been lost, mutilated, destroyed or stolen, the stockholder should complete this Letter of Transmittal and check the appropriate box above and promptly notify the Transfer Agent. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, mutilated, destroyed or stolen certificates have been followed. To expedite replacement, call the Transfer Agent at (800) 635-9270. The stockholder may also be required to give the Company a bond as indemnity against any claim that may be made against it with respect to the certificate(s) alleged to have been lost, mutilated, destroyed or stolen. There can be no assurance that such lost, mutilated, destroyed or stolen certificate(s) will be replaced prior to the Expiration Date. 11. Requests for Assistance or Additional Copies. Questions or requests for assistance may be directed to the Information Agent at the address and telephone number set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent at the address and telephone number set forth below. Holders of Common Shares may also contact their brokers, dealers, commercial banks or trust companies or other nominees for assistance concerning the Offer. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR MANUALLY SIGNED FACSIMILE HEREOF) PROPERLY COMPLETED AND DULY EXECUTED (WITH ALL REQUIRED GUARANTEES AND CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY PROPERLY COMPLETED AND DULY EXECUTED MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. 11 12 IMPORTANT TAX INFORMATION Under federal income tax law, a stockholder whose tendered Common Shares are accepted for payment is required to provide the Depositary (as payer) with such stockholder's current TIN on Substitute Form W-9. If such stockholder is an individual, the TIN is such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder or other payee may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder or other payee with respect to Common Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. The box in part 3 of the Substitute Form W-9 may be checked if the tendering stockholder (or other payee) is required to submit a Substitute Form W-9 and has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the tendering stockholder must also complete the attached Certificate of Awaiting Taxpayer Identification Number in order to avoid backup withholding. If the box in Part 3 is so checked and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% on all such payments of the Common Share Offer Price until a TIN is provided to the Depositary. A tendering stockholder who checks the box in Part 3 in lieu of furnishing his or her TIN should furnish the Depositary with his or her TIN as soon as it is received. Certain stockholders (including, among others, all corporation, and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual or a foreign entity to qualify as an exempt recipient, that stockholder must submit to the Depositary a properly completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payment made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments made to a stockholder or other payee with respect to shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of the stockholder's current TIN (or the TIN of any other payee) by completing the form, certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and that (1) the stockholder has not been notified by the Internal Revenue Service that the stockholder is subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the stockholder that the stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN (i.e., social security number or employer identification number) of the record owner of the shares tendered hereby. If the shares are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. The Information Agent for the Offer is: [GEORGESON SHAREHOLDER COMMUNICATIONS, INC.] 17 STATE STREET, 10TH FLOOR NEW YORK, NY 10004 BANKS AND BROKERS CALL COLLECT: (212) 440-9800 ALL OTHERS CALL TOLL FREE: (800) 223-2064 12 EX-99.(A)(1)(III) 4 h83324tex99-a1iii.txt LETTER OF TRANSMITTAL FOR PREFERRED STOCK 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK OF TEXOIL, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JANUARY 24, 2001 BY OEI ACQUISITION CORP., A WHOLLY-OWNED SUBSIDIARY OF OCEAN ENERGY, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: EQUISERVE TRUST COMPANY, N.A. By Mail: By Hand: EquiServe Trust Company, N.A. Boston EquiServe LP Corporate Actions c/o Securities Transfer & Reporting Services, Inc. P.O. Box 43014 100 William Street, Galleria Providence, RI 02940-3014 New York, NY 10038 By Facsimile Transmission: By Overnight Courier: (781) 575-2233 EquiServe Trust Company, N.A. Investor Relations Telephone: Corporate Actions (781) 575-3120 150 Royall Street Canton, MA 02021
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED BY HOLDERS OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE ("PREFERRED SHARES") OF TEXOIL, INC. WHO HOLD CERTIFICATES EVIDENCING PREFERRED SHARES WHICH ARE TO BE FORWARDED HEREWITH. HOLDERS WHOSE CERTIFICATES EVIDENCING PREFERRED SHARES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT DELIVER THEIR CERTIFICATES AND ALL OTHER DOCUMENTS REQUIRED HEREBY TO THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1 -- "TERMS OF THE OFFER; EXPIRATION DATE; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT" OF THE OFFER TO PURCHASE) AND WHO WISH TO TENDER THEIR PREFERRED SHARES MUST DO SO PURSUANT TO THE GUARANTEED DELIVERY PROCEDURE DESCRIBED IN SECTION 3 -- "PROCEDURE FOR TENDERING SHARES" OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2 OF THIS LETTER OF TRANSMITTAL. 2
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF PREFERRED SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) AND PREFERRED PREFERRED SHARE(S) TENDERED SHARES TENDERED APPEAR(S) ON PREFERRED SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF PREFERRED NUMBER SHARES OF PREFERRED CERTIFICATE EVIDENCED BY SHARES NUMBER(S) CERTIFICATE(S) TENDERED* ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Preferred Shares - ------------------------------------------------------------------------------------------------------------------------ * Unless otherwise indicated, it will be assumed that all Preferred Shares evidenced by each certificate delivered to the Depositary are being tendered. See Instruction 4 of this Letter of Transmittal. - ------------------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY. [ ] I HAVE LOST MY CERTIFICATES THAT REPRESENTED PREFERRED SHARES AND REQUIRE ASSISTANCE IN OBTAINING A REPLACEMENT CERTIFICATE. I UNDERSTAND THAT I MUST CONTACT MELLON INVESTOR SERVICES LLC (THE "TRANSFER AGENT") TO OBTAIN INSTRUCTIONS FOR REPLACING LOST CERTIFICATES. SEE INSTRUCTION 10. [ ] CHECK HERE IF PREFERRED SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING (please enclose a photocopy of such guaranteed delivery): Name(s) of Registered Holder(s): ------------------------------------------------ Window Ticket No. (if any): ----------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: ----------------------------- Name of Institution that Guaranteed Delivery: ---------------------------------- 2 3 Ladies and Gentlemen: The undersigned hereby tenders to OEI Acquisition Corp., a Nevada corporation (the "Offeror") and a wholly-owned subsidiary of Ocean Energy, Inc., a Texas corporation (the "Parent"), the above-described shares of Series A Convertible Preferred stock, par value $.01 per share (the "Preferred Shares"), of Texoil, Inc., a Nevada corporation (the "Company"), pursuant to the Offeror's offer to purchase (a) all of the outstanding shares of the Company's Preferred Stock (the "Preferred Shares"), at a purchase price of $18.04 per Share, net to the seller in cash, without interest (such price for Preferred Shares referred to herein as the "Preferred Share Offer Price"), and (b) all of the outstanding shares of the Company's Common Stock (the "Common Shares"), at a purchase price of $8.25 per Common Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Subject to, and effective upon, the acceptance for payment of the Preferred Shares tendered herewith, in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Offeror, all right, title and interest in and to all of the Preferred Shares tendered hereby and all rights associated with such Preferred Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Preferred Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof (including, without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement dated October 12, 1997 by and among the Company and certain stockholders, as amended to the date of the Merger Agreement) on or after January 18, 2001 (collectively, a "Distribution") and irrevocably constitutes and appoints the Depositary as the true and lawful agent and attorney-in-fact of the undersigned with respect to such Preferred Shares (and any Distribution) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver certificates for such Preferred Shares (and any Distribution) together with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, upon receipt by the Depositary, as the undersigned's agent, of the Preferred Share Offer Price, (ii) present such Preferred Shares (and any Distribution) for transfer on the books of the Company and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Preferred Shares (and any Distribution), all in accordance with the terms and subject to the conditions of the Offer. The undersigned irrevocably appoints designees of Offeror as such undersigned's agents, attorneys-in-fact and proxies, with full power of substitution, to the full extent of the undersigned's rights with respect to the Preferred Shares (and any Distribution) tendered by the undersigned and accepted for payment by Offeror. All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest. Such appointment will be effective when, and only to the extent that, Offeror accepts such Preferred Shares for payment. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the undersigned with respect to such Preferred Shares (and any Distribution) will be revoked without further action, and no subsequent powers of attorney and proxies may be given nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). The designees of Offeror will, with respect to the Preferred Shares (and any Distribution) for which such appointment is effective, be empowered to exercise all voting and other rights of the undersigned as they in their sole discretion may deem proper at any annual or special meeting of Company stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. Offeror reserves the right to require that, in order for the Preferred Shares to be deemed validly tendered, immediately upon Offeror's acceptance of such Preferred Shares, Offeror must be able to exercise full voting rights with respect to such Preferred Shares (and any Distribution), including, without limitation, voting at any meeting of stockholders. 3 4 The undersigned hereby represents and warrants that: (i) the undersigned has full power and authority to tender, sell, assign and transfer the Preferred Shares tendered hereby (and any Distribution) and (ii) when the same are accepted for payment by the Offeror, the Offeror will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances, and the same will not be subject to any adverse claim and will not have been transferred to the Offeror in violation of any contractual or other restriction on the transfer hereof. The undersigned, upon request, shall execute and deliver all additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the Preferred Shares tendered hereby (and any Distribution). In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Offeror any and all Distributions in respect of the Preferred Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Offeror shall be entitled, subject to applicable law, to all rights and privileges as owner of each such Distribution and may withhold the entire Preferred Share Offer Price or deduct from the Preferred Share Offer Price the amount or value of such Distribution as determined by the Offeror in its sole discretion. No authority conferred herein or agreed to be conferred herein shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned. All obligations of the undersigned hereunder shall be binding upon the heirs, executors, administrators, trustees in bankruptcy, personal and legal representatives, successors and assigns of the undersigned. Tenders of Preferred Shares made pursuant to the Offer are irrevocable, except that Preferred Shares tendered pursuant to the Offer may be withdrawn at any time prior the Expiration Date, and, unless theretofore accepted for payment by the Offeror pursuant to the Offer, may also be withdrawn at any time after March 24, 2001. See Section 4 -- "Withdrawal Rights" of the Offer to Purchase. The undersigned understands that tenders of Preferred Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions set forth in the Offer, including the undersigned's representation that the undersigned owns the Preferred Shares being tendered. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Offeror may not be required to accept for payment any of the Preferred Shares tendered hereby. See Section 14 -- "Certain Conditions to Our Obligations" of the Offer to Purchase. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the Preferred Share Offer Price for all Preferred Shares purchased and return any certificates for Preferred Shares not tendered or not purchased, in the name(s) of the registered holder(s) appearing above under "Description of Preferred Shares Tendered." Similarly, unless otherwise indicated in the box entitled "Special Delivery Instructions," please mail the check for the Preferred Share Offer Price for all Preferred Shares purchased and return any certificates for any Preferred Shares not tendered or not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Preferred Shares Tendered." If the boxes entitled "Special Delivery Instructions" and "Special Payment Instructions" are both completed, please issue the check for the Preferred Share Offer Price for all Preferred Shares purchased and return any certificates for Preferred Shares not tendered or not purchased in the name(s) of, and deliver said check and/or certificate(s) to, the person(s) so indicated. The undersigned recognizes that the Offeror has no obligation, pursuant to the "Special Payment Instructions," to transfer any Preferred Shares from the name(s) of the registered holder(s) thereof if the Offeror does not accept for payment any of the Preferred Shares tendered hereby. 4 5 - ---------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the Preferred Share Offer Price of Preferred Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Preferred Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue [ ] Check [ ] Certificate(s) to: Name ---------------------------------------------------- (Please Print) Address ------------------------------------------------- --------------------------------------------------------- (Include Zip Code) -------------------------------------------------------- (Recipient's Tax Identification or Social Security No.) (See Substitute W-9 below) - ----------------------------------------------------------------
- ---------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the Preferred Share Offer Price of Preferred Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Preferred Shares not tendered or not purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Preferred Shares Tendered". Issue [ ] Check [ ] Certificate(s) to: Name ------------------------------------------------------ (Please Print) Address ------------------------------------------------------ ------------------------------------------------------------- (Include Zip Code) ------------------------------------------------------------- (Recipient's Tax Identification or Social Security No.) (See Substitute W-9 below) - ----------------------------------------------------------------
5 6 IMPORTANT STOCKHOLDERS: SIGN HERE (Also Complete Substitute Form W-9 Below) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Signature(s) of Stockholder(s)) (See guarantee requirement below) Dated: ------------------------------------ (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificates or on a security position listing or by person(s) authorized to become registered holder(s) by certificate(s) and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s) ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity (Full Title) ----------------------------------------------------------- Address ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ------------------------------------------------- Tax Identification or Social Security Number ---------------------------------- (See Substitute Form W-9 below) GUARANTEE OF SIGNATURE(S) (If Required -- See Instructions 1 and 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN THE SPACE BELOW. Authorized Signature(s) -------------------------------------------------------- Name ---------------------------------------------------------------------------- (Please Print) Title --------------------------------------------------------------------------- Name of Firm ------------------------------------------------------------------- Address ------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ------------------------------------------------ Dated: ------------------------------ 6 7 PAYER'S NAME: EQUISERVE TRUST COMPANY, N.A. - -------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Social Security Number FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW. Employer Identification Number DEPARTMENT OF THE TREASURY (if awaiting TIN write INTERNAL REVENUE SERVICE "Applied For") PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN") -------------------------------------------------------------------------------------------- PART 2 -- Certification -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. [ ]. -------------------------------------------------------------------------------------------- CERTIFICATION INSTRUCTIONS -- You must cross out item PART 3 -- (2) above if you have been notified by the IRS that AWAITING TIN [ ] you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup, do not cross out item (2). Signature Date --------------------------------- ------------------ - --------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a taxpayer identification number within 60 days. Signature Dated ----------------------------------- ---------------------- Name (Please print) --------------------------------------------- 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Signature Guarantee. No signature guarantee on this Letter of Transmittal is required if (i) this Letter of Transmittal is signed by the registered holder(s) or (ii) such Preferred Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. 2. Delivery of Letter of Transmittal and Certificates. This Letter of Transmittal is to be completed by stockholders pursuant to the procedures set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Certificates for all physically tendered Preferred Shares, this Letter of Transmittal (or manually signed facsimile hereof) properly completed and duly executed with all required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary at the address set forth herein on or prior to the Expiration Date (as defined in Section 1 -- "Terms of the Offer; Expiration Date; Extension of Tender Period; Termination; Amendment" of the Offer to Purchase), or the tendering stockholder must comply with the guaranteed delivery procedures set forth below. If certificates are forwarded to the Depositary in multiple deliveries, this Letter of Transmittal (or manually signed facsimile hereof) properly completed and duly executed with all required signature guarantees must accompany each such delivery. Stockholders whose certificates for Preferred Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date, may tender their Preferred Shares pursuant to the guaranteed delivery procedures set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror, must be received by the Depositary, either by hand delivery, mail or facsimile transmission, on or prior to the Expiration Date and (iii) the certificates for all physically tendered shares, in proper form for transfer together with this Letter of Transmittal (or manually signed facsimile thereof) properly completed and duly executed with all required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within three trading days after the date of the execution of the Notice of Guaranteed Delivery. A trading day is any day on which the Nasdaq Small Cap Market is open for business. The method of delivery of this Letter of Transmittal, the certificates for Preferred Shares and all other required documents is at the option and risk of the tendering stockholder. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed for such documents to reach the Depositary. Except as otherwise provided in this Instruction 2, delivery will be deemed made only when actually received by the Depositary. No alternative, conditional or contingent tenders will be accepted and no fractional Preferred Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Preferred Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Preferred Shares Tendered" is inadequate, the certificate numbers, the number of Preferred Shares evidenced by such certificates and the number of Preferred Shares tendered should be listed on a separate signed schedule and attached hereto. 4. Partial Tenders. If fewer than all the Preferred Shares evidenced by any certificate delivered to the Depositary herewith are to be tendered, fill in the number of Preferred Shares that are to be tendered in the box entitled "Number of Preferred Shares Tendered." In such case, as soon as practicable after the Expiration Date, new certificate(s) evidencing the remainder of the Preferred Shares that were evidenced by the certificates delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions." All Preferred 8 9 Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Preferred Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the certificates without alteration, enlargement or any other change whatsoever. If any Preferred Shares tendered hereby are held of record by two or more holders, all such holders must sign this Letter of Transmittal. If any of the Preferred Shares tendered hereby are registered in names of different holders on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Preferred Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made, or certificates for Preferred Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), in which case the certificate(s) tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such certificate(s), and the signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Preferred Shares tendered hereby, the certificates tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed as the name(s) of the registered holder(s) appear(s) on such certificates. Signatures on such certificates and stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Offeror of such person's authority to so act must be submitted. 6. Special Payment and Delivery Instructions. If a check for the Preferred Share Offer Price of any Preferred Shares tendered hereby is to be issued, or certificate(s) not tendered or not purchased are to be issued, in the name of a person other than the person signing this Letter of Transmittal, or if the check or any certificate for Preferred Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal, or to the person(s) signing this Letter of Transmittal but at an address other than that shown above, the appropriate boxes on this Letter of Transmittal must be completed. 7. Stock Transfer Taxes. Except as set forth in this Instruction 7, the Offeror will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of the purchased Preferred Shares to it, or to its order, pursuant to the Offer. If, however, payment of the Preferred Share Offer Price of any Preferred Shares purchased is to be made to, or certificate(s) for Preferred Shares not tendered or not purchased are to be issued in the name of, a person other than the registered holder(s), or if tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such other person will be deducted from the Preferred Share Offer Price of such Preferred Shares purchased, unless evidence satisfactory to the Offeror of the payment of such taxes or exemption therefrom is submitted. Except as otherwise provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 8. Waiver of Conditions. Subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), the conditions of the Offer may be waived by the Offeror, in whole or in part, at any time and from time to time in the Offeror's sole discretion. 9. Substitute Form W-9. Each tendering stockholder is required to provide the Depositary with a correct taxpayer identification number ("TIN"), generally the stockholder's social security or federal 9 10 employer identification number, and with certain other information, on the Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such number is correct and that the stockholder is not subject to backup withholding of federal income tax. If a tendering stockholder has been notified by the Internal Revenue Service that such stockholder is subject to backup withholding, such stockholder must cross out item (2) of the Certification box (Part 2) of the Substitute Form W-9, unless such stockholder has since been notified by the Internal Revenue Service that such stockholder is no longer subject to backup withholding. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to 31% federal income tax withholding on the payment of the Preferred Share Offer Price of all Preferred Shares purchased from such stockholder. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the Depositary is not provided with the TIN within 60 days, the Depositary will withhold 31% on all payments of the Preferred Share Offer Price to such stockholder until a TIN is provided to the Depositary. 10. Lost, Mutilated, Destroyed or Stolen Certificates. If any certificate(s) representing shares has been lost, mutilated, destroyed or stolen, the stockholder should complete this Letter of Transmittal and check the appropriate box above and promptly notify the Transfer Agent. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, mutilated, destroyed or stolen certificates have been followed. To expedite replacement, call the Transfer Agent at (800) 635-9270. The stockholder may also be required to give the Company a bond as indemnity against any claim that may be made against it with respect to the certificate(s) alleged to have been lost, mutilated, destroyed or stolen. There can be no assurance that such lost, mutilated, destroyed or stolen certificate(s) will be replaced prior to the Expiration Date. 11. Requests for Assistance or Additional Copies. Questions or requests for assistance may be directed to the Information Agent at the address and telephone number set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent at the address and telephone number set forth below. Holders of Preferred Shares may also contact their brokers, dealers, commercial banks or trust companies or other nominees for assistance concerning the Offer. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR MANUALLY SIGNED FACSIMILE HEREOF) PROPERLY COMPLETED AND DULY EXECUTED (WITH ALL REQUIRED GUARANTEES AND CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY PROPERLY COMPLETED AND DULY EXECUTED MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a stockholder whose tendered Preferred Shares are accepted for payment is required to provide the Depositary (as payer) with such stockholder's current TIN on Substitute Form W-9. If such stockholder is an individual, the TIN is such stockholder's social security number. If the Depositary is not provided with the correct TIN, the stockholder or other payee may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder or other payee with respect to Preferred Shares purchased pursuant to the Offer may be subject to backup withholding of 31%. The box in part 3 of the Substitute Form W-9 may be checked if the tendering stockholder (or other payee) is required to submit a Substitute Form W-9 and has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the tendering stockholder must also complete the attached Certificate of Awaiting Taxpayer Identification Number in order to avoid backup withholding. If the box in Part 3 is so checked and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% on all such payments of the Preferred Share Offer Price until a TIN is provided to the Depositary. A tendering stockholder who checks the box in Part 3 in lieu of furnishing his or her TIN should furnish the Depositary with his or her TIN as soon as it is received. 10 11 Certain stockholders (including, among others, all corporation, and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual or a foreign entity to qualify as an exempt recipient, that stockholder must submit to the Depositary a properly completed Internal Revenue Service Form W-8 (a "Form W-8"), signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payment made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments made to a stockholder or other payee with respect to shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of the stockholder's current TIN (or the TIN of any other payee) by completing the form, certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN), and that (1) the stockholder has not been notified by the Internal Revenue Service that the stockholder is subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the stockholder that the stockholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN (i.e., social security number or employer identification number) of the record owner of the shares tendered hereby. If the shares are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 11 12 The Information Agent for the Offer is: [GEORGESON SHAREHOLDER COMMUNICATIONS, INC.] 17 STATE STREET, 10TH FLOOR NEW YORK, NY 10004 BANKS AND BROKERS CALL COLLECT (212) 440-9800 ALL OTHERS CALL TOLL-FREE (800) 223-2064 12 EX-99.(A)(1)(IV) 5 h83324tex99-a1iv.txt NOTICE OF GUARANTEED DELIVERY FOR COMMON STOCK 1 NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF COMMON STOCK of TEXOIL, INC. Pursuant to the Offer to Purchase Dated January 24, 2001 by OEI ACQUISITION CORP., a wholly-owned subsidiary of OCEAN ENERGY, INC. --------------------- This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc., a Nevada corporation (the "Company"), are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary (as described herein) on or prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand, facsimile transmission or mail to the Depositary. See Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"). The Depositary for the Offer is: EQUISERVE TRUST COMPANY, N.A. By Mail: By Hand: EquiServe Trust Company, N.A. Boston EquiServe LP Corporate Actions c/o Securities Transfer & Reporting Services, P.O. Box 43014 Inc. Providence, RI 02940-3014 100 William Street, Galleria New York, NY 10038 By Facsimile Transmission: By Overnight Courier: (781) 575-2233 EquiServe Trust Company, N.A. Investor Relations Telephone: Corporate Actions (781) 575-3120 150 Royall Street Canton, MA 02021
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to OEI Acquisition Corp., a Nevada corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with all amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of Common Shares of the Company indicated below, pursuant to the guaranteed delivery procedure set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Number of Common Shares: ---------------------------------- Certificate No(s). (if available): - ---------------------------------------------------------- - ---------------------------------------------------------- If Common Shares will be tendered by book-entry transfer: Account No: ---------------------------------------------- Dated: ------------------------------------- , 2001 Name of Record Holder(s): -------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- Address: -------------------------------------------------- - ----------------------------------------------------------- (Zip Code) Area Code and Telephone No: ------------------------------- SIGNATURE(S): - ------------------------------------------------------ - ------------------------------------------------------ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program or any other "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees the delivery to the Depositary of either the Common Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase), together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile(s) thereof) with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery of Common Shares, and any other required documents all within three Nasdaq Small Cap Market trading days of the date hereof. Name of Firm: ------------------------------------------------------------------ AUTHORIZED SIGNATURE: --------------------------------------------------------- Name: --------------------------------------------------------------------------- (Please Print or Type) Title: -------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ Dated: ------------------------------- , 2001 NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(1)(V) 6 h83324tex99-a1v.txt NOTICE OF GUARANTEED DELIVERY FOR PREFERRED STOCK 1 NOTICE OF GUARANTEED DELIVERY TO TENDER SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK of TEXOIL, INC. Pursuant to the Offer to Purchase Dated January 24, 2001 by OEI ACQUISITION CORP., a wholly-owned subsidiary of OCEAN ENERGY, INC. --------------------- This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares"), of Texoil, Inc., a Nevada corporation (the "Company"), are not immediately available or time will not permit all required documents to reach the Depositary (as described herein) on or prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand, facsimile transmission or mail to the Depositary. See Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"). The Depositary for the Offer is: EQUISERVE TRUST COMPANY, N.A. By Mail: By Hand: EquiServe Trust Company, N.A. Boston EquiServe LP Corporate Actions c/o Securities Transfer & Reporting Services, P.O. Box 43014 Inc. Providence, RI 02940-3014 100 William Street, Galleria New York, NY 10038 By Facsimile Transmission: By Overnight Courier: (781) 575-2233 EquiServe Trust Company, N.A. Investor Relations Telephone: Corporate Actions (781) 575-3120 150 Royall Street Canton, MA 02021
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 Ladies and Gentlemen: The undersigned hereby tenders to OEI Acquisition Corp., a Nevada corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with all amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of Preferred Shares of the Company indicated below, pursuant to the guaranteed delivery procedure set forth in Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase. Number of Preferred Shares: --------------------------------- Certificate No(s). (if available): - ------------------------------------------------------------ - ------------------------------------------------------------ Dated: ------------------------------------- , 2001 Name of Record Holder(s): ---------------------------------- - ------------------------------------------------------------ - ------------------------------------------------------------ Address: --------------------------------------------------- - ------------------------------------------------------------ (Zip Code) Area Code and Telephone No: --------------------------------- SIGNATURE(S): - ------------------------------------------------------------ - ------------------------------------------------------------ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program or any other "eligible guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees the delivery to the Depositary of the Preferred Shares tendered hereby, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile(s) thereof) with any required signature guarantees, and any other required documents all within three Nasdaq Small Cap Market trading days of the date hereof. Name of Firm: ------------------------------------------------------------------ AUTHORIZED SIGNATURE: --------------------------------------------------------- Name: --------------------------------------------------------------------------- (Please Print or Type) Title: -------------------------------------------------------------------------- Address: ------------------------------------------------------------------------ Area Code & Telephone No.: ------------------------------------------------------ Dated: ------------------------------------- , 2001 NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(1)(VI) 7 h83324tex99-a1vi.txt LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS 1 [GEORGESON SHAREHOLDER COMMUNICATIONS INC. LOGO] Offer to Purchase for Cash All Outstanding Shares of Common Stock and All Outstanding Shares of Series A Convertible Preferred Stock of TEXOIL, INC. at $8.25 NET PER SHARE OF COMMON STOCK and $18.04 NET PER SHARE OF SERIES A CONVERTIBLE PREFERRED STOCK by OEI ACQUISITION CORP., a wholly-owned subsidiary of OCEAN ENERGY, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001, UNLESS THE OFFER IS EXTENDED. January 24, 2001 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by OEI Acquisition Corp., a Nevada corporation (the "Offeror"), and Ocean Energy, Inc. a Texas corporation and parent of the Offeror ("Parent"), to act as Information Agent in connection with the Offeror's offer to purchase (i) all the outstanding shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc. (the "Company") at a purchase price of $8.25 per share, net to the seller, in cash, without interest (such price referred to herein as the "Common Share Offer Price"), and (ii) all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares," and, together with the Common Shares, the "Shares"), of the Company at a purchase price of $18.04 per share, net to the seller, in cash, without interest (such price referred to herein as the "Preferred Share Offer Price") upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, as each may be amended and supplemented from time to time, together constitute the "Offer") enclosed herewith. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED AS OF JANUARY 18, 2001 (THE "MERGER AGREEMENT"), BY AND AMONG PARENT, THE OFFEROR AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS (I) DETERMINED THAT EACH OF THE OFFER AND THE MERGER OF THE OFFEROR WITH AND INTO THE COMPANY ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS OF SHARES, (II) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (III) DECLARED THE ADVISABILITY OF THE MERGER AGREEMENT, AND (IV) RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, 2 TENDER THEIR SHARES PURSUANT TO THE OFFER AND (IF REQUIRED BY APPLICABLE LAW) ADOPT THE MERGER AGREEMENT. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER (A) AT LEAST THAT NUMBER OF COMMON SHARES OF THE COMPANY WHICH WOULD CONSTITUTE A MAJORITY OF THE OUTSTANDING COMMON SHARES ON A FULLY DILUTED BASIS (EXCLUDING FOR THIS PURPOSE COMMON SHARES ISSUABLE UPON CONVERSION OF OUTSTANDING PREFERRED SHARES) AND (B) AT LEAST THAT NUMBER OF PREFERRED SHARES OF THE COMPANY WHICH WOULD CONSTITUTE A MAJORITY OF THE PREFERRED SHARES ON A FULLY DILUTED BASIS, ON THE DATE OF PURCHASE, AND (II) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE. Pursuant to the Merger Agreement, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Offeror will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). Following consummation of the Merger, the Surviving Corporation will be a wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), Shares outstanding immediately prior to the Effective Time (other than Shares held by the Offeror and Shares held by holders who perfect their appraisal rights in accordance with the Nevada Revised Statutes) will, by virtue of the Merger, be cancelled and terminated and shall represent solely the right to receive the Common Share Offer Price or the Preferred Share Offer Price as set forth in the Merger Agreement and described in the Offer to Purchase. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Common Shares registered in your name or in the name of your nominee. For your information and for forwarding to your clients for whom you hold Common Shares registered in your name or in the name of your nominee, or who hold Common Shares registered in their own names, we are enclosing the following documents: 1. The Offer to Purchase dated January 24, 2001. 2. The Letter of Transmittal to be used by holders of Common Shares in accepting the Offer and tendering Common Shares. Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Common Shares. 3. A letter to the stockholders of the Company from Frank A. Lodzinski, Chairman of the Board, President and Chief Executive Officer of the Company, and the Company's Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission. 4. The Notice of Guaranteed Delivery to be used to accept the Offer if the certificates evidencing such Common Shares (the "Certificates") are not immediately available or time will not permit all required documents to reach the Depositary (as defined in the Offer to Purchase) prior to the Expiration Date (as defined in the Offer to Purchase) or the procedure for book-entry transfer cannot be completed by the Expiration Date. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Common Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withheld. 7. A return envelope addressed to the Depositary. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Offeror will accept for payment and will 2 3 pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn promptly after the latest to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions to the Offer set forth in Section 14 -- "Certain Conditions to Our Obligations" of the Offer to Purchase. For purposes of the Offer, the Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when the Offeror gives oral or written notice to the Depositary of its acceptance for payment of such Common Shares pursuant to the Offer. In all cases, payment for Common Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Certificates or a timely confirmation of a book-entry transfer of such Common Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase) pursuant to the procedures set forth in Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duty executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in "Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase), and (iii) all other documents required by the Letter of Transmittal. Under no circumstances will interest on the purchase price for Shares be paid by the Offeror, regardless of any delay in making such payment. The Offeror will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent as set forth in Section 16 -- "Fees and Expenses" of the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Offeror will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. The Offeror will pay any stock transfer taxes with respect to the transfer and sale to it or its order pursuant to the Offer, except as otherwise provided in Instruction 7 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001 UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, a duly executed and properly completed Letter of Transmittal, with any required signature guarantees and any other required documents, should be sent to the Depositary, and Certificates should be delivered or such Common Shares should be tendered by book-entry transfer, all in accordance with the Instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Common Shares wish to tender shares, but it is impracticable for them to forward their Certificates or other required documents to the Depositary prior to the Expiration Date or to comply with the procedures for book-entry transfer on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified under Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase. 3 4 Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from the undersigned at the address and telephone number set forth on the back cover of the Offer to Purchase. Very truly yours, GEORGESON SHAREHOLDER COMMUNICATIONS INC. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE OFFEROR, PARENT, THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. 4 EX-99.(A)(1)(VII) 8 h83324tex99-a1vii.txt LETTER TO CLIENTS FROM BROKERS, DEALERS, BANKS 1 Offer to Purchase for Cash All Outstanding Shares of Common Stock and All Outstanding Shares of Series A Convertible Preferred Stock of TEXOIL, INC. at $8.25 NET PER SHARE OF COMMON STOCK and $18.04 NET PER SHARE OF SERIES A CONVERTIBLE PREFERRED STOCK by OEI ACQUISITION CORP., a wholly-owned subsidiary of OCEAN ENERGY, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001 UNLESS THE OFFER IS EXTENDED. January 24, 2001 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as each may be amended from time to time, together constitute the "Offer") in connection with the Offer by OEI Acquisition Corp., a Nevada corporation (the "Offeror") and a wholly-owned subsidiary of Ocean Energy, Inc., a Texas Corporation ("Parent"), to purchase (i) all the outstanding shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc. (the "Company") at a purchase price of $8.25 per share, net to the seller, in cash, without interest (such price referred to herein as the "Common Share Offer Price"), and (ii) all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares," and, together with the Common Shares, the "Shares"), of the Company at a purchase price of $18.04 per share, net to the seller, in cash, without interest (such price referred to herein as the "Preferred Share Offer Price") upon the terms and subject to the conditions set forth in the Offer to Purchase. Also enclosed is the letter to stockholders of the Company from the Chairman of the Board of the Company, and the Company's Solicitation/Recommendation Statement on Schedule 14D-9. Holders whose certificates evidencing Common Shares (the "Certificates") are not immediately available or who cannot deliver their Certificates and all other documents required by the Letter of Transmittal to the Depositary prior to the Expiration Date (as such terms are defined in the Offer to Purchase) or who cannot complete the procedure for delivery by book-entry transfer to the Depositary's account at the Book-Entry Transfer Facility (as defined in Section 3 -- "Procedures for Tendering Shares" of the Offer to Purchase) on a timely basis and who wish to tender their Common Shares must do so pursuant to the guaranteed delivery procedure described in Section 3 -- Procedures for Tendering Shares" of the Offer to Purchase. See Instruction 2 of the Letter of Transmittal. Delivery of documents to the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. 2 THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF COMMON SHARES HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF COMMON SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH COMMON SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS BEING FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER COMMON SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Common Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Please note the following: 1. The tender price for the Common Shares is $8.25 per share (the "Common Share Offer Price"), net to you in cash, without interest thereon, upon the terms and subject to the conditions of the Offer. 2. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on February 22, 2001, unless the Offer is extended. 3. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of January 18, 2001 (the "Merger Agreement"), by and among the Company, Parent and the Offeror which provides, among other things, for the commencement of the Offer by the Offeror and further provides that after the purchase of a majority of the Common Shares and a majority of the Preferred Shares pursuant to the Offer, subject to the satisfaction or waiver of certain conditions contained in the Merger Agreement, Offeror will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation (the "Surviving Corporation"). Following consummation of the Merger, the Surviving Corporation will be a wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), Shares outstanding immediately prior to the Effective Time (other than Shares held by holders who perfect their appraisal rights in accordance with the Nevada Revised Statutes) will, by virtue of the Merger, be cancelled and terminated, and shall represent solely the right to receive the Common Share Offer Price or the Preferred Share Offer Price as set forth in the Merger Agreement and described in the Offer to Purchase. 4. The Board of Directors of the Company (the "Board") has approved the Offer, the Merger and the Merger Agreement, has declared the advisability of the Merger Agreement, and has determined that the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company, and recommends that stockholders accept the Offer and tender their Shares pursuant thereto. 5. The Offer is being made for all outstanding Common Shares and Preferred Shares. 6. The Offer is conditioned upon, among other things, the Offeror purchasing at least a majority of the outstanding Common Shares determined on a fully diluted basis (excluding for this purpose Common Shares issuable upon conversion of the Preferred Shares) and at least a majority of the outstanding Preferred Shares determined on a fully diluted basis (the "Minimum Condition"). The Offer is also conditioned upon the satisfaction of certain other terms and conditions. See Section 14 -- "Certain Conditions of Our Obligations" in the Offer to Purchase. 7. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 7 of the Letter of Transmittal, transfer taxes on the purchase of Common Shares pursuant to the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal (and any amendments or supplements thereto) and is being made to all holders of all Common Shares and Preferred Shares. The Offeror is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Offeror becomes aware of any valid state statute 2 3 prohibiting the making of the Offer, the Offeror will make a good faith effort to comply with such statute. If, after such good faith effort, the Offeror cannot comply with such state statute, the Offer will not be made to, nor will tenders be accepted from or on behalf of, the holders of Shares in any such state. In any jurisdiction where the securities, "blue sky" or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Offeror by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Common Shares, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Common Shares, all such Common Shares will be tendered unless otherwise specified on the instruction form contained in this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. 3 4 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF TEXOIL, INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated January 24, 2001 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as each may be amended from time to time, together constitute the "Offer"), in connection with the offer by OEI Acquisition Corp., a Nevada corporation (the "Offeror"), to purchase all the outstanding shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc. (the "Company") at a purchase price of $8.25 per Common Share, net to the seller, in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. (Pursuant to the Offer, the Offeror is also offering to purchase all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share, of the Company. No instructions are being given by this letter with respect to shares of Preferred Stock of the Company.) This will instruct you to tender to the Offeror the number of Common Shares indicated below (or, if no number is indicated below, all Common Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Common Shares to be Tendered: --------------- Common Shares* SIGN HERE Account Number: Signature(s): ------------------------------- --------------- Dated: ------------------------------------ , 2001 - -------------------------------------------------------------------------------- Please type or print name(s) - -------------------------------------------------------------------------------- Please type or print address(es) here - -------------------------------------------------------------------------------- Area Code and Telephone Number - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number(s) * Unless otherwise indicated, it will be assumed that all Common Shares held by us for your account are to be tendered. 4 EX-99.(A)(1)(VIII) 9 h83324tex99-a1viii.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER I.D. 1 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 5. Sole proprietorship The owner(3) 6. A valid trust, estate, or pension The legal entity trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 7. Corporate account The corporation 8. Religious, charitable, or The organization educational organization account 9. Partnership account The partnership 10. Association, club, or other tax- The organization exempt organization 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) Show your individual name. You may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name listed, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service ("IRS") and apply for a number. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividend payments, all listed payees are exempt except the payee in item (9). For broker transactions, all payees listed in items (1) through (13) and a person registered under the Investment Advisors Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that medical and health care payments, attorneys' fees (including gross proceeds paid to an attorney under Section 6045(f), even if the attorney is a corporation), and payments for services paid by a Federal executive agency, and reportable on Form 1099-Misc. (Miscellaneous Income), are not exempt. Only payees described in items (1) through (5) are exempt from backup withholding for barter exchange transactions and patronage dividends. (1) An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7), if the account satisfies the requirements of section 401(f)(2). (2) The United States or any of its agencies or instrumentalities. (3) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (4) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (5) An international organization or any of its agencies or instrumentalities. (6) A corporation. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or custodian. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends that generally are exempt from backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) payments made by an ESOP. Payments of interest that generally are exempt from backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments of mortgage or student loan interest to you. Exempt payees described above should file substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Payments that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations promulgated thereunder. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payors who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(1)(IX) 10 h83324tex99-a1ix.txt TEXT OF JOINT PRESS RELEASE OF JANUARY 18, 2001 1 [OCEAN ENERGY LOGO] [TEXOIL LOGO] FOR IMMEDIATE RELEASE January 18, 2001 CONTACTS: Ocean Energy, Inc. Texoil, Inc. Bruce Busmire -- 713-265-6161 (financial) Frank Lodzinski -- 281-537-9920 Janice Aston White -- 713-265-6164 (media)
OCEAN ENERGY TO ACQUIRE TEXOIL HOUSTON, JANUARY 18, 2001 -- Ocean Energy, Inc. (NYSE: OEI) and Texoil, Inc. (NASD: TXLI) today announced the signing of a definitive agreement for Ocean Energy to acquire all the outstanding shares of common stock of Texoil at a price of $8.25 per share and all outstanding shares of Series A convertible preferred stock of Texoil at a price of $18.04 per share. The all-cash transaction is structured as a first step tender offer followed by a cash merger to acquire all remaining shares of Texoil common stock and Series A convertible preferred stock for approximately $130 million including assumed bank debt of approximately $15 million plus certain other liabilities. The acquisition is expected to be accretive to Ocean's earnings and cash flow. The tender offer is subject to a number of conditions, including the valid tender of at least a majority of the outstanding common stock and a majority of the outstanding preferred stock. In conjunction with the tender offer, several principal stockholders of Texoil, who collectively own greater than a majority of Texoil's common stock and preferred stock, have agreed to tender their shares and vote such shares in favor of the merger agreement. Ocean estimates total proved reserves of approximately 150 billion cubic feet of natural gas equivalent, of which some 57 percent are gas reserves. During 2000, Texoil's average production rate was approximately 34 million cubic feet of gas equivalent per day. "This acquisition will expand our core operating area in South Texas and complement our strong position in Louisiana," said John D. Schiller, Ocean Energy Executive Vice President -- Operations. "It also will enhance our ability to grow production through exploitation and exploration, one of our primary corporate goals in 2001. Ocean will succeed Texoil as operator of approximately 80 percent of the properties." "This transaction provides our shareholders with a premium value for their holdings," said Frank A. Lodzinski, Chairman, President and Chief Executive Officer for Texoil, Inc. "Since our inception we have focused on increasing share value and liquidity for our shareholders, by assembling an attractive producing asset base with exploration and exploitation potential. This action fulfills that commitment by providing our shareholders an immediate cash return on their investment." Texoil, Inc. is an independent oil and gas company engaged in the acquisition of oil and gas reserves through a program, which includes purchases of reserves, reengineering, development and exploration activities in Texas and Louisiana. Ocean Energy, Inc. is an independent energy company engaged in the exploration, development, production and acquisition of crude oil and natural gas. North American operations are focused in the shelf and deepwater areas of the Gulf of Mexico, the Permian Basin, Mid-continent and Rocky Mountain regions. Internationally, Ocean Energy holds a leading position among U.S. independents in West Africa with oil and gas activities in Cote d'Ivoire, Equatorial Guinea and Angola. The company also conducts operations in the republics of Egypt, Tatarstan, Pakistan, and Indonesia. Texoil stockholders are advised to read the tender offer statement regarding the acquisition of Texoil, described in this press release, which will be filed by Ocean Energy with the Securities and Exchange Commission and the related solicitation/recommendation statement, which will be filed by Texoil with the 2 Commission. The tender offer statement (including an offer to purchase, letter of transmittal and related tender offer documents) and the solicitation/recommendation statement will contain important information which should be read carefully before any decision is made with respect to the offer. These documents will be made available at no charge to all stockholders of Texoil, Inc. Stockholders may contact the information agent at (800) 223-2064. These documents also will be available at no charge on the SEC's web site at www.sec.gov. CERTAIN STATEMENTS IN THIS NEWS RELEASE MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE AND ACHIEVEMENT OF OCEAN ENERGY OR TEXOIL TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENT EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. 2 EX-99.(A)(1)(X) 11 h83324tex99-a1x.txt FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(1)(x) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined herein). The Offer (as defined herein) is made solely by the Offer to Purchase, dated January 24, 2001, and the related Letters of Transmittal (and any amendments or supplements thereto), and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Offeror (as defined below) may, in its discretion, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of OEI Acquisition Corp. by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock and All Outstanding Shares of Series A Convertible Preferred Stock of Texoil, Inc. at $8.25 Net Per Share of Common Stock and $18.04 Net Per Share of Series A Convertible Preferred Stock by OEI Acquisition Corp., a Wholly-Owned Subsidiary of Ocean Energy, Inc. OEI Acquisition Corp. (the "Offeror"), a Nevada corporation and a wholly- owned subsidiary of Ocean Energy, Inc., a Texas corporation ("Parent"), is offering to purchase (i) all the outstanding shares of common stock, par value $.01 per share (the "Common Shares"), of Texoil, Inc. (the "Company") at a purchase price of $8.25 per share, net to the seller, in cash, without interest (such price referred to herein as the "Common Share Offer Price"), and (ii) all the outstanding shares of Series A Convertible Preferred Stock, par value $.01 per share (the "Preferred Shares," and, together with the Common Shares, the "Shares"), of the Company at a purchase price of $18.04 per share, net to the seller, in cash, without interest (such price referred to herein as the "Preferred Share Offer Price"), on the terms and subject to the conditions set forth in the Offer to Purchase dated January 24, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal for the Common Shares and the related Letter of Transmittal for the Preferred Shares (each individually, a "Letter of Transmittal," and together, the "Letters of Transmittal," and which, together with the Offer to Purchase, as each may be amended and supplemented from time to time, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FEBRUARY 22, 2001, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered by the Expiration Date and not withdrawn (a) at least that number of Common Shares which would constitute a majority of the outstanding Common Shares on a fully diluted basis (excluding for this purpose Common Shares issuable but not yet issued as of such date upon conversion of outstanding Preferred Shares) on the date of purchase, and (b) at least that number of Preferred Shares which would constitute a majority of the outstanding Preferred Shares on a fully diluted basis on the date of purchase (clauses (a) and (b) together, the "Minimum Condition"). The Offer is also subject to other terms and conditions described in the Offer to Purchase and in the related Letters of Transmittal. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of January 18, 2001 (the "Merger Agreement"), by and among Ocean Energy, Inc., a Texas corporation ("Parent"), the Offeror (jointly, the "Ocean Entities") and the Company. The Merger Agreement provides that, among other things, as promptly as practicable after consummation of the Offer and the satisfaction or waiver of the other conditions contained in the Merger Agreement, the Offeror will be merged with and into the Company (the "Merger"), with the Company continuing as the surviving corporation. At the effective time of the Merger (the "Effective Time"), Shares outstanding immediately prior to the Effective Time (other than Shares held by the Company, any wholly-owned subsidiary of the Company or the Ocean Entities or any wholly-owned subsidiary of Parent and Shares held by holders who have properly exercised their appraisal rights in accordance with the Nevada Revised Statutes) will, by virtue of the Merger, be cancelled and terminated, as of the Effective Time, and shall represent solely the right to receive the Common Share Offer Price (or any higher price paid for Common Shares pursuant to the Offer), without interest, or the Preferred Share Offer Price (or any higher price paid for Preferred Shares pursuant to the Offer), without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. The Merger Agreement is more fully described in Section 13 of the Offer to Purchase. The Offeror and Parent have entered into a separate Tender and Voting Agreement and Tender Agreement with certain stockholders of the Company who own as of January 18, 2001 an aggregate of approximately 54.8% of the outstanding Common Shares (45.9% of the Common Shares on a fully diluted basis (excluding for this purpose Common Shares issuable upon conversion of the Preferred Shares)) and 100% of the outstanding Preferred Shares. Such stockholders have, subject to the provisions thereof, agreed, among other things, to validly tender (and not withdraw) all such Shares pursuant to the Offer. The Board of Directors of the Company has (i) determined that each of the Merger Agreement, the Offer and the Merger are fair to and in the best interests of the Company's stockholders, (ii) approved the Merger Agreement and the transactions contemplated thereby, 2 including the Offer and the Merger and (iii) recommended acceptance of the Offer by the Company's stockholders and (if required by applicable law) approval of the Merger Agreement. For purposes of the Offer, the Offeror will be deemed to have accepted for payment (and thereby purchased) Shares validly tendered and not properly withdrawn as, if and when the Offeror gives written notice to EquiServe Trust Company, N.A. (the "Depositary") of its acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Offeror and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. Under no circumstances will interest be paid by the Offeror, regardless of any extension of the Offer or any delay in making such payment. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates evidencing such Shares, or in the case of Common Shares, timely confirmation of a book-entry transfer of such Common Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to the procedures set forth in Section 3 of the Offer to Purchase, (2) the related Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer of Common Shares, an Agent's Message (as defined in the Offer to Purchase) and (3) any other documents required by the Letter of Transmittal. The purpose of the Offer is to acquire for cash as many outstanding Shares as possible as a first step in acquiring the entire common and preferred equity interest in the Company. The Offer is subject to certain conditions set forth in the Offer to Purchase. If any such condition is not satisfied, the Offeror may, except as provided in the Merger Agreement, (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) extend the Offer and, subject to withdrawal rights as set forth below, retain all such Shares until the expiration of the Offer as so extended, (iii) waive such condition and purchase all Shares validly tendered and not withdrawn prior to the expiration of the Offer, or (iv) delay acceptance for payment or payment for Shares, subject to applicable laws, until satisfaction or waiver of the conditions to the Offer. The term "Expiration Date" means 12:00 midnight, New York City time, on February 22, 2001, unless and until the Offeror, in its sole discretion (but subject to the terms of the Merger Agreement), shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Offer, as so extended by the Offeror, shall expire. Subject to the applicable rules and regulations of the Securities and Exchange Commission, applicable law and the terms of the Merger Agreement, the Offeror expressly reserves the right, in its sole discretion, at any time, from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. Any such extension will be followed as promptly as possible by a public announcement thereof not later than 9:00 a.m., New York City time, on the next business day after the day on which the Offer is scheduled to expire. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw its Shares. Pursuant to the Merger Agreement, the Offeror shall extend the Offer from time to time until May 31, 2001 if at the then scheduled Expiration Date all of the conditions to the Offer have not been satisfied or waived as permitted by the Merger Agreement; provided, however, that the Offeror is required to so extend the Offer unless, in Parent's reasonable judgment, (i) each such condition is reasonably capable of being satisfied; (ii) the Company is in material compliance with all of its covenants in the Merger Agreement; and (iii) the failure of such condition to be satisfied shall not result from a breach by the Company of any of its covenants and agreements contained in the Merger Agreement. Any extension of the Offer shall not, without the written consent of the Company, exceed the number of days that the Offeror reasonably believes will be necessary so that the conditions will be satisfied. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment by the Offeror pursuant to the Offer, may also be withdrawn at any time after March 24, 2001. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the class and number of Shares to be withdrawn and the name of the registered holder of the Shares, if different from that of the person who tendered such Shares. If stock certificates representing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such stock certificates, the serial numbers shown on such stock certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. Common Shares tendered pursuant to the procedure for book-entry transfer, as set forth in Section 3 of the Offer to Purchase, may be withdrawn only by means of the withdrawal procedures made available by the Book-Entry Transfer Facility, must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Common Shares and must otherwise comply with the Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Offeror, in its sole discretion, whose determination will be final and binding on all parties. Neither the Offeror, any of its affiliates or assigns, the Depositary, Georgeson Shareholder Communications Inc., which is acting as the Information Agent for the Offer, or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, properly withdrawn Shares may be retendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 of the Offer to Purchase. Subject to the terms of the Merger Agreement, pursuant to Rule 14d-11 under the Exchange Act, the Offeror may, subject to certain conditions, provide a subsequent offering period from three to 20 business days in length following the Expiration Date. A subsequent offering period would be an additional period of time, following the expiration of the Offer and the purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. The Offeror does not presently intend to elect to provide a subsequent offering period, although it reserves the right to do so. Under the Exchange Act, no withdrawal rights apply to Shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares tendered in the Offer and accepted for payment. See Section 1 of the Offer to Purchase. The receipt by a stockholder of the Company of cash for Shares pursuant to the Offer and the Merger will be a taxable transaction for United States federal income tax purposes. All stockholders are urged to consult their own tax advisors as to the particular tax consequences to them of the Offer and the Merger. The information required to be disclosed by Rule 14d-6(d)(1) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Offeror with the Company's stockholder list and security position listing for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and, if required, other relevant materials will be mailed to recordholders of Shares whose names appear on the stockholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTERS OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent at the address and telephone numbers set forth below. Requests for copies of the Offer to Purchase and the related Letters of Transmittal and all other tender offer materials may be directed to the Information Agent, and copies will be furnished promptly at the Offeror's expense. The Offeror will not pay any fees or commissions to any broker or dealer or any other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: GEORGESON SHAREHOLDER COMMUNICATIONS INC. 17 State Street, 10th Floor New York, New York 10004 Bankers and Brokers Call Collect: (212) 440-9800 All Others Call Toll Free: (800) 223-2064 January 24, 2001 EX-99.(D)(1) 12 h83324tex99-d1.txt AGREEMENT AND PLAN OF MERGER DATED 1/18/01 1 EXHIBIT (d)(1) AGREEMENT AND PLAN OF MERGER AMONG OCEAN ENERGY, INC., OEI ACQUISITION CORP., AND TEXOIL, INC. DATED AS OF JANUARY 18, 2001 2 TABLE OF CONTENTS
Page ARTICLE I. DEFINITIONS............................................................................................2 SECTION 1.01. CERTAIN DEFINED TERMS..................................................................2 ARTICLE II. THE OFFER............................................................................................12 SECTION 2.01. THE OFFER.............................................................................12 SECTION 2.02. COMPANY ACTIONS.......................................................................14 SECTION 2.03. DIRECTORS.............................................................................15 ARTICLE III. THE MERGER..........................................................................................17 SECTION 3.01. THE MERGER............................................................................17 SECTION 3.02. EFFECTIVE TIME; CLOSING...............................................................17 SECTION 3.03. EFFECT OF THE MERGER..................................................................17 SECTION 3.04. ARTICLES OF INCORPORATION; BYLAWS.....................................................17 SECTION 3.05. DIRECTORS AND OFFICERS................................................................18 SECTION 3.06. EFFECT ON CAPITAL STOCK...............................................................18 SECTION 3.07. EXCHANGE OF COMPANY CERTIFICATES......................................................19 SECTION 3.08. STOCK OPTIONS AND WARRANTS............................................................21 SECTION 3.09. SUBSEQUENT ACTIONS....................................................................22 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................23 SECTION 4.01. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY..............................23 SECTION 4.02. CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES.................................23 SECTION 4.03. COMPANY SUBSIDIARIES..................................................................24 SECTION 4.04. CORPORATE BOOKS AND RECORDS...........................................................25 SECTION 4.05. NO CONFLICT...........................................................................25 SECTION 4.06. GOVERNMENTAL CONSENTS AND APPROVALS...................................................26 SECTION 4.07. SEC REPORTS, FINANCIAL INFORMATION, BOOKS AND RECORDS.................................26 SECTION 4.08. NO UNDISCLOSED LIABILITIES............................................................27 SECTION 4.09. ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS.....................................27 SECTION 4.10. LITIGATION............................................................................27 SECTION 4.11. COMPLIANCE WITH LAWS..................................................................28 SECTION 4.12. MATERIAL CONTRACTS....................................................................28 SECTION 4.13. TITLE TO PROPERTY.....................................................................29 SECTION 4.14. INTELLECTUAL PROPERTY.................................................................31 SECTION 4.15. EMPLOYEE BENEFIT MATTERS..............................................................31 SECTION 4.16. ENVIRONMENTAL MATTERS.................................................................35 SECTION 4.17. HEDGING...............................................................................36 SECTION 4.18. TAXES.................................................................................36 SECTION 4.19. INSURANCE.............................................................................38 SECTION 4.20. BROKERS...............................................................................38 SECTION 4.21. PRODUCTION AND PIPELINE IMBALANCES....................................................39 SECTION 4.22. OIL AND GAS OPERATIONS................................................................39 SECTION 4.23. WELLS AND EQUIPMENT...................................................................39 SECTION 4.24. PROXY STATEMENT.......................................................................40 SECTION 4.25. GAS IMBALANCES; PREFERENTIAL RIGHTS...................................................40 SECTION 4.26. REQUIRED STOCKHOLDER VOTE OR CONSENT..................................................41 SECTION 4.27. FAIRNESS OPINION......................................................................41 SECTION 4.28. TAKEOVER RESTRICTIONS.................................................................41 SECTION 4.29. INDEMNIFICATION OBLIGATIONS...........................................................41 SECTION 4.30. BANKRUPTCY............................................................................42
i 3 ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................................................42 SECTION 5.01. ORGANIZATION AND AUTHORITY OF PARENT AND PURCHASER....................................42 SECTION 5.02. NO CONFLICT...........................................................................42 SECTION 5.03. GOVERNMENTAL CONSENTS AND APPROVALS...................................................43 SECTION 5.04. OFFER DOCUMENTS; PROXY STATEMENT......................................................43 SECTION 5.05. BROKERS...............................................................................43 SECTION 5.06. FINANCING ARRANGEMENTS................................................................44 ARTICLE VI. ADDITIONAL AGREEMENTS................................................................................44 SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING..............................................44 SECTION 6.02. ACCESS TO INFORMATION.................................................................47 SECTION 6.03. CONFIDENTIALITY.......................................................................47 SECTION 6.04. STOCKHOLDER ACTION....................................................................47 SECTION 6.05. PREPARATION OF THE PROXY STATEMENT....................................................48 SECTION 6.06. REGULATORY AND OTHER AUTHORIZATIONS; NOTICES AND CONSENTS.............................48 SECTION 6.07. NOTICE OF CERTAIN MATTERS.............................................................49 SECTION 6.08. NO SOLICITATION OF TRANSACTION........................................................49 SECTION 6.09. EXPENSES..............................................................................50 SECTION 6.10. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE................................50 SECTION 6.11. COOPERATION AND FILINGS...............................................................51 SECTION 6.12. PUBLICITY.............................................................................51 SECTION 6.13. ADDITIONAL ACTIONS....................................................................52 SECTION 6.14. CONSENTS..............................................................................52 SECTION 6.15. STOCKHOLDER LITIGATION................................................................52 SECTION 6.16. AMENDMENT TO BYLAWS...................................................................52 ARTICLE VII. CONDITIONS TO CLOSING...............................................................................52 SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY...........................................52 ARTICLE VIII. TERMINATION AND WAIVER.............................................................................53 SECTION 8.01. TERMINATION...........................................................................53 SECTION 8.02. EFFECT OF TERMINATION.................................................................54 ARTICLE IX. GENERAL PROVISIONS...................................................................................55 SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.................................55 SECTION 9.02. NOTICES...............................................................................55 SECTION 9.03. ENTIRE AGREEMENT......................................................................57 SECTION 9.04. HEADINGS..............................................................................57 SECTION 9.05. SEPARABILITY..........................................................................57 SECTION 9.06. ASSIGNMENT............................................................................57 SECTION 9.07. AMENDMENT.............................................................................57 SECTION 9.08. GOVERNING LAW; FORUM..................................................................57 SECTION 9.09. COUNTERPARTS..........................................................................57 SECTION 9.10. SPECIFIC PERFORMANCE..................................................................58 SECTION 9.11. WAIVER OF JURY TRIAL..................................................................58 SECTION 9.12. ATTORNEY'S FEES.......................................................................58 SECTION 9.13. EXTENSIONS, WAIVERS, ETC..............................................................58 Annex I Conditions to the Offer
ii 4 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of January 18, 2001, among Ocean Energy, Inc., a Texas corporation ("PARENT"), OEI Acquisition Corp., a Nevada corporation and a direct, wholly owned subsidiary of Parent ("PURCHASER"), and Texoil, Inc., a Nevada corporation (the "COMPANY"). WITNESSETH: WHEREAS, the respective Boards of Directors of Purchaser and the Company have approved, and deem it advisable and in the best interests of their respective companies and stockholders to consummate, the acquisition of the Company by Parent and Purchaser upon the terms and subject to the conditions set forth herein; WHEREAS, pursuant to this Agreement, Purchaser has agreed to commence a tender offer (the "OFFER") to purchase (i) all of the outstanding shares (the "COMMON SHARES") of the Company's common stock, par value $0.01 per share ("COMPANY COMMON STOCK"), at a price per Common Share of $8.25 (such price or such higher price as may be paid for Common Shares in the Offer, the "OFFER PRICE") net to the seller in cash and (ii) all of the outstanding shares (the "PREFERRED SHARES") of the Company's Series A Convertible Preferred Stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"), at a price per Preferred Share of $18.04 (such price or such higher price as may be paid for Preferred Shares in the Offer, the "PREFERRED OFFER PRICE") net to the seller in cash; WHEREAS, the Board of Directors of the Company has (i) approved the Offer and (ii) approved and adopted this Agreement, declared its advisability and is recommending that the Company's stockholders accept the Offer, tender their Shares to Purchaser and approve the Merger (hereinafter defined) and adopt this Agreement; WHEREAS, the respective Boards of Directors of Purchaser and the Company, and Parent as sole stockholder of Purchaser, have approved and adopted the merger of Purchaser with and into the Company, as set forth below (the "MERGER"), in accordance with the Nevada Revised Statutes (the "NRS") upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Board of Directors of the Company has approved the terms of and transactions contemplated by the (i) Tender Agreement (the "TENDER AGREEMENT") to be executed and delivered by Parent, Purchaser and the stockholders of the Company named therein and (ii) Tender and Voting Agreement (the "TENDER AND VOTING Agreement") to be executed and delivered by Parent, Purchaser and the stockholders of the Company named therein; WHEREAS, Parent, Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger, and 5 WHEREAS, there are no prior agreements, arrangements or understandings with respect to the subject matter hereof or the Tender Agreement or the Tender and Voting Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, the parties hereto hereby agree as follows: ARTICLE I. DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ACQUISITION PROPOSAL" means any offer or proposal for, or any indication of interest in, a merger or other business combination directly or indirectly involving the Company or any Company Subsidiary or the acquisition of a substantial equity interest in, or a substantial portion of the assets of, any such party, other than the transactions contemplated by this Agreement. "ACTION" means any claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority. "AFFILIATE" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. "AGREEMENT" or "THIS AGREEMENT" means this Agreement, dated as of January 18, 2001, among the Company, Parent and Purchaser (including the Exhibits hereto and the Disclosure Letter) and all amendments hereto made in accordance with the provisions of Section 9.07. "ALLOCATED VALUE SCHEDULE" means Schedule A attached to the Disclosure Letter. "ARTICLES OF MERGER" has the meaning specified in Section 3.02(b). "AUDIT" means any audit, assessment of Taxes, other examination by any Tax Authority, proceeding or appeal of such proceeding relating to Taxes. "BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance or other similar contract, arrangement or policy and each plan, arrangement (written or oral), program, agreement or commitment providing for insurance coverage (including without limitation any self-insured arrangements), workers' compensation, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, life, health, disability or accident benefits (including without limitation any "voluntary employees' beneficiary association" as defined in Section 501(c)(9) of the Code providing for the same or other benefits) or for deferred compensation, profit-sharing bonuses, stock options, restricted stock, phantom stock, stock appreciation rights, stock purchases or other forms of incentive compensation or post-retirement insurance, compensation or benefits which (i) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (ii) is (or was within the six-year period ending on the Closing Date) entered into, maintained, contributed to or required to be contributed to, as the case may be, by 2 6 the Company or any ERISA Affiliate, and (iii) covers any current or former employee, director, or consultant of the Company or any ERISA Affiliate (with respect to their relationship with such entities). "BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in The City of New York. "CLASS B COMPANY COMMON STOCK" has the meaning specified in Section 4.02. "CLOSING" has the meaning specified in Section 3.02(a). "CLOSING DATE" has the meaning specified in Section 3.02(a). "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the Regulations promulgated thereunder. "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the Regulations promulgated thereunder. "COMMON SHARES" has the meaning specified in the recitals to this Agreement. "COMPANY" has the meaning specified in the recitals to this Agreement. "COMPANY CERTIFICATES" has the meaning specified in Section 3.07(b). "COMPANY COMMON STOCK" has the meaning specified in the recitals to this Agreement. "COMPANY OPTION" has the meaning specified in Section 3.08(a). "COMPANY OPTION PAYMENTS" has the meaning specified in Section 3.08(a). "COMPANY OPTION PLANS" has the meaning specified in Section 3.08(a). "COMPANY PREFERRED STOCK" has the meaning specified in the recitals to this Agreement. "COMPANY SEC REPORTS" has the meaning specified in Section 4.07(a). "COMPANY STOCKHOLDERS' APPROVAL" has the meaning specified in Section 4.26. "COMPANY STOCKHOLDERS' MEETING" has the meaning specified in Section 6.04. "COMPANY SUBSIDIARY" means any and all corporations, partnerships, joint ventures, associations, limited liability companies and other entities controlled by the Company, directly or indirectly through one or more intermediaries. "COMPANY WARRANT" has the meaning specified in Section 3.08(b). "COMPANY WARRANT PAYMENTS" has the meaning specified in Section 3.08(b). 3 7 "CONFIDENTIALITY AGREEMENTS" has the meaning specified in Section 6.03. "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including, without limitation, the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person. "COURT" shall mean any court, tribunal, or other judicial or arbitral panel of the United States, any foreign country, or any domestic or foreign state, and any political subdivision or agency thereof. "DAIN RAUSCHER" means Dain Rauscher Wessels, a division of Dain Rauscher Incorporated. "DEBT RELIEF ACTIONS" has the meaning specified in Section 4.30. "DEFENSIBLE TITLE" has the meanings specified in Section 4.13(b). "DISCLOSURE LETTER" means the disclosure letter delivered by the Company to Parent simultaneously with the execution of this Agreement. "D&O INSURANCE" has the meaning specified in Section 6.10(b). "DISSENTING SHARES" has the meaning specified in Section 3.06(e). "EASEMENTS" means all easements, rights-of-way, licenses, permits, servitudes, surface leases, and similar assets, rights and interests in any way appertaining, belonging, affixed, incidental or applicable to, or used in connection with, the ownership of the Leases, the Wells, Fee Mineral Interests or Other Real Property or the Operations of the Company or any Company Subsidiary, including, without limitation, those described in Section 4.13(c) of the Disclosure Letter. "EFFECTIVE TIME" has the meaning specified in Section 3.02(b). "EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans. "ENCUMBRANCE" means any security interest, pledge, mortgage, lien (including, without limitation, environmental and tax liens), charge, encumbrance, adverse claim, preferential arrangement or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership. "ENVIRONMENTAL LAWS" means any Law in effect on the date of this Agreement relating to pollution or protection of the environment, health, safety or natural resources, including, but 4 8 not limited to, Laws pertaining to the use, handling, transportation, storage, disposal, release or discharge of Hazardous Materials. "EQUIPMENT" means all equipment, fixtures, physical facilities, tank batteries, surface and subsurface machinery, inventory, spare parts, supplies, tools, and other tangible personal property owned or leased by the Company or any Company Subsidiary and other personal property of any kind on or associated with the Operations of the Company or any Company Subsidiary on the date hereof, including, without limitation, casing, tubing, tubular goods, rods, pumping units and engines, Christmas trees, derricks, platforms, separators, compressors, gun barrels, gathering lines, pipelines, flow lines, tanks, wellheads, production units, platforms, related plants, valves, meters, heaters, dehydrators, and communications systems and equipment, which are located on or connected with the Leases, the Easements or the Operations of the Company or any Company Subsidiary. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and the Regulations promulgated thereunder. "ERISA AFFILIATE" shall mean any entity which is (or at any relevant time was) a member of a "controlled group of corporations" with, under "common control" with, or a member of an "affiliated service group" with the Company as such terms are defined in Section 414(b), (c), (m) or (o) of the Code. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "EXPENSE FEE" has the meaning specified in Section 8.02(b). "EXPENSES" has the meaning specified in Section 6.09(b). "EXPIRATION DATE" has the meaning specified in Section 2.01(b). "FEE MINERAL INTERESTS" means all of the record and beneficial right, title and interest of the Company and any Company Subsidiary in and to the oil, gas and other minerals in and under the land described in Section 4.13(d) of the Disclosure Letter. "FINANCIAL STATEMENTS" has the meaning specified in Section 4.07(b). "GOVERNMENTAL AUTHORITY" means any United States federal, state, local or any foreign government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body. "GOVERNMENTAL ORDER" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. "HAZARDOUS MATERIALS" means (i) petroleum and petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials and polychlorinated biphenyls, and (ii) other chemicals, materials or substances defined or regulated as toxic or hazardous or as pollutants, contaminants or waste under any applicable Environmental Law. 5 9 "HYDROCARBONS" means crude oil, natural gas, casinghead gas, condensate, sulphur, natural gas liquids, plant products and other liquid or gaseous hydrocarbons produced in association therewith, including, without limitation, coalbed methane and gas and CO(2), and all other minerals of every kind and character which may be covered by or included in the Property, except Fee Mineral Interests, with respect to which "HYDROCARBONS" means all of the foregoing subject to the terms of any Lease existing at the Effective Time. "INDEBTEDNESS" means, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables), (c) all obligations of such Person evidenced by notes, bonds, debentures, repurchase and reverse repurchase agreements or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement, in the event of default, are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with U.S. GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, and (g) all Indebtedness of others referred to in clauses (a) through (f) above guaranteed by such Person. "INDEMNIFICATION OBLIGATIONS" has the meaning set forth in Section 4.29. "INDEMNIFIED PARTIES" has the meaning set forth in Section 6.10(a). "INDEPENDENT DIRECTORS" has the meaning set forth in Section 2.03(a). "INTELLECTUAL PROPERTY" has the meaning specified in Section 4.14. "INTERIM FINANCIAL STATEMENTS" has the meaning specified in Section 4.07(b). "IRS" means the Internal Revenue Service of the United States. "KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a particular fact or other matter if (a) such individual is actually aware of such fact or other matter; (b) such individual should be aware of such fact or matter; or (c) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a comprehensive investigation concerning the existence of such fact or other matter. A Person other than an individual will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is currently serving as an officer of such Person or a subsidiary of such Person (or in each case any similar capacity), has, or at any time had, Knowledge of such fact or other matter. "LAWS" shall mean all laws, statutes, ordinances, rulings and Regulations of the United States, any foreign country, or any domestic or foreign state, and any political subdivision or agency thereof, including all decisions of Courts having the effect of law in each such jurisdiction. 6 10 "LEASES" means the fee mineral interests other than Fee Mineral Interests as that term is defined herein, oil, gas and mineral leasehold interests and other leasehold interests, subleases, mineral servitudes, licenses, concessions, working interests, farm-out or farm-in rights, royalty, overriding royalty or other non-working or carried interests, operating rights or other rights and interests described or referred to in Section 4.13(b) of the Disclosure Letter (other than Permitted Encumbrances), including, without limitation, all right, title, and interest of the Company and any Company Subsidiary in all pooled or unitized areas in which the Leases are included, to the extent that such rights and interests arise from and are associated with the Leases or Wells, and all right, title and interest owned by the Company and any Company Subsidiary in, under or derived from all or any presently existing unitization, pooling, operating, communitization or other agreements, whether voluntary or involuntary, or formed under orders, regulations, rules or declaration or other official acts of any governmental or regulatory authority. "LIABILITIES" means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, or determined or determinable, including, without limitation, those arising under any Law, Action or Governmental Order, and those arising under any contract or agreement. "LOSS" means any and all Liabilities, losses, damages, claims, costs and expenses, interest, awards, judgments and penalties (including, without limitation, attorneys' fees and expenses) actually suffered or incurred by a Person. "MATERIAL ADVERSE EFFECT" means any event, circumstance, condition, development or occurrence causing, resulting in or having (or with the passage of time likely to cause, result in or have) a material adverse effect on the financial condition, business, assets, properties or results of operations of the Company and the Company Subsidiaries taken as a whole; provided, that such term shall not include (i) changes in the market price and trading volume of the Company's securities or (ii) effects that are not applicable primarily to the Company resulting from market conditions generally in the oil and gas industry (including without limitation changes in commodities prices). "MATERIAL CONTRACTS" has the meaning specified in Section 4.12(a). "MATERIAL TITLE FAILURE" means Title Failures having a value in excess of Six Million dollars ($6,000,000.00). "MERGER" has the meaning specified in the recitals to this Agreement. "MINIMUM CONDITION" has the meaning specified in Annex I attached hereto. "MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined in Sections 3(37) or 4001(a)(3) of ERISA, which (i) is (or was within the six-year period ending on the Closing Date) entered into, maintained, administered, contributed to or required to be contributed to, as the case may be, by the Company or any ERISA Affiliate and (ii) covers or covered any employee or former employee of the Company or any ERISA Affiliate (with respect to their relationship with such entities). 7 11 "NET REVENUE INTEREST" means an overall share of Hydrocarbons throughout the duration of the estate produced (including the proceeds attributable thereto) from or attributable to the Fee Mineral Interests, Leases and Wells, after deducting all lessors' royalties, overriding royalties, production payments, and other interests or burdens on Hydrocarbons produced therefrom. "NRS" has the meaning specified in the recitals to this Agreement. "OFFER" has the meaning specified in the recitals to this Agreement. "OFFER DOCUMENTS" has the meaning specified in Section 2.01(a). "OFFER PRICE" has the meaning specified in the recitals to this Agreement. "OTHER REAL PROPERTY" means the real property described and identified in Section 4.13(e) of the Disclosure Letter. "OPERATIONS" means all Hydrocarbon exploration, development, production, treatment and marketing and all operations related thereto, including, without limitation, (a) the acquisition, purchase, sale, development, operation, maintenance or remediation and abandonment of oil, gas and mineral leases, lands and related interests, (b) the drilling, reworking, production, purchase, sale, gathering, transportation, storage, processing, treating, manufacture and disposal of, or for, Hydrocarbon, and associated by-products and wastes, and (c) the acquisition, construction, installation, maintenance or remediation and operation of related plants, platforms, pipelines, gathering lines, compressors, facilities, storage facilities and equipment. "PBGC" shall mean the Pension Benefit Guaranty Corporation. "PARENT" has the meaning specified in the recitals to this Agreement. "PARENT MATERIAL ADVERSE EFFECT" means any event, circumstance, condition, development or occurrence causing, resulting in or having (or with the passage of time likely to cause, result in or have) a material adverse effect on the financial condition, business, assets, properties, or results of operations of Parent and Parent's subsidiaries taken as a whole; provided, that such term shall not include effects that are not applicable primarily to Parent resulting from market conditions generally in the oil and gas industry (including without limitation changes in commodities prices). "PAYING AGENT" has the meaning specified in Section 3.07(a). "PENSION PLAN" shall mean any "employee pension benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (i) is (or was within the six-year period ending on the Closing Date) entered into, maintained, administered, contributed to or required to be contributed to, as the case may be, by the Company or any ERISA Affiliate and (ii) which covers or covered any current or former employee, director, or consultant of the Company or any ERISA Affiliate (with respect to their relationship with such entities). 8 12 "PERMITTED ENCUMBRANCES" means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) liens for taxes, assessments and governmental charges or levies not yet due and payable; (b) Encumbrances imposed by Law, such as materialmen's, mechanics', carriers', workmen's and repairmen's liens and other similar liens arising in the ordinary course of business; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; (d) minor survey exceptions, reciprocal easement agreements and other customary encumbrances on title to real property that do not, individually or in the aggregate, materially adversely affect the value or use of property subject thereto for its current and anticipated purposes; (e) lessor's royalties, overriding royalties, nonparticipating royalties, net profits interests, carried interests, production payments, reversionary interests, and other burdens, if the net cumulative effect of such burdens does not operate to reduce the Net Revenue Interest of the Company or the Company Subsidiary, as applicable, in any Property to an amount less than the Net Revenue Interest for such Property set forth on Section 4.13(b) of the Disclosure Letter; (f) easements, rights-of-way, servitudes, permits, licenses, surface leases, and other rights in respect of surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or the like; conditions covenants or other restrictions, and easements for streets, alleys, highways, pipelines, telephone lines, power lines, railways, and other easements and rights-of-way on, over, or in respect of any Property which will not materially interfere with the value, operation or use of any of the affected Properties; (g) farmout and farmin agreements, participation agreements, joint operating agreements, division orders, pooling agreements, unitization orders or agreements, if the net cumulative effect thereof (A) do not operate to reduce the Net Revenue Interest of the Company or the Company Subsidiary, as applicable, in any Property to an amount less than the Net Revenue Interest for such Property set forth on Section 4.13(b) of the Disclosure Letter, or (B) do not obligate the Company or the Company Subsidiary to bear costs and expenses relating to the maintenance, development, and operation of any Properties in an amount greater than the Working Interest of the Company or Company Subsidiary, as applicable, for such Property as set forth on Section 4.13(b) of the Disclosure Letter (unless the actual Net Revenue Interest for such Property is greater than the Net Revenue Interest set forth on Section 4.13(b) of the Disclosure Letter in the same proportion as any increase in such Working Interest); (h) Hydrocarbon sales agreements entered into in the ordinary course of business and, with respect to those Hydrocarbon sales agreements that were entered into prior to the date of the Reserve Report, that do not adversely affect the assumptions made in the Reserve Report; (i) rights reserved to or vested in any Governmental Authority to control or regulate any Property in any manner, and (j) any defect, irregularity, deficiencies in title, or other matter that a reasonable and prudent operator, experienced and knowledgeable in the domestic oil and gas business, would not consider a material impairment of the Company's or the Company Subsidiary's title in such Property. "PERSON" means any individual, partnership, corporation, limited liability company, trust, incorporated or unincorporated organization or other legal entity of any kind. "PREFERRED OFFER PRICE" has the meaning specified in the recitals to this Agreement. "PREFERRED SHARE" has the meaning specified in the recitals to this Agreement. 9 13 "PREFERRED STOCK PURCHASE AGREEMENT" means the Preferred Stock Purchase Agreement dated October 12, 1999 by and among the Company, Quantum Energy Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital Investment Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B. David, Thomas A. Reiser and Jerry M. Crews, as amended to the date hereof. "PROPERTY" or "PROPERTIES" mean the Leases, Wells, Easements, Equipment, Other Real Property and Fee Mineral Interests. "PROXY STATEMENT" has the meaning specified in Section 6.05. "PURCHASER" has the meaning specified in the recitals to this Agreement. "REFERENCE BALANCE SHEET" means the consolidated balance sheet of the Company, dated as of September 30, 2000, included in the Financial Statements. "REGULATION" shall mean any rule or regulation of any governmental authority having the effect of law. "REPRESENTATIVES" has the meaning specified in Section 6.02. "RESERVE REPORT" means the oil and gas reserve report for the Company prepared by the Company and reviewed by W.D. Von Gonten & Co. as of January 1, 2000. "SCHEDULE TO" has the meaning specified in Section 2.01(a). "SCHEDULE 14D-9" has the meaning specified in Section 2.02(a). "SEC" means the United States Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "SHARES" refers collectively to the shares of Company Common Stock and shares of Company Preferred Stock. "SUPERIOR PROPOSAL" has the meaning specified in Section 8.01(f). "SURVIVING CORPORATION" has the meaning specified in Section 3.01. "TAX" or "TAXES" means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any government or taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or 10 14 gains taxes; license, registration and documentation fees; and customs duties, tariffs, and similar charges. "TAX AUTHORITY" means the IRS and any other domestic or foreign Governmental Authority responsible for the administration of Taxes. "TENDER AGREEMENT" has the meaning specified in the recitals to this Agreement. "TENDER AND VOTING AGREEMENT" has the meaning specified in the recitals to this Agreement. "TENDER OFFER CONDITIONS" has the meaning specified in Section 2.01(a). "TERMINATION DATE" has the meaning specified in Section 8.01(b). "TERMINATION FEE" has the meaning specified in Section 8.02(b). "THIRD PARTY PROVISIONS" has the meaning specified in Section 9.06. "TITLE FAILURE" means the occurrence or existence of any of the following conditions: (a) the Company does not have Defensible Title to a Lease or Well; (b) any royalties, rentals, pugh clause payments, shut-in gas payments and other payments due with respect to a Lease have not been properly and timely paid by or on behalf of the Company, except for payments held in suspense for title or other reasons which are customary in the industry and which will not result in grounds for cancellation of the Company's rights in such Lease; (c) the Company is in default under the material terms of any Leases, farm-out agreements or other contracts or agreements respecting a Lease or Well which could (A) prevent the Company from receiving the proceeds of production attributable to its interest therein, or (B) result in cancellation of the Company's interest therein; or (d) the Company is not receiving on a current basis the proceeds of production attributable to its Net Revenue Interest, or if so, is required to post a bond or provide indemnity to receive such payments. The value of any Title Failure shall be determined as follows: (1) If the Title Failure results from the failure to have Defensible Title, the value of the Title Failure shall equal the difference between the Allocated Value for the affected Lease or Well and the Adjusted Allocated Value. For purposes hereof, the Adjusted Allocated Value for a Lease or Well means the product obtained by multiplying (x) the Allocated Value for such Lease or Well, times (y) one (1) minus the Adjustment Ratio. For purposes hereof, the Adjustment Ratio with respect to a Lease or Well means the ratio of: (i) the actual Net Revenue Interest and/or Working Interest, as applicable, to which the Company has Defensible Title, to (ii) the Net Revenue Interest and/or Working Interest, as applicable, set forth for such Lease or Well in the Allocated Value Schedule. (2) If the Title Failure results from a lien, encumbrance or other charge that is uncontested and liquidated in amount, then the value of the Title Failure shall equal the lesser of the Allocated Value for the affected Lease or Well and the sum necessary to be paid to the obligee to remove the Title Failure. 11 15 (3) If the Title Failure results from other than those described in (1) or (2) above, the value of the Title Failure shall equal an amount determined in good faith by Parent and Company, taking into account the Allocated Value of the affected Lease or Well, the legal effect of the Title Failure and the probable economic effect of the Title Failure over the life of such Lease or Well. For purposes of the foregoing, the Allocated Value shall be the 10% discounted present value specified in the Allocated Value Schedule for the relevant Lease or Well. "U.S. GAAP" means United States generally accepted accounting principles and practices as in effect from time to time and applied consistently throughout the periods involved. "WELFARE PLAN" shall mean any "employee welfare benefit plan" as defined in Section 3(1) of ERISA, which (i) is (or was within the six-year period ending on the Closing Date) entered into, maintained, administered, contributed to or required to be contributed to, as the case may be, by the Company or any ERISA Affiliate and (ii) which covers or covered any current or former employee, director, or consultant of the Company or any ERISA Affiliate (with respect to their relationship with such entities). "WELLS" means those oil, condensate or natural gas wells or wells producing any combination thereof (whether producing, not producing, abandoned or temporarily abandoned), water source wells, and water and other types of injection or disposal wells and systems located on the Leases, including, without limitation, the wells described and identified in Section 4.13(b) of the Disclosure Letter. "WINDROCK" means Windrock Capital, Ltd. "WORKING INTERESTS" means that share of all of the costs, expenses, burdens and obligations of any type or nature attributable to the Company's or the Company Subsidiaries throughout the duration of the estates, as applicable, interest in any Lease or Well. ARTICLE II. THE OFFER SECTION 2.01. The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Article VIII hereof and none of the events set forth in Annex I hereto shall have occurred or be existing (and shall not have been waived by Purchaser), as promptly as practicable but in no event later than the fifth Business Day following the public announcement by Parent and the Company of the execution of this Agreement, Purchaser shall commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer to purchase all outstanding Common Shares at the Offer Price and all outstanding Preferred Shares at the Preferred Offer Price. Any Shares acquired pursuant to the Offer will include, by way of amplification and not limitation, all rights associated with such Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued, paid or distributed or issuable, payable or distributable in respect thereof on or after the date of this Agreement (including, 12 16 without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). As promptly as practicable on the date of commencement of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule TO (together with all amendments and supplements thereto, the "SCHEDULE TO") with respect to the Offer. The Schedule TO shall contain or incorporate by reference an offer to purchase and forms of the related letters of transmittal and other ancillary offer documents (collectively, together with all supplements and amendments thereto, being referred to as the "OFFER DOCUMENTS") and otherwise shall comply in all material respects with the Exchange Act. Purchaser shall disseminate to holders of Shares the Offer Documents to the extent required by law. The obligation of Purchaser to accept for payment and pay for any Shares tendered pursuant thereto will be subject only to the satisfaction of the conditions set forth in Annex I hereto (the "TENDER OFFER CONDITIONS"). The Offer Price and the Preferred Offer Price shall be net to the seller in cash, without interest, subject to reduction only for any applicable withholding taxes or stock transfer taxes payable by the seller. The Company agrees that no Shares held by the Company or any of its subsidiaries will be tendered in the Offer. (b) Purchaser specifically reserves the right to waive any condition of the Offer, to increase the Offer Price and the Preferred Offer Price and to make any other changes in the terms and conditions of the Offer; provided that without the prior written consent of the Company, Purchaser shall not decrease the Offer Price or the Preferred Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased in the Offer, impose additional conditions to the Offer or amend any other term of the Offer in any manner materially adverse to the holders of Shares or reduce the time period during which the Offer shall remain open. Subject to the terms of the Offer and this Agreement and the satisfaction or waiver of all the Tender Offer Conditions as of any Expiration Date, Purchaser will accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such Expiration Date of the Offer. Notwithstanding the foregoing, Purchaser shall be entitled to extend the Offer, without the consent of the Company if at the initial expiration of the Offer, which will be 12:00 midnight eastern standard time on the twentieth Business Day following commencement of the Offer (such date and time, as extended in accordance with the term hereof, the "EXPIRATION DATE"), or any extension thereof, any condition to the Offer is not satisfied or waived, and Purchaser agrees to extend the Offer from time to time until the Termination Date if at the then scheduled Expiration Date all of the Tender Offer Conditions have not been satisfied or waived as permitted by this Agreement; provided, however, that Purchaser shall not be required to extend the Offer as provided in this sentence unless, in Parent's reasonable judgment, (i) each such condition is reasonably capable of being satisfied; (ii) the Company is in material compliance with all of its covenants in this Agreement; and (iii) the failure of such condition to be satisfied shall not result from a breach by the Company of any of its covenants and agreements contained in this Agreement. Any extension of the Offer pursuant to this Section 2.01 shall not, without the written consent of the Company, exceed the number of days that Purchaser reasonably believes will be necessary so that the Tender Offer Conditions will be satisfied. In addition, Purchaser may, without the consent of the Company, extend any then scheduled Expiration Date of the Offer for any period required by applicable rules, regulations, interpretations or positions of the SEC or the staff thereof applicable to the Offer or for any period required by applicable law. If the Minimum Condition (as defined in Annex I hereto) has been satisfied and all other conditions to the Offer have been satisfied or waived but fewer than 90% of the Shares have been validly tendered and not 13 17 withdrawn as of any Expiration Date, Purchaser shall accept and purchase all of the Shares tendered in the initial offer period and may provide for a subsequent offering period (as contemplated by Rule 14d-11 under the Exchange Act) as long as providing for the subsequent offering period does not require the extension of the initial offer period under applicable rules and regulations of the SEC, which subsequent offering period shall not exceed 20 Business Days. In addition, the Offer Price and the Preferred Offer Price may be increased and the Offer may be extended to the extent required by law in connection with such increase in each case without the consent of the Company. On or prior to the dates that Purchaser becomes obligated to accept for payment and pay for Shares pursuant to the Offer, Parent shall provide or cause to be provided to Purchaser the funds necessary to pay for all Shares that Purchaser becomes so obligated to accept for payment and pay for pursuant to the Offer. (c) Parent and Purchaser represent that the Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied by the Company for inclusion in the Offer Documents. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents and any amendments thereto prior to the filing thereof with the SEC. Each of Parent and Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case, as and to the extent required by applicable federal securities laws. Parent and Purchaser will provide the Company and its counsel with a copy of any written comments or telephonic notification of any oral comments Parent or Purchaser receives from the SEC or its staff with respect to the Offer Documents promptly after receipt thereof and will provide the Company and its counsel with a copy of any written responses and telephonic notification of any oral responses of Parent, Purchaser or their counsel. SECTION 2.02. Company Actions. (a) The Company shall file with the SEC and mail to the holders of Shares, on the date of the filing by Parent and Purchaser of the Offer Documents, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "SCHEDULE 14D-9") reflecting the recommendation of the Board of Directors of the Company that holders of Shares tender their Shares pursuant to the Offer, and shall disseminate the Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule 14D-9 will set forth, and the Company hereby represents, that the Board of Directors of the Company, at a meeting duly called and held, has unanimously, by vote of the directors attending such meeting, (i) determined by vote of its directors present at the meeting at which this Agreement was approved that the transactions contemplated hereby, including each of the Offer, the Merger, the Tender Agreement and the Tender and Voting Agreement, are fair to and in the best interests of the Company and its stockholders, 14 18 (ii) approved the Offer and approved and adopted this Agreement and declared its advisability in accordance with the NRS, and (iii) recommended acceptance of the Offer and approval of this Agreement by the Company's stockholders (if such approval is required by applicable law). The Company further represents that, prior to the execution hereof, Dain Rauscher has delivered to the Board of Directors of the Company its written opinion that the consideration to be received for the Shares pursuant to the Offer and the Merger is fair to the Company's stockholders from a financial point of view. The Company further represents and warrants that it has been authorized by Dain Rauscher to permit, subject to prior review and consent by Dain Rauscher (such consent not to be unreasonably withheld), the inclusion of the fairness opinion (or a reference thereto) in the Offer Documents and in the Schedule 14D-9. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Board of Directors of the Company described in this Section 2.02(a). (b) The Company represents that the Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Purchaser for inclusion in the Schedule 14D-9. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 and any amendments thereto prior to the filing thereof with the SEC. Each of the Company, on the one hand, and Parent and Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in the Schedule 14D-9 to the extent that it shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the stockholders of the Company, in each case, as and to the extent required by applicable federal securities law. The Company will provide Parent, Purchaser and their counsel with a copy of any written comments or telephonic notification of any oral comments the Company may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof and will provide Parent, Purchaser and their counsel with a copy of any written responses and telephonic notification of any oral responses of the Company or its counsel. (c) In connection with the Offer, the Company will promptly furnish Purchaser with mailing labels, security position listings, any non-objecting beneficial owner lists and any available listing or computer list containing the names and addresses of the record holders of the Shares as of the most recent practicable date and shall furnish Purchaser with such additional information (including updated lists of holders of Shares and their addresses, mailing labels and lists of security positions and non-objecting beneficial owner lists) and such other assistance as Purchaser or its agents may reasonably request in communicating the Offer to the Company's record and beneficial stockholders. SECTION 2.03. Directors. (a) Subject to compliance with applicable law, promptly upon the payment by Purchaser for the Shares pursuant to the Offer and from time to time thereafter (provided, 15 19 however, that Purchaser shall not be entitled to designate any members to the Board of Directors of the Company without owning a majority of the Common Shares and a majority of the Preferred Shares), Purchaser shall be entitled to designate (i) such number of Class A directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class A directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by Parent or its Affiliates (calculated on an as converted basis) bears to the total number of Shares then outstanding (calculated on an as converted basis), and (ii) such number of Class B directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of Class B directors on the Board of Directors of the Company (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Preferred Shares beneficially owned by Parent or its Affiliates bears to the total number of Preferred Shares then outstanding, and the Company shall, upon request of Purchaser, promptly take all actions necessary to cause Purchaser's designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors, increasing the number of authorized directors or amending its bylaws; provided, however, that prior to the Effective Time, the Board of Directors of the Company shall have at least two members who are directors of the Company on the date hereof and are not employees of the Company (such members, the "INDEPENDENT DIRECTORS"), provided, however, that if no Independent Directors remain, the other directors shall designate one person to fill one of the vacancies who shall be neither an employee of the Company nor an Affiliate of Parent and such person shall be deemed to be an Independent Director for purposes of this Agreement. Upon written request of Purchaser, the Company shall cause the designees of Purchaser to constitute the same percentage of representation as is on the Board of Directors of the Company after giving effect to this Section 2.03 on (i) each committee of the Board of Directors of the Company; (ii) the Board of Directors of each Company Subsidiary; and (iii) each committee of each such board. The provisions of this Section 2.03 shall not limit any rights that Purchaser, Parent or any of their Affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (b) The Company's obligations to appoint Purchaser's designees to the Board of Directors of the Company shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 2.03 and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or an amendment thereof or an information statement pursuant to Rule 14f-1 if Purchaser has not theretofore designated directors or timely provided the requisite information) such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 2.03. Parent and Purchaser will supply any information with respect to itself and its officers, directors and Affiliates required by such Section and Rule to the Company. (c) Following the election or appointment of Parent's designees pursuant to this Section 2.03 and prior to the Effective Time, any amendment or termination of this Agreement by the Company, any extension of time for performance of any of the obligations of Parent or Purchaser hereunder, any waiver of any condition or any of the Company's rights hereunder or 16 20 other action by the Company hereunder adversely affecting the rights of the stockholders of the Company other than Purchaser and its Affiliates, will require the concurrence of the Independent Directors. ARTICLE III. THE MERGER SECTION 3.01. The Merger. Upon the terms and subject to the satisfaction or waiver of the conditions hereof, and in accordance with the applicable provisions of this Agreement and the NRS, at the Effective Time, Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation (sometimes referred to herein as the "SURVIVING CORPORATION"). SECTION 3.02. Effective Time; Closing. (a) The closing of the Merger (the "CLOSING") shall take place at 10:00 a.m. on the second Business Day after satisfaction or waiver of the conditions set forth in Article VII, at the offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1900 Pennzoil Place, South Tower, 711 Louisiana Street, Houston, Texas 77002, unless another date, time or place is agreed to in writing between Parent and the Company. The date on which the Closing occurs is referred to in this Agreement as the "CLOSING DATE." (b) On the Closing Date or as promptly as practicable thereafter, the parties hereto shall cause the Merger to be consummated by filing Articles of Merger, in accordance with Section 92A.200 of the NRS, with the Nevada Secretary of State in such form as required by, and executed in accordance with the relevant provisions of the NRS (the "ARTICLES OF MERGER") (the time of such filing (or such later time as is specified in such Articles of Merger as agreed between Parent and the Company) being the "EFFECTIVE TIME"). SECTION 3.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the NRS (except as provided herein). Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company and Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. SECTION 3.04. Articles of Incorporation; Bylaws. At the Effective Time, the Articles of Incorporation and Bylaws of the Surviving Corporation shall be amended to be identical to the Articles of Incorporation and Bylaws, respectively, of Purchaser as in effect immediately prior to the Effective Time (except that the name of the Surviving Corporation shall be "OEI Resources, Inc."), in each case until duly amended in accordance with applicable law. 17 21 SECTION 3.05. Directors and Officers. (a) The directors of Purchaser immediately prior to the Effective Time shall be the directors of the Surviving Corporation at the Effective Time, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation until his or her respective successor is duly elected or appointed and qualified. (b) The officers of Purchaser immediately prior to the Effective Time shall be the officers of the Surviving Corporation at the Effective Time, each to hold office in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation until his or her respective successor is duly elected or appointed and qualified. SECTION 3.06. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or any shares of capital stock of Purchaser: (a) Capital Stock of Purchaser. Each issued and outstanding share of capital stock of Purchaser shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent-Owned Stock. Each Share that is owned by the Company or by any wholly-owned Subsidiary of the Company and each Share that is owned by Parent, Purchaser or any other wholly-owned Subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to Section 3.06(e), each issued and outstanding share of Company Common Stock (other than such shares to be canceled in accordance with Section 3.06(b)) shall be cancelled and terminated and shall represent solely the right to receive from the Surviving Corporation in cash, without interest, the Offer Price. As of the Effective Time, all such Shares shall no longer be outstanding and shall be automatically canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Offer Price, without interest. (d) Conversion of Company Preferred Stock. Subject to Section 3.06(e), each issued and outstanding share of Company Preferred Stock (other than such shares to be canceled in accordance with Section 3.06(b)) shall be cancelled and terminated and shall represent solely the right to receive from the Surviving Corporation in cash, without interest, an amount equal to the Preferred Offer Price. As of the Effective Time, all such Shares shall no longer be outstanding and shall be automatically canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Preferred Offer Price, without interest. (e) Shares of Dissenting Stockholders. (i) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are 18 22 held by holders of Shares who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing payment of the fair market value of such Shares in accordance with Section 92A.420 of the NRS (collectively, the "DISSENTING SHARES") shall be cancelled and terminated and shall represent solely the right to receive payment from the Surviving Corporation of the fair market value of such Shares held by them in accordance with the provisions of the NRS, except that all Dissenting Shares held by holders of Shares who shall have failed to perfect or who effectively shall have withdrawn or lost their rights for an appraisal of such shares under the NRS shall thereupon be deemed to have been cancelled and terminated, as of the Effective Time, and shall represent solely the right to receive the Offer Price as provided in Section 3.06(c) or the Preferred Offer Price as provided in 3.06(d), as applicable, upon surrender in the manner provided in Section 3.07, of the certificate or certificates that formerly evidenced such Shares. (ii) The Company shall give to Parent (i) prompt notice of any demands for appraisal received by the Company, withdrawals of such demands, and any other instruments served pursuant to the NRS and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for payment of fair market value under the NRS. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any such demands, or offer to settle, or settle, any such demands. Any amount payable to any holder of Shares exercising dissenters' rights shall be paid solely by the Surviving Corporation out of its own funds. SECTION 3.07. Exchange of Company Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company to act as agent for the holders of the Shares in connection with the Merger (the "PAYING AGENT") to receive in trust the funds to which holders of the Shares shall become entitled pursuant to Sections 3.06(c) and 3.06(d). From time to time, Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent cash in amounts and at times necessary for the prompt payment of the Offer Price as provided in Section 3.06(c) and the Preferred Offer Price as provided in Section 3.06(d) upon surrender of certificates representing Shares as provided herein. All interest earned on such funds shall be paid to Parent. (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented Shares (the "COMPANY CERTIFICATES"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Company Certificates shall pass, only upon delivery of the Company Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Company Certificates in exchange for the Offer Price as provided in Section 3.06(c) or the Preferred Offer Price as provided in Section 3.06(d), as the case may be. Upon surrender of a Company Certificate for 19 23 cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Company Certificate shall be entitled to receive in exchange therefor the amount of cash into which the Shares theretofore represented by such Company Certificate shall have been converted pursuant to Sections 3.06(c) or 3.06(d), as the case may be, and the Company Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment may be made to a Person other than the Person in whose name the Company Certificate so surrendered is registered, if such Company Certificate shall be properly endorsed or otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a Person other than the registered holder of such Company Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.07, each Company Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares theretofore represented by such Company Certificate shall have been converted pursuant to Sections 3.06(c) or 3.06(d), as the case may be. No interest will be paid or will accrue on the cash payable upon the surrender of any Company Certificate. (c) No Further Ownership Rights in Shares; Transfer Books. All cash paid upon the surrender of Company Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Company Certificates. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article III. (d) Termination of Fund; No Liability. At any time following six months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Company Certificates, and thereafter such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Offer Price or the Preferred Offer Price, as applicable, payable upon due surrender of their Company Certificates, without any interest thereon. Notwithstanding the foregoing, none of Parent, Purchaser, the Company or the Paying Agent shall be liable to any Person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Company Certificates shall not have been surrendered immediately prior to such date on which any payment pursuant to this Article III would otherwise escheat to or become the property of any Governmental Authority, the cash payment in respect of such Company Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interests of any Person previously entitled thereto. 20 24 (e) Lost, Stolen or Destroyed Certificates. In the event any Company Certificates evidencing Shares shall have been lost, stolen or destroyed, the Paying Agent shall pay to such holder the Offer Price required pursuant to Section 3.06(c) or the Preferred Offer Price required pursuant to Section 3.06(d), as applicable, in exchange for such lost, stolen or destroyed Company Certificates, upon the making of an affidavit, which shall include indemnities which are acceptable to Parent, of that fact by the holder thereof with such assurances as the Paying Agent, in its discretion and as a condition precedent to the payment of the Offer Price or the Preferred Offer Price, as applicable, may reasonably require of the holder of such lost, stolen or destroyed Company Certificates. (f) Withholding Taxes. Parent and Purchaser shall be entitled to deduct and withhold, or cause the Paying Agent to deduct and withhold, from the consideration otherwise payable to a holder of Shares pursuant to the Offer or the Merger any stock transfer taxes and such amounts as are required under the Code, or any applicable provisions of state, local or foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding were made. SECTION 3.08. Stock Options and Warrants. (a) Options. (i) Each outstanding and unexercised option to purchase shares of Company Common Stock ("COMPANY OPTION") pursuant to each stock option and incentive plan of or sponsored by the Company (the "COMPANY OPTION PLANS"), that is fully vested and exercisable as of the consummation of the Offer shall be converted into an obligation of the Company to pay, and a right of the holder thereof to receive in full satisfaction of such Option, cash in an amount in respect thereof equal to the product of (A) the excess, if any, of the Offer Price over the exercise price thereof and (B) the number of shares of Company Common Stock subject to such Company Option (such payment to be net of withholding taxes) (the "COMPANY OPTION PAYMENTS"). The Company shall take all actions necessary to cause the Company's employees and directors to consent, to the extent required, to the transactions contemplated by this Section 3.08(a) no later than immediately prior to the time Purchaser accepts Shares for payment pursuant to the Offer. Except as may be otherwise agreed to by Parent or Purchaser and the Company, as of the Effective Time, (A) the Company Option Plans shall terminate, (B) the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any of the Company Subsidiaries shall be deleted and (C) no holder of Company Options or any participant in the Company Option Plans or any other plans, programs or arrangements shall have any rights thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. All Company Options outstanding as of the date of this Agreement, the price at which they are exercisable and the vesting schedule therefore are listed on Section 3.08(a) of the Disclosure Letter. The Company and Parent agree that the 21 25 Company Option Payments are the sole payments that will be made with respect to or in relation to the Company Options. (ii) With respect to each Company Option granted pursuant to the terms of a Company Option Plan that is not vested and exercisable as of the consummation of the Offer, the Company or the Surviving Corporation, as applicable, shall make the payment of the amount determined pursuant to Section 3.08(a)(i) above at the time each such unvested Company Option would otherwise have become vested and exercisable subject to the satisfaction of the terms and conditions set forth in the applicable option award agreement and the Company Option Plan pursuant to which such Company Option was granted, or at such earlier date as may be determined by Parent in its sole and absolute discretion. (b) Warrants. At the Effective Time, each warrant to purchase shares of Company Common Stock, that is then outstanding and exercisable (each a "COMPANY WARRANT"), shall be cancelled and converted into the right to receive cash in an amount equal to the product of (A) the excess, if any, of the Offer Price over the exercise price of such Company Warrant and (B) the number of Shares previously subject to such Company Warrant immediately prior to its cancellation (such payment to be net of withholding taxes) (the "COMPANY WARRANT PAYMENTS"). The Company shall take all actions necessary to cause the holders of the Company Warrants to consent, to the extent required, to the transactions contemplated by this Section 3.08(b) no later than immediately prior to the time Purchaser accepts Shares for payment pursuant to the Offer. All Company Warrants outstanding as of the date of this Agreement, the date or dates when they become exercisable if not exercisable on the date of this Agreement and the price at which they are exercisable are listed on Section 3.08(b) of the Disclosure Letter. The Company and Parent agree that the Company Warrant Payments are the sole payments that will be made with respect to or in relation to the Company Warrants. SECTION 3.09. Subsequent Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Purchaser, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. 22 26 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent that: SECTION 4.01. Organization, Authority and Qualification of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has all necessary power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it is currently conducted and as it is now proposed to be conducted. The Company has all necessary power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The Company is duly licensed or qualified as a foreign corporation to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except for such failures to be so licensed or qualified and in good standing that would not have a Material Adverse Effect. Complete and correct copies of the Articles of Incorporation and Bylaws of the Company, each as in effect on the date hereof, have been made available by the Company to Parent. The Company is not in default in any respect in the performance, observation or fulfillment of any provision of its Articles of Incorporation or Bylaws. The execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby (other than, with respect to the Merger, obtaining approval of the Company's stockholders and the filing and recordation of appropriate merger documents as required by the NRS). The Company hereby represents that the Board of Directors of the Company, at a meeting duly called and held, has unanimously, by vote of the directors attending such meeting, (i) determined by vote of its directors present at the meeting at which this Agreement was approved that the transactions contemplated hereby, including each of the Offer, the Merger, the Tender Agreement and the Tender and Voting Agreement are fair to and in the best interests of the Company and its stockholders, (ii) approved the Offer and approved and adopted this Agreement and declared its advisability in accordance with the NRS, and (iii) recommended acceptance of the Offer and approval of this Agreement by the Company's stockholders (if such approval is required by applicable law). This Agreement has been duly executed and delivered by the Company, and (assuming due authorization, execution and delivery by Parent and Purchaser) this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. SECTION 4.02. Capital Stock of the Company; Ownership of the Shares. The authorized capital stock of the Company consists of 25,000,000 shares of Company Common Stock, 10,000,000 shares of Class B common stock, par value $.01 per share ("CLASS B COMPANY COMMON STOCK") and 10,000,000 shares of preferred stock, par value $.01 per share, of which 5,000,000 shares have been designated and issued as Company Preferred Stock. As of the date of this Agreement, (i) 6,724,939 shares of Company Common Stock, (ii) no shares of Company Class B Common Stock, and (iii) 2,991,465 shares of Company Preferred Stock are issued and outstanding, all of which (a) are duly authorized, validly issued, fully paid and nonassessable and 23 27 (b) were issued in compliance with all applicable state and federal securities laws. No shares of the Company's capital stock are held in the treasury of the Company. None of the issued and outstanding shares of the Company's capital stock were issued in violation of any preemptive rights. Except as set forth in Section 4.02 of the Disclosure Letter and except for the dividends to be issued on the Company Preferred Stock that are payable in shares of Company Preferred Stock pursuant to the Company's Articles of Incorporation and Section 4.17 of the Preferred Stock Purchase Agreement, there are no (i) options, warrants, convertible securities, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the capital stock of the Company or obligating the Company to issue or sell any shares of capital stock of, or any other interest in, the Company, (ii) outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of the Company's capital stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person or (iii) outstanding contractual obligations to register any shares of the Company's capital stock or instruments convertible or exchangeable into shares of the Company's capital stock. Section 4.02 of the Disclosure Letter sets forth all voting trusts, stockholder agreements, proxies or other agreements in effect with respect to the voting or transfer of any shares of the Company's capital stock binding upon the Company or to which the Company is a party, except those contemplated or required by this Agreement, and to the Knowledge of the Company no such other voting trusts, stockholder agreements, proxies or other agreements with respect to the voting or transfer of any shares of the Company's capital stock are in effect. SECTION 4.03.Company Subsidiaries. (a) Section 4.03 of the Disclosure Letter sets forth a list of all Company Subsidiaries, listing for each Company Subsidiary its name, type of entity, the jurisdiction and date of its incorporation or organization, its authorized capital stock, partnership capital or equivalent, the number and type of its issued and outstanding shares of capital stock, partnership interests or similar ownership interests and the current ownership of such shares, partnership interests or similar ownership interests. (b) Other than the Company Subsidiaries, there are no other corporations, partnerships, joint ventures, associations or other entities in which the Company owns, of record or beneficially, any direct or indirect equity or other interest, or any right (contingent or otherwise) to acquire the same. Other than Company Subsidiaries, there are no partnerships or joint venture agreements or other business entities in which the Company or any Company Subsidiary owns any equity interest. (c) Each Company Subsidiary that is a corporation: (i) is a corporation duly organized and validly existing under the laws of its jurisdiction of incorporation, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Company Subsidiary and to carry on its business as it is currently conducted and as it is now proposed to be conducted by such Company Subsidiary and (iii) is duly licensed or qualified as a foreign corporation to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except for such failures to be so licensed or qualified and in good standing that would not have a Material Adverse Effect. Each Company Subsidiary that is not a 24 28 corporation: (i) is duly organized and validly existing under the laws of its jurisdiction of organization, (ii) has all necessary power and authority to own, operate or lease the properties and assets owned, operated or leased by such Company Subsidiary and to carry on its business as it is currently conducted and as it is now proposed to be conducted by such Company Subsidiary and (iii) is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business makes such licensing or qualification necessary, except for such failures to be so licensed or qualified and in good standing that would not have a Material Adverse Effect. No Company Subsidiary is in default in any respect in the performance, observation or fulfillment of any provision of its Articles of Incorporation or Bylaws (or similar organizational documents). (d) Except as set forth in Section 4.03 of the Disclosure Letter, all the outstanding shares of capital stock of each Company Subsidiary are validly issued, fully paid and nonassessable and are owned by the Company, whether directly or indirectly, free and clear of all Encumbrances, except Permitted Encumbrances. (e) There are no (i) options, warrants, convertible securities, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the capital stock of any Company Subsidiary or obligating the Company or any Company Subsidiary to issue or sell any shares of capital stock of, or any other interest in, any Company Subsidiary nor (ii) outstanding contractual obligations of any Company Subsidiary to repurchase, redeem or otherwise acquire Common Stock or any shares of outstanding capital stock of the Company or any Company Subsidiary or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. (f) There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of, or any other interests in, any Company Subsidiary. (g) True and complete copies of the charter and by-laws (or similar organizational documents), in each case as in effect on the date hereof, of each Company Subsidiary have been made available by the Company to Parent. SECTION 4.04. Corporate Books and Records. The minute books of the Company and the Company Subsidiaries that are corporations contain accurate records of all meetings and accurately reflect all other actions taken by the shareholders, Boards of Directors and all committees of the Boards of Directors of the Company and the Company Subsidiaries. Complete and accurate copies of all such minute books of the Company and each Company Subsidiary have been made available by the Company to Parent. SECTION 4.05. No Conflict. Except as disclosed in Section 4.05 of the Disclosure Letter, assuming that all consents, approvals, authorizations and other actions described in Section 4.06 have been obtained and all filings, approvals and notifications listed in Section 4.06 of the Disclosure Letter have been made or obtained, the execution, delivery and performance of this Agreement by the Company do not and will not (a) violate or conflict with or result in a breach of any provision of the Articles of Incorporation or Bylaws or similar organizational documents of the Company or any Company Subsidiary, (b) violate or conflict with any Law or 25 29 Governmental Order applicable to the Company or any Company Subsidiary or any of their respective assets and properties, or (c) conflict with, result in any violation or breach of or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under, require any notice or consent under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, the triggering of any payment by, or the increase in any other obligation of, the Company or any Company Subsidiary or the creation of any Encumbrance on any assets or properties of the Company or any Company Subsidiary pursuant to any Material Contract (as defined in Section 4.12) or any other material license, permit, franchise or other instrument or arrangement to which the Company or any Company Subsidiary is a party or by which any of them, the Company Common Stock or any of such assets or properties is bound or affected, except for such conflicts, violations, breaches, defaults or other occurrences which would not (i) have a Material Adverse Effect, (ii) impair, in any material respect, the ability of the Company to perform its obligations under this Agreement or (iii) prevent or materially delay the consummation of any of the transactions contemplated hereby. SECTION 4.06. Governmental Consents and Approvals. Except as disclosed in Section 4.06 of the Disclosure Letter, the execution, delivery and performance of this Agreement by the Company and compliance by the Company with any of the provisions hereof do not and will not require any consent, waiver, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, except (a) the requirements of the Securities Act, the Exchange Act, state securities or blue sky laws, (b) the filing and recordation of appropriate merger documents as required by the NRS, (c) any other consent, approval, authorization, filing or notice the failure of which to make or obtain would not (i) have a Material Adverse Effect, (ii) impair, in any material respect, the ability of the Company to perform its obligations under this Agreement, or (iii) prevent or materially delay the consummation of any of the transactions contemplated hereby and (d) any consent, approval, authorization, filing or notice required as a result of the identity of Parent. SECTION 4.07. SEC Reports, Financial Information, Books and Records. (a) The Company has filed with the SEC and has heretofore made available to Parent true and complete copies of, each form, registration statement, report, schedule, proxy or information statement and other information statement and other document (including Exhibits and amendments thereto), including without limitation its Annual Reports to Stockholders incorporated by reference in certain of such reports, required to be filed by it or its predecessors with the SEC since December 31, 1996 under the Securities Act or the Exchange Act (collectively, the "COMPANY SEC REPORTS"). As of the respective dates such Company SEC Reports were filed or, if any such Company SEC Reports were amended, as of the date such amendment was filed, each of the Company SEC Reports, including without limitation any financial statements or schedules included therein, (a) complied in all material respects with all applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and (b) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 26 30 (b) Each of the audited consolidated balance sheets of the Company for each of the three fiscal years ended as of December 31, 1997, December 31, 1998 and December 31, 1999, and the related audited consolidated statements of operations and cash flows of the Company, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company's accountants (collectively referred to herein as the "FINANCIAL Statements") included in the Company SEC Reports and (ii) the unaudited consolidated balance sheet of the Company as of September 30, 2000, and the related consolidated statement of operations, together with all related notes and schedules thereto (collectively referred to herein as the "INTERIM FINANCIAL STATEMENTS") included in the Company SEC Reports (i) were prepared from, and are in accordance with, the books of account and other financial records of the Company, (ii) present fairly the consolidated financial position of the Company and the Company Subsidiaries as of the dates thereof and the consolidated results of operations and cash flows of the Company and the Company Subsidiaries for the periods covered thereby, subject, in the case of unaudited financial statements, to normal year-end adjustments, (iii) have been prepared in accordance with U.S. GAAP applied on a basis consistent with the past practices of the Company and (iv) comply in all material respect with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto. (c) The books of account and other financial records of the Company and the Company Subsidiaries (i) are complete and correct, and do not contain or reflect any material inaccuracies or discrepancies and (ii) have been maintained in accordance with good business and accounting practices and in accordance with U.S. GAAP. SECTION 4.08. No Undisclosed Liabilities. There are no Liabilities of the Company or any Company Subsidiary other than Liabilities (a) reflected or reserved against on the Reference Balance Sheet or reflected in the notes thereto or (b) incurred since the date of the Reference Balance Sheet in the ordinary course of the business, consistent with past practice, of the Company and the Company Subsidiaries, which in the aggregate do not exceed $2,000,000.00. The Company and the Company Subsidiaries have no Knowledge of any basis for the assertion of any other claims or liabilities of any material nature or in any material amount. SECTION 4.09. Absence of Certain Changes, Events and Conditions. Since the date of the Reference Balance Sheet, the business of the Company and the Company Subsidiaries has been conducted in all material respects in the ordinary course, consistent with past practice, and, since such date, there has not been (a) individually or in the aggregate, any Material Adverse Effect, (b) any material change by the Company or any Company Subsidiary in its accounting methods, principles or practices, (c) any declaration, setting aside or payment of any dividend or distribution in respect of the Company Common Stock or any redemption, purchase or other acquisition of any of its securities, (d) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option, stock purchase or other employee benefit plan, except in the ordinary course of business consistent with past practice or (e) the occurrence of the other events set forth in Section 6.01(b). SECTION 4.10. Litigation. Except as disclosed in Section 4.10 of the Disclosure Letter, there is no material Action pending or, to the Knowledge of the Company, threatened against or directly affecting the Company, any Company Subsidiary or any Property of the 27 31 Company or any Company Subsidiary or any of the directors or officers of the Company or any Company Subsidiary in their capacity as such, before any Governmental Authority. There are no outstanding Governmental Orders against the Company or any Company Subsidiary or any Property of the Company or any Company Subsidiary that would reasonably be expected to (a) have a Material Adverse Effect, (b) impair, in any material respect, the ability of the Company to perform its obligations under this Agreement, or (c) prevent or materially delay the consummation of the transactions contemplated hereby. Neither the Company nor any Company Subsidiary is aware of any facts or circumstances which would give rise to any Action or right to initiate any Action. Neither the Company nor any Company Subsidiary is subject to any outstanding Governmental Order. SECTION 4.11. Compliance with Laws. Each of the Company and the Company Subsidiaries holds all material approvals, licenses, permits, registrations and similar type authorizations necessary for the lawful conduct of their respective businesses, as now conducted, and such businesses are not being, and neither the Company nor any Company Subsidiary has received any notice from any Governmental Authority or Person that any such business has been or is being conducted in violation of any law, ordinance or regulation, including without limitation any law, ordinance or regulation relating to occupational health and safety, and have conducted and continues to conduct their businesses in compliance in all material respects with all Laws and Governmental Orders applicable to the Company or any Company Subsidiary. SECTION 4.12. Material Contracts. (a) As of the date hereof, Section 4.12(a) of the Disclosure Letter lists each contract, lease, indenture, agreement, arrangement or understanding to which the Company or any of the Company Subsidiaries is subject that is of a type that would be required to be included as an Exhibit to a Registration Statement on Form S-1 pursuant to the rules and regulations of the SEC if such registration statement was filed by the Company (collectively, the "MATERIAL CONTRACTS"). (b) Each of the Material Contracts listed on Section 4.12(a) of the Disclosure Letter (i) are in full force and effect and are the valid and legally binding obligations of the parties thereto and are enforceable in accordance with their respective terms; (ii) neither the Company nor any such Company Subsidiary nor, to the Knowledge of the Company, any other party to such Material Contract is in violation, breach or default of any material provision thereof, including with respect to payments or otherwise; (iii) no party to any Material Contract has given notice of any action to terminate, cancel, rescind or procure a judicial reformation thereof; and (iv) no Material Contract contains any provision that prevents the Company or any Company Subsidiary from owning, managing and operating the Leases of the Company or any Company Subsidiary in accordance with historical practices. (c) As of the date of this Agreement, (i) there are no material outstanding calls for payment that are due or that the Company or any Company Subsidiary are committed to make that have not been made; (ii) there are no material operations with respect to which the Company or any Company Subsidiary have become a non-consenting party; and (iii) there are no commitments for the material expenditure of funds for drilling or other capital projects other than projects with respect to which the operator is not required under the applicable operating agreement to seek consent. 28 32 SECTION 4.13. Title to Property. (a) Except as would not have a Material Adverse Effect or except as to those matters set forth in Section 4.13(a) of the Disclosure Letter, the Company or a Company Subsidiary, as the case may be, has Defensible Title to the Property, free and clear of Encumbrances, other than Permitted Encumbrances. (b) Section 4.13(b) of the Disclosure Letter sets forth a brief description of all Leases and Wells. With respect to any Lease or Well, "DEFENSIBLE TITLE" shall mean: (i) such record and beneficial right, title and interest in and to such Lease or Well that: (A) entitles the Company or the Company Subsidiary, as applicable, to receive a Net Revenue Interest in such Lease or Well that is equal to or greater than the Net Revenue Interest set forth in Section 4.13(b) of the Disclosure Letter therefor, without reduction, suspension or diminution throughout the duration of the estate constituting such Property, except (x) as shown in Section 4.13(b) of the Disclosure Letter or as provided in any Lease or other agreement filed as public record as of the date hereof, (y) as permitted or required by Section 6.01, changes or adjustments that result from the establishment of units, the entry into of pooling or unitization agreements after the date hereof, changes in existing units (or the participating areas therein) made after the date hereof voluntarily or by order of the appropriate regulatory agency having jurisdiction, or (z) that result from or are incidental to Operations conducted as permitted or required by Section 6.01; (B) obligates or subjects the Company or the Company Subsidiary, as applicable, to bear a Working Interest in such Well or Lease that is no greater than the Working Interest set forth in Section 4.13(b) of the Disclosure Letter therefor, without increase throughout the duration of the estate constituting such Property, except (w) as shown in Section 4.13(b) of the Disclosure Letter or as provided in any Lease or other agreement filed as public record as of the date hereof, (x) for any changes or adjustments that are caused by contribution requirements provided for under provisions similar to those contained in an operating agreement, (y) as permitted or required by Section 6.01, changes or adjustments that result from the establishment of units, the entry into of pooling or unitization agreements after the date hereof, changes in existing units (or the participating areas therein) made after the date hereof voluntarily or by order of the appropriate regulatory agency having jurisdiction, after the date hereof or (z) that result from or are incidental to Operations conducted as permitted or required by Section 6.01; and 29 33 (ii) (A) the Leases are valid and enforceable and grant the rights purported to be granted thereby and all rights necessary thereunder for the current Operations of the Company or the Company Subsidiary, as applicable, (B) neither the Company nor the Company Subsidiary that is party to each such Lease, nor, to the Knowledge of the Company, any other party to any such Lease, is in breach or default thereunder in any material respect, no notice of default to termination thereunder has been given or received by the Company or any Company Subsidiaries, and no event has occurred which would, with the giving of notice or passage of time or both, constitute a breach or default thereunder or permit termination, modification or acceleration thereunder that could reasonably be expected to result in a Material Adverse Effect, and (C) (i) there are no express contractual obligations to engage in continuous development operations in order to maintain any producing Property in force and effect; (ii) there are no provisions applicable to the Properties that increase the royalty percentage of the lessor thereunder; and (iii) none of the Properties are limited by terms fixed by a certain number of years (other than primary terms under Leases). (c) Section 4.13(c) of the Disclosure Letter contains a description of the Easements. With respect to Easements and related Equipment, Defensible Title shall mean record or beneficial right, title and interest in the applicable Easement sufficient to enable the Company or any Company Subsidiary to conduct its Operations as currently conducted with respect thereto, without material interference by any other Person, and, to the Knowledge of the Company or the Company Subsidiary, as applicable, all material Easements are valid and enforceable and grant the rights purported to be granted thereby and all rights necessary for the current Operations of such business without material interference by any other Person. (d) Section 4.13(d) of the Disclosure Letter sets forth a brief description of each parcel of real property comprising the Fee Mineral Interests. With respect to Fee Mineral Interests, Defensible Title means all the record and beneficial right, title and interest in and to each such parcel of land, respectively, that was conveyed or granted to the Company or any Company Subsidiary, or their respective predecessors-in-title, in the instrument of conveyance referred to and described by volume or book and page in Section 4.13(d) of the Disclosure Letter, as each instrument of conveyance is recorded in the county or parish where the land is located. (e) Section 4.13(e) of the Disclosure Letter sets forth a brief description of each parcel of Other Real Property. With respect to Other Real Property, Defensible Title shall mean the right of quiet enjoyment of all such real property, whether leased or fee, for the term of any applicable agreement relating thereto, and all such interests in Other Real Property are valid and enforceable and grant the rights purported to be granted thereby and all rights necessary thereunder for the current Operations of such business without material interference. 30 34 (f) In evaluating the significance of any fact, circumstance or condition for purposes of determining Defensible Title, due consideration shall be given to the length of time that the particular Property has been producing Hydrocarbons and whether such fact, circumstance or condition is of the type expected to be encountered in the area involved and is usual and customarily acceptable to reasonable and prudent operators, interest owners, and/or purchasers engaged in the business of the ownership, development and operation of oil and gas properties with knowledge of such facts and appreciation of their legal significance. SECTION 4.14. Intellectual Property. The Company and the Company Subsidiaries own the entire right, title and interest, free and clear of any Encumbrance, in and to, or are licensed to use, or otherwise have the right to use, all patents and patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, trade dress, logos, domain names, corporate names and goodwill associated therewith; and copyrights, technology, trade secrets know-how, processes, confidential business information, seismic rights and other proprietary intellectual property rights and computer software ("INTELLECTUAL PROPERTY") currently used in the conduct of the business of the Company and the Company Subsidiaries, except where the failure to so own, be licensed or otherwise have the right to use such Intellectual Property would not, individually or in the aggregate, have a Material Adverse Effect. No Person has notified either the Company or any Company Subsidiary that their use of the Intellectual Property infringes on the rights of any Person, subject to such claims and infringements as do not, individually or in the aggregate, give rise to any liability on the part of the Company and the Company Subsidiaries that could have a Material Adverse Effect, and, to the Company's Knowledge, no Person is infringing on any right of the Company or any Company Subsidiary with respect to and no action is pending or threatened which challenges and neither the Company nor the Company's Subsidiaries are aware of any fact which, individually or in the aggregate, could reasonably be argued to detrimentally affect the validity, enforceability, use or ownership of any such Intellectual Property. No claims are pending or, to the Company's Knowledge, threatened that any activity of the Company or any Company Subsidiary now conducted or presently contemplated to be conducted, infringes, violates or otherwise adversely affects the intellectual property or other proprietary rights of any Person. The consummation of the transactions contemplated by this Agreement will not have a Material Adverse Effect on any right to or the use of the any Intellectual Property. SECTION 4.15. Employee Benefit Matters. (a) Pension Plans. (i) No "accumulated funding deficiency" (for which an excise tax is due or would be due in the absence of a waiver) as defined in Section 412 of the Code or as defined in Section 302(a)(2) of ERISA, whichever may apply, has been incurred with respect to any Pension Plan with respect to any plan year, whether or not waived. Neither the Company nor any ERISA Affiliate has failed to pay when due any "required installment," within the meaning of Section 412(m) of the Code and Section 302(e) of ERISA, whichever may apply, with respect to any Pension Plan. Neither the Company nor any ERISA Affiliate is subject to any lien imposed under Section 412(n) of the Code or Section 302(f) or 4068 of ERISA, 31 35 whichever may apply, with respect to any Pension Plan. All "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA, are fully funded as of the Closing Date with respect to each Pension Plan as determined on a termination basis using the assumed interest rate set forth in each Pension Plan or otherwise required by ERISA or the Code. Neither the Company nor any ERISA Affiliate is required to provide security to a Pension Plan under Section 401(a)(29) of the Code. (ii) No Pension Plan is "top heavy" within the meaning of Section 416 of the Code. (iii) Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which is intended to be qualified and tax exempt under the provisions of Code Sections 401(a) and 501(a) or 408, as applicable, is so qualified and, except for Pension Plans which are qualified under Code Section 408, each such plan has been so determined by the Internal Revenue Service pursuant to a favorable determination letter considering the Tax Reform Act of 1986, as amended, or application for such determination has been made within the applicable remedial amendment period and is currently pending. (iv) Each Pension Plan, related trust agreement, annuity contract or other funding instrument is in material compliance with its terms and, both as to form and in operation, with the requirements prescribed by any and all Laws which are applicable to such Pension Plan, including without limitation ERISA and the Code. (v) The Company or an ERISA Affiliate has paid all premiums (and interest charges and penalties for late payment, if applicable) due to the PBGC with respect to each Pension Plan which is covered by Title IV of ERISA for each plan year thereof for which such premiums are required. Neither the Company nor any ERISA Affiliate has engaged in, or is a successor or affiliate of an entity that has engaged in, a transaction which is described in Section 4069 or Section 4212(c) of ERISA. There has been no unreported "reportable event" (as defined in Section 4043(b) of ERISA and the PBGC regulations under such Section) requiring notice to the PBGC with respect to any Pension Plan. No filing has been made by the Company or any ERISA Affiliate with the PBGC, and no proceeding has been commenced by the PBGC, to terminate any Pension Plan. No condition exists and no event has occurred that could constitute grounds for the termination of any Pension Plan by the PBGC, or which could reasonably be expected to result in liability of the Company or any ERISA Affiliate to the PBGC with respect to any Pension Plan, other than liabilities for premium payments. Neither the Company nor any ERISA Affiliate has, at any time, (1) ceased operations at a facility so as to become subject to the provisions of Section 4062(e) of ERISA, (2) withdrawn as a substantial employer so as to become subject to the 32 36 provisions of Section 4063 of ERISA, (3) ceased making contributions on or before the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA to which the Company or any ERISA Affiliate made contributions during the six years prior to the Closing Date, or (4) otherwise incurred any liability to the PBGC, including the creation of a lien against any property of the Company or any ERISA Affiliate pursuant to Section 4068 of ERISA. (b) Multiemployer Plans. There are no Multiemployer Plans, and neither the Company nor any ERISA Affiliate has ever maintained, contributed to, or participated or agreed to participate in any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has ever withdrawn, partially or completely, or instituted steps to withdraw, whether partially or completely, from any Multiemployer Plan, nor has any event occurred which could enable a Multiemployer Plan to give notice of and demand payment of any withdrawal liability with respect to the Company or any ERISA Affiliate. (c) Welfare Plans. (i) Each Welfare Plan is in material compliance with its terms and, both as to form and operation, with the requirements prescribed by any and all Laws which are applicable to such Welfare Plan, including without limitation ERISA and the Code. (ii) An estimate of the liabilities of the Company and any ERISA Affiliates for providing retiree life and medical benefits coverage to active and retired employees of the Company and any ERISA Affiliates has been made and is reflected on the appropriate balance sheet and books and records according to Statement of Financial Accounting Standards No. 106. The Company or any ERISA Affiliate has the right to modify or terminate each Welfare Plan that provides coverage or benefits for either or both retired and active employees and/or their beneficiaries. (iii) Each Welfare Plan which is a "group health plan," as defined in Section 607(1) of ERISA, has been operated in material compliance with provisions of Part 6 and 7 of Title I, Subtitle B of ERISA and Sections 4980B, 9801-9803, 9811, 9812, and 9831-9833 of the Code at all times. (iv) No Welfare Plans are self-insured "multiple employer welfare arrangements" as such term is defined in Section 3(40) of ERISA. (d) Benefit Arrangements. Each Benefit Arrangement is in material compliance with its terms and with the requirements prescribed by any and all Laws which are applicable to such Benefit Arrangement, including without limitation the Code. (e) Fiduciary Duties and Prohibited Transactions. Neither the Company nor any ERISA Affiliate has any liability with respect to any transaction which relates to any Pension Plan or any Welfare Plan and which is in violation of Sections 404 or 406 of ERISA or constitutes a "prohibited transaction," as defined in Section 4975(c)(1) of the Code, and for 33 37 which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code. To the Knowledge of the Company, neither it nor any ERISA Affiliate has participated in a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan or has any unpaid civil penalty under Section 502(1) of ERISA. (f) Litigation. There is no material action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral action, governmental audit or investigation (including, without limitation, any such audit or investigation by the Internal Revenue Service, Department of Labor, or PBGC) relating to or seeking benefits under any Employee Plan that is pending or, to the Knowledge of the Company, threatened or anticipated against the Company or any ERISA Affiliate other than routine claims for benefits. To the best of the Company's Knowledge, no Employee has any material claim against the Company (whether under federal or state law, any employment agreement, or otherwise) on account of or for (i) overtime pay, other than overtime pay for the current payroll period; (ii) wages or salary for any period other than the current payroll period; (iii) vacation, time off, sick time or pay in lieu of any of the foregoing, other than that earned in respect of the current fiscal year of the Company; or (iv) any violation of any statute, ordinance or regulation relating to minimum wages or maximum hours of work. To the best of the Company's Knowledge, no Employee has any material claim, or basis for any material action or proceeding against the Company, arising under any statute, ordinance or regulation relating to discrimination in employment or employment practices, occupational safety and health standards or workers' compensation. (g) Unpaid Contributions. Neither the Company nor any ERISA Affiliate has any liability for unpaid contributions with respect to any Employee Plan. The Company and all ERISA Affiliates have made all required contributions and paid all accrued liabilities under each Employee Plan for all periods through and including the Closing Date. For purposes of the preceding sentence, accrued liability shall include a pro rata contribution to each Employee Plan for that portion of a plan year or other applicable period which precedes the Closing Date, and accrued liabilities for any portion of a plan year or other applicable period shall be determined by multiplying the liability for the entire such year or period by a fraction, the numerator of which is the number of days preceding the Closing Date in such year or period, and the denominator of which is the number of days in such year or period, as the case may be. No event has occurred or circumstance exists that could result in a material increase in the premium or other benefit cost of any Employee Plan. (h) Amendment and Termination. Each Employee Plan may be amended or terminated at any time by the Company or an ERISA Affiliate. (i) Change of Control Payments and Compensation Deduction Limitations. The execution of this Agreement and the consummation of the transactions contemplated hereby will not result in any payment (whether of separation pay or otherwise), cancellation of indebtedness, or other obligation becoming due from the Company or any ERISA Affiliate to any current or former employee, director, or consultant, or result in the vesting, acceleration of payment or increase in the amount of any benefit payable to or in respect of any such current or former employee, director, or consultant of the Company or any ERISA Affiliate. There is no contract, agreement, plan or arrangement covering any current or former employee, director, or consultant of the Company or any ERISA Affiliate that, individually or collectively, could give rise to the 34 38 payment of any amount that would not be deductible pursuant to the terms of Sections 162(a)(1), 162(m), and/or 280G of the Code or would require the payment of an excise tax imposed by Section 4999 of the Code or of any "gross up" of any such excise tax. (j) Copies of Documentation. The Company has made available to Parent (i) copies of all employment agreements with officers of the Company or any Company Subsidiary; (ii) copies of all severance agreements, programs and policies of the Company or any Company Subsidiary with or relating to its employees; and (iii) copies of all plans, programs, agreements and other arrangements of the Company or any Company Subsidiary with or relating to its employees which contain change of control provisions. (k) Labor. As of the date of this Agreement, there is no labor dispute, strike or work stoppage against the Company or any Company Subsidiary, pending or threatened in writing, which may interfere with the respective business activities of the Company or any Company Subsidiary. As of the date of this Agreement, to the Knowledge of the Company, neither the Company nor any Company Subsidiary, nor their representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of the Company or any Company Subsidiary, and there is no charge or complaint against the Company by the National Labor Relations Board or any comparable state agency pending or threatened. Neither the Company nor any Company Subsidiary (i) is a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims or unfair labor practices, or other collective bargaining disputes; (ii) has committed any unfair labor practice; or (iii) has any Knowledge of any organizational effort currently being made or threatened by or on behalf of any labor union with respect to employees of the Company or any Company Subsidiary. SECTION 4.16. Environmental Matters. Except as disclosed in Section 4.16 of the Disclosure Letter: (a) the Company and the Company Subsidiaries currently are and have been in compliance in all material respects with all applicable Environmental Laws; (b) there are no existing, pending or, to the Company's Knowledge, threatened actions, suits, investigations, allegations, inquiries, proceedings or clean-up obligations relating to any Environmental Laws with respect to the Properties or any other properties adversely affected by the Properties or activities thereon; (c) there are no conditions or circumstances at the Properties creating a cleanup obligation relating to any Environmental Laws or any other action, suit, investigation, inquiry, or proceeding arising from such conditions or circumstances; (d) all material notices, permits, licenses, registrations, approvals or authorizations required to be obtained or filed in connection with the operation of the Properties by the Company or the Company Subsidiaries, including, without limitation, treatment, storage, disposal or release of hazardous substances or solid waste into the environment, have been duly obtained or filed; their are no pending or, to the Knowledge of the Company or the Company Subsidiaries, threatened or existing actions, proceedings, or investigations seeking to modify, 35 39 revoke, or deny renewal of any permits, licenses, registrations, approvals, or other authorizations; and the Company and the Company Subsidiaries do not have Knowledge of any fact or condition that could give rise to any action, proceeding, or investigation to modify, revoke, or deny renewal of any such permits, licenses, registrations, approvals, or other authorizations and all notices or similar authorizations required for transfer of such permits, licenses, registrations, approvals or authorizations have been duly obtained or filed or will have been obtained or filed at or prior to the Closing Date; (e) to the Knowledge of the Company and the Company Subsidiaries, all off-site locations where the Company and the Company Subsidiaries has transported, released, discharged, stored, disposed or arranged for the disposal of pollutants, contaminants, hazardous wastes or toxic substances are licensed and responsible disposal sites as required by Environmental Laws; or (f) to the Knowledge of the Company and the Company Subsidiaries, all underground storage tanks, and the operating status, capacity, and contents of such tanks located on any property owned, leased or operated by the Company and the Company Subsidiaries are identified in Section 4.16 of the Disclosure Letter. SECTION 4.17. Hedging. (a) The Company and the Company Subsidiaries do not have any outstanding obligations for the delivery of Hydrocarbons attributable to any of the Properties of the Company or any Company Subsidiary in the future on account of prepayment, advance payment, take-or-pay or similar obligations without then or thereafter being entitled to receive full value therefor. (b) Section 4.17(b) of the Disclosure Letter sets forth, as of the date of this Agreement, all futures, hedge, swap, collar, put, call, floor, cap, option or other contracts that are intended to benefit from, relate to or reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons or securities, to which the Company or any Company Subsidiary is bound and the current position of the parties thereto. SECTION 4.18. Taxes. Except as set forth in Section 4.18 of the Disclosure Letter, and except for matters that would not have a Material Adverse Effect: (a) Each of the Company and the Company Subsidiaries has timely filed all Tax reports and returns that it was required to file. All such reports and returns were correct and complete in all material respects. (b) All Taxes owed by any of the Company and Company Subsidiaries (whether or not shown on any report or return) have been timely paid. (c) None of the Company and the Company Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax report or Tax return. 36 40 (d) No claim has been made by an authority in a jurisdiction where any of the Company and the Company Subsidiaries does not file reports and returns that it is or may be subject to taxation by that jurisdiction. (e) There are no Encumbrances on any of the assets of any of the Company and the Company Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. (f) Each of the Company and the Company Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. (g) There is no dispute or claim concerning any Tax Liability of any of the Company or the Company Subsidiaries either (A) claimed or raised by any authority in writing or (B) as to which the Company or the directors and officers (and employees responsible for Tax matters) of the Company and the Company Subsidiaries has Knowledge based upon personal contact with any agent of such authority. (h) Section 4.18 of the Disclosure Letter lists all federal, state, local, and foreign income Tax returns filed with respect to any of the Company and the Company Subsidiaries for taxable periods ended on or after December 31, 1999, indicates those returns that have been audited, and indicates those returns that currently are subject of audit. (i) The Company has delivered to Parent correct and complete copies of all federal income tax returns, examination reports, and statements of deficiencies assessed against or agreed to by any of the Company and the Company Subsidiaries since December 31, 1999. (j) None of the Company and the Company Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (k) None of the Company and the Company Subsidiaries has filed a consent under Code Sec. 341(f) concerning collapsible corporations. (l) None of the Company and the Company Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible in whole or in part under Code Sec. 280G or Code Section 162(m). (m) None of the Company and the Company Subsidiaries has been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). (n) Each of the Company and the Company Subsidiaries has disclosed on its federal income Tax returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Sec. 6661. 37 41 (o) Except as set forth in Section 4.18 of the Disclosure Letter, none of the Company and the Company Subsidiaries is a party to any Tax allocation or sharing agreement or policy. (p) None of the Company and the Company Subsidiaries has any liability under Treas. Reg. 1.1502-6 or any similar provision of any other tax law or by agreement for unpaid taxes because it is or once was a member of an affiliated, consolidated, or unitary group of corporations. (q) Section 4.18 of the Disclosure Letter sets forth the following information with respect to each of the Company and the Company Subsidiaries (or, in the case of clause (B) below, with respect to each of the Company Subsidiaries) as of the most recent practicable date: (A) the basis of the Company or the Company Subsidiaries in its assets; (B) the basis of the stockholder(s) of the Company Subsidiary in its stock (or the amount of any Excess Loss Account); (C) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company and the Company Subsidiaries; and (D) the amount of any deferred gain or loss allocable to the Company and the Company Subsidiaries arising out of any deferred intercompany transaction. SECTION 4.19. Insurance. The Company has all insurance policies that it believes are required in connection with the operation of the business of the Company and the Company Subsidiaries. Section 4.19 of the Disclosure Letter lists each of the insurance polices relating to the Company or any Company Subsidiary which are currently in effect and describes any self-insurance arrangement affecting the Company or any Company Subsidiary. The Company has made available to Parent true and correct summaries of each of the insurance policies relating to the Company or the Company Subsidiaries that are currently in effect. With respect to each such insurance policy, none of the Company, any Company Subsidiary or, to the Knowledge of the Company, any other party to the policy is in breach or default thereunder (including with respect to the payment of premiums or the giving of notice) and the Company does not know of any occurrence of any event which, with notice or the lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under the policy, except for such breaches or defaults as would not result in a Material Adverse Effect. Except as set forth on Section 4.19 of the Disclosure Letter, to the Knowledge of the Company, there are no claims pending with respect to any of such policies which are likely to exceed the amount of coverage provided by the applicable policy. The Company has not received (A) any written notice of cancellation of any such policy or refusal of coverage thereunder, (B) any written notice that any issuer of such policy has filed for protection under applicable bankruptcy or other insolvency laws or is otherwise in the process of liquidating or has been liquidated, of (C) any other written indication that such policies are no longer in full force or effect or that the issuer of any such policy is no longer willing or able to perform its obligations thereunder. All premiums and other payments relating to the insurance have been paid for coverage through the date of this Agreement. SECTION 4.20. Brokers. Except for Windrock and Dain Rauscher, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement, based upon arrangements made by or on behalf of the Company or the Company Subsidiaries. True and correct copies of 38 42 all agreements and engagement letters currently in effect with each of Windrock and Dain Rauscher have been provided to Parent. SECTION 4.21. Production and Pipeline Imbalances. Section 4.21 of the Disclosure Letter sets forth all Company and Company Subsidiary pipeline, plant and production imbalances and penalties as of September 30, 2000 with respect to the Properties. SECTION 4.22. Oil and Gas Operations. Except as set forth in Section 4.22 of the Disclosure Letter, as of the date of this Agreement, with respect to authorizations for expenditure executed on or after September 30, 2000, (a) there are no material outstanding calls for payments that are due or that the Company or its Subsidiaries are committed to make that have not been made; (b) there are no material operations with respect to which the Company or the Company Subsidiaries have become a nonconsenting party; and (c) there are no commitments for the material expenditure of funds for drilling or other capital projects, other than projects with respect to which the operator is not required under the applicable operating agreement to seek consent. SECTION 4.23. Wells and Equipment. Except as otherwise set forth in Section 4.23 of the Disclosure Letter: (a) None of the Wells have overproduced, except where such overproduction individually, or in the aggregate with all other such overproduction, would not have a Material Adverse Effect; (b) To the Knowledge of the Company, there have been no material changes proposed in the production allowables for any Wells; (c) All Wells have been drilled and (if completed) completed, operated, and produced in accordance with good oil and gas field practices and in compliance in all respects with applicable oil and gas leases and applicable Laws, rules, and regulations, except where any failure or violation would not have a Material Adverse Effect; (d) There are no Wells that: (i) Company or any of the Company Subsidiaries is currently obligated by law or contract to plug and abandon or will be obligated by Law or contract to plug and abandon with the lapse of time or notice or both because the Well is not currently capable of producing in commercial quantities, except for such Wells that will not individually, or in the aggregate with all other such Wells, result in Company and the Company Subsidiaries incurring plugging and abandonment costs (net of salvage value) in an amount in excess of $2,000,000.00 in addition to any plugging and abandonment costs that have been provided for in the Financial Statements; (ii) are subject to exceptions to a requirement to plug and abandon issued by a Governmental Authority having jurisdiction over the Wells; 39 43 (iii) have been plugged and abandoned but have not been plugged or reclaimed in accordance with all applicable requirements of each Governmental Authority having jurisdiction over such Wells; or (iv) have not been plugged and abandoned and are located on lands which have been sold to a third party but for which the Company has been identified as the operator for such Wells with the regulatory agency having jurisdiction over such Wells; (e) Proceeds from the sale of Hydrocarbons produced from the Properties are being received by the Company and the Company Subsidiaries, as applicable, in a timely manner and are not being held by third parties in suspense for any reason (except for amounts individually or in the aggregate, not in excess of $350,000.00 and held in suspense in the ordinary course of business); (f) To the Knowledge of the Company and the Company Subsidiaries, all equipment and machinery currently in use and material of the operation of the Property as conduced prior to the date hereof are in reasonable working condition, ordinary wear and tear excepted; and (g) With respect to Wells that are not operated by the Company or any of the Company Subsidiaries, the Company makes the foregoing representations and warranties set forth in Paragraphs (a) through (d) of this Section 4.23 only to its and the Company Subsidiaries' Knowledge. SECTION 4.24. Proxy Statement. None of the information to be supplied by the Company for inclusion in (a) the Proxy Statement to be filed by the Company with the SEC, and any amendments or supplements thereto, or (b) the Schedule TO to be filed by Parent with the SEC in connection with the Merger, and any amendments or supplements thereto, will, at the respective times such documents are filed, and, in the case of the Proxy Statement, at the time the Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on approval and adoption of this Agreement and at the Effective Time contain any untrue statement of a material fact or omit to state any material fact required to be made therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Company does not make any representation or warranty with respect to statements made or incorporated by reference in any of the foregoing documents based upon information that has been supplied by Parent or Purchaser or their accountants, counsel or other authorized representatives for use in any of the foregoing documents. SECTION 4.25. Gas Imbalances; Preferential Rights. Section 4.25 to the Disclosure Letter sets forth (a) an accurate description of all material obligations (if any) of the Company to any third party under any contracts to which the Company or by which its assets are bound and which includes "take or pay" or similar provisions obligating the Company to deliver production from an oil and gas property of the Company for which it has already received payment (or obligating the Company to return any such payment) together with an accurate and detailed listing of the amount of all such delivery obligations and (b) a list of all instruments and agreements whereby any third party may claim a preferential right or call to purchase a material 40 44 portion of the production of the Company at a price other than the market price prevailing from time to time where such properties are located, other than under existing contracts for sale of production. SECTION 4.26. Required Stockholder Vote or Consent. The only vote of the holders of any class or series of the Company's capital stock that will be necessary or required under this Agreement, the NRS or under applicable Law to consummate the Merger and the other transactions contemplated by this Agreement are the approval and adoption of this Agreement by the holders of a majority of the votes entitled to be cast by holders of (a) the Company Common Stock and the Company Preferred Stock, voting together as a single class, with each Preferred Share entitling the holder thereof to the number of votes equal to the full number of Common Shares into which such Preferred Share is convertible on the record date for such vote, (b) the Company Common Stock, voting as a single class, and (c) the Company Preferred Stock, voting as a single class (collectively, the "COMPANY STOCKHOLDERS' APPROVAL"). SECTION 4.27. Fairness Opinion. The Board of Directors of the Company has received the written opinion of Dain Rauscher to the effect that, as of the date of such opinion, the consideration to be received in the Offer and the Merger by the holders of Company Common Stock and Company Preferred Stock is fair from a financial point of view to such holders. True and complete copies of such opinions have been given to Parent. SECTION 4.28. Takeover Restrictions. (a) The Company and the Board of Directors of the Company have each taken all action required to be taken by it in order to exempt the Offer (including the purchase of Shares pursuant to the Offer), the Merger, this Agreement, the Tender Agreement, the Tender and Voting Agreement and the transactions contemplated hereby and thereby from, the requirements of any "moratorium," "control share," "fair price," "affiliate transaction," "business combination," or other antitakeover laws and regulations of any state, including, without limitation, the State of Nevada. (b) No provision of the Articles of Incorporation or Bylaws of the Company or comparable organizational documents of any of the Company Subsidiaries would, directly or indirectly, restrict or impair the ability of Purchaser or its Affiliates to vote, or otherwise to exercise the rights of a stockholder with respect to, securities of the Company or any Company Subsidiary that may be acquired or controlled by Purchaser or its Affiliates pursuant to this Agreement, the Tender Agreement or the Tender and Voting Agreement or permit any stockholder to acquire securities of the Company on a basis not available to Purchaser in the event that Purchaser were to acquire securities of the Company. (c) There are no agreements, arrangements or commitments, including any rights plan or rights agreement or similar arrangement, pursuant to which there are outstanding or which obligates the Company to issue any rights to purchase any series or class of the Company's securities. SECTION 4.29. Indemnification Obligations. Except as contained in the Leases and as set forth on Section 4.29 to the Disclosure Letter, there are no Indemnification 41 45 Obligations (as defined below) that the Company or any Company Subsidiary has to any Person. "INDEMNIFICATION OBLIGATIONS" shall mean any obligations of the Company to hold harmless or to indemnify any Person from any cost, expense, liability, penalty, damage, deficiency, claim or loss arising from, resulting from, based in any way on, relating to or attributable to a breach by the Company of any portion of an agreement between the Company and such Person, including but not limited to any breach of a representation, warranty, or covenant under any such agreement. SECTION 4.30. Bankruptcy. Neither the (i) Company, (ii) any predecessor of the Company, nor (iii) any Company Subsidiary has (A) voluntarily sought, consented to or acquiesced in the benefits of, or become party to or made the subject of the Bankruptcy Code of the United States or any other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally (collectively, "DEBT RELIEF ACTIONS") except as disclosed in Section 4.30 of the Disclosure Letter or (B) any outstanding obligations to creditors in connection with a Debt Relief Action or the resolution of a Debt Relief Action. ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby jointly and severally represent and warrant to the Company as follows: SECTION 5.01. Organization and Authority of Parent and Purchaser. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, and has all necessary power and authority to carry on its business as it is currently conducted. Parent and Purchaser have all necessary corporate power and authority to enter into this Agreement, to carry out their obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of Parent and Purchaser, the performance by each of Parent and Purchaser of its obligations hereunder and the consummation by each of Parent and Purchaser of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of each of Parent and Purchaser and no other corporate proceedings on the part of Parent or Purchaser are necessary to authorize this Agreement or the consummation of the transactions contemplated hereby (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by the NRS). This Agreement has been duly executed and delivered by each of Parent and Purchaser, and (assuming due authorization, execution and delivery by the Company) this Agreement constitutes a legal, valid and binding obligation of each of Parent and Purchaser enforceable against each in accordance with its terms. SECTION 5.02. No Conflict. Assuming the making and obtaining of all filings, notifications, consents, approvals, authorizations and other actions referred to in Section 5.05, except as may result from any facts or circumstances relating solely to the Company, the execution, delivery and performance of this Agreement by each of Parent and Purchaser do not and will not (i) violate, conflict with or result in the breach of any provision of the Articles of Incorporation or Bylaws of either Parent or Purchaser, (ii) conflict with or violate any Law or 42 46 Governmental Order applicable to Parent or Purchaser or by which any property or asset of either of them is bound or (iii) conflict with, result in any breach of or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment or cancellation of, or result in the creation of any Encumbrance on any of the assets or properties of Parent or Purchaser pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or obligation to which Parent or Purchaser, respectively, is a party or by which any of such assets or properties are bound or affected, except for, in the case of clauses (i) and (iii), conflicts, violations, breaches or defaults which would not prevent or materially delay the consummation of the Offer and the Merger. SECTION 5.03. Governmental Consents and Approvals. Except for (a) applicable requirements, if any, of the Exchange Act, (b) the filing and recordation of appropriate merger documents as required by the NRS, (c) filings as may be required by any applicable "blue sky" laws, (d) any required notifications or filings with any national securities exchange on which Parent's securities are listed and (e) as would not prevent or materially delay the consummation of the Offer and the Merger, neither Parent nor Purchaser is required to submit any notice, report or other filing with any Governmental Authority, in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. No waiver, consent, approval or authorization of any Governmental Authority, is required to be obtained or made by either Parent or Purchaser in connection with its execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, except (i) where the failure to obtain such waivers, consents, approvals or authorizations would not prevent or materially delay the performance by Parent or Purchaser of their respective obligations under this Agreement or (ii) in connection with any submission required above. SECTION 5.04. Offer Documents; Proxy Statement. None of the information to be supplied by Parent for inclusion in (a) the Proxy Statement to be filed by the Company with the SEC, and any amendments or supplements thereto, or (b) the Schedule 14D-9 to be filed by the Company with the SEC in connection with the Offer, and any amendments or supplements thereto, will, at the respective times such documents are filed, and, in the case of the Proxy Statement, at the time the Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company, at the time such stockholders vote on approval of the Merger and adoption of this Agreement and at the Effective Time contain any untrue statement of a material fact or omit to state any material fact required to be made therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, Parent and Purchaser do not make any representation or warranty with respect to statements made or incorporated by reference in any of the foregoing documents based upon information that has been supplied by the Company or their accountants, counsel or other authorized representatives for use in any of the foregoing documents. SECTION 5.05. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent. 43 47 SECTION 5.06. Financing Arrangements. Parent has or will have funds available to it sufficient to consummate the Offer and the Merger in accordance with the terms of this Agreement. ARTICLE VI. ADDITIONAL AGREEMENTS SECTION 6.01. Conduct of Business Prior to the Closing. (a) The Company covenants and agrees that, between the date of this Agreement and the time of the Closing, except as set forth in Section 6.01(a) of the Disclosure Letter or as contemplated by any other provision of this Agreement, unless Parent shall otherwise consent in writing: (i) the businesses of the Company and the Company Subsidiaries shall be conducted only in, and the Company and the Company Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and (ii) the Company and the Company Subsidiaries shall use reasonable efforts to preserve substantially intact their business organization, to keep available the services of the current employees of the Company and the Company Subsidiaries and to preserve the current relationships of the Company and the Company Subsidiaries with customers, contractholders and other Persons with whom the Company or any Company Subsidiary has significant business relations. (b) By way of amplification and not limitation, except as contemplated by this Agreement, or as reflected in Section 6.01(a) of the Disclosure Letter, neither the Company nor any Company Subsidiary shall, between the date of this Agreement and the Closing, directly or indirectly do, or propose to do, any of the following, without the prior written consent of Parent: (i) amend, propose to amend, or otherwise change its Articles of Incorporation or Bylaws or similar organizational documents; (ii) issue, sell, pledge, dispose of, grant, encumber, amend the terms of, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (A) any shares of capital stock of the Company or any Company Subsidiary of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest (including, without limitation, any phantom interest) of the Company or any Company Subsidiary, except the sale of capital stock of the Company in connection with the exercise of outstanding options or warrants or (B) any assets or Properties of the Company or any Company Subsidiary, except the sales of Hydrocarbons in the ordinary course of business and in a manner consistent with past practice; 44 48 (iii) declare, set aside, make or pay any dividend or other distribution payable in cash, stock, property or otherwise, with respect to any of its capital stock, except for shares of Company Preferred Stock to be issued and cash to be paid as dividends on the Preferred Shares in accordance with the Company's Articles of Incorporation and Section 4.17 of the Preferred Stock Purchase Agreement; (iv) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (v) (A) acquire or sell, lease, license, surrender, relinquish or otherwise dispose of (including, without limitation, by merger, consolidation or acquisition or disposition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets, other than sales of Hydrocarbons in the ordinary course of business, consistent with past practice, and any other acquisitions for consideration which is not, in the aggregate, in excess of $250,000.00; (B) incur any Indebtedness for borrowed money, incur any trade debt, or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any Person (other than the Company or a wholly owned Company Subsidiary), except for Indebtedness incurred in the ordinary course of business, consistent with past practice, in amounts not in excess of $250,000.00 in the aggregate; (C) make any loans or advances to any Person other than the Company or a wholly owned Company Subsidiary; (D) authorize or commit to any capital expenditure in excess of $250,000.00 in the aggregate per month, other than pursuant to any commitment as of the date hereof disclosed in Section 4.12(a) of the Disclosure Letter; or (E) enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would not be permitted under this subsection (v); (vi) enter a new line of business or commence business operations in any country outside the United States; (vii) increase the compensation payable or to become payable to its officers or employees, except in the ordinary course of business and consistent with past practice, or grant any severance or termination pay to, or modify or enter into any employment or severance agreement with, any director, officer, employee or former employee of the Company or any Company Subsidiary, or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer or employee; 45 49 (viii) change any method of accounting or accounting practice by the Company or any Company Subsidiary, except for any such change required by U.S. GAAP; (ix) pay, discharge or satisfy any material claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business and consistent with past practice, of liabilities reflected or reserved against in the Reference Balance Sheet or subsequently incurred in the ordinary course of business and consistent with past practice or in accordance with the provisions of this Section 6.01, provided however, that in no event shall payments under this Section 6.01(b)(ix) exceed individually, or in the aggregate, $250,000.00 without the express written consent of Parent. (x) settle any material Audit, make or change any material Tax election or file any material amended Tax return; (xi) take any action that would give rise to a claim under the WARN Act or any similar state law or regulation because of a "plant closing" or "mass layoff" (each as defined in the WARN Act); (xii) enter into any futures, hedge, swap, collar, put, call, floor, cap, option or other contracts that are intended to benefit from or reduce or eliminate the risk of fluctuations in the price of commodities, including Hydrocarbons, or securities; (xiii) enter into any fixed price commodity sales agreements with a duration of more than three months; (xiv) take, or agree or commit to take, any action that would make any representation and warranty of the Company or any Company Subsidiary hereunder inaccurate in any respect at, or as of any time prior to, the Closing, or omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any time; (xv) (A) engage in any transaction (either acting alone or in conjunction with any Plan or trust created thereunder) in connection with which the Company or any Company Subsidiary could be subjected (directly or indirectly) to either a civil penalty assessed pursuant to subsections (c), (i) or (1) of Section 502 of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code, (B) terminate any Plan in a manner, or take any other action with respect to any Plan, that could result in the liability of the Company or any Company Subsidiary to any Person, (C) take any action that could adversely affect the qualification of any Plan or its compliance with the applicable requirements of ERISA, (D) fail to make full payment 46 50 when due of all amounts which, under the provisions of any Plan, any agreement relating thereto or applicable law, the Company or any Company Subsidiary are required to pay as contributions thereto or (E) fail to file, on a timely basis, all reports and forms required by federal regulations with respect to any Plan; or (xvi) other than the consummation of the Merger, take any action that would cause adjustment to the conversion price of the Preferred Shares. SECTION 6.02. Access to Information. Except as required pursuant to any confidentiality agreement or similar agreement or arrangement to which the Company or any Company Subsidiary is a party or pursuant to applicable Law, from the date hereof until the Closing, upon reasonable notice, the Company shall, and shall cause each of the Company Subsidiaries and each of the Company's and the Company Subsidiaries' officers, directors, employees, agents, representatives, accountants and counsel to: (a) afford the officers, employees and authorized agents, accountants, counsel and representatives of Parent (collectively, "REPRESENTATIVES") full access, during normal business hours, to the offices, premises, properties, oil and gas fields, other facilities, books and records of the Company and each Company Subsidiary and to those officers, directors, employees, agents, accountants and counsel of the Company and of each Company Subsidiary who have any knowledge relating to the Company, any Company Subsidiary or the business, (b) furnish to the Representatives such additional financial and operating data and other information regarding the assets, properties and goodwill of the Company and the Company Subsidiaries as Parent may from time to time reasonably request; (c) provide Parent reasonable assistance in searches of government records related to the assets of the Company and the Company Subsidiaries; and (d) furnish copies, and allow for the audit, of all such books and records, documents, and all financial, operating, and other data and other information as Parent may request. No investigation will affect any of the representations or warranties made herein or the conditions to the obligations of the parties hereto to consummate the transaction contemplated hereby. SECTION 6.03. Confidentiality. Each party shall hold in confidence all nonpublic information until such time as such information is otherwise publicly available and, if this Agreement is terminated, each party will deliver to the other all documents, work papers and other materials (including copies) obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof. Notwithstanding the foregoing, the Confidentiality Agreement dated October 30, 2000 between the Company and Parent and the Confidentiality Agreement dated December 18, 2000 between the Company and Parent (collectively, the "CONFIDENTIALITY AGREEMENTS") shall survive the execution and delivery of this Agreement. SECTION 6.04. Stockholder Action. (a) Following consummation of the Offer, if required by applicable law in order to consummate the Merger, the Company shall, in accordance with applicable law, give notice of, convene and hold a special meeting of its stockholders (the "COMPANY STOCKHOLDERS' MEETING") for the purpose of securing the Company Stockholders' Approval. The date of any Company Stockholders' Meeting shall be set by the Board of Directors of the Company after consultation 47 51 with, and on a date approved by, Parent, whose approval shall not be unreasonably withheld. The Board of Directors of the Company shall (i) distribute to its stockholders the Proxy Statement in accordance with applicable federal and state law and with its Articles of Incorporation and Bylaws, which Proxy Statement shall contain (A) the recommendation of the Board of Directors of the Company that its stockholders approve the Merger and adopt this Agreement and the transactions contemplated hereby if proxies are solicited by the Company with respect to such vote and (B) the opinion of Dain Rauscher referred to in Section 2.02(a), (ii) cause the Company to use all reasonable efforts to solicit from its stockholders proxies in favor of the approval of the Merger and adoption of this Agreement and the transactions contemplated hereby and to secure the Company Stockholders' Approval, unless, in accordance with applicable law and the regulations of the Nasdaq Small-Cap Market, such solicitation is not required to achieve approval of the Merger, (iii) take all other action in their judgment necessary and appropriate to secure the Company Stockholders' Approval, and (iv) cooperate and consult with Parent with respect to each of the foregoing matters, all subject to the right of the Board of Directors of the Company to modify or withdraw its recommendation in the exercise of its fiduciary duties to the Company and its stockholders. (b) Parent agrees that it will vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of Parent's other subsidiaries in favor of the approval of the Merger and of this Agreement. SECTION 6.05. Preparation of the Proxy Statement. Following the consummation of the Offer and if required by applicable law in order to consummate the Merger, the Company shall promptly (i) prepare a preliminary version of a proxy statement pursuant to Regulation 14A under the Exchange Act or, if applicable law and regulations do not so require, an information statement pursuant to Regulation 14C under the Exchange Act (the "PROXY STATEMENT"), (ii) file with the SEC the Proxy Statement and use all reasonable efforts to respond to the comments of the SEC in connection therewith and to furnish all information required to prepare the definitive Proxy Statement, and (iii) as promptly as practicable after responding to all such comments to the satisfaction of the SEC, cause the definitive Proxy Statement to be mailed to its respective stockholders, and if necessary, after the definitive Proxy Statement shall have been mailed, promptly circulate amended, supplemented or supplemental proxy materials and, if required in connection therewith, resolicit proxies. The Company shall advise Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Company Stockholders' Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare and mail to its stockholders such an amendment or supplement. The Company shall not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects. SECTION 6.06. Regulatory and Other Authorizations; Notices and Consents. Upon the terms and subject to the conditions hereof, each of the parties hereto shall (i) use its reasonable best efforts to take, or cause to be taken, all appropriate action and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate 48 52 and make effective the Offer, the Merger and the other transactions contemplated by this Agreement and (ii) use its reasonable best efforts to (A) take all reasonable actions necessary to cause the Tender Offer Conditions to be satisfied, and (B) obtain any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained or made by Parent or the Company or any of their subsidiaries in connection with the authorization, execution and delivery of this Agreement and the consummation of the Offer, the Merger and the other transactions contemplated by this Agreement and (iii) make all necessary filings, and thereafter make any other required submissions with respect to this Agreement, the Offer, the Merger and the other transactions contemplated by this Agreement required under applicable Law. The parties hereto shall cooperate with each other in connection with the making of all such filings. SECTION 6.07. Notice of Certain Matters. Parent shall give prompt notice to the Company, and the Company shall give prompt notice to Parent, of (a) the occurrence, or nonoccurrence, of any event the occurrence or nonoccurrence of which would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied, and (b) any failure of Parent or the Company, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. Each of the Company and Parent shall promptly notify each other of any notice or other communication from any Person alleging that the consent of such Person (or other Person) is or may be required in connection with the transactions contemplated by this Agreement or any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement. SECTION 6.08. No Solicitation of Transaction. From the date of this Agreement until the termination hereof, the Company and the Company Subsidiaries will not, and will not authorize their respective officers, directors, employees or other agents to, directly or indirectly, (i) take any action to solicit, initiate or encourage any Acquisition Proposal or (ii) engage in negotiations with, or disclose any nonpublic information relating to the Company or the Company Subsidiaries, respectively, or afford access to their respective properties, books or records to any Person that may be considering making, or has made, an Acquisition Proposal. Nothing contained in this Section 6.08 shall prohibit the Company and its Board of Directors from (i) taking and disclosing a position with respect to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated by the SEC under the Exchange Act, or (ii) furnishing information, including without limitation nonpublic information to, or entering into negotiations with any Person that has indicated its willingness to make an unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A) such unsolicited bona fide Acquisition Proposal is made by a third party that the Board of Directors of the Company determines in good faith has the good faith intent to proceed with negotiations or consider, and financial and other capability to consummate, such Acquisition Proposal (taking into account among other things the legal, financial, regulatory and other aspects of such Acquisition Proposal and the Person making such Acquisition Proposal), (B) the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that such action is required for the Board of Directors of the Company to comply with its fiduciary duties to stockholders imposed by applicable law, (C) contemporaneously with furnishing such information to, or entering into discussions or negotiations with, such Person, the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or 49 53 negotiations with, such Person and (D) the Company uses all reasonable efforts to keep Parent informed in all material respects of the status and terms of any such negotiations or discussions (including without limitation the identity of the Person with whom such negotiations or discussions are being held) and provides Parent copies of such written proposals and any amendments or revisions thereto or correspondence related thereto. The Company, the Company Subsidiaries, and their respective officers, directors, employees or other agents shall immediately cease any existing discussions or negotiations, if any, with any Persons conducted heretofore with respect to any Acquisition Proposal. SECTION 6.09. Expenses. (a) Except as provided in Section 8.02, all Expenses (as defined below) incurred by the parties hereto shall be borne solely and entirely by the party that has incurred such Expenses; provided, however, that if this Agreement is terminated for any reason, then the allocable share of Parent and the Company for all Expenses (including any fees and expenses of accountants, experts, and consultants, but excluding the fees and expenses of legal counsel and investment bankers) related to preparing, printing, filing and mailing the Offer Documents, the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Offer Documents and the Proxy Statement shall be allocated one-half each. (b) "EXPENSES" as used in this Agreement shall include all reasonable out-of-pocket expenses (including, without limitation, all reasonable fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and mailing of the Offer Documents and the Proxy Statement, the solicitation of stockholder approvals, requisite filings and all other matters related to the consummation of the transactions contemplated hereby. SECTION 6.10. Directors' and Officers' Indemnification and Insurance. (a) For six years after the Effective Time, Parent and the Surviving Corporation shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, an officer or director of the Company or any Company Subsidiary (each, an "INDEMNIFIED Party") against all losses, claims, damages, liabilities, fees and expenses (including reasonable fees and disbursements of counsel and judgments, fines losses, claims, liabilities and amounts paid in settlement (provided that any such settlement is effected with the prior written consent of Parent or the Surviving Corporation, which consent will not be unreasonably withheld)) arising in whole or in part out of actions or omissions in their capacity as such occurring at or prior to the Effective Time to the fullest extent permitted under Nevada law and the Surviving Corporation's Articles of Incorporation and Bylaws and the Company's written indemnification agreements in effect at the date hereof and listed on Section 6.10 of the Disclosure Letter, including provisions therein relating to the advancement of expenses incurred in the defense of any action or suit; provided, that in the event any claim or claims are asserted or made within such six year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and 50 54 all such claims, provided that in no event shall the liability of Parent and the Surviving Corporation in the aggregate under this Section 6.10(a) exceed $115,000,000.00. (b) Parent shall cause the Surviving Corporation to maintain the Company's existing officers' and directors' liability insurance policy ("D&O INSURANCE") for a period of not less than six years after the Effective Time, but only to the extent related to actions or omissions prior to the Effective Time; provided, that the Surviving Corporation may substitute therefor policies of substantially similar coverage and amounts containing terms no less advantageous to such former directors or officers; provided further, that the annual premiums to be paid with respect to the maintenance of such D&O Insurance during such six year period shall not exceed two hundred percent (200%) of the premium paid by the Company for such D&O Insurance during the year ended December 31, 2000, it being agreed and understood that if such policies cannot be obtained at such cost, Parent shall cause the Surviving Corporation to obtain as much of such policies as can be obtained at a cost equal to such amount. (c) The Articles of Incorporation and Bylaws of the Surviving Corporation and each subsidiary thereof shall contain provisions no less favorable with respect to indemnification than are currently set forth in the Bylaws of the Company and any Company Subsidiary, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were Indemnified Parties, unless such modification shall be required by Law. Notwithstanding the foregoing, the Surviving Corporation shall not be obligated to maintain the provisions of the Company's and Company Subsidiaries' Bylaws and Articles of Incorporation that provide for indemnification of directors and officers in their capacities as stockholders. SECTION 6.11. Cooperation and Filings. (a) Subject to compliance with applicable law, from the date hereof until the Effective Time, each of the parties hereto shall confer on a regular and frequent basis with one or more representatives of the other parties to report operational matters of materiality and the general status of ongoing operations. (b) Each party hereto shall make all filings required to be made by such party in connection herewith or desirable to achieve the purposes contemplated hereby, shall cooperate as needed with respect to any such filing by any other party hereto, and shall promptly provide the other party or its counsel with copies of all filings made by such party with any Governmental Authority in connection with this Agreement and the transactions contemplated hereby SECTION 6.12. Publicity. Neither the Company, Parent nor any of their respective Affiliates shall issue or cause the publication of any press release or other announcement with respect to the Offer, the Merger, this Agreement or the other transactions contemplated hereby without a prior consultation of the other party, except as may be required by Law or by any listing agreement with a national securities exchange and will use reasonable efforts to provide copies of such release or other announcement to the other party hereto, and give due consideration to such comments as the other party may have, prior to such release. 51 55 SECTION 6.13. Additional Actions. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws, or to remove any injunctions or other impediments or delays, to consummate and make effective the Offer, the Merger and the other transactions contemplated by this Agreement, subject, however, to the appropriate vote of stockholders of the Company required to so vote. SECTION 6.14. Consents. Each of Parent and the Company shall use all reasonable efforts to obtain all consents necessary or advisable in connection with its obligations hereunder. SECTION 6.15. Stockholder Litigation. Each of Parent and the Company shall give the other the reasonable opportunity to participate in the defense of any litigation against Parent or the Company, as applicable, and its directors relating to the transactions contemplated by this Agreement. SECTION 6.16. Amendment to Bylaws. Within four Business Days of the date of this Agreement, the Company shall by action of the Company's Board of Directors cause the Company's Bylaws to be amended such that the Company elects not to be governed by the provisions of Sections 78.378 through 78.3793, inclusive, of the NRS. ARTICLE VII. CONDITIONS TO CLOSING SECTION 7.01. Conditions to the Obligations of Each Party. The obligations of the Company, Parent and Purchaser to consummate the Merger are subject to the satisfaction or waiver, in whole or in part, (where permissible by applicable law), at or prior to the Closing, of each of the following conditions: (a) no Governmental Authority or court of competent jurisdiction located or having jurisdiction in the United States shall have enacted, issued, promulgated, enforced or entered any Law or Governmental Order which is then in effect making the consummation of the Merger illegal or otherwise prohibiting the consummation of the Merger; (b) if required by applicable law in order to consummate the Merger, the Company Stockholders' Approval shall have been obtained; (c) Parent, Purchaser or their Affiliates shall have purchased Shares pursuant to the Offer; and (d) all approvals of Governmental Authorities necessary to consummate the Merger and other transactions contemplated hereby shall have been received and shall be in effect at the Effective Time. 52 56 ARTICLE VIII. TERMINATION AND WAIVER SECTION 8.01. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after approval by the stockholders of the Company: (a) by the mutual written consent of Parent and the Company; (b) by either Parent or the Company if the Effective Time shall not have occurred on or before May 31, 2001 (the "TERMINATION DATE"); provided that the party seeking to terminate this Agreement pursuant to this Section 8.01(b) shall not have breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure to consummate the Merger on or before the Terminated Date; (c) by the Company if there has been a material breach by Parent or Purchaser of any representation, warranty, covenant or agreement set forth in this Agreement which breach (if susceptible to cure) has not been cured in all material respects within five Business Days following receipt by Parent or Purchaser of notice of such breach; (d) by either Parent or the Company if any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Common Shares or Preferred Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable, provided that the party seeking to terminate this Agreement shall have used its reasonable best efforts to remove or lift such order, decree or ruling; (e) by Parent, if (i) the Board of Directors of the Company (A) withdraws, modifies or changes (including by amendment of the Schedule 14D-9) its recommendation of the Offer, this Agreement or the Merger in a manner adverse to Parent or shall have resolved to do any of the foregoing, (B) shall have recommended to the stockholders of the Company any Acquisition Proposal or resolved to do so or (C) shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's stockholders that they tender their Shares in the Offer, which public reaffirmation must be made within five days after Parent's written request to do so; or (ii) the Minimum Condition (as defined in Annex I) shall not have been satisfied by the Expiration Date and (A) a third party shall have made or caused to be made an Acquisition Proposal or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or Person (including the Company or any of its Affiliates), other than Parent or any of its Affiliates, shall have become the beneficial owner of more than 50% of the Common Shares or 50% of the Preferred Shares; provided, however, the current ownership of Shares by the Company's stockholders who are party to either the Tender Agreement or the Tender and Voting Agreement shall not be deemed to trigger this clause (B); (f) by the Company, if, prior to the acceptance of and payment for the Shares pursuant to the Offer, the Company's Board of Directors shall have determined to recommend a Superior Proposal and the Company makes the payment of the Termination Fee as required 53 57 pursuant to Section 8.02 of this Agreement and of the Expense Fee for which the Company is responsible under Section 8.02 of this Agreement. For purposes of this Agreement, "SUPERIOR PROPOSAL" means an unsolicited bona fide proposal made by a third party relating to an Acquisition Proposal on terms that the Board of Directors of the Company determines it cannot reject in favor of the Offer and the Merger, based on applicable fiduciary duties and after consultation with the Company's outside counsel (taking into account among other things the legal, financial, regulatory and other aspects of the Acquisition Proposal, the Person making such Acquisition Proposal, the likelihood of consummation and the time required to complete such transaction); provided, however, that the Company shall not be permitted to terminate this Agreement pursuant to this Section 8.01(f) unless it has complied with Section 6.08 and used all reasonable efforts to provide Parent with two Business Days prior written notice of its intent to so terminate this Agreement together with a detailed summary of the terms and conditions of such Acquisition Proposal; provided further, that prior to any such termination, the Company shall, and shall cause its respective financial and legal advisors to, negotiate in good faith with Parent to make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the transactions contemplated herein, and it is acknowledged by Parent that such negotiations with Parent shall be conducted in a manner consistent with the fiduciary duties of the Company's Board of Directors. (g) by the Company if (i) Purchaser fails to commence the Offer in violation of Section 2.01 hereof, provided, however, that the Company may not terminate this Agreement pursuant to this Section 8.01(g) if the Company has materially breached this Agreement, or (ii) Purchaser fails to purchase validly tendered Shares in violation of the terms of this Agreement; (h) by Parent or the Company if the Offer is terminated or withdrawn or shall have expired pursuant to its terms without any Shares being purchased thereunder; provided, however, that neither Parent nor the Company may terminate this Agreement pursuant to this Section 8.01(h) if such party (or in the case of Parent, Purchaser) shall have materially breached this Agreement; (i) by Parent if the Company shall have breached any of its representations or warranties which breach would give rise to the failure of the condition set forth in clause (e) of Annex I hereto to be satisfied or if, prior to consummation of the Offer, the Company shall have failed to perform its covenants or other agreements contained in this Agreement which failure to perform would give rise to the failure of the condition set forth in clause (e) of Annex I hereto to be satisfied, which breach or failure to perform is incapable of being cured or has not been cured by the date that is five Business Days following written notice thereof to the Company from Parent. SECTION 8.02. Effect of Termination. (a) In the event of termination of the Agreement pursuant to this Article VIII, all obligations of the parties shall terminate, except the obligations of the parties pursuant to this Section 8.02 and except for the provisions of Sections 6.03, 6.09, 6.12, 9.01, 9.02, 9.03, 9.04, 9.05, 9.07, 9.08, 9.11, 9.12 and 9.13, provided that nothing herein shall relieve any party from liability for any breaches hereof. 54 58 (b) In the event that this Agreement is terminated pursuant to Section 8.01(e)(i) (other than Section 8.01(e)(i)(A) if no Acquisition Proposal shall have been publicly announced or disclosed) or Section 8.01(f), then the Company shall promptly (and in any event within one Business Day after such termination or, in the case of any such termination by the Company, prior to such termination) pay Parent an amount equal to (i) a termination fee of $5,200,000.00 (the "TERMINATION FEE"), provided, however, that in no event shall more than one Termination Fee be payable by the Company plus (ii) Parent's aggregate Expenses up to $500,000.00 (the "EXPENSE FEE"). (c) In the event that this Agreement is terminated pursuant to (i) Section 8.01(e)(i)(A) (if no Acquisition Proposal shall have been publicly announced or disclosed) and within 12 months of the date of termination of this Agreement a transaction constituting an Acquisition Proposal is consummated, the Company shall, prior to or simultaneously with the consummation of such transaction, pay Parent the Termination Fee and the Expense Fee or (ii) Section 8.01(e)(ii) hereof and within 12 months of the date of termination of this Agreement either (A) a transaction constituting an Acquisition Proposal is consummated or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or Person (including the Company or any of its Affiliates), other than Parent or any of its Affiliates, shall have become the beneficial owner of more than 50% of the Common Shares or 50% of the Preferred Shares, the Company shall, prior to or simultaneously with the consummation of such transaction or the acquisition of such Common Shares or Preferred Shares, pay Parent the Termination Fee and the Expense Fee; provided, however, the current ownership of Shares by the Company's stockholders who are party to either the Tender Agreement or the Tender and Voting Agreement shall not be deemed to trigger this clause (B); and provided further that the acquisition of additional Preferred Shares by any of the current holders of Preferred Shares by virtue of a transfer or purchase of such Preferred Shares from another current holder of Preferred Shares shall not be deemed to trigger this clause (B). (d) In no event shall the Company be obligated to pay more than one Termination Fee and Expense Fee pursuant to this Section 8.02. ARTICLE IX. GENERAL PROVISIONS SECTION 9.01. Survival of Representations, Warranties and Covenants. (a) The representations and warranties of the parties contained in this Agreement shall not survive the Effective Time. (b) The covenants and agreements of the parties to be performed after the Effective Time contained in this Agreement shall survive the Effective Time. SECTION 9.02. Notices. All notices or communications hereunder shall be in writing (including facsimile or similar writing) addressed as follows: To the Company: 55 59 Texoil, Inc. 110 Cypress Station Drive, Suite 220 Houston, Texas 77090 Telecopy: (281) 537-8324 Attention: Frank A. Lodzinski, President with a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue, Suite 3200 Dallas, Texas 75202 Telecopy: (214) 855-4300 Attention: Thomas G. Adler To Parent or Purchaser: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: James T. Hackett Chairman of the Board, President and Chief Executive Officer with a copy to: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: Robert K. Reeves, Esq. Executive Vice President, General Counsel and Secretary with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telecopy: 214-969-4343 Attention: Michael E. Dillard, P.C. Any such notice or communication shall be deemed given (i) when made, if made by hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one Business Day after being deposited with a next day courier, postage prepaid, or (iii) three Business Days after being 56 60 sent certified or registered mail, return receipt requested, postage prepaid, in each case addressed as above (or to such other address as such party may designate in writing from time to time). SECTION 9.03. Entire Agreement. This Agreement and the confidentiality obligations under the Confidentiality Agreements represent the entire agreement of the parties with respect to the subject matter hereof and shall supersede any and all previous contracts, arrangements or understandings between the parties hereto with respect to the subject matter hereof. SECTION 9.04. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.05. Separability. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. SECTION 9.06. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by operation of law or otherwise without the prior written consent of the parties hereto, which consent may be granted or withheld in the sole discretion of the parties. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Article III and Section 6.10 (collectively, the "THIRD PARTY PROVISIONS"), nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. The Third Party Provisions may be enforced by the beneficiaries thereof. SECTION 9.07. Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by each of, or on behalf of each of, the parties or (b) by a waiver in accordance with Section 9.13. SECTION 9.08. Governing Law; Forum. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas applicable to contracts executed in and to be performed in that state and without regard to any applicable conflicts of law. All actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any Texas state or federal court located in Houston, Texas. In connection with the foregoing, each of the parties to this Agreement irrevocably (a) consents to submit itself to the personal jurisdiction of the state and federal courts of competent jurisdiction located in Houston, Texas, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (c) hereby consents to service of process pursuant to the notice provisions set forth in Section 9.02. SECTION 9.09. Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties 57 61 hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. SECTION 9.10. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. SECTION 9.11. Waiver of Jury Trial. Each of the parties hereto irrevocably and unconditionally waives all right to trial by jury in any action, proceeding or counterclaim (whether based in contract, tort or otherwise) arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof. SECTION 9.12. Attorney's Fees. If any action at law or equity, including an action for declaratory relief, is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and expenses from the other party, which fees and expenses shall be in addition to any other relief which may be awarded. SECTION 9.13. Extensions, Waivers, Etc. At any time prior to the Effective Time, either party may: (a) extend the time for the performance of any of the obligations or act of the other party; (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto; or (c) waive compliance with any of the agreements or conditions of the other party contained herein. Notwithstanding the foregoing, no failure or delay by Parent or the Company in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. [SIGNATURE PAGES FOLLOW] 58 62 IN WITNESS WHEREOF, the Company, Parent and Purchaser have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. TEXOIL, INC. By: /s/ Frank A. Lodzinski ------------------------------------ Frank A. Lodzinski Chairman of the Board, President and Chief Executive Officer OCEAN ENERGY, INC. By: /s/ James T. Hackett ------------------------------------ James T. Hackett Chairman of the Board, President and Chief Executive Officer OEI ACQUISITION CORP. By: /s/ James T. Hackett ------------------------------------ James T. Hackett Chairman of the Board, President and Chief Executive Officer 63 ANNEX I CONDITIONS TO THE OFFER The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement and Plan of Merger to which this Annex is attached, except that the term "MERGER AGREEMENT" shall be deemed to refer to such Agreement and Plan of Merger. Notwithstanding any other provisions of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act, pay for any tendered Shares and, subject to the terms of the Merger Agreement, may terminate or amend the Offer, if (i) there shall not be validly tendered and not properly withdrawn prior to the Expiration Date for the Offer (A) at least a majority of the total number of outstanding Common Shares on a fully diluted basis on the date of purchase (excluding for this purpose Common Shares issuable but not yet issued as of such date upon conversion of outstanding Preferred Shares) and (B) at least a majority of the total number of outstanding Preferred Shares on a fully diluted basis on the date of purchase (clauses (A) and (B), collectively the "MINIMUM CONDITION"), (ii) any applicable approvals or consents listed on Section 4.06 of the Disclosure Letter have not been obtained (or waiting periods relating to any filings identified therein have not expired or been terminated), or (iii) at any time on or after the date of the Merger Agreement and prior to the time of payment for any Shares any of the following conditions shall exist or be determined by Purchaser to have occurred: (a) there shall be any action taken, or any statute, rule, regulation, legislation, interpretation, ruling, judgment, order or injunction enacted, enforced, promulgated, proposed, amended, issued or deemed applicable to the Offer by any Governmental Authority that could reasonably be expected to directly or indirectly: (1) make the acceptance for payment of, or payment for or purchase of all or a substantial number of the Shares pursuant to the Offer, illegal, or otherwise restrict or prohibit the making of the Offer or the consummation of the Offer or the Merger, (2) result in a significant delay in or restrict the ability of Purchaser to accept for payment, pay for or purchase all or a substantial number of the Shares pursuant to the Offer or to effect the Merger, (3) render Purchaser unable to accept for payment or pay for or purchase all or a substantial number of the Shares pursuant to the Offer, (4) prohibit or materially limit the ownership or operation by Parent or Purchaser of all or a portion of the business or assets of the Company and the Company Subsidiaries or compel Parent or Purchaser to dispose of or hold separately all or a portion of the business or assets of Parent or any of its subsidiaries or Purchaser or the Company and the Company subsidiaries, or seek to impose a limitation on the ability of Parent, any of its subsidiaries or Purchaser to conduct its business or own such assets, (5) impose a limitation on the ability of Parent or Purchaser effectively to acquire, hold or exercise full rights of ownership of the Shares, including the right to vote any Shares acquired or owned by Purchaser or Parent on an equal basis with all other Shares on all matters properly presented to the Company's stockholders, (6) require divestiture by Parent or Purchaser of Shares, (7) impose any limitations on the ability of Parent or Purchaser effectively to control the business or operations of the Company and the Company subsidiaries or (8) which would otherwise reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or Parent Material Adverse Effect; or I-1 64 (b)(i) there shall be instituted or pending any action, proceeding or counterclaim seeking any of the consequences referred to in clauses (1) through (8) of paragraph (a) above, or (ii) there shall have been threatened any action, proceeding or counterclaim seeking any of the consequences referred to in clauses (1) through (8) of paragraph (a) above that, in the good faith judgment of Parent, has a reasonable probability of success; or (c)(i) it shall have been publicly disclosed or Purchaser shall have otherwise learned that beneficial ownership (determined for the purposes of this paragraph (c) as set forth in Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the outstanding Common Shares or more than 50% of the outstanding Preferred Shares has been acquired by any Person other than Parent and Purchaser and except for any Person having such beneficial ownership as of the date of the Merger Agreement, (ii) the Board of Directors of the Company (A) withdraws, modifies or changes (including by amendment of the Schedule 14D-9) its recommendation of the Offer, this Agreement or the Merger in a manner adverse to Parent, (B) shall have recommended to the stockholders of the Company any Acquisition Proposal, or (C) shall have failed to reaffirm publicly and unconditionally its recommendation to the Company's stockholders that they tender their Shares in the Offer, which public reaffirmation must be made within five days after Parent's written request to do so, (iii) a third party shall have entered into a definitive agreement or a written agreement in principle with the Company with respect to an Acquisition Proposal, or (iv) the Board of Directors of the Company or any committee thereof shall have resolved to do any of the foregoing; or (d) the Merger Agreement shall have been terminated in accordance with its terms, or the Company and Purchaser and Parent shall have reached an agreement that the Offer or the Merger Agreement be terminated; or (e)(i) any of the representations and warranties of the Company set forth in Sections 4.02 and 4.03 of the Merger Agreement shall not be true and correct as if such representations and warranties were made at the time of such determination (except as to any such representation or warranty that speaks as of a specific date, which must be untrue or incorrect as of such date); (ii) the representations and warranties of the Company set forth in Section 4.16 of the Merger Agreement shall not be true and correct as if such representations and warranties were made at the time of such determination and the cost of correcting the breach of such representations and warranties shall be in excess of $6,000,000.00 in the aggregate; (iii) any of the other representations and warranties of the Company set forth in the Merger Agreement, when read without any exception or qualification as to materiality or reference to Material Adverse Effect, shall not be true and correct as if such representations and warranties were made at the time of such determination (except as to any such representation and warranty which speaks as of a specific date, which must be untrue or incorrect as of such date) except where the failure to be so true and correct would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect or (iv) the Company shall have breached or failed to observe or perform in any material respect any of its material covenants under the Merger Agreement, which breach has not been cured in all material respects within five Business Days following receipt by the Company of written notice of such breach; or (f) any approvals or consents (other than the filing of a certificate of merger or approval by the stockholders of the Company of the Merger if required by the NRS) required to I-2 65 be filed, or obtained by the Company or any of its subsidiaries in connection with the execution and delivery of this Agreement, the Offer and the consummation of the transactions contemplated by this Agreement shall not have been filed or obtained except where the failure to obtain such approval or consent would not reasonably be expected to have a Material Adverse Effect; or (g) there shall have occurred, and continued to exist, (1) any general suspension of, or limitation on prices for, trading in securities on the Nasdaq Small-Cap Market, (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, or a material limitation (whether or not mandatory) by any Governmental Authority on the extension of credit by banks or other lending institutions, or (3) in the case of any of the foregoing clauses existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (h) since the date of this Agreement there shall have occurred any event, change, effect or development that, individually or when considered together with any other event, change, effect or development, has had or would have a Material Adverse Effect; or (i) There shall exist any Material Title Failure. The foregoing conditions (including those set forth in clauses (i), (ii) and (iii) of the initial paragraph) are for the benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such conditions and other than clauses (i) and (ii) may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in their reasonable discretion, in each case, subject to the terms of the Merger Agreement. The conditions in clauses (i) and (ii) of the initial paragraph may not be waived without the written consent of the Company. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. I-3 EX-99.(D)(2) 13 h83324tex99-d2.txt TENDER AND VOTING AGREEMENT DATED 1/18/01 1 EXHIBIT (d)(2) TENDER AND VOTING AGREEMENT TENDER AND VOTING AGREEMENT (this "AGREEMENT"), dated as of January 18, 2001, by and between Ocean Energy, Inc., a Texas corporation ("PARENT"), OEI Acquisition Corp. (the "PURCHASER"), a Nevada corporation and a wholly-owned subsidiary of Parent, and the stockholders set forth in Schedule I hereto (each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"). WHEREAS, concurrently herewith, Parent, Purchaser and Texoil, Inc. (the "COMPANY"), a Nevada corporation, are entering into an Agreement and Plan of Merger of even date herewith (the "MERGER AGREEMENT") (capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement), pursuant to which Purchaser has agreed to commence a tender offer (the "OFFER") to purchase (i) all of the outstanding shares (the "COMMON SHARES") of the Company's common stock, par value $0.01 per share ("COMPANY COMMON STOCK"), at a price per Common Share of $8.25 (such price or such higher price as may be paid for Common Shares in the Offer, the "OFFER PRICE") net to the seller in cash and (ii) all of the outstanding shares (the "PREFERRED SHARES") of the Company's Series A Convertible Preferred Stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"), at a price per Preferred Share of $18.04 (such price or such higher price as may be paid for Preferred Shares in the Offer, the "PREFERRED OFFER PRICE") net to the seller in cash; WHEREAS, as of the date hereof, each Stockholder owns, beneficially and of record, the outstanding shares of Common Stock, Preferred Stock, the options to purchase Common Stock the ("COMPANY OPTIONS") and warrants convertible into Common Stock (the "COMPANY WARRANTS") set forth opposite such Stockholder's name on Schedule I hereto; provided, however, that any shares held in a fiduciary capacity for the benefit of others by any Stockholder that is a financial institution or its Affiliates shall not be subject to this Agreement; WHEREAS, each of Energy Capital Investment Company, PLC ("ENERGY CAPITAL"), EnCap Equity 1996 Limited Partnership ("ENCAP"; together with Energy Capital, the "ENCAP STOCKHOLDERS") and the Company, as successor in interest to Cliffwood Oil & Gas Corp. ("CLIFFWOOD"), are parties to that certain Investment Agreement (the "INVESTMENT AGREEMENT") dated as of September 26, 1996; WHEREAS, pursuant to Section 8 of the Investment Agreement, each of the EnCap Stockholders has the right (the "ENCAP PUT RIGHT") during a period commencing on May 27, 2001 and ending September 27, 2001, to cause the Company to repurchase certain securities of the Company from the EnCap Stockholders, all on the terms and conditions detailed in the Investment Agreement; WHEREAS, First Union Capital Partners, Inc. ("FIRST UNION") and the Company, as successor in interest to Cliffwood, are parties to that certain Common Stock and Warrant Purchase Agreement (the "PURCHASE AGREEMENT") dated as of May 30, 1997; 2 WHEREAS, pursuant to Article 9 of the Purchase Agreement, First Union has the right (the "FIRST UNION PUT RIGHT") commencing on a change of control of the Company to cause the Company to repurchase certain securities of the Company from First Union, all on the terms and conditions detailed in the Purchase Agreement; WHEREAS, V&C Energy Limited Partnership ("V&C") may have certain special rights relating to the management and future activities of the Company and its Affiliates (the "V&C MANAGEMENT RIGHTS"), including but not limited to the right to participate in acquisitions and dispositions of the Company, its Affiliates, and of various assets, interests or other properties by the Company or its Affiliates; WHEREAS, as a condition to their willingness to enter into the Merger Agreement and make the Offer, Parent and Purchaser have required that each Stockholder agree, and in order to induce Parent and Purchaser to enter into the Merger Agreement, each Stockholder hereby agrees, (i) to tender pursuant to the Offer the Common Shares and the Preferred Shares now legally and/or beneficially owned ("OWNED") by such Stockholder (the "OWNED SHARES"), together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of Company Options, Company Warrants, conversion of convertible securities or otherwise (collectively, the "TENDER SHARES") on the terms and subject to the conditions provided for in this Agreement and (ii) to enter into the other agreements set forth herein; and WHEREAS, there are no prior agreements, arrangements or understandings with respect to the subject matter hereof or the Merger Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: SECTION 1. Agreement to Tender and to Vote. 1.1 Tender. Each Stockholder hereby agrees, severally (and not jointly), to validly tender (or cause the record owner of such Tender Shares to validly tender), pursuant to and in accordance with the terms of the Offer, as soon as practicable after commencement of the Offer but in no event later than ten Business Days after the date of commencement of the Offer, its Tender Shares by physical delivery of the certificates therefor and to not withdraw such Tender Shares, except following termination of the Offer pursuant to its terms. Any Preferred Shares tendered pursuant to this Section 1.1 and acquired pursuant to the Offer will include, by way of amplification and not limitation, all rights associated with such Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date of this Agreement (including, without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). Each Stockholder hereby agrees and acknowledges that it will have no rights to dividends on its Preferred Shares payable on or at any time subsequent to the purchase of such Preferred Shares pursuant to the Offer. Each Stockholder further acknowledges and agrees that Parent's and Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Each Stockholder hereby permits 2 3 Parent and Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC) its identity and ownership of the Tender Shares and the nature of its commitments, arrangements and understandings under this Agreement. 1.2 Voting. Each Stockholder hereby severally (and not jointly) agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called, or in any other circumstance in which the vote, consent or approval of stockholders of the Company is sought, such Stockholder shall (i) vote the Tender Shares to approve and vote in favor of the Merger Agreement; (ii) vote the Tender Shares against any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement; and (iii) vote the Tender Shares against any action or agreement (other than the Merger Agreement or the transactions contemplated thereby) that would impede, interfere with, delay, postpone or attempt to discourage the Merger or the Offer, including, but not limited to: (1) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or any of its subsidiaries; (2) a sale or transfer of a material amount of assets of the Company or any of the Company Subsidiaries or a reorganization, recapitalization or liquidation of the Company and the Company Subsidiaries; (3) any change in the management or board of directors of the Company, except as otherwise agreed to in writing by Purchaser; (4) any material change in the present capitalization or dividend policy of the Company; or (5) any other material change in the Company's corporate structure or business. 1.3 Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each Stockholder hereby irrevocably grants to, and appoints Parent such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote the Tender Shares to approve and vote in favor of the Offer, the Merger Agreement and the transactions contemplated by the Merger Agreement, against any Acquisition Proposal and otherwise as contemplated by Section 1.2. (b) Each Stockholder severally (and not jointly) represents that any proxies heretofore given in respect of the Tender Shares are revocable, and that any such proxies are hereby revoked. (c) Each Stockholder severally (and not jointly) understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. Each Stockholder severally (and not jointly) hereby affirms that the irrevocable proxy set forth in this Section 1.3 is given in connection with the execution of the Merger Agreement and affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked until the termination of this Agreement pursuant to Section 2. Each Stockholder severally (and not jointly) hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND, EXCEPT AS SET FORTH IN SECTION 2, IS EXECUTED AND INTENDED TO BE IRREVOCABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 78.355 OF THE NEVADA REVISED STATUTES. Each Stockholder shall execute 3 4 and deliver to Parent any proxy cards that such Stockholder receives to vote in favor of the consummation of the Merger. Parent shall deliver to the Secretary of the Company any such proxy cards received by it at any meeting called to approve the consummation of the Merger. 1.4 No Inconsistent Arrangements. Each Stockholder severally (and not jointly) hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, it shall not (i) except to Purchaser, transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (ii) except with Parent, enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Company Options, Company Warrants or Tender Shares, (iv) deposit any Company Options, Company Warrants or Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares, (v) with respect to any Stockholder that is a holder of Company Preferred Stock, (A) elect, under Section 3(C) of the Designation of Preferences, Limitations and Rights of Series A Convertible Preferred Stock of the Company (the "DESIGNATION"), to have the Offer or Merger or any of the transactions contemplated hereby or thereby treated as a Liquidation (as defined in the Designation) or (B) convert any Preferred Shares held by such Stockholder into any other series or class of securities of the Company or (vi) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of such Stockholder hereunder untrue or incorrect. 1.5 No Solicitation. Each Stockholder severally (and not jointly) hereby agrees that it shall not, and shall not permit or authorize any of its affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any Person or group (other than Parent, Purchaser or any of their affiliates or representatives) concerning any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Offer, the Merger or any other transactions contemplated by the Merger Agreement. Each Stockholder will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. From and after the execution of this Agreement, each Stockholder shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Proposal, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Proposal. Such Stockholder shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, any representative of any Stockholder acting in such capacity, in accordance with the second sentence of Section 6.08 of the Merger Agreement shall be deemed not to violate this Section 1.5. 4 5 1.6 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each Stockholder severally (and not jointly) hereby agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each Stockholder shall promptly consult with Parent and provide any necessary information and material with respect to all filings made by such Stockholder with any Governmental Authority in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and thereby. 1.7 Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that it may have. 1.8 Payment for Tender Shares in Excess of the Offer Price. Each Stockholder severally (and not jointly) hereby agrees that, if the Merger Agreement is terminated pursuant to Section 8.01(e) or (f) of the Merger Agreement, fifty percent (50%) of any incremental value such Stockholder actually receives for its equity in the Company (including but not limited to any Shares, Company Options and Company Warrants beneficially Owned by such Stockholder) resulting from or attributable to an Acquisition Proposal (other than with Parent or Purchaser) that is entered into or consummated within six months of the termination of the Merger Agreement that exceeds $8.25 per Common Share or $18.04 per Preferred Share (100% of such excess amount with respect to the Common Shares, Company Options, Company Warrants and the Preferred Shares, as applicable, collectively referred to as the "EXCESS AMOUNT") shall belong to Parent. Each Stockholder severally (and not jointly) accordingly agrees to hold in trust for the benefit of Parent, and to remit to Parent (in the same form of consideration as received by the Stockholder) within three Business Days of any receipt thereof, fifty percent (50%) of any Excess Amount or Amounts that such Stockholder actually receives from any Person. In the event of any change in the number of issued and outstanding Shares by reason of any stock dividend, subdivision, merger, recapitalization, combination, conversion or exchange of shares, or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of a dividend of cash or securities) which would have the effect of diluting or otherwise adversely affecting Parent's rights and privileges under this Section 1.8, the Excess Amount due hereunder shall be appropriately and equitably adjusted to restore to Parent its rights and privileges under this Section 1.8. Each Stockholder severally (and not jointly) hereby agrees to reimburse Parent and Purchaser for any fees and expenses (including reasonable attorneys fees) incurred by Parent and Purchaser in connection with any successful litigation, dispute or other attempt to recover the portion of the Excess Amount due from such Stockholder pursuant to this Section 1.8 in the event that Stockholder fails to deliver such Excess Amount to Parent upon written demand. 1.9 Transfer of Company Options and Company Warrants. Each Stockholder holding Company Options or Company Warrants severally (and not jointly) agrees that so long as this Agreement shall remain in effect, such Stockholder (for purposes of this Section 1.9, an "OPTIONHOLDER") will not transfer or exercise any Company Options or Company Warrants held by such Optionholder except to an Affiliate of such Stockholder that becomes a party to this Agreement or a similar agreement; provided, however, that each Optionholder agrees to accept at the Effective Time (as defined in the Merger Agreement) an amount in respect of such Company Options equal to the Company Option Payments and an amount in respect of such Company 5 6 Warrants equal to the Company Warrant Payments, and each such Company Option and Company Warrant shall thereafter be canceled. Nothing in this Agreement shall limit the ability of the holders of Company Options or Company Warrants to exercise such securities in accordance with their terms, provided that such holder tenders the shares of Company Common Stock issued upon exercise thereof in the Offer. 1.10 Special Provision Applicable Only to the EnCap Stockholders. Each EnCap Stockholder hereby acknowledges that no EnCap Put Right exists with respect to any Tender Shares now or hereafter Owned by such Stockholder. 1.11 Special Provision Applicable Only to First Union. Subject to the termination provisions of Section 2 of this Agreement, First Union hereby irrevocably waives the First Union Put Right with respect to any and all Tender Shares now or hereafter Owned by such Stockholder. 1.12 Special Provision Applicable Only to V&C. Subject to the termination provisions of Section 2 of this Agreement, V&C hereby irrevocably waives the V&C Management Rights and agrees and acknowledges that neither Parent, Purchaser nor the Surviving Corporation will have any continuing obligation to V&C with respect to such V&C Management Rights or any similar special right to control or effect the affairs or activities of the Surviving Corporation or its Affiliates. SECTION 2. Effectiveness; Termination. This Agreement shall become effective as to each Stockholder upon its execution by such Stockholder, Parent and Purchaser and upon the execution of the Merger Agreement. This Agreement may be terminated as to each Stockholder at any time by mutual written consent of such Stockholder, Parent and Purchaser. Other than the provisions of Section 1.8 and Section 6, this Agreement shall terminate, without any action by the parties hereto, on the date on which the Merger Agreement terminates in accordance with its terms. SECTION 3. Representations and Warranties. 3.1 Representations and Warranties of Stockholders. Each Stockholder hereby represents and warrants, severally (and not jointly), to Parent and Purchaser as follows: (a) Title. Such Stockholder has good and valid title to the Owned Shares of such Stockholder, free and clear of any lien, pledge, charge, encumbrance or claim of whatever nature and, upon the purchase of the Tender Shares by Purchaser, such Stockholder will deliver good and valid title to the Tender Shares, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) No Other Rights. Except for this Agreement and as shown on Schedule I hereto, there are no outstanding options, warrants or rights to purchase or acquire the Shares of such Stockholder. (c) Ownership of Shares. On the date hereof, the Owned Shares of such Stockholder are owned of record or beneficially by such Stockholder and, on the date hereof, such Owned Shares of such Stockholder constitute all of the Shares owned of record or 6 7 beneficially by such Stockholder. Such Stockholder has sole voting power and sole power of disposition with respect to all of the Owned Shares of such Stockholder, with no restrictions, subject to applicable federal securities laws, on such Stockholder's rights of disposition pertaining thereto. (d) Power; Binding Agreement. Such Stockholder has the legal capacity, and all the necessary power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder, and assuming this Agreement has been duly and validly authorized, executed and delivered by each party hereto other than such Stockholder, this Agreement constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other equitable relief may be subject to equitable defenses and to the discretion of the court. (e) No Conflicts. Other than in connection with or in compliance with the provisions of the Exchange Act, no authorization, consent or approval of, or filing with, any court or any public body or authority is necessary for the consummation by such Stockholder of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, encumbrance, pledge, charge or claim upon any of the properties or assets of such Stockholder under, (i) the certificate of incorporation or other organizational documents of such Stockholder, if any, or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which such Stockholder is a party or by which its properties or assets are bound. (f) No Finder's Fees. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Stockholder. 3.2 Representations and Warranties of Parent and Purchaser. Each of Parent and Purchaser hereby represent and warrant to each Stockholder that the Offer, the Offer Documents and the transactions contemplated thereby will comply in all material respects with the provisions of applicable federal securities laws. Parent and Purchaser further represent that the Offer Documents, on the date filed with the SEC and on the date first published, sent or given to the Stockholders, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied by the 7 8 Company for inclusion in the Offer Documents. Each of Parent and Purchaser agree and acknowledge that the Stockholders are entering into this Agreement in material reliance on this Section 3.2. SECTION 4. Additional Shares. Each Stockholder hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by such Stockholder, if any, after the date hereof. SECTION 5. Further Assurances. From time to time, at the Parent's request and without further consideration, each Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to carry out the provisions of this Agreement. SECTION 6. Miscellaneous. 6.1 Non-Survival. The representations and warranties made by a Stockholder herein shall terminate upon the termination of this Agreement, other than such Stockholder's representations and warranties in Sections 3(a) through (c) which shall survive the termination of this Agreement. 6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent may assign its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 6.3 Waiver and Amendments. Any provision of this Agreement may be waived at any time by the party which is entitled to the benefits thereof and this Agreement may be amended or supplemented at any time. No such waiver, amendment or supplement shall be effective unless in writing and signed by the party sought to be bound thereby. 6.4 Notices. All notices or communications hereunder shall be in writing (including facsimile or similar writing) addressed as follows: To the Stockholders: At the addresses set forth on Schedule I hereto. with a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue, Suite 3200 Dallas, Texas 75202 Telecopy: (214) 855-4300 Attention: Thomas G. Adler 8 9 To the Parent or Purchaser: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: James T. Hackett Chairman of the Board, President and Chief Executive Officer with a copy to: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: Robert K. Reeves, Esq. Executive Vice President, General Counsel and Secretary with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telecopy: 214-969-4343 Attention: Michael E. Dillard, P.C. Any such notice or communication shall be deemed given (i) when made, if made by hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one Business Day after being deposited with a next day courier, postage prepaid, or (iii) three Business Days after being sent certified or registered mail, return receipt requested, postage prepaid, in each case addressed as above (or to such other address as such party may designate in writing from time to time). 6.5 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof; provided, however, that the laws of the State of Nevada will govern the internal affairs of the Company. Each Stockholder, Parent and Purchaser irrevocably submits to the exclusive jurisdiction of any Texas state or federal court sitting in the State of Texas in any action arising out of or relating to this Agreement, hereby irrevocably agrees that all claims in respect of such action may be heard and determined in such Texas state or federal court, and hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. 6.6 Specific Performance. Each Stockholder recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause Parent to 9 10 sustain damages for which it would not have an adequate remedy at law, and therefore each Stockholder agrees that in the event of any such breach Parent shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same Agreement. Notwithstanding anything in this Agreement to the contrary, regardless of the number of Stockholders that enter into this Agreement, all obligations, duties and liabilities of the Stockholders hereunder shall be several and not joint. 6.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 6.10 Expenses. Each of the parties shall pay its own expenses in connection with the negotiation, execution and performance of this Agreement. [SIGNATURE PAGES FOLLOW] 10 11 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OCEAN ENERGY, INC. By: /s/ James T. Hackett ----------------------------------- James T. Hackett Chairman of the Board, President and Chief Executive Officer OEI ACQUISITION CORP. By: /s/ James T. Hackett ----------------------------------- James T. Hackett Chairman of the Board, President and Chief Executive Officer 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. V&C ENERGY LIMITED PARTNERSHIP By: Energy Resource Associates, Inc., its general partner By: /s/ Frank A. Lodzinski ----------------------------------- Name: Frank A. Lodzinski ---------------------------------- Title: President --------------------------------- 13 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. QUANTUM ENERGY PARTNERS, LP By: Quantum Energy Management, LLC, its General Partner By: /s/ S. Wil VonLoh, Jr. ----------------------------------- Name: S. Wil VonLoh, Jr. ---------------------------------- Title: President --------------------------------- 14 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Jerry M. Crews ----------------------------------- Jerry M. Crews 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Francis M. Mury ----------------------------------- Francis M. Mury 16 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Robert E. LaJoie ----------------------------------- Robert E. LaJoie 17 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Richard J. Glover ----------------------------------- Richard J. Glover 18 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. THE LINCOLN NATIONAL LIFE INSURANCE CO. By: Delaware Lincoln Investment Advisers, a series of Delaware Management Business Trust Attorney-in-Fact By: /s/ R. Gordon Marsh --------------------------------- Name: R. Gordon Marsh --------------------------------- Title: Vice President --------------------------------- 19 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. ENCAP EQUITY 1996 LIMITED PARTNERSHIP By: EnCap Investments LLC, its general partner By: /s/ Robert L. Zorich --------------------------------- Name: Robert L. Zorich Title: Managing Director ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ Robert L. Zorich --------------------------------- Name: Robert L. Zorich Title: Managing Director 20 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. FIRST UNION CAPITAL PARTNERS, INC. By: /s/ Jay M. Chenosky --------------------------------- Name: Jay M. Chenosky --------------------------------- Title: Senior Vice President --------------------------------- 21 SCHEDULE I
STOCKHOLDER NAME AND ADDRESS COMMON STOCK PREFERRED STOCK COMPANY OPTIONS COMPANY WARRANTS ---------------- ------------ --------------- ---------------- ---------------- V&C Energy Limited Partnership 1,378,050 456,250 -- -- Attn: Frank A. Lodzinski 110 Cypress Station Drive, Suite 220 Houston, TX 77097 Quantum Energy Partners, LP -- 2,075,663 -- -- Attn: S. Wil VanLoh, Jr 777 Walker, 2530 Two Shell Plaza Houston, TX 77002 Jerry M. Crews 279,903 6,250 121,100 -- 8930 Sedgemoor Drive Tomball, TX 77375 Francis M. Mury 110,582 -- 121,100 -- 17611 Fireside Spring, TX 77379 Robert E. LaJoie 140,417 -- 33,700 -- 340 S. Palm Avenue, Apt. 83 Sarasota, FL 34236-6795 Richard Jess Glover 158,584 -- -- -- P.O. Box 1893 Odessa, TX 79760 The Lincoln National Life Insurance Co. 516,942 -- -- 293,471 Attn: Gordon Marsh 1300 S. Clinton Street Ft. Wayne, IN 46801 EnCap Equity 1996 Limited Partnership 320,904 159,059 -- -- Attn: Robert Zorich 1100 Louisiana, Suite 3150 Houston, TX 77002-5218 Energy Capital Investment Company PLC 106,968 103,783 -- -- Attn: Robert Zorich 1100 Louisiana, Suite 3150 Houston, TX 77002-5218 First Union Capital Partners, Inc. 374,446 -- -- 188,158 c/o Jay Chernosky First Union Corp. of North Carolina 1001 Fannin, Suite 2255 Houston, TX 77002-6707
EX-99.(D)(3) 14 h83324tex99-d3.txt TENDER AGREEMENT, DATED 1/18/01 1 EXHIBIT (d)(3) TENDER AGREEMENT TENDER AGREEMENT (this "AGREEMENT"), dated as of January 18, 2001, by and between Ocean Energy, Inc., a Texas corporation ("PARENT"), OEI Acquisition Corp. (the "PURCHASER"), a Nevada corporation and a wholly-owned subsidiary of Parent, and the stockholders set forth in Schedule I hereto (each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"). WHEREAS, concurrently herewith, Parent, Purchaser and Texoil, Inc. (the "COMPANY"), a Nevada corporation, are entering into an Agreement and Plan of Merger of even date herewith (the "MERGER AGREEMENT") (capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement), pursuant to which Purchaser has agreed to commence a tender offer (the "OFFER") to purchase (i) all of the outstanding shares (the "COMMON SHARES") of the Company's common stock, par value $0.01 per share ("COMPANY COMMON STOCK"), at a price per Common Share of $8.25 (such price or such higher price as may be paid for Common Shares in the Offer, the "OFFER PRICE") net to the seller in cash and (ii) all of the outstanding shares (the "PREFERRED SHARES") of the Company's Series A Convertible Preferred Stock, par value $0.01 per share ("COMPANY PREFERRED STOCK"), at a price per Preferred Share of $18.04 (such price or such higher price as may be paid for Preferred Shares in the Offer, the "PREFERRED OFFER PRICE") net to the seller in cash; WHEREAS, as of the date hereof, each Stockholder owns, beneficially and of record, the outstanding shares of Common Stock, Preferred Stock, the options to purchase Common Stock the ("COMPANY OPTIONS") and warrants convertible into Common Stock (the "COMPANY WARRANTS") set forth opposite such Stockholder's name on Schedule I hereto; provided, however, that any shares held in a fiduciary capacity for the benefit of others by any Stockholder that is a financial institution or its Affiliates shall not be subject to this Agreement; WHEREAS, as a condition to their willingness to enter into the Merger Agreement and make the Offer, Parent and Purchaser have required that each Stockholder agree, and in order to induce Parent and Purchaser to enter into the Merger Agreement, each Stockholder hereby agrees, (i) to tender pursuant to the Offer the Common Shares and the Preferred Shares now legally and/or beneficially owned ("OWNED") by such Stockholder (the "OWNED SHARES"), together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of Company Options, Company Warrants, conversion of convertible securities or otherwise (collectively, the "TENDER SHARES") on the terms and subject to the conditions provided for in this Agreement and (ii) to enter into the other agreements set forth herein; and WHEREAS, there are no prior agreements, arrangements or understandings with respect to the subject matter hereof or the Merger Agreement. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration given to each party hereto, the receipt of which is hereby acknowledged, the parties agree as follows: 2 SECTION 1. Agreement to Tender. 1.1 Tender. Each Stockholder hereby agrees, severally (and not jointly), to validly tender (or cause the record owner of such Tender Shares to validly tender), pursuant to and in accordance with the terms of the Offer, as soon as practicable after commencement of the Offer but in no event later than ten Business Days after the date of commencement of the Offer, its Tender Shares by physical delivery of the certificates therefor and to not withdraw such Tender Shares, except following termination of the Offer pursuant to its terms. Any Preferred Shares tendered pursuant to this Section 1.1 and acquired pursuant to the Offer will include, by way of amplification and not limitation, all rights associated with such Shares, including but not limited to all cash and non-cash dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date of this Agreement (including, without limitation, with respect to the Preferred Shares, rights to dividends pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). Each Stockholder hereby agrees and acknowledges that it will have no rights to dividends on its Preferred Shares payable on or at any time subsequent to the purchase of such Preferred Shares pursuant to the Offer. Each Stockholder further acknowledges and agrees that Parent's and Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Each Stockholder hereby permits Parent and Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the SEC) its identity and ownership of the Tender Shares and the nature of its commitments, arrangements and understandings under this Agreement. 1.2 No Inconsistent Arrangements. Each Stockholder severally (and not jointly) hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, it shall not (i) except to Purchaser, transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (ii) except with Parent, enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Company Options, Company Warrants or Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Company Options, Company Warrants or Tender Shares, (iv) deposit any Company Options, Company Warrants or Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares, (v) with respect to any Stockholder that is a holder of Company Preferred Stock, (A) elect, under Section 3(C) of the Designation of Preferences, Limitations and Rights of Series A Convertible Preferred Stock of the Company (the "DESIGNATION"), to have the Offer or Merger or any of the transactions contemplated hereby or thereby treated as a Liquidation (as defined in the Designation) or (B) convert any Preferred Shares held by such Stockholder into any other series or class of securities of the Company or (vi) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby or by the Merger Agreement or which would make any representation or warranty of such Stockholder hereunder untrue or incorrect. 1.3 No Solicitation. Each Stockholder severally (and not jointly) hereby agrees that it shall not, and shall not permit or authorize any of its affiliates, representatives or agents to, directly or indirectly, encourage, solicit, explore, participate in or initiate discussions or 2 3 negotiations with, or provide or disclose any information to, any Person or group (other than Parent, Purchaser or any of their affiliates or representatives) concerning any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Offer, the Merger or any other transactions contemplated by the Merger Agreement. Each Stockholder will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. From and after the execution of this Agreement, each Stockholder shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations or proposals relating to an Acquisition Proposal, identify the offeror and furnish to Parent a copy of any such proposal or inquiry, if it is in writing, or a written summary of any oral proposal or inquiry relating to an Acquisition Proposal. Such Stockholder shall promptly advise Parent in writing of any development relating to such proposal, including the results of any discussions or negotiations with respect thereto. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, any representative of any Stockholder acting in such capacity, in accordance with the second sentence of Section 6.08 of the Merger Agreement shall be deemed not to violate this Section 1.3. 1.4 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, each Stockholder severally (and not jointly) hereby agrees to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each Stockholder shall promptly consult with Parent and provide any necessary information and material with respect to all filings made by such Stockholder with any Governmental Authority in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and thereby. 1.5 Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that it may have. 1.6 Payment for Tender Shares in Excess of the Offer Price. Each Stockholder severally (and not jointly) hereby agrees that, if the Merger Agreement is terminated pursuant to Section 8.01(e) or (f) of the Merger Agreement, fifty percent (50%) of any incremental value such Stockholder actually receives for its equity in the Company (including but not limited to any Shares, Company Options and Company Warrants beneficially Owned by such Stockholder) resulting from or attributable to an Acquisition Proposal (other than with Parent or Purchaser) that is entered into or consummated within six months of the termination of the Merger Agreement that exceeds $8.25 per Common Share or $18.04 per Preferred Share (100% of such excess amount with respect to the Common Shares, Company Options, Company Warrants and the Preferred Shares, as applicable, collectively referred to as the "EXCESS AMOUNT") shall belong to Parent. Each Stockholder severally (and not jointly) accordingly agrees to hold in trust for the benefit of Parent, and to remit to Parent (in the same form of consideration as received by the Stockholder) within three Business Days of any receipt thereof, fifty percent (50%) of any Excess Amount or Amounts that such Stockholder actually receives from any Person. In the event of any change in the number of issued and outstanding Shares by reason of any stock dividend, subdivision, merger, recapitalization, combination, conversion or exchange of shares, or any other change in the corporate or capital structure of the Company (including, without 3 4 limitation, the declaration or payment of a dividend of cash or securities) which would have the effect of diluting or otherwise adversely affecting Parent's rights and privileges under this Section 1.6, the Excess Amount due hereunder shall be appropriately and equitably adjusted to restore to Parent its rights and privileges under this Section 1.6. Each Stockholder severally (and not jointly) hereby agrees to reimburse Parent and Purchaser for any fees and expenses (including reasonable attorneys fees) incurred by Parent and Purchaser in connection with any successful litigation, dispute or other attempt to recover the portion of the Excess Amount due from such Stockholder pursuant to this Section 1.6 in the event that Stockholder fails to deliver such Excess Amount to Parent upon written demand. 1.7 Transfer of Company Options and Company Warrants. Each Stockholder holding Company Options or Company Warrants severally (and not jointly) agrees that so long as this Agreement shall remain in effect, such Stockholder (for purposes of this Section 1.7, an "OPTIONHOLDER") will not transfer or exercise any Company Options or Company Warrants held by such Optionholder except to an Affiliate of such Stockholder that becomes a party to this Agreement or a similar agreement; provided, however, that each Optionholder agrees to accept at the Effective Time (as defined in the Merger Agreement) an amount in respect of such Company Options equal to the Company Option Payments and an amount in respect of such Company Warrants equal to the Company Warrant Payments, and each such Company Option and Company Warrant shall thereafter be canceled. Nothing in this Agreement shall limit the ability of the holders of Company Options or Company Warrants to exercise such securities in accordance with their terms, provided that such holder tenders the shares of Company Common Stock issued upon exercise thereof in the Offer. SECTION 2. Effectiveness; Termination. This Agreement shall become effective as to each Stockholder upon its execution by such Stockholder, Parent and Purchaser and upon the execution of the Merger Agreement. This Agreement may be terminated as to each Stockholder at any time by mutual written consent of such Stockholder, Parent and Purchaser. Other than the provisions of Section 1.6 and Section 6, this Agreement shall terminate, without any action by the parties hereto, on the date on which the Merger Agreement terminates in accordance with its terms. SECTION 3. Representations and Warranties. 3.1 Representations and Warranties of Stockholders. Each Stockholder hereby represents and warrants, severally (and not jointly), to Parent and Purchaser as follows: (a) Title. Such Stockholder has good and valid title to the Owned Shares of such Stockholder, free and clear of any lien, pledge, charge, encumbrance or claim of whatever nature and, upon the purchase of the Tender Shares by Purchaser, such Stockholder will deliver good and valid title to the Tender Shares, free and clear of any lien, charge, encumbrance or claim of whatever nature. (b) No Other Rights. Except for this Agreement and as shown on Schedule I hereto, there are no outstanding options, warrants or rights to purchase or acquire the Shares of such Stockholder. 4 5 (c) Ownership of Shares. On the date hereof, the Owned Shares of such Stockholder are owned of record or beneficially by such Stockholder and, on the date hereof, such Owned Shares of such Stockholder constitute all of the Shares owned of record or beneficially by such Stockholder. Such Stockholder has sole power of disposition with respect to all of the Owned Shares of such Stockholder, with no restrictions, subject to applicable federal securities laws, on such Stockholder's rights of disposition pertaining thereto. (d) Power; Binding Agreement. Such Stockholder has the legal capacity, and all the necessary power and authority to enter into and perform all of its obligations under this Agreement. The execution, delivery and performance of this Agreement by such Stockholder will not violate any other agreement to which such Stockholder is a party including, without limitation, any voting agreement, stockholders agreement or voting trust. This Agreement has been duly and validly executed and delivered by such Stockholder, and assuming this Agreement has been duly and validly authorized, executed and delivered by each party hereto other than such Stockholder, this Agreement constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws, now or hereafter in effect, affecting creditor rights generally and (ii) the remedy of specific performance and injunctive and other equitable relief may be subject to equitable defenses and to the discretion of the court. (e) No Conflicts. Other than in connection with or in compliance with the provisions of the Exchange Act, no authorization, consent or approval of, or filing with, any court or any public body or authority is necessary for the consummation by such Stockholder of the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not constitute a breach, violation or default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, encumbrance, pledge, charge or claim upon any of the properties or assets of such Stockholder under, (i) the certificate of incorporation or other organizational documents of such Stockholder, if any, or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument to which such Stockholder is a party or by which its properties or assets are bound. (f) No Finder's Fees. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of such Stockholder. 3.2 Representations and Warranties of Parent and Purchaser. Each of Parent and Purchaser hereby represent and warrant to each Stockholder that the Offer, the Offer Documents and the transactions contemplated thereby will comply in all material respects with the provisions of applicable federal securities laws. Parent and Purchaser further represent that the Offer Documents, on the date filed with the SEC and on the date first published, sent or given to the Stockholders, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made 5 6 therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or Purchaser with respect to information supplied by the Company for inclusion in the Offer Documents. Each of Parent and Purchaser agree and acknowledge that the Stockholders are entering into this Agreement in material reliance on this Section 3.2. SECTION 4. Additional Shares. Each Stockholder hereby agrees, while this Agreement is in effect, to promptly notify Parent of the number of any new Shares acquired by such Stockholder, if any, after the date hereof. SECTION 5. Further Assurances. From time to time, at the Parent's request and without further consideration, each Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to carry out the provisions of this Agreement. SECTION 6. Miscellaneous. 6.1 Non-Survival. The representations and warranties made by a Stockholder herein shall terminate upon the termination of this Agreement, other than such Stockholder's representations and warranties in Sections 3(a) through (c) which shall survive the termination of this Agreement. 6.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Parent may assign its rights and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, but no such assignment shall relieve Parent of its obligations hereunder if such assignee does not perform such obligations. 6.3 Waiver and Amendments. Any provision of this Agreement may be waived at any time by the party which is entitled to the benefits thereof and this Agreement may be amended or supplemented at any time. No such waiver, amendment or supplement shall be effective unless in writing and signed by the party sought to be bound thereby. 6.4 Notices. All notices or communications hereunder shall be in writing (including facsimile or similar writing) addressed as follows: To the Stockholders: At the addresses set forth on Schedule I hereto. with a copy to: Jenkens & Gilchrist, P.C. 1445 Ross Avenue, Suite 3200 Dallas, Texas 75202 Telecopy: (214) 855-4300 Attention: Thomas G. Adler 6 7 To the Parent or Purchaser: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: James T. Hackett Chairman of the Board, President and Chief Executive Officer with a copy to: Ocean Energy, Inc. 1001 Fannin, Suite 1600 Houston, Texas 77002 Telecopy: (713) 265-8840 Attention: Robert K. Reeves, Esq. Executive Vice President, General Counsel and Secretary with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 1700 Pacific Avenue, Suite 4100 Dallas, Texas 75201 Telecopy: 214-969-4343 Attention: Michael E. Dillard, P.C. Any such notice or communication shall be deemed given (i) when made, if made by hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one Business Day after being deposited with a next day courier, postage prepaid, or (iii) three Business Days after being sent certified or registered mail, return receipt requested, postage prepaid, in each case addressed as above (or to such other address as such party may designate in writing from time to time). 6.5 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof; provided, however, that the laws of the State of Nevada will govern the internal affairs of the Company. Each Stockholder, Parent and Purchaser irrevocably submits to the exclusive jurisdiction of any Texas state or federal court sitting in the State of Texas in any action arising out of or relating to this Agreement, hereby irrevocably agrees that all claims in respect of such action may be heard and determined in such Texas state or federal court, and hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. 7 8 6.6 Specific Performance. Each Stockholder recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause Parent to sustain damages for which it would not have an adequate remedy at law, and therefore each Stockholder agrees that in the event of any such breach Parent shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 6.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same Agreement. Notwithstanding anything in this Agreement to the contrary, regardless of the number of Stockholders that enter into this Agreement, all obligations, duties and liabilities of the Stockholders hereunder shall be several and not joint. 6.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 6.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 6.10 Expenses. Each of the parties shall pay its own expenses in connection with the negotiation, execution and performance of this Agreement. [SIGNATURE PAGES FOLLOW] 8 9 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. OCEAN ENERGY, INC. By: /s/ James T. Hackett ------------------------------------- James T. Hackett Chairman of the Board, President and Chief Executive Officer OEI ACQUISITION CORP. By: /s/ James T. Hackett ------------------------------------- James T. Hackett Chairman of the Board, President and Chief Executive Officer 10 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. EL PASO CAPITAL INVESTMENT COMPANY, LLC By: /s/ John Harrison ------------------------------------- Name: John Harrison ----------------------------------- Title: Sr. Managing Director and CFO ---------------------------------- 11 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Thomas A. Reiser ------------------------------------- Thomas A. Reiser 12 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Paul B. David ------------------------------------- Paul B. David 13 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Peggy C. Simpson ------------------------------------- Peggy C. Simpson 14 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Frank A. Lodzinski ------------------------------------- Frank A. Lodzinski 15 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ T. W. Hoehn, III ------------------------------------- T. W. Hoehn, III 16 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. /s/ Arthur L. Smith ------------------------------------- Arthur L. Smith 17 SCHEDULE I
STOCKHOLDER NAME AND ADDRESS COMMON STOCK PREFERRED STOCK COMPANY OPTIONS COMPANY WARRANTS ---------------- ------------ --------------- --------------- ---------------- El Paso Capital Investment Company LLC -- 152,291 -- -- Attn: Robert Zorich 1100 Louisiana, Suite 3150 Houston, TX 77002-5218 Thomas A. Reiser 48,304 6,919 28,083 -- 2020 N. Memorial Way Houston, TX 77007 Paul B. David 57,257 18,750 22,467 -- 204 Kings Road Lafayette, LA 70503 Peggy C. Simpson 50,646 -- 59,317 -- 3614 Lost Oak Drive Spring, TX 77388 Frank A. Lodzinski 40,000 -- 132,333 -- 18726 White Candle Spring, TX 77388-5856 T. W. Hoehn, III 104,572 -- -- -- c/o Hoehn Motors 5475 Paseo Del Norte Car Country Drive Carlsbad, CA 92008 Arthur L. Smith -- 12,500 -- -- John S. Herold, Inc. Wedgewood International Tower 1415 Louisiana, Suite 2210 Houston, TX 77002
EX-99.(D)(4) 15 h83324tex99-d4.txt CONFIDENTIALITY AGREEMENT, DATED 10/30/00 1 EXHIBIT (d)(4) [TEXOIL LOGO] October 30, 2000 Mr. Hank Wood Ocean Energy, Inc. 1001 Fannin Suite 1600 Houston TX, 77002-6794 Subject: Confidentiality Agreement Dear Mr. Wood: In connection with a possible transaction between Texoil, Inc. ("Texoil") and Ocean Energy, Inc. ("Ocean"), Texoil intends to furnish Ocean with certain oral and written information about Texoil that is non-public, confidential and/or proprietary in nature, including, but not limited to certain financial and contractual information, certain information related to proved reserves ("Reserve Reports") and certain information related to unproved prospects ("Prospects"). All such information provided pursuant to this letter agreement (the "Confidentiality Agreement") about Texoil is to be considered confidential. Collectively all such information is referred to herein as the "Evaluation Material" and collectively Texoil and Ocean may be referred to herein as the "Parties". It is agreed that for purposes of this Confidentiality Agreement, the Evaluation Material does not include information which (i) was or becomes available to the public other than as a result of actions taken by Ocean or Ocean's subsidiaries or affiliates or their respective directors, officers, employees, affiliates or agents (collectively "Representatives") in violation of this Agreement, (ii) was in the possession of Ocean prior to disclosure by or on behalf of Texoil, (iii) becomes available to Ocean, without obligation of confidentiality from a source other than Texoil or Agents, provided that such source is not bound by a confidentiality agreement with Texoil or (iv) is required to be disclosed by law, rule, regulation or by legal process. For a period ending one year from the date hereof the Evaluation Material may be used by Ocean or its Representatives, solely for the purpose of evaluating a possible business transaction or combination with Texoil (a "Transaction") and the Evaluation Material will be kept confidential by Ocean and its Representatives; provided, however, that any of the Evaluation Material may be disclosed to Representatives who need to review such possible Transaction and who are bound to comply with the obligation of confidentiality hereunder. It is specifically understood that such Representatives shall be informed of the confidential nature of such Evaluation Material, shall be directed to treat such Evaluation Material confidentially, and shall be bound by the terms of this Confidentiality Agreement. Each Party agrees that it will not, nor will its Representatives, without the prior written consent of the other Party, except as required by law, disclose to any person either the fact that any investigations, discussions or negotiations are taking place concerning a possible Transaction or any of the terms, conditions or other facts with respect to any such possible Transaction, 2 Confidentiality Agreement Page 2 including the status thereof. The term "person" as used in this letter shall be broadly interpreted to include, without limitation, any corporation, company, partnership or individual. In the event that no Transaction is effected between the Parties within a reasonable time after the Evaluation Material has been furnished to Ocean and upon the written request of Texoil, Ocean and its Representatives will deliver to Texoil, within five (5) business days, the Evaluation Material along with any and all copies, notes, extracts thereof, and also upon written request of Texoil deliver an authorized statement, in writing, that all analyses, projections, and other work product derived from or directly relating to the Evaluation Material have been returned to Texoil or destroyed. In the event that Ocean or anyone to whom it supplies Evaluation Material receives a request to disclose any or all of the Evaluation Material under the requirements of applicable law, including without limitation, the rules of the Securities and Exchange Commission, state securities commissions or agencies or securities exchange, or under the terms of a subpoena, Ocean agrees to (i) immediately notify Texoil of the existence, terms and circumstances surrounding such request, (ii) consult with Texoil on the advisability of taking legally available steps to resist or narrow such request, and (iii) if disclosure is required, furnish only that portion of the information which, in the written opinion of counsel, Ocean is legally compelled to disclose. Texoil will endeavor to include in the Evaluation Material, known information, which it believes to be relevant for the purpose of an evaluation. Ocean understands that Texoil, its affiliates and agents make no representation or warranty as to the accuracy or completeness of the Evaluation Material, including the accuracy of any reserve estimates, the Reserve Reports or any other estimates relating to the assets and/or liabilities of Texoil. It is understood and agreed that money damages would not be sufficient remedy for any breach of this Confidentiality Agreement by Ocean and that Texoil shall be entitled to specific performance as a remedy for any such breach. It is accordingly agreed that Texoil shall be entitled to an injunction or injunctions to limit or prevent breaches of this agreement and/or compel specific performance of this agreement and that neither Ocean nor its counsel or Representatives will oppose the granting of such relief. Such remedy shall not be deemed to be the exclusive remedy for the breach of this Confidentiality Agreement but shall be in addition to all other remedies available at law or equity. It is further understood and agreed that no failure or delay by Texoil in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. In addition, Ocean agrees that neither it nor its Representatives will use any non-public information obtained (directly or indirectly) from or about Texoil to trade in Texoil's securities, nor will Ocean or its Representatives divulge any non-public information obtained (directly or indirectly) from or about Texoil to any other party, which could be used by such other party to trade in Texoil's securities, for a period of six (6) months following the signing of this Confidentiality Agreement. This Confidentiality Agreement shall be governed by the laws of the State of Texas without regard to conflict of law principles, and Ocean and its Representatives submit to the nonexclusive jurisdiction of and venue in any federal or state court sitting in Texas in any action or proceedings arising out of or relating to this Confidentiality Agreement. 3 Confidentiality Agreement Page 3 In the event that Ocean makes any offer for Texoil common stock and/or securities convertible into Texoil common stock, which includes Ocean securities of any form, and to the extent that Texoil requires material non-public information related to Ocean to evaluate such offer, then Texoil will agree to enter into a separate confidentiality agreement, mutually agreeable to the Parties, applicable to any such information provided by Ocean. Texoil warrants that it has the right to allow Ocean access to the Evaluation Material. Texoil agrees to release, defend, indemnify, protect and hold Ocean, its subsidiaries and affiliates and their respective directors, officers, employees, consultants, representatives, agents and advisors harmless from and against any and all claims, liabilities, losses, demands, causes of action and any expenses (including court costs and attorney's fees) arising from any breach or alleged breach by Texoil of license agreements or other agreements under which the Evaluation Material were obtained. This Agreement does not create any agency, partnership or joint venture relationship between the Parties. The Parties hereto understand and agree that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist between the Parties, and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof, except, in case of this agreement, for the matters specially agreed to herein. For purposes of this Agreement, the term definitive agreement does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties. Ocean acknowledges agreement with the foregoing by its signature below and the delivery to Texoil of an executed original of this Confidentiality Agreement, which will constitute the Parties' agreement with respect to the subject matter of this letter. TEXOIL, INC. /s/ FRANK A. LODZINSKI - -------------------------------- Frank A. Lodzinski, President OCEAN ENERGY, INC. ACCEPTED AND AGREED as of the 30th day of October, 2000 By: /s/ JOHN H. CAMPBELL ---------------------------------- Name: /s/ JOHN H. CAMPBELL -------------------------------- Title: Attorney-in-Fact EX-99.(D)(5) 16 h83324tex99-d5.txt CONFIDENTIALITY AGREEMENT, DATED 12/18/00 1 EXHIBIT (d)(5) [OCEAN ENERGY LETTERHEAD] December 18, 2000 Mr. Frank A. Lodzinski Texoil, Inc. 110 Cypress Station Dr. Suite 220 Houston, TX 77090-1629 Subject: Confidentiality Agreement Dear Mr. Lodzinski: In connection with a possible transaction between Texoil, Inc., a Nevada corporation (the "Company") and Ocean Energy, Inc., a Texas corporation (the "Purchaser"), the Purchaser intends to furnish the Company with certain oral and written information about the Purchaser that is non-public, confidential and/or proprietary in nature, including, but not limited to certain financial and contractual information, certain information related to proved reserves ("Reserve Reports") and certain information related to unproved prospects ("Prospects"). All such information provided pursuant to this letter agreement (the "Confidentiality Agreement") about the Purchaser is to be considered confidential. Collectively all such information is referred to herein as the "Evaluation Material" and collectively the Purchaser and the Company may be referred to herein as the "Parties." It is agreed that for purposes of this Confidentiality Agreement, the Evaluation Material does not include information which (i) was or becomes available to the public other than as a result of actions taken by the Company or the Company's subsidiaries or affiliates or their respective directors, officers, employees, affiliates or agents (collectively "Representatives") in violation of this Agreement, (ii) was in the possession of the Company prior to disclosure by or on behalf of the Purchaser, or (iii) becomes available to the Company, without obligation of confidentiality from a source other than the Purchaser or its Representatives, provided that such source is not bound by a confidentiality agreement with the Purchaser. For a period ending one year from the date hereof, the Evaluation Material may be used by the Company or its Representatives, solely for the purpose of evaluating a possible business transaction or combination with the Purchaser (a "Transaction"), and the Evaluation Material will be kept confidential by the Company and its Representatives; provided, however, that any of the Evaluation Material may be disclosed to Representatives who need to review such possible Transaction and who are bound to comply with the obligation of confidentiality hereunder. It is specifically understood that such Representatives shall be informed of the confidential nature of such Evaluation Material, shall be directed to treat such Evaluation Material confidentially, and shall be bound by the terms of this Confidentiality Agreement. 2 Confidentiality Agreement December 18, 2000 Page 2 Each Party agrees that it will not, nor will its Representatives, without the prior written consent of the other Party, except as required by law, disclose to any person either the fact that any investigations, discussions or negotiations are taking place concerning a possible Transaction or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof. The term "person" as used in this letter shall be broadly interpreted to include, without limitation, any corporation, company, partnership or individual. In the event that no Transaction is effected between the Parties within a reasonable time after the Evaluation Material has been furnished to the Company and upon the written request of the Purchaser, the Company and its Representatives will deliver to the Purchaser, within five (5) business days of receipt of such request, the Evaluation Material along with any and all copies, notes, electronic or otherwise, and extracts thereof, and also upon written request of the Purchaser deliver an authorized statement, in writing, that all analyses, projections, and other work product derived from or directly relating to the Evaluation Material have been returned to the Purchaser or destroyed. In the event that the Company or anyone to whom it supplies Evaluation Material receives a request to disclose any or all of the Evaluation Material under the requirements of applicable law, including without limitation, the rules of the Securities and Exchange Commission, state securities commissions or agencies or securities exchange, or under the terms of a subpoena, agrees to (i) immediately notify the Purchaser of the existence, terms, circumstances surrounding such request, (ii) consult with the Purchaser on the advisability of taking legally available steps to resist or narrow such request, and (iii) if disclosure is required, furnish only that portion of the information which, in the written opinion of counsel, the Company is legally compelled to disclose. The Purchaser will endeavor to include in the Evaluation Material, known information, which it believes to be relevant for the purpose of an evaluation. The Company understands that the Purchaser and its Representatives make no representation or warranty as to the accuracy or completeness of the Evaluation Material, including the accuracy of any reserve estimates, the Reserve Reports or any other estimates relating to the assets and/or liabilities of the Purchaser. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Confidentiality Agreement by the Company and that the Purchaser, shall be entitled to specific performance as a remedy in connection with any actual or threatened breach. It is accordingly agreed that the Purchaser shall be entitled to an injunction or injunctions to limit or prevent actual or threatened breaches of this agreement and/or compel specific performance of this agreement and that neither the Company nor its counsel or Representatives will oppose the granting of such relief. Such remedy shall not be deemed to be the exclusive remedy for the actual or threatened breach of this Confidentiality Agreement but shall be in addition all other remedies available at law or equity. 3 Confidentiality Agreement December 18, 2000 Page 3 It is further understood and agreed that no failure or delay by the Purchaser in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. In addition, the Company agrees that neither it nor its Representatives will use any non-public information obtained (directly or indirectly) from or about the Purchaser to trade in the Purchaser's securities, nor will the Company or its Representatives divulge any non-public information obtained (directly or indirectly) from or about the Purchaser to any other party, which could be used by such other party to trade in the Purchaser's securities. This Confidentiality Agreement shall be governed by the laws of the State of Texas without regard to conflict of law principles, and the Company and its Representatives submit to the nonexclusive jurisdiction of and venue in any federal or state court sitting in Texas in any action or proceedings arising out of or relating to this Confidentiality Agreement. The Purchaser warrants that it has the right to allow the Company access to the Evaluation Material. The Purchaser agrees to release, defend, indemnify, protect and hold the Company, its subsidiaries and affiliates and their respective directors, officers, employees, consultants, representatives, agents and advisors harmless from and against any and all claims, liabilities, losses, demands, causes of action and any expenses (including court costs and attorney's fees) arising from any breach or alleged breach by the Purchaser of license agreements or other agreements under which the Evaluation Material was obtained. This Agreement does not create any agency, partnership or joint venture relationship between the Parties. The Parties hereto understand and agree that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist between the Parties, and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof, except, in case of this agreement matters specially agreed to herein. For purposes of this Agreement, the term "definitive agreement" does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties. [SIGNATURE PAGES FOLLOW] 4 Confidentiality Agreement December 18, 2000 Page 4 The Company acknowledges agreement with the foregoing by its signature below and the delivery to the Purchaser of an executed original of this Confidentiality Agreement, which will constitute the Parties' agreement with respect to the subject matter of this letter. OCEAN ENERGY, INC. By: /s/ ROBERT K. REEVES --------------------------- Robert K. Reeves Executive Vice President, General Counsel & Secretary TEXOIL, INC. ACCEPTED AND AGREED as of the 20th day of December, 2000. By: /s/ FRANK A. LODZINSKI --------------------------- Name: Frank A. Lodzinski ------------------------- Title: President ------------------------ -----END PRIVACY-ENHANCED MESSAGE-----