Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
CRIMSON EXPLORATION, INC.
("Crimson"),
CRIMSON EXPLORATION OPERATING, INC.
("Crimson Sub"),
CORE NATURAL RESOURCES, INC
("Target")
and
All of the Stockholders of Target
("Stockholders")
Dated as of March 14, 2006
Table of Contents
Page
ARTICLE I THE MERGER..............................................................................................1
Section 1.1 The Merger................................................................................1
Section 1.2 Effective Time of the Merger..............................................................1
Section 1.3 Effect of the Merger......................................................................1
Section 1.4 Tax Treatment.............................................................................2
ARTICLE II THE SURVIVING CORPORATION..............................................................................2
Section 2.1 Articles of Incorporation.................................................................2
Section 2.2 Bylaws....................................................................................2
Section 2.3 Directors and Officers....................................................................2
ARTICLE III CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES........................................................2
Section 3.1 Effect on Stock...........................................................................2
Section 3.2 Exchange of Certificates..................................................................3
Section 3.3 No Fractional Shares......................................................................4
Section 3.4 Closing...................................................................................4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TARGET AND STOCKHOLDERS..............................................4
Section 4.1 Organization and Qualification............................................................4
Section 4.2 Capitalization............................................................................4
Section 4.3 Authority; No Conflict....................................................................5
Section 4.4 Permits...................................................................................6
Section 4.5 Absence of Undisclosed Liabilities........................................................6
Section 4.6 Properties................................................................................6
Section 4.7 Litigation................................................................................7
Section 4.8 Contracts and Burdens.....................................................................8
Section 4.9 Compliance with Law.......................................................................8
Section 4.10 Economic Risk; Sophistication; Accredited Investors.......................................8
Section 4.11 Tax Treatment.............................................................................8
Section 4.12 Section 368 (a) (2) (D) Representations...................................................9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CRIMSON..............................................................10
Section 5.1 Tax Treatment............................................................................10
Section 5.2 Section 368(a) (2) (D) Representations...................................................10
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER; COVENANTS.....................................................11
Section 6.1 Conduct of Business by Target............................................................11
Section 6.2 Representations and Warranties...........................................................12
Section 6.3 Inspection...............................................................................12
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.............................................................12
Section 7.1 Conditions to Obligation of Each Party...................................................12
Section 7.2 Conditions to the Obligations of Crimson.................................................12
Section 7.3 Conditions to the Obligations of Target..................................................13
ARTICLE VIII SURVIVAL AND INDEMNIFICATION........................................................................13
Section 8.1 Survival of Representations and Warranties...............................................13
i
Section 8.2 Survival of Covenants and Agreements.....................................................14
Section 8.3 Indemnity................................................................................14
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.....................................................................14
Section 9.1 Termination..............................................................................14
Section 9.2 Effect of Termination....................................................................15
ARTICLE X GENERAL PROVISIONS.....................................................................................15
Section 10.1 Notices..................................................................................15
Section 10.2 Entire Agreement.........................................................................16
Section 10.3 Assignment...............................................................................16
Section 10.4 Severability.............................................................................16
Section 10.5 Interpretation...........................................................................16
Section 10.6 Governing Law............................................................................16
Section 10.7 Counterparts.............................................................................16
ii
EXHIBITS AND SCHEDULES
Exhibit A........................................Properties
Exhibit B........................................Registration Rights Agreement
Schedule 4.2.....................................Stockholders
Schedule 4.3(ii).................................Consents
Schedule 4.3(iii)................................Violations
Schedule 4.6.....................................Property - Leases
Schedule 4.8.....................................Contracts
Schedule 7.3(d)..................................Target Indebtedness
Exhibits and Schedules
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of March 14,
2006, by and among Crimson Exploration, Inc., a corporation organized under the
laws of Delaware ("Crimson"), Crimson Exploration Operating, Inc., a corporation
organized under the laws of Delaware ("Crimson Sub"), Core Natural Resources,
Inc., a corporation organized under the laws of Texas ("Target"), and all of
Target's stockholders as set forth on the signature page to this Agreement
("Stockholders" or "stockholders of Target" or words of similar import).
RECITALS
WHEREAS, Crimson and Crimson Sub are corporations duly organized and existing
under the laws of the State of Delaware, and Target is a corporation duly
organized and existing under the laws of the State of Texas; and
WHEREAS, Crimson Sub is a wholly-owned subsidiary of Crimson; and
WHEREAS, the respective Boards of Directors of Crimson Sub and Target deem it
advisable and in the best interests of their respective shareholders that Target
merge with and into Crimson Sub (the "Merger"), upon the terms and subject to
the conditions set forth herein, and such Boards of Directors have approved the
Merger;
NOW, THEREFORE, IN CONSIDERATION OF the recitals and mutual covenants and
agreements set forth in this Agreement, the Parties hereby agree as follows:
THE MERGER
The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time, Target shall merge with and into Crimson
Sub and the separate corporate existence of Target shall thereupon cease and
Crimson Sub shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue its separate corporate existence under the laws
of the State of Delaware.
Effective Time of the Merger. The Merger shall become effective (the
"Effective Time") upon the later of (i) the filing of properly executed
Certificates of Merger relating to the Merger with the Secretary of State of the
State of Texas in accordance with Section 10.151 of the Texas Business
Organizations Code ("TBOC") and the Secretary of State of the State of Delaware
in accordance with Section 259 of the Delaware General Corporation Law ("DGCL"),
or (ii) at such later time as the parties shall agree and set forth in such
Certificates of Merger. The filing of the Certificates of Merger referred to
above shall be made as soon as practicable on the Closing Date set forth in
Section 3.4.
Effect of the Merger. At the Effective Time, the Merger shall have the
effects set forth in Section 10.008 of the TBOC and Section 259 of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the properties, rights,
privileges, powers and franchises of Crimson Sub and Target shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Crimson Sub and
Target shall become the debts, liabilities and duties of the Surviving
Corporation.
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Tax Treatment. It is intended that the Merger shall constitute a
reorganization under section 368(a) of the Code.
THE SURVIVING CORPORATION
Certificate of Incorporation. The certificate of incorporation of
Crimson Sub in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation at and after the
Effective Time until thereafter amended in accordance with the terms thereof and
the DGCL.
Bylaws. The bylaws of Crimson Sub as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation at and after the
Effective Time, and thereafter may be amended in accordance with their terms and
as provided by the articles of incorporation of the Surviving Corporation and
the DGCL.
Directors and Officers. The directors and officers of Crimson Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation until their respective successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's articles of incorporation
and bylaws.
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Effect on Stock. As of the Effective Time, by virtue of the Merger and
without any action on the part of Crimson Sub, Target or the holders of any
securities of Target or Crimson Sub:
Each share of common stock, no par value per share, of Target
("Target Common Stock") that is owned directly by Target as treasury
stock shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
Subject to Section 3.3, each share of Target Common Stock
issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 3.1(a)), shall be
converted into the right to receive (i) 5.39270725 shares (the "Common
Stock Exchange Ratio") of the common stock, par value $.001 per share,
of Crimson ("Crimson Common Shares") and cash in an amount determined
by dividing $706,123.25 by 600,000 (the "Cash Consideration") (together
(i) and (ii) being referred to herein as the "Merger Consideration").
For purposes of this Agreement, the parties agree that Schedule 4.2
accurately reflects the number of Crimson Common Shares and the
aggregate Cash Consideration to be received by each Stockholder (as set
forth opposite such Stockholder's name) assuming that the number of
shares of Target Common Stock owned by such Stockholder is accurately
reflected in such schedule. As of the Effective Time, all such shares
of Target Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Target Common
Stock (the "Certificates") shall cease to have any rights with respect
thereto, except the right to receive: (i) certificates representing the
number of whole Crimson Common Shares into which such shares have been
converted ("Crimson Certificates"), (ii) cash in an amount equal to the
product that is obtained by multiplying (A) the Cash Consideration by
(B) the whole number of shares of Target Common Stock surrendered, and
(iii) cash in lieu of fractional Crimson Common Shares in accordance
with Section 3.3, without interest. Notwithstanding the foregoing, if
between the date of this Agreement and the Effective Time the
outstanding Crimson Common Shares or shares of Target Common Stock
shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, the Common Stock Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
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Each issued and outstanding share of common stock, par value
$0.01 per share, of Crimson Sub (the "Crimson Sub Common Stock") shall
remain outstanding following the Merger.
Exchange of Certificates.
As of the Effective Time, Crimson shall deliver (or cause to
be delivered) to Fidelity Transfer Company, or another bank or trust
company designated by it (the "Exchange Agent"), for the benefit of the
holders of shares of Target Common Stock for exchange in accordance
with this Article III, cash funds sufficient to make payment of the
Cash Consideration payable pursuant to Section 3.1(b) and Crimson
Certificates evidencing Crimson Common Stock issuable pursuant Section
3.1(b). The Crimson Certificates and the cash funds are hereafter
collectively referred to as the "Exchange Fund".
Upon surrender of a Certificate for cancellation to the
Exchange Agent and such other documents as may reasonably be required
by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor: (i) a Crimson Certificate representing
that number of whole Crimson Common Shares which such holder has the
right to receive pursuant to the provisions of this Article III, (ii) a
check payable to the order of such holder representing payment of the
Cash Consideration for each share of Target Common Stock evidenced by
the Certificate surrendered and (iii) a check payable to the order of
such holder representing payment of cash in lieu of any fractional
Crimson Common Shares in accordance with Section 3.3, and the
Certificate so surrendered shall forthwith be canceled. Until
surrendered as contemplated by this Section 3.2, each Certificate shall
be deemed at any time after the Effective Time to represent only the
right to receive, upon such surrender, Crimson Certificates
representing the number of whole Crimson Common Shares into which the
shares of Target Common Stock formerly represented by such Certificate
have been converted, the Cash Consideration, and cash in lieu of any
fractional Crimson Common Share in accordance with Section 3.3. No
interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article III.
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All Crimson Common Shares and Cash Consideration issued or
paid upon the surrender for exchange of Certificates in accordance with
the terms of this Article III shall be deemed to have been issued (and
paid) in full satisfaction of all rights pertaining to the shares of
Target Common Stock theretofore represented by such Certificates. There
shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Target Common Stock
which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article III, except as
otherwise provided by law.
Any portion of the Exchange Fund which remains undistributed
to the holders of the Certificates for six months after the Effective
Time shall be delivered to Crimson, upon demand, and any holders of the
Certificates who have not theretofore complied with this Article III
shall thereafter look only to Crimson for payment of their claim for
Merger Consideration, any cash in lieu of fractional Crimson Common
Shares and any dividends or distributions with respect to Crimson
Common Shares
No Fractional Shares. No fractional Crimson Common Shares shall be
issued in the Merger and fractional share interests shall not entitle the owner
thereof to vote or to any rights of a stockholder of Crimson. All holders of
fractional Crimson Common Shares shall be entitled to receive, in lieu thereof,
an amount in cash determined by multiplying the fraction of a Crimson Common
Share to which such holder would otherwise have been entitled by the closing
sales price of Crimson Common Shares as reported in The Wall Street Journal on
the trading day prior to the Effective Time.
Closing. The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at a location mutually acceptable to Target and
Crimson, at 10:00 a.m., local time, on the day (the "Closing Date") on which all
of the conditions set forth in Article VI hereof are satisfied or waived (but
not later than March 21, 2006), or at such other date and time as Crimson and
Target shall otherwise agree.
REPRESENTATIONS AND WARRANTIES OF TARGET AND STOCKHOLDERS
Target and Stockholders represent and warrant to Crimson and Crimson Sub as
follows:
Organization and Qualification. Target and each entity Stockholder is a
corporation or limited liability company duly organized or formed, validly
existing and in good standing under the laws of the State of Texas. Target and
each entity Stockholder has all requisite corporate or other entity power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted. Target has made available to Crimson a complete and
correct copy of its articles of incorporation and bylaws, each as amended to
date, and Target's articles of incorporation and bylaws as so delivered are in
full force and effect. Target is not in default in any respect in the
performance, observation or fulfillment of any provision of its articles of
incorporation or bylaws. Target does not have any subsidiaries.
Capitalization. The authorized capital stock of Target consists of
1,000,000 shares of Target Common Stock. As of the date of this Agreement,
600,000 shares of Target Common Stock were issued and outstanding, and no shares
were held by Target as treasury shares. All of the outstanding shares of Target
Common Stock are validly issued, fully paid and nonassessable, and free of
preemptive rights. There are no outstanding stock options, subscriptions,
rights, warrants, convertible securities, stock appreciation rights, phantom
equity or other agreements or commitments obligating Target to issue, transfer,
sell, redeem, repurchase or otherwise acquire any shares of its capital stock of
any class. All of the beneficial and record stockholders of Target are listed on
Schedule 4.2 and the number of shares owned by each is set forth opposite his or
her name.
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Authority; No Conflict.
Target has full corporate power and authority to execute and
deliver this Agreement and, subject to obtaining the approval of
Target's stockholders as contemplated by Section 7.1, to consummate the
transactions contemplated hereby. Each Stockholder has full legal
right, power and authority to enter into this Agreement. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized
by Target's Board of Directors and each Stockholder and no other
corporate proceedings on the part of Target and the entity Stockholders
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, subject to obtaining the approval of
Target's stockholders as contemplated by Section 7.1. The Agreement has
been duly and validly executed and delivered by Target and the
Stockholders and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes valid and
binding obligations of Target and the Stockholders enforceable against
Target and the Stockholders in accordance with its terms, except as
such enforceability may be subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or
affecting the rights of creditors and of general principles of equity.
Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated
hereunder, will, directly or indirectly (with or without notice or
lapse of time):
subject to the obtaining of the approval of Target's
stockholders as contemplated by Section 7.1 hereof, breach any
provision of Target's articles of incorporation, or bylaws or
similar documents of any entity Stockholder;
subject to the obtaining of the approval of Target's
stockholders as contemplated by Section 7.1 hereof, require
any consent, waiver, approval, order, authorization or permit
of, or registration, filing with or notification to, (i) any
governmental or regulatory authority or agency (a
"Governmental Authority"), except as set forth in Schedule
4.3(ii) and except for approvals that are ministerial in
nature and are customarily obtained from Governmental
Authorities after the Effective Time in connection with
transactions of the same nature as are contemplated hereby
("Customary Post-Closing Consents") or (ii) except as set
forth in Schedule 4.3(ii), any third party other than a
Governmental Authority, other than such non-Governmental
Authority third party consents, waivers, approvals, orders,
authorizations and permits that would not (i) result in an
Material Adverse Effect (as defined below), (ii) materially
impair the ability of Target or any Stockholder to perform its
obligations under this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by this
Agreement;
Page 5
except as set forth in Schedule 4.3(iii), result in
any violation of or the breach of or constitute a default
(with notice or lapse of time or both) under, or give rise to
any right of termination, cancellation or acceleration or
guaranteed payments or a loss of a material benefit under, any
of the terms, conditions or provisions of any note, lease,
mortgage, license, agreement or other instrument or obligation
to which Target or a Stockholder is a party or by which Target
or Stockholder or any of their properties or assets may be
bound, except for such violations, breaches, defaults, or
rights of termination, cancellation or acceleration, or losses
as to which requisite waivers or consents have been obtained
or which, individually or in the aggregate, would not (i)
result in an Material Adverse Effect, (ii) materially impair
the ability of Target or such Stockholder to perform its
obligations under this Agreement or (iii) prevent the
consummation of any of the transactions contemplated by this
Agreement;
violate the provisions of any order, writ,
injunction, judgment, decree, statute, rule or regulation
applicable to Target or Stockholder; or
result in the creation of any Lien upon any shares of
capital stock or material properties or assets of Target or a
Stockholder under any agreement or instrument to which Target
is a party or by which Target or any of its properties or
assets is bound.
For purposes of this Agreement, a "Material Adverse Effect"
shall mean 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
(quantified as an amount in excess of $25,000) on the financial
condition, business, assets, properties, or results of operations of
the Target or Crimson, as the case may be, taken as a whole.
Permits. Except for Customary Post-Closing Consents, Target holds all
licenses, franchises, certificates, approvals, certificates of approval,
consents, permits, authorizations and orders ("Permits") necessary for Target to
lawfully operate its businesses, except where the failure to hold such Permits
could not reasonably be expected to result in a Material Adverse Effect, and,
Target is in compliance in all material respects with such Permits and, to our
knowledge, any applicable statutes, laws, ordinances, rules and regulations of
any Governmental Authorities.
Absence of Undisclosed Liabilities. Except as specifically disclosed in
that certain pro forma balance sheet dated as of March 15, 2006, which has been
delivered by Target to Crimson, Target has not incurred any liabilities or
obligations of any nature (contingent or otherwise).
Properties. Schedule 4.6 sets forth a list of all real property leased
by Target (the "Properties". Copies of all lease agreements have been delivered
by Target to Crimson. All leases are in full force and effect and constitute
valid and binding agreements of Target and, to our knowledge, the other parties
thereto. Target is not in default under the leases and no event has occurred
which, through the passage of time or the giving of notice, would constitute a
default by Target under the leases. To our knowledge, no other party to the
leases is in default under the leases. At the time of the Merger, the Properties
will be conveyed free and clear of any outstanding mortgage, deed of trust, lien
or encumbrance created by Target other than Permitted Exceptions, below defined,
but not otherwise. Permitted Exceptions are:
Page 6
lessor's royalties, overriding royalties, production payments,
net profits interests, reversionary interests and similar burdens
measured by or payable out of production of substances or proceeds from
the sale thereof that do not, and will not, reduce the relevant net
revenue interest of Crimson Sub provided pursuant to this Agreement, as
the successor in title to Target, below the relevant net revenue
interest or increase the relevant working interest, as Target's
successor in title, above the relevant working interest of Crimson Sub
(unless the circumstance causing such working interest to increase will
cause the corresponding net revenue interest to increase at least in
the same proportion);
preferential rights to purchase and third-party consents with
respect to which, prior to closing, (i) waivers or consents are
obtained from the appropriate persons or entities or (ii) the time for
asserting such rights has expired without exercise;
mechanics', materialmen's, operator's and non-operators', tax
and similar liens or charges arising in the ordinary course of business
related to the Properties, if such liens or charges secure payments not
yet due;
all consents from, notices to, approvals by or other actions
by any governmental authority in connection with the sale or transfer
of the Properties by Target to Crimson Sub pursuant to this agreement
if such matters are customarily and appropriately obtained after the
sale or transfer;
liens, security interests or other encumbrances that are
released at or prior to closing pursuant to the terms of releases and
other instruments in form and substance reasonably satisfactory to
Crimson Sub and executed, delivered and acknowledged by the owner and
holder thereof;
rights of a governmental entity to control or regulate the
Properties, together with all applicable laws, rules and regulations;
easements, rights-of-way, surface leases and other surface use
restrictions if such restrictions will not materially adversely affect
the use, value or operation of the Properties; and
title matters waived in writing by Crimson or Crimson Sub.
Litigation. To our knowledge, there are no actions, suits or
proceedings, to include tax proceedings, pending before any court or
governmental agency, as of the date of this Agreement that would result in a
Material Adverse Effect to Target or a loss or impairment of Target's title to
the Properties or significantly reduce the value of the Properties.
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Contracts and Burdens. All contracts or agreements to which Target is
bound or is a party are listed on Schedule 4.8. To our knowledge, there are no
contracts or agreements or other circumstances which: (i) would require Target
to deliver hydrocarbons from the Properties at some future time without then or
thereafter receiving full payment for such production; (ii) would require
Crimson or its subsidiaries to make payment at some time for hydrocarbons
already produced and sold from the Properties; or (iii) would materially or
adversely affect the value or marketability of the Properties.
Compliance with Law. The stockholders of Target acknowledge the shares
of Crimson Common Stock issued in accordance with the terms of this Agreement,
including in connection with the Assignments of Overriding Royalty Interests
contemplated by Section 7.1(d) (the "Restricted Shares") will not be registered
under the Securities Act of 1933, as amended (the "1933 Act") and therefore may
not be resold without compliance with the 1933 Act. The Restricted Shares are
being or will be acquired by the stockholders solely for their own account, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of them in connection with a distribution. Each
stockholder covenants, warrants and represents that none of the Restricted
Shares held by such stockholder will be, directly or indirectly, offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except
after full compliance with all of the applicable provisions of the 1933 Act and
the rules and regulations of the Securities Exchange Commission. Certificates
representing the Restricted Shares shall bear the following legend:
The shares represented by this certificate were not issued in
a transaction registered under the Securities Act of 1933, as
amended ("Securities Act"), or any applicable state securities
laws. The shares represented hereby have been acquired for
investment and may not be sold or transferred unless such sale
or transfer is covered by an effective registration statement
under the Securities Act and applicable state securities laws
or, in the opinion of counsel to the issuer, is exempt from
the registration requirements of the Securities Act and such
laws.
Economic Risk; Sophistication; Accredited Investors. Each stockholder
of Target is able to bear the economic risk of an investment in the Restricted
Shares and can afford to sustain a total loss of such investment. Each
stockholder has such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect his or her own interests in
connection with the acquisition of the Restricted Shares pursuant hereto. Each
stockholder represents to Crimson and Crimson Sub that he or she is an
"accredited investor," as that term is defined in Regulation D under the 1933
Act. Each stockholder or his or her representatives have had an adequate
opportunity to ask questions of, and receive answers from the appropriate
officers and representatives of Crimson and Crimson Sub concerning, among other
matters, Crimson, its management, business, operations and financial condition,
its plans for the operation of its business and potential additional
acquisitions, and to obtain any additional information requested by such
stockholder or his or her representatives concerning such matters.
Tax Treatment. Neither the Target nor, to the Stockholders' knowledge,
any of its affiliates has taken, has agreed or failed to take, or intends to
take any action or has any knowledge of any fact or circumstance that would
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code (a "368 Reorganization").
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Section 368 (a) (2) (D) Representations. Target and the Stockholders,
hereby represent and warrant the following to be true and correct as of the
Effective Time:
The fair market value of the Crimson Common Shares and other
consideration received by the Stockholders will be approximately equal
to the fair market value of the Target Common Stock surrendered in the
exchange.
There is no plan or intention of any Stockholder to have
Crimson redeem, or have a party related to Crimson acquire, shares of
Crimson Common Stock received in the Merger which would reduce the
Stockholder's ownership of a number of shares of Crimson Common Stock
received in the Merger to a number of shares having a value, as of the
date of the Merger, of less than 40% of the sum of (i) the value at the
Effective Time of all the Target Common Stock held immediately prior to
the Merger by the Stockholders and (ii) the value at the Effective Time
of any other instruments (such as debt of the Target which is
guaranteed by the Stockholders) which are classified for federal income
tax purposes as stock of the Target (collectively, "Shares") and which
are held immediately prior to the Merger by the Stockholders. For
purposes of this representation, Shares outstanding immediately prior
to the Merger include Shares redeemed prior to the Merger by reason of
this Agreement or otherwise as part of the Merger shall be determined
with regard to any extraordinary distributions (i.e., distributions
with respect to Shares other than regular, normal dividends) by the
Target by reason of this Agreement or otherwise as part of the Merger.
For purposes of this representation, a party is related to Crimson if
such party and Crimson would be treated as related parties within the
meaning of Treasury Regulations Section 1.368-1(e)(3).
Crimson Sub will acquire substantially all of the properties
including the business assets of the Target within the meaning of
Section 368(a)(1)(C). For purposes of this representation, amounts paid
by the Target to dissenters, amounts paid by the Target to the
Stockholders who receive cash or other property, amounts used by the
Target to pay reorganization expenses, and all redemptions and
distributions (except for regular, normal dividends, if any) made by
the Target immediately preceding the Merger, will be included as assets
of the Target held immediately prior to the Merger.
Target and the Stockholders will pay their respective
expenses, if any, incurred in connection with the Merger.
There is no intercorporate indebtedness existing between
Crimson and Target or between Crimson Sub and Target that was issued,
acquired or will be settled at a discount.
Target is not an investment company. For purposes of this
representation, an investment company means a regulated investment
company (as defined in the Code), a real estate investment trust (as
defined in the Code), or a corporation, 50 percent or more of the value
of whose total assets are stock and securities and 80 percent or more
of the value of whose total assets are assets held for investment
within the meaning of Section 368(a)(2)(F)(iii) of the Code.
Page 9
Target is not under the jurisdiction of a court in a case
under Title 11 of the United States Code, or a receivership,
foreclosure, or similar proceeding in a federal or state court.
On the date of the Merger, the fair market value of the assets
of Target will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which its assets are subject.
None of the compensation received by any stockholder-employees
of Target will be separate consideration for, or allocable to, any of
their shares of Target Common Stock. None of the shares of Crimson
Common Stock to be received by any stockholder-employee will be
separate consideration for, or allocable to, any employment agreements,
and the compensation paid to any stockholder-employee will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
The payment of cash in lieu of issuing factional shares of
Crimson Common Stock is solely for the purpose of avoiding the expense
and inconvenience to Crimson of issuing fractional shares and does not
represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to the Stockholders
instead of issuing fractional shares of Crimson Common Stock will not
exceed one percent of the total consideration that will be issued in
the Merger to the Stockholders in exchange for their shares of Target
Common Stock.
REPRESENTATIONS AND WARRANTIES OF CRIMSON
Tax Treatment. Neither Crimson nor, to Crimson's knowledge, any of its
affiliates has taken, has agreed or failed to take, or intends to take any
action or has any knowledge of any fact or circumstance that would prevent the
Merger from qualifying as a 368 Reorganization.
Section 368(a) (2) (D) Representations. Crimson hereby represents and
warrants the following to be true and correct as of the Effective Time:
The Merger was negotiated through arm's length bargaining.
Accordingly, the fair market value of the Crimson Common Shares and
other consideration received by the Stockholders will be approximately
equal to the fair market value of the Target Common Stock surrendered
in the exchange.
Prior to the Merger, Crimson will be in control of Crimson Sub
within the meaning of Section 368(c)(1) of the Code.
Following the Merger, Crimson Sub has no current plan or
intent to issue additional shares of its stock that would result in
Crimson losing control of Crimson Sub within the meaning of Section
368(c)(1) of the Code.
Page 10
Crimson has no current plan or intention to reacquire any of
its stock issued in the Merger.
Crimson has no current plan or intention to liquidate Crimson
Sub; to merge Crimson Sub with and into another corporation; to sell or
otherwise dispose of any of the assets of the Company acquired in the
Merger, except for dispositions made in the ordinary course of business
or transfers described in the section 368(a)(2)(C) of the Code.
Following the Merger, Crimson Sub will continue the historic
business of Target or use a significant portion of the Target's
business assets in a business.
There is no inter-corporate indebtedness existing between
Crimson and Target or between Crimson Sub and Target that was issued,
acquired, or will be settled at a discount.
Neither Crimson nor Crimson Sub is an investment company as
defined in section 368(a)(2)(f)(iii) and (iv) of the Code.
None of the compensation received by any stockholder-employees
of Target will be separate consideration for, or allocable to, any of
their shares of Target Common Stock. None of the shares of Crimson
Common Shares to be received by any stockholder-employee will be
separate consideration for, or allocable to, any employment agreements,
and the compensation paid to any stockholder-employee will be for
services actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's length for similar services.
CONDUCT OF BUSINESS PENDING THE MERGER; COVENANTS
After the date hereof and prior to the Effective Time or earlier termination
of this Agreement, Target agrees, except as expressly contemplated or permitted
in this Agreement, or to the extent the other party shall otherwise consent in
writing, which consent shall not be unreasonably withheld, as follows:
Conduct of Business by Target. Target shall carry on its businesses in
all material respects in the usual, regular and ordinary course, consistent with
past practice, and shall not incur additional indebtedness, make any
expenditures over $1,000.00, or transfer, assign, convey or encumber any
Properties listed on Schedule 4.6 and shall use its best efforts to (i) preserve
intact its present business organizations and goodwill, preserve the goodwill
and relationships with customers, suppliers and others having business dealings
with them, (ii) subject to prudent management of workforce needs and ongoing or
planned programs relating to downsizing, re-engineering and similar matters,
keep available the services of their present officers and employees as a group
and (iii) maintain and keep its material properties and assets (including the
Properties listed on Schedule 4.6) in as good repair and condition as at
present, subject to ordinary wear and tear, and maintain supplies and
inventories in quantities consistent with past practice, all to the end that
their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time.
Page 11
Representations and Warranties. Target shall not (i) take, or agree or
commit to take, any action that would make any representation or warranty of
Target hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time, (ii) 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 such time, (iii) increase or otherwise change the number
of outstanding shares of capital stock of Target or issue any stock options,
subscriptions, rights, warrants, convertible securities, stock appreciation
rights, phantom equity or other agreements or commitments obligating Target to
issue, transfer, sell, redeem, repurchase or otherwise acquire any shares of its
capital stock, or (iv) amend or modify any of its charter documents.
Inspection. To allow Crimson to confirm Target's title to the
Properties, compliance with applicable environmental laws and to conduct other
due diligence with respect to the Target and this merger transaction, for a
period of seven (7) days following execution of this Agreement (the "Due
Diligence Period"), Target shall make available to Crimson, and Crimson's
authorized representatives, at mutually agreeable times before Closing, during
normal business hours, all corporate minute books for Target, and all contract,
lease, Environmental Health & Safety Department records and operational records,
title opinions, certificates of title, abstracts of title, title data, records
and files relating to Target and the Properties, to the extent such data and
records are in Target's possession. With Target's permission, Crimson may
photocopy such records at its sole expense. Crimson shall keep confidential all
information made available to Crimson until the Closing Date. In addition, prior
to Closing, Crimson will have the right to conduct an environmental assessment
of the Properties.
CONDITIONS TO CONSUMMATION OF THE MERGER
Conditions to Obligation of Each Party. The respective obligations of
each party to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following conditions:
The approval of Target's stockholders and Crimson Sub's
stockholders shall have been obtained.
No action, suit or proceeding instituted by any Governmental
Authority shall be pending and no statute, rule or regulation and no
injunction, order, decree or judgment of any court or Governmental
Authority of competent jurisdiction shall be in effect, in each case
which would prohibit, restrain, enjoin or restrict the consummation of
the Merger.
Each of Target and Crimson shall have obtained such permits,
authorizations, consents, or approvals required to consummate the
transactions contemplated hereby..
Xxxxxxx Xxxxxx shall have executed Assignments of Overriding
Royalty Interests assigning to Crimson-Sub undivided two percent (2%)
overriding royalty interests in and to all oil, gas and other minerals
that may be produced from the Properties.
Conditions to the Obligations of Crimson. The obligation of Crimson to
effect the Merger is subject to the satisfaction at or prior to the Effective
Time of the following conditions:
Page 12
Target shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or
prior to the Effective Time and the representations and warranties of
Target contained in this Agreement, to the extent qualified with
respect to materiality shall be true and correct in all respects, and
to the extent not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and at
and as of the Effective Time as if made at and as of such time, except
as expressly contemplated by this Agreement and except that the
accuracy of representations and warranties that by their terms speak as
of the date of this Agreement or some other date will be determined as
of such date.
From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial condition,
business, or operations of Target that would constitute a Material
Adverse Effect or any material adverse change in the conditions of the
Properties.
Crimson shall have completed its due diligence review of
Target and the Properties as contemplated by Section 6.3.
The Board of Directors of Crimson shall have approved the
Merger on the terms and conditions set forth herein.
Conditions to the Obligations of Target. The obligation of Target to
effect the Merger is subject to the satisfaction at or prior to the Effective
Time of the following conditions:
Crimson shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or
prior to the Effective Time
From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial condition,
business, or operations of Crimson and its subsidiaries, taken as a
whole, that would constitute a Material Adverse Effect.
Crimson and Target's stockholders shall have entered into a
registration rights agreement in the form of Exhibit B attached hereto
and incorporated herein, granting the stockholders of Target certain
piggy-back rights and such other rights with respect to the Crimson
Common Stock received by the stockholders of Target.
Crimson shall have provided Crimson Sub with funds sufficient
to enable Crimson Sub to pay all of the indebtedness of Target existing
on the Closing Date, which indebtedness shall be paid on and as of the
Closing Date to the extent set forth on Schedule 7.3(d) in an aggregate
amount not to exceed $2,045,258.00.
SURVIVAL AND INDEMNIFICATION
Survival of Representations and Warranties. The representations and
warranties of the parties contained in this Agreement shall survive for a period
of one (1) year following the Effective Time.
Page 13
Survival of Covenants and Agreements. The covenants and agreements of
the parties to be performed after the Effective Time contained in this Agreement
shall survive the Effective Time.
Indemnity.
The Stockholders shall indemnify and hold harmless Crimson and
the Surviving Corporation, their respective directors, officers,
employees and agents, from and against any and all losses, liabilities,
liens, judgments and suits ("Losses") of any kind or character arising
out of, in connection with, or resulting from the breach by Target or
Stockholders of any of the representations, warranties, covenants,
agreements or obligations hereunder. The Stockholders agree to defend
any suits brought against Crimson and the Surviving Corporation on
account of any such Losses and to pay any judgments against Crimson and
the Surviving Corporation resulting from any such Losses along with all
costs and expenses relative to such Losses, including attorneys' fees.
Crimson shall indemnify and hold harmless each Stockholder,
their respective directors, officers, employee and agents, from and
against any and all Losses of any kind or character arising out of, in
connection with, or resulting from the breach by Crimson of any of its
representations, warranties, covenants, agreements or obligations
hereunder. Crimson agrees to defend any suits brought against the
Stockholders on account of any such Losses and to pay any judgments
against the Stockholders resulting from any such Losses, along with all
costs and expenses relative to such Losses, including attorneys' fees.
TERMINATION, AMENDMENT AND WAIVER
Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the stockholders of Target
and Crimson Sub:
by the mutual written consent of Crimson and Target;
by either Crimson or Target if the Effective Time shall not
have occurred on or before March 22, 2006 (the "Termination Date");
provided that the party seeking to terminate this Agreement pursuant to
this Section 9.1(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 Termination Date;
by Target if there has been a material breach by Crimson 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 twenty business days following receipt by
Crimson of written notice of such breach (an "Acquiror Breach") or (ii)
Crimson shall have discovered in its due diligence review contemplated
by Section 6.3 any event, condition or matter that would have a
Material Adverse Effect on Target or the Properties that cannot be
cured within twenty (20) business days; or;
Page 14
by Crimson, if (i) there has been a material breach by Target
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 twenty business days following receipt
by Target of written notice of such breach (a "Target Breach") or (ii)
Crimson shall have discovered in its due diligence review contemplated
by Section 6.3 a Material Adverse Effect on Target or the Properties
that Target elects not to cure, or is not cured, within twenty (20)
business days after notice from Crimson; or
by either Target or Crimson, if there shall be any applicable
law, rule or regulation that makes consummation of the Merger illegal
or if any judgment, injunction, order or decree of a court or other
Governmental Authority of competent jurisdiction shall restrain or
prohibit the consummation of the Merger, and such judgment, injunction,
order or decree shall become final and nonappealable.
Effect of Termination. In the event of termination of the Agreement and
the abandonment of the Merger pursuant to this Article IX, all obligations of
the parties shall terminate, provided that nothing herein shall relieve any
party from liability for any breaches hereof.
GENERAL PROVISIONS
Notices. All notices or other communications required or permitted by
this Agreement shall be in writing addressed as follows:
If to Crimson:If to Target:
Crimson Exploration, Inc. Core Natural Resources, Inc.
------------------------------------------------ --------------------------------------------------
000 X. Xxx Xxxxxxx Xxxxxxx Xxxx 0000 Xxxxxxx, Xxxxx 000
------------------------------------------------ --------------------------------------------------
Xxxxx 000 Xxxxxxx, XX 00000
------------------------------------------------ --------------------------------------------------
Xxxxxxx, XX 00000 Attn: Xxxxxxx X. Xxxxxx
------------------------------------------------ --------------------------------------------------
Attn: Xxx Xxxxx Telephone: 000-000-0000
------------------------------------------------ --------------------------------------------------
Telephone: 000-000-0000
------------------------------------------------ --------------------------------------------------
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 register mail, return
receipt requested, postage prepaid.
Page 15
Entire Agreement. This Agreement represents 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.
Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors, and assigns; provided, however, that neither this Agreement nor any
rights hereunder shall be assignable or otherwise subject to hypothecation and
any assignment in violation hereof shall be null and void, except that Crimson
Sub may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to Crimson or to any direct or indirect wholly
owned subsidiary of Crimson.
Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Governing Law. This Agreement will be governed by and construed under
the laws of the State of Texas without regard to conflicts of laws principles
that would require the application of any other law.
Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE(S) TO FOLLOW]
Page 16
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first written above.
CRIMSON EXPLORATION INC., a Delaware corporation
By: /s/ E. Xxxxxx Xxxxx
--------------------
E. Xxxxxx Xxxxx Xx.
Vice President & CFO
CRIMSON EXPLORATION OPERATING, INC., a Delaware
corporation
By: /s/ E. Xxxxxx Xxxxx
--------------------
E. Xxxxxx Xxxxx Xx.
Vice President & CFO
CORE NATURAL RESOURCES, INC., a Texas corporation
By: /s/ Xxxxxxx Xxxxxx
------------------
Xxxxxxx X. Xxxxxx
Director
Signature Page - 1
STOCKHOLDERS:
CORE NATURAL RESOURCES GP, LLC,
a Texas limited liability company
By: /s/ Xxxxxxx Xxxxxx
------------------
Xxxxxxx X. Xxxxxx
Manager
Signature Page - 1
By:/s/ Xxxxxxx Xxxxxx
XXXXXXX X. XXXXXX
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
XXXXXXX X. XXXXXX
By:/s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
By:/s/ Xxxxxxx X. Xxxxx
XXXXXXX X. XXXXX
XXXXXXX, INC.,
a Texas corporation
By:/s/ M.B. Xxxxx
Name: M.B. Xxxxx
Title: President
Signature Page - 2
EXHIBIT A
PROPERTIES
----------
Oil and Gas Lease dated November 14, 2005 and recorded on November 30, 2005 in
Volume 91, Page 195 of the oil and gas records and Volume 13, File No. M-105846
of the mineral records of Xxxxxxxxx County, Texas, from Xxxx Xxxxxxx, a single
man, as Lessor, to Core Natural Resources, Ltd., as Lessee.
Oil and Gas Lease dated January 6, 2006 and filed on January 27, 2006 under
Clerk's File No. 60498 in the oil and gas records of Xxxxxxxxx County, Texas,
from Xxxxxx Xxxxx Xxxxx and wife, Xxxxxxx Xxxxx, as Lessor, to Core Natural
Resources, Ltd., as Lessee
Exhibit A
SCHEDULE 4.2
STOCKHOLDERS
------------
SCHEDULE 4.2
Number of
Shares of
Number of Crimson to be
Shares of Received via Cash Received for
Stockholder Name and Address Core Merger Stock
---------------------------------------------- -------------- ------------------ ---- -------------------
Core Natural Resources GP, LLC 6,000 32,356.24 $7,061.23
00000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxx 522,000 2,814,993.18 $614,327.23
00000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxx 24,000 129,424.97 $28,244.93
000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxx 24,000 129,424.97 $28,244.93
00000 Xxxxxxxxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxx 3,000 16,178.12 $3,530.62
000 Xxxxxxxxxx Xxxx, #00
Xxxxxxx, Xxxxx 00000
Xxxxxxx, Inc. 21,000 113,246.85 $24,714.31
x/x X. X. Xxxxx
0000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
-------------- ------------------ ---- -------------------
Total 600,000 3,235,624.35 $706,123.25
============== ================== ==== ===================
Schedule 4.2
SCHEDULE 4.3(ii)
CONSENTS
--------
None.
Schedule 4.3(ii)
SCHEDULE 4.3(iii)
VIOLATIONS
----------
None.
Schedule 4.3(iii)
SCHEDULE 4.6
PROPERTY - LEASES
-----------------
Oil and Gas Lease dated November 14, 2005 and recorded on November 30, 2005 in
Volume 91, Page 195 of the oil and gas records and Volume 13, File No. M-105846
of the mineral records of Xxxxxxxxx County, Texas, from Xxxx Xxxxxxx, a single
man, as Lessor, to Core Natural Resources, Ltd., as Lessee.
Oil and Gas Lease dated January 6, 2006 and filed on January 27, 2006 under
Clerk's File No. 60498 in the oil and gas records of Xxxxxxxxx County, Texas,
from Xxxxxx Xxxxx Xxxxx and wife, Xxxxxxx Xxxxx, as Lessor, to Core Natural
Resources, Ltd., as Lessee
Schedule 4.6
SCHEDULE 4.8
CONTRACTS
---------
None.
Schedule 4.8
SCHEDULE 7.3(d)
TARGET INDEBTEDNESS
-------------------
Outstanding
Stockholder Name and Address Amount
------------------------------------------------------ ----------------
Core Natural Resources GP, LLC $20,452.58
00000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxx $1,779,374.46
00000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxxx $81,810.32
000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxx $81,810.32
00000 Xxxxxxxxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx X. Xxxxx $10,226.29
000 Xxxxxxxxxx Xxxx, #00
Xxxxxxx, Xxxxx 00000
Xxxxxxx, Inc. $71,584.03
c/o M. B. Xxxxx
0000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
----------------
Total $2,045,258.00
================
