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EXHIBIT 5
AGREEMENT
AND
PLAN OF MERGER
BY AND BETWEEN
EXCO RESOURCES, INC.,
AND
GLADSTONE RESOURCES, INC.
DATED AS OF MAY 1, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of May 1, 1998, by and between EXCO Resources, Inc., a Texas corporation (the
"Company")and Gladstone Resources, Inc., a Washington corporation ("Gladstone").
W I T N E S S E T H:
WHEREAS, Gladstone and the Company desire to effect a merger of
Gladstone with and into the Company (the "Merger");
WHEREAS, the Company has unanimously recommended (subject to the
satisfaction of the conditions precedent set forth herein) that the Board of
Directors of the Company approve this Agreement and the transactions
contemplated hereby;
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interests of the Company's stockholders to consummate
the Merger, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of Gladstone has determined it
advisable and in the best interests of Gladstone's stockholders to consummate
the Merger, upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the laws of the State of
Texas, at the Effective Time (as hereinafter defined), Gladstone shall be merged
with and into the Company and the separate corporate existence of Gladstone
shall thereupon cease, and the Company, as the surviving corporation in the
Merger (the "Surviving Corporation"), shall by virtue of the Merger continue its
corporate existence in accordance with Texas law.
Section 1.2 Effective Time of the Merger. The Merger shall become
effective at the date and time (the "Effective Time") when a properly executed
certificate of merger, in such form as is required by and executed in accordance
with the Texas law, is duly filed with the Secretary of State of the State of
Texas or at such later time as the parties hereto shall have provided in such
certificate. The parties hereto shall cause such filing to occur as soon as
practicable on or after the Closing Date (as hereinafter defined).
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Effects of Merger. The Merger shall have the effects set
forth in Section 5.06 of the Texas Business Corporation Act ("TBCA"). The
corporate existence of the Company, with all its purposes, powers and objects,
shall continue unaffected and unimpaired by the Merger and, as the
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Surviving Corporation, it shall be governed by the laws of the State of Texas
and shall succeed to all rights, assets, liabilities, properties, privileges,
powers, franchises and obligations of the Company in accordance with the Texas
law.
ARTICLE III
CONVERSION OF SECURITIES
Section 3.1 Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of Gladstone, the Company or their
respective stockholders (other than the filing of the certificate of merger
referred to in Section 1.2 hereof) (a) each share (a "Share") of common stock,
par value $0.01 per share, of Gladstone ("Gladstone Common Stock") issued and
outstanding immediately prior to the Effective Time (other than (i) Shares held
in the treasury of Gladstone or owned by any subsidiary of Gladstone and (ii)
Dissenting Shares (as hereinafter defined) in respect of which appraisal rights
are properly exercised and perfected) shall be canceled and extinguished and be
converted automatically into the right to receive, pursuant to Section 3.2
hereof, $0.33 per Share in cash, without interest thereon (the "Merger
Consideration"), less any required withholding of taxes, which Merger
Consideration shall be payable upon surrender of the certificate formerly
representing such Share (a "Certificate") in the manner provided in Section
3.2(b), (b) each Share then held in the treasury of Gladstone and each Share
owned by any subsidiary of Gladstone shall be canceled and retired without
conversion thereof and without payment of any consideration and shall cease to
exist, and (c) each Share owned beneficially or of record by Gladstone
immediately prior to the Effective Time shall be canceled and retired without
conversion thereof and without payment of any consideration and shall cease to
exist.
Section 3.2 Paying Agent and Surrender of Certificates. (a) Prior to
the Effective Time, the Company and Gladstone shall appoint a bank reasonably
acceptable to the Company, and having a place of business in Dallas, Texas as
paying agent (the "Paying Agent") for the holders of Shares in connection with
the Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 3.1. At Closing, the Company shall cause to be deposited in
trust with the Paying Agent, cash in the aggregate amount equal to the product
of (A) the number of Shares outstanding immediately prior to the Effective Time
(other than Shares held by Gladstone) and (B) the Merger Consideration. Such
funds shall be invested by the Paying Agent as directed by the Company, provided
that such investments shall be in obligations of or guaranteed by the United
States of America or of any agency thereof and backed by the full faith and
credit of the United States of America, in commercial paper obligations rated
A-1 or P-1 or better by Xxxxx'x Investors Services, Inc. or Standard & Poor's
Corporation, respectively, or in deposit accounts, certificates of deposit or
banker's acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital, surplus
and undivided profits aggregating in excess of $100 million (based on the most
recent financial statements of such bank which are then publicly available at
the Commission (as hereinafter defined) or otherwise); provided, however, that
no loss on any investment made pursuant to this Section 3.2(a) shall relieve the
Company or the Surviving Corporation of its obligation to pay the Merger
Consideration for each Share outstanding immediately prior to the Effective
Time. The Company shall promptly replace, or cause to be replaced, any monies
lost through any investment made pursuant to this Section 3.2(a).
(b) As soon as practicable after the Effective Time, the Company shall
cause the Surviving Corporation to mail to each person who was a record holder
of Shares immediately prior to the Effective Time (other than holders of
Dissenting Shares, Gladstone, the Company and the Company's subsidiaries), a
form of letter of transmittal and instructions for use in effecting the
surrender for payment of Certificates that immediately prior to the Effective
Time represented Shares. Upon surrender of a Certificate to the
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Paying Agent, together with a duly executed and completed letter of transmittal
and any other required documents, the holder of the Certificate shall receive in
exchange , and the Paying Agent will pay (via U.S. mail, postage prepaid) as
soon as practicable to such holder, cash in an amount equal to the product of
the number of Shares represented by the Certificate or Certificates surrendered
and the Merger Consideration, without any interest thereon and less any required
withholding of taxes, and such Certificate(s) shall forthwith be canceled. If
the payment is to be made to a person other than the person in whose name a
surrendered Certificate is registered, it shall be a condition of payment that
(x) the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that (y) the person requesting such payment shall
either pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation or the Paying Agent
that such tax has been paid or is not applicable. The Surviving Corporation
shall pay all charges and expenses (except those taxes described in the
immediately preceding sentence and expenses incurred by the holders of
Certificates in tendering their Certificates), including those of the Paying
Agent, in connection with the distribution of the Merger Consideration. After
the Effective Time, until surrendered in accordance with the provisions of this
Section 3.2(b), a Certificate shall represent only the right to receive the
Merger Consideration in cash multiplied by the number of Shares evidenced by
such Certificate, without any interest thereon. On or after the one-hundred
eightieth day following the Effective Time, the Surviving Corporation may by
written request require the Paying Agent to pay to the Surviving Corporation
that portion of the funds deposited with the Paying Agent pursuant to this
Section 3.2(b) (and any income earned thereon) that has not been disbursed
pursuant to this Section 3.2(b), and holders of Certificates shall thereafter
look only to the Surviving Corporation for any payment to be made pursuant to
this Section 3.2(b). Notwithstanding anything to the contrary, none of the
Paying Agent, the Surviving Corporation or any party hereto shall be liable to a
holder of a Certificate for any amount delivered to a public official pursuant
to applicable abandoned property, escheat or similar law.
Section 3.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders who have properly
exercised appraisal rights with respect thereto under Section 5.12 of the TBCA
(the "Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration as provided in Sections 3.1 and 3.2, but the
holders of Dissenting Shares shall be entitled to receive such payment of the
appraised value of such Shares held by them from the Surviving Corporation (or
the Paying Agent, if applicable) as shall be determined pursuant to Section 5.12
of the TBCA; provided, however, that if any such holder shall have failed to
perfect or shall withdraw or lose the right to appraisal and payment under the
TBCA, each such holder's Shares shall thereupon be deemed to have been converted
as of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon and less any required withholding of taxes as
provided in Section 3.1, and upon surrender of the Certificate(s) representing
such Shares, in the manner provided in Section 3.2, such Shares shall no longer
be Dissenting Shares.
Section 3.4 Stockholders to Have No Further Rights. At and after the
Effective Time, the holder of a Certificate shall cease to have any rights as a
stockholder of Gladstone, except for (i) the right to surrender such Certificate
in exchange for the amount of Merger Consideration to which such holder is
entitled under this Agreement, or (ii) the rights available under the TBCA for
Dissenting Shares.
Section 3.5 Stockholders' Meeting. Gladstone, acting through its Board
of Directors, shall take all action necessary, in accordance with applicable law
and its Certificate of Incorporation and By-laws, to convene a special meeting
of the holders of Gladstone Common Stock (the "Gladstone Meeting") as promptly
as practicable for the purpose of considering and taking action to authorize
this Agreement and the Merger pursuant to the TBCA. Subject to its fiduciary
duties under applicable law as advised by
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outside counsel, the Board of Directors of Gladstone will recommend that holders
of Gladstone Common Stock vote in favor of and approve the Merger and the
adoption of this Agreement at the Gladstone Meeting.
Section 3.6 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall be made thereafter. In the event that, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for the Merger Consideration as provided in Sections 3.1 and 3.2.
Section 3.7 Closing. Unless this Agreement is terminated and the
transactions contemplated herein abandoned pursuant to Section 11.1 and subject
to the satisfaction or, if permissible, waiver of the conditions set forth in
Article X, the consummation of the Merger and the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place (i) at the
offices of the Company at 11:00 A.M. local time on a date to be specified by
Gladstone and the Company, but as soon as practicable (and in any event within
two business days) after the day on which the last of the conditions set forth
in Article X is fulfilled (other than deliveries of instruments to be made at
Closing) or, if permissible, waived by the relevant party or (ii) at such other
time and place as Gladstone and the Company shall agree upon in writing. The
date on which the Closing occurs is referred to herein as the "Closing Date."
ARTICLE IV
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Agreement"shall have the meaning set forth in the opening paragraph.
"CERCLA" shall mean the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended.
"Certificate" shall have the meaning set forth in Section 3.1.
"Closing" shall have the meaning set forth in Section 3.7.
"Closing Date" shall have the meaning set forth in Section 3.7.
"Commission" shall have the meaning set forth in Section 6.5.
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"Company" shall have the meaning set forth in the opening paragraph.
"Gladstone Common Stock" shall have the meaning set forth in Section
3.1.
"Gladstone Material Adverse Effect" shall have the meaning set forth in
Section 6.1.
"Gladstone Meeting" shall have the meaning set forth in Section 3.5.
"Gladstone SEC Reports" shall have the meaning set forth in Section
6.5.
"Gladstone Voting Debt" shall have the meaning set forth in Section
6.2.
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"Defensible Title" shall mean, subject to and except for the Permitted
Encumbrances, (i) the title of Gladstone to such assets is free and
clear of all liens, encumbrances and defects of any kind whatsoever,
and (ii) as to those xxxxx for which a "Working Interest" and a "Net
Revenue Interest" are set forth in the Gladstone Engineering Report,
Gladstone are entitled to receive the percentage of all Hydrocarbons
produced, saved and marketed from such xxxxx in an amount not less than
the Net Revenue Interest set forth in the such engineering report,
without reduction, suspension or termination throughout the duration of
the productive life of such xxxxx (except as set forth in such report),
and such party is obligated to bear the percentage of costs and
expenses related to the maintenance, development and operation of such
xxxxx in an amount not greater than the Working Interest set forth in
such engineering report, without increase throughout the productive
life of such xxxxx, except increases that also result in a
proportionate increase in Net Revenue Interest and as set forth in such
report.
"Dissenting Shares" shall have the meaning set forth in Section 3.3.
"TBCA" shall have the meaning set forth in Section 2.1.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, or orders of any Governmental Entity pertaining to
health or the environment currently in effect in any or all
jurisdictions in which the Company and its Subsidiaries own property or
conduct business, including without limitation, the Clean Air Act, as
amended, CERCLA, the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act of 1970, as amended, RCRA, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act,
as amended, the Hazardous & Solid Waste Amendments Act of 1984, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, the
Oil Pollution Act of 1990 ("OPA"), any state laws implementing the
foregoing federal laws, any state laws pertaining to the handling of
oil and gas exploration and production wastes or the use, maintenance,
and closure of pits and impoundments, and all other environmental
conservation or protection laws.
"Exchange Act" shall have the meaning set forth in Section 5.2.
"Fixed Price Contracts" means any contracts, commitments or agreements
for the purchase or sale of Hydrocarbons (i) having, as of the date
hereof, a remaining term of two months or more, wherein the purchase or
sales price thereunder throughout all or part of the life of such
contract, commitment or agreement is a fixed amount or an amount that
is otherwise reasonably determinable as of the date hereof pursuant to
the terms of such contract, commitment or agreement, or (ii) which
Gladstone has hedged with futures contracts or otherwise; provided,
that the term Fixed Price Contracts will not include any contract,
commitment or agreement wherein the purchase or sales price thereunder
throughout all of the life of the contract, commitment or agreement is
based on a market responsive reference price for a Hydrocarbon.
"GAAP" shall have the meaning set forth in Section 6.5.
"Governmental Entity" shall have the meaning set forth in Section 6.9.
"HSR Act" shall have the meaning set forth in Section 5.2.
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"Hydrocarbons" means oil, gas, condensate, casinghead gas, helium,
carbon dioxide, mineral and other liquid or gaseous hydrocarbons.
"Indebtedness" means any liability in respect of (A) borrowed money,
(B) capitalized lease obligations, (C) the deferred purchase price of
property or services (other than trade payables in the ordinary course
of business) and (D) guarantees of any of the foregoing.
"Leases" shall have the meaning set forth in Section 6.12(e).
"Loss" shall have the meaning set forth in Section 8.2(a).
"Material Gladstone Assets" shall have the meaning set forth in Section
6.13.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall have the meaning set forth in Section 3.1.
"Oil and Gas Interests" means, when used with respect to Gladstone,
direct and indirect interests in and rights with respect to
Hydrocarbons and related properties and assets of any kind and nature,
direct or indirect, including working, royalty, and overriding royalty
interests, production payments, operating rights, net profits
interests, other nonworking interests, and nonoperating interests; and
all revenues therefrom and all contracts in connection therewith and
claims and rights thereto (including all oil and gas leases, operating
agreements, unitization and pooling agreements and orders, divisions
orders, transfer orders, mineral deeds, royalty deeds, oil and gas
sales, exchange and processing contracts and agreements, and in each
case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; all easements,
rights of way, licenses, permits, leases and other interests associated
with, appurtenant to, or necessary for the operation of any of the
foregoing; and all interests in equipment and machinery (including
tanks, batteries, pipelines, and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries
and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing.
"Paying Agent" shall have the meaning set forth in Section 3.2.
"Permitted Encumbrances" shall mean any of the following: (i) any liens
for taxes and assessments not yet delinquent or, if delinquent, that
are being contested in good faith in the ordinary course of business;
(ii) any obligations or duties to any municipality or public authority
with respect to any franchise, grant, certificate, license or permit,
and all applicable laws; (iii) any easements, rights-of-way,
servitudes, permits and other rights in respect of surface operations,
pipelines or the like, and easements for pipelines, power lines and
other similar rights-of-way, and encroachments, on, over or in respect
of any property or lands of Gladstone or over which such party owns
rights-of-way, easements, permits or licenses, that do not unreasonably
or materially interfere with the operation of any property or lands for
exploration and production of hydrocarbon or related operations; (iv)
all royalties, overriding royalties, net profits interests, production
payments, carried interests, reversionary interests, calls on
production and other burdens on or deductions from the proceeds of
production that do not operate to (A) reduce the Net Revenue Interest
below that set forth in the Gladstone Engineering Report, or (B)
increase the Working Interest of Gladstone above that set forth in the
engineering report without a proportionate increase in the Net
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Revenue Interest of such party; (v) the terms and conditions of all
leases, servitudes, production sales contracts, division orders,
contracts for sale, purchase, exchange, refining or processing of
hydrocarbons, unitization and pooling designations, declarations,
orders and agreements, operating agreements, agreements of development,
area of mutual interest agreements, farmout agreements, gas balancing
or deferred production agreements, processing agreements, plant
agreements, pipeline, gathering and transportation agreements,
injection, repressuring and recycling agreements, carbon dioxide
purchase or sale agreements, salt water or other disposal agreements,
seismic or geophysical permits or agreements, and other agreements, to
the extent that such contracts and agreements do not (A) reduce the Net
Revenue Interest below that set forth in the Gladstone Engineering
Report, or (B) increase the Working Interest above that set forth in
the Gladstone Engineering Report, as applicable, without a
proportionate increase in the Net Revenue Interest of the applicable
party; (vi) conventional rights of reassignment prior to abandonment;
(vii) materialmen's, mechanics', repairmen's, employees', contractors',
operators', tax and other similar liens or charges arising in the
ordinary course of business incidental to construction, maintenance or
operation of any of the assets (A) if they have not been filed pursuant
to law, (B) if filed, they have not yet become due and payable or
payment is being withheld as provided by law or (C) if their validity
is being contested in good faith in the ordinary course of business by
appropriate action; and (viii) any other encumbrances that (A) do not
secure an obligation in respect of borrowed money or (B) do not
interfere materially with the operation, value or use of assets of the
Company or its Subsidiaries.
"Potential Acquirer" shall have the meaning set forth in Section 8.6.
"Proxy Statement" shall have the meaning set forth in Section 5.3.
"RCRA" shall mean the Resource Conservation and Recovery Act of 1976,
as amended.
"Securities Act" shall have the meaning set forth in Section 6.5.
"Share" shall have the meaning set forth in Section 3.1.
"Surviving Corporation" shall have the meaning set forth in Section
1.1.
"Tax" shall mean all federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties and assessments of any nature
whatsoever together with all interest, penalties and additions imposed with
respect to such amounts.
"Tax Return" shall mean any return, declaration, report, estimate,
claim for refund, information return, statement, request for extension, or other
similar document relating to any tax, including any schedule or attachment
thereto, and including any amendment thereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Gladstone as follows:
Section 5.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas and has the corporate power to carry on its business as it
is now being conducted. The Company is duly qualified as a foreign corporation
and is in good standing in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a direct or indirect
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or operations of the Company or the Company's ability to
consummate the Merger (a "Company Material Adverse Effect"). Complete and
correct copies as of the date hereof of the Certificate of Incorporation and
By-laws of the Company have been delivered to Gladstone.
Section 5.2 Authority Relative to this Agreement. The Company has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated
hereby by the Company have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery of this Agreement by the Gladstone, this Agreement constitutes a legal,
valid and binding obligation of the Company enforceable in accordance with its
terms except as enforcement may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and except
that the availability of equitable remedies, including specific performance, is
subject to the discretion of the court before which any proceeding therefor may
be brought.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of the Company or (ii)
result in any breach or constitute a default (with or without notice or lapse of
time, or both) or give rise in others of any rights of termination, cancellation
or acceleration under any indenture, contract, license, franchise, permit,
order, decree, concession, lease, instrument, judgment, statute, law, ordinance,
rule or regulation applicable to Sub or its assets, other than, in the case of
clause (ii) only, breaches, defaults, violations and losses of rights that would
not have a Company Material Adverse Effect. Except as referred to herein, or in
connection or in compliance with the provisions of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the filing and
recordation of the certificate of merger pursuant to the TBCA, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
The Company of the Merger or the other transactions contemplated by this
Agreement, except where the failure to make any such filing or registration or
to obtain such authorization, consent or approval would not prevent consummation
of the Merger or have a Company Material Adverse Effect.
Section 5.3 Information in Proxy Statement. None of the information
supplied by the Company for inclusion in the preliminary and definitive proxy
statement of Gladstone and any amendments or supplements thereto (collectively
the "Proxy Statement") to be mailed to the stockholders of Gladstone in
connection with the Merger will, at the time of the mailing thereof or at the
time of the Gladstone Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 5.4 Capitalization of the Company. The authorized capital stock
of the Company consists of ten million shares of common stock, par value $0.02
per share, 508,900 of which shares, as of the date of this Agreement, are
validly issued and outstanding, fully paid and nonassessable and are free and
clear of all liens, claims and encumbrances.
Section 5.5 Financing. The Company has or will have available to it at
the time the Company is required to pay for the Shares pursuant to Article III
hereof sufficient funds to permit it to (i) pay for all of the outstanding
shares of Gladstone Common Stock and pay amounts due to stockholders of
Gladstone who have perfected dissenters' rights in accordance with the TBCA.
Section 5.6 Review of Company. Without in any way affecting the
importance of, or impacting its reliance on, any other provision of this
Agreement, the Company acknowledges that it has had a full opportunity to
request from Gladstone and its representatives, and has received and reviewed,
all oral and written information concerning Gladstone that the Company deems
relevant to its decision to enter into this Agreement and to consummate the
transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GLADSTONE
Gladstone hereby represents and warrants to the Company as follows:
Section 6.1 Organization and Qualification. Gladstone is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington and has the corporate power to carry on its business as it
is now being conducted. Gladstone is duly qualified as a foreign corporation and
is in good standing in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a direct or indirect
material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or operations of Gladstone and its Subsidiaries (as
hereinafter defined) taken as a whole or its ability to consummate the Merger (a
"Gladstone Material Adverse Effect"). Complete and correct copies of the charter
and by-laws of Gladstone as of the date hereof have been previously provided to
the Company.
Section 6.2 Capitalization. The authorized capital stock of Gladstone
consists of 6,000,000 shares of Gladstone Common Stock, par value $0.01 per
share. As of the date of this Agreement, 4,244,060 shares of Gladstone Common
Stock were outstanding, no shares of Gladstone Common Stock were held in the
treasury of Gladstone, no shares were held by Subsidiaries of Gladstone and no
shares of preferred stock were outstanding. All the outstanding shares of
Gladstone Common Stock are validly issued, fully paid and non-assessable and
were issued free of preemptive rights. As of the date hereof, there are no
bonds, debentures, notes or other evidences of indebtedness having the right to
vote on any matters on which Gladstone's stockholders may vote ("Gladstone
Voting Debt") issued or outstanding. There are no options, warrants, calls or
other rights, agreements or commitments outstanding obligating Gladstone to
issue, deliver or sell shares of its capital stock or debt securities, or
obligating Gladstone to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
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Section 6.3 Authority Relative to this Agreement. Gladstone has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of this Agreement by the holders of a majority of the
outstanding shares of the Gladstone Common Stock, the corporate power and
authority to carry out its obligations hereunder. The execution and delivery of
this Agreement by Gladstone and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Gladstone (except for the approval of the holders of a majority
of the outstanding shares of Gladstone Common Stock). This Agreement has been
duly executed and delivered by Gladstone and, assuming the due authorization,
execution and delivery of this Agreement by the Company, this Agreement
constitutes a legal, valid and binding obligation of Gladstone enforceable in
accordance with its terms except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies, including
specific performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
Neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby will (i) conflict with
or violate the Certificate of Incorporation or By-laws of Gladstone, or (ii)
result in any breach or constitute a default (with or without notice or lapse of
time, or both) under, or give rise in others to any rights of termination,
cancellation or acceleration under, any indenture, contract, loan agreement,
license, franchise, permit, order, decree, concession, lease, instrument,
judgment, statute, law, ordinance, rule or regulation applicable to Gladstone or
its assets, other than, in the case of clause (ii) only, such breaches,
defaults, violations and losses of rights that would not, individually or in the
aggregate, have a Gladstone Material Adverse Effect. Except in connection or in
compliance with the provisions of the HSR Act, the Exchange Act and the filing
and recordation of the Certificate of Merger pursuant to the TBCA, no filing or
registration with, or authorization, consent or approval of, any governmental or
regulatory body or authority or third party is necessary for the consummation by
Gladstone of the Merger or the other transactions contemplated hereby, except
where failure to make such filing or registration or obtain such authorization,
consent or approval would not, individually or in the aggregate, prevent
consummation of the Merger or have a Gladstone Material Adverse Effect.
Section 6.4 Reports and Financial Statements. Gladstone has furnished
the Company with true and complete copies of the Company's (i) Annual Reports on
Form 10-K for the fiscal years ended December 31, 1996 and December 31, 1997, as
filed with the Securities and Exchange Commission (the "Commission"), (ii)
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30,
1995, September 30, 1995, March 31, 1996, June 30, 1996, September 30, 1996,
March 31, 1997, June 30, 1997, and September 30, 1997 as filed with the
Commission, (iii) proxy statements related to all meetings of its stockholders
(whether annual or special) held since January 1, 1995 and (iv) all other
reports on Form 8-K and registration statements declared effective by the
Commission since December 31, 1994, which are all the documents (other than
preliminary material) that Gladstone was required to file with the Commission
since January 1, 1995 (all items in clauses (i) through (iv) being referred to
herein collectively as the "Gladstone SEC Reports"). As of their respective
dates, the Gladstone SEC Reports complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
Commission thereunder applicable to such Gladstone SEC Reports. As of their
respective dates, the Gladstone SEC Reports did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their respective
dates, the audited consolidated financial statements and unaudited interim
financial statements of Gladstone included in the Gladstone SEC Reports complied
in all material respects with applicable accounting requirements of the
Securities Act and
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the Exchange Act, and with the published rules and regulations of the Commission
with respect thereto. The financial statements included in the Gladstone SEC
Reports (i) have been prepared in accordance with GAAP during the periods
presented (except as may be indicated therein or in the notes thereto or, in the
case of the unaudited statements, subject to normal year-end audit adjustments
and except for the fact that such unaudited statements do not contain all notes
required by GAAP), (ii) present fairly, in all material respects, the financial
position of Gladstone as of the dates thereof and (iii) are, in all material
respects, in accordance with the books of account and records of Gladstone.
Gladstone has no liability and is not subject to any loss contingency material
to Gladstone other than as reflected or disclosed in the financial statements or
notes thereto included in the Gladstone SEC Reports filed prior to the date
hereof. Any reports or other material filed by Gladstone with the Commission
after the date hereof and prior to the Effective Time (other than preliminary
material) shall be deemed to be included in the defined term "Gladstone SEC
Reports" for purposes of this Agreement and Gladstone shall be deemed to have
made the representations set forth in this Section 7.5 in respect of such
reports or other material and any financial statements set forth therein.
Section 6.5 Litigation. Except as disclosed in Gladstone's Annual
Report on Form 10-K for the year ended December 31, 1997, there is no claim,
suit, action or proceeding pending or, to the knowledge of the officers of
Gladstone, overtly threatened, against or affecting Gladstone, either
individually or in the aggregate, which could reasonably be expected to have a
Gladstone Material Adverse Effect, nor, as of the date of this Agreement, is
there any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against Gladstone.
Section 6.6 Information in Disclosure Documents. None of the
information with respect to Gladstone included or incorporated by reference in
the Proxy Statement will, at the time of the mailing thereof and at the time of
the Gladstone Meeting, 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 therein, in light of the circumstances under which they
are made, not misleading; provided, however, that this provision shall not apply
to, and no representation or warranty is made by Gladstone with respect to,
statements or omissions in the Proxy Statement based upon information furnished
by or on behalf of the Company for use therein. The Proxy Statement will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder. No representation or warranty made by Gladstone
contained in this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading.
Section 6.7 Environmental Matters. Gladstone and the properties and
operations of Gladstone are not subject to any existing, pending or, to the
knowledge of Gladstone, overtly threatened action, suit, investigation, inquiry
or proceeding by or before any Governmental Entity under any Environmental Law.
Except for matters that would not result, individually or in the aggregate, in a
Gladstone Material Adverse Effect, (i) the properties, operations and activities
of Gladstone are in compliance with all applicable Environmental Laws; (ii) all
notices, permits, licenses, or similar authorizations, if any, required to be
obtained or filed by Gladstone under any Environmental Law in connection with
any aspect of the business of Gladstone, including without limitation those
relating to the treatment, storage, disposal or release of a hazardous
substance, have been duly obtained or filed and will remain valid and in effect
after the Merger, and Gladstone is in compliance with the terms and conditions
of all such notices, permits, licenses and similar authorizations; (iii) there
are no physical or environmental conditions existing on any property of
Gladstone or resulting from Gladstone's operations or activities, past or
present, at any location, that would give rise to any on-site or off-site
remedial obligations imposed on Gladstone under any Environmental Laws; (iv) to
Gladstone's knowledge, since the effective date of the relevant requirements
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of applicable Environmental Laws and to the extent required by such applicable
Environmental Laws, all hazardous substances generated by Gladstone have been
transported only by carriers authorized under Environmental Laws to transport
such substances and wastes, and disposed of only at treatment, storage, and
disposal facilities authorized under Environmental Laws to treat, store or
dispose of such substances and wastes; (v) there has neither been any exposure
of any person or property to hazardous substances or any pollutant or
contaminant released by Gladstone, nor has there been any release of hazardous
substances, or any pollutant or contaminant into the environment by Gladstone or
in connection with their properties or operations that could reasonably be
expected to give rise to any claim against Gladstone for damages or
compensation; and (vi) Gladstone has made available to the Company all internal
and external environmental audits and studies and all correspondence on
substantial environmental matters in the possession of Gladstone relating to any
of the current or former properties or operations of Gladstone. For purposes of
this Agreement, the terms "hazardous substance" and "release" have the meanings
specified in CERCLA, and the term "disposal" has the meaning specified in RCRA;
provided, however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance," "release," or
"disposal" that is broader than that specified in either CERCLA or RCRA, such
broader meaning shall apply.
Section 6.8 Public Utility Holding Company Act. Gladstone is not
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, and the rules and regulations thereunder.
Section 6.9 Compliance with Applicable Laws. Except as disclosed in
the Gladstone SEC Reports filed prior to the date of this Agreement, Gladstone
is not in violation of any law, ordinance, regulation, order or writ of any
courts, administrative agencies or commissions or other governmental
authorities or instrumentalities, domestic or foreign (each a "Governmental
Entity") applicable to Gladstone or by which it may be bound, except for
violations that would not, individually or in the aggregate, have a Gladstone
Material Adverse Effect. Gladstone has not received notice of violation of any
law, ordinance, regulation, order or writ, or is in default with respect to any
order, writ, judgment, award injunction or decree of any Governmental Entity,
except for such notices or defaults which would not, individually or in the
aggregate, reasonably be expected to have a Gladstone Material Adverse Effect.
Section 6.10 Taxes. Gladstone has timely filed when due (taking into
account permitted extensions) all material federal, state and local income and
franchise Tax Returns and all other Tax Returns required to be filed and has
paid all Taxes required to be paid in respect of the periods covered by such Tax
Returns. The information contained in such Tax Returns is true, complete and
accurate in all material respects. Gladstone is not delinquent in the payment of
any Tax, assessment or governmental charge. No deficiencies for any Taxes have
been proposed, asserted or assessed against Gladstone, or to the knowledge of
the officers of Gladstone, that have not been finally settled or paid in full,
and no requests for waivers of the time to assess any such Tax are pending.
Section 6.11 Certain Agreements.
Gladstone is not a party to any oral or written (i) agreements,
contracts, indentures or other instruments relating to Indebtedness which, when
aggregated with all such other agreements, contracts, indentures or instruments,
exceeds an amount of $500,000, (ii) confidentiality or standstill agreements or
other material contract or agreement which, after giving effect to the
transactions contemplated by this Agreement, purports to restrict or bind the
Company (iii) collective bargaining agreement, (iv) contract, agreement or
commitment not entered into in the ordinary course of business consistent with
past practice and for which Gladstone could become liable for payments in excess
of $500,000 (in respect of all such contracts, agreements or commitments,
collectively), or (v) any contract or agreement granting a
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preferential right of purchase or similar right to any person or entity with
respect to any Material Gladstone Asset (as hereinafter defined).
Section 6.12 Oil and Gas Reserve Information. Except for exceptions
that would not, and could not reasonably be expected to, individually or in the
aggregate, have a Gladstone Material Adverse Effect:
(a) To the knowledge of Gladstone's officers, none of the xxxxx
included in the Oil and Gas Interests of Gladstone has been overproduced such
that it is subject or liable to being shut-in or to any other overproduction
penalty (including cash payments);
(b) There are no xxxxx included in the Oil and Gas Interests of
Gladstone that: (i) Gladstone or any of its Subsidiaries are currently obligated
by law or contract to plug and abandon; (ii) are subject to exceptions to a
requirement to plug and abandon issued by a regulatory authority having
jurisdiction over such Oil and Gas Interests; or (iii) to the knowledge of
Gladstone, have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of each regulatory
authority having jurisdiction over such Oil and Gas Interests;
(c) No person has any call on, option to purchase, or similar rights
with respect to the Oil and Gas Interests of Gladstone (including without
limitation the production attributable thereto) and upon consummation of the
transactions contemplated by this Agreement, the Company and its Subsidiaries
will have the right to market production from the Oil and Gas Interests of
Gladstone on terms no less favorable than the terms upon which such Gladstone is
currently marketing such production;
(d) To the knowledge of Gladstone's officers, all royalties, overriding
royalties, compensatory royalties and other payments due with respect to the Oil
and Gas Interests of Gladstone (excluding those held in suspense in accordance
with past operating practices or in connection with post-closing adjustments in
respect of acquired properties) have been properly and timely paid; and
(e) To the knowledge of Gladstone's officers, with respect to those
assets of that are oil and gas leases ("Leases"), there has not occurred any
event, fact or circumstance which with the lapse of time or the giving of
notice, or both, would constitute a breach or default on behalf of Gladstone and
its Subsidiaries or, to the knowledge of Gladstone and its Subsidiaries, with
respect to any other parties under the Leases.
Section 6.13 Title to Property. Gladstone has Defensible Title to all
of the material assets reflected on the consolidated financial statements of
Gladstone included in the Gladstone SEC Reports as being owned by it (including
Oil and Gas Interests of Gladstone) and all of the material assets thereafter
acquired by it (except to the extent that such assets have thereafter been
disposed of in the ordinary course of business consistent with past practice)
(collectively, the "Material Gladstone Assets"). All material payments of any
kind required to be made by Gladstone to third parties under any contract or
agreement relating to the Material Gladstone Assets have been or will be
properly and timely paid or provided for.
ARTICLE VII
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 7.1 Conduct of Business by Gladstone. Following the date hereof
and prior to the Effective Time, except as otherwise contemplated by this
Agreement or unless the Company shall otherwise consent in writing:
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(a) subject to the limitations contained in or transactions
contemplated by this Agreement, Gladstone shall carry on its operations in the
usual and ordinary course consistent with past practice, and shall use its
reasonable best efforts to preserve substantially intact its present business
organization, keep available the services of its present officers and employees,
maintain and keep its material assets in as good repair and condition as of the
date hereof, ordinary wear and tear and damage due to casualty excepted, and
preserve its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and on-going businesses shall be
materially unimpaired at the Effective Time;
(b) Gladstone shall not, nor shall it propose to, except as required by
this Agreement, (i) amend its Certificate of Incorporation or By-laws, (ii)
split, combine or reclassify its outstanding capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the capital stock, or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property, or (iii)
directly or indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of its capital stock;
(c) Gladstone shall not, without the consent of the Company: (i) except
as required or contemplated by this Agreement, issue, deliver or sell or agree
to issue, deliver or sell any additional shares of, or stock appreciation rights
or rights of any kind to acquire any shares of, its capital stock of any class,
any Gladstone Voting Debt, or any option, rights or warrants to acquire, or
securities convertible into, shares of capital stock, (ii) acquire or lease or
agree to acquire or lease any material capital asset or assets, or make any
other capital expenditures, (iii) dispose or agree to dispose of capital assets
or any other assets other than in the ordinary course, (iv) (A) create, incur,
assume or permit additional material indebtedness (including obligations in
respect of capital leases), (B) assume, guarantee, endorse or otherwise become
liable or responsible for the obligations of any other person in an amount in
excess of $10,000, (C) encumber or grant a security interest in any Material
Gladstone Asset, or (D) make any loans or advances to any other person, enter
into any agreement or instrument relating to the borrowing of money or the
extension of credit or enter into any other material transaction, other than in
each case in the ordinary course of business consistent with past practice,(v)
enter into or renew any material agreements, contracts or other commitments that
are not expected to be fully performed within thirty days after the Effective
Time excluding oil and gas leases, farmout agreements, gas sales or purchase
contracts, joint operating agreements, unit operating agreements and unit
agreements entered into in the ordinary course of business, or (vi) adopt, enter
into, amend or terminate any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Gladstone shall not, except as required to comply with applicable
law: (i) adopt, enter into, terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other Plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any current or former director,
officer or employee, (ii) increase in any manner the compensation or fringe
benefits of any director (other than the adoption of any special compensation
for the members of the Special Committee), executive officer or employee, (iii)
pay any benefit not provided under any existing plan or arrangement, (iv) grant
any awards under any other bonus, incentive, performance or other compensation
plan or arrangement or plan (including, without limitation, the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Plans or agreements or awards made thereunder), (v) take any action to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or Plan, other than in the
ordinary course of business consistent with past practice, or (vi) adopt, enter
into, amend or terminate any contract, agreement, commitment or arrangement to
do any of the foregoing;
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(e) Gladstone shall not, make any change in its accounting policies or
procedures, except as required under GAAP;
(f) Gladstone shall use its reasonable best efforts to refrain from
taking any action that would, or reasonably might be expected to, result in any
of its representations and warranties set forth in this Agreement being or
becoming untrue in any material respect as of the Effective Time, or in any of
the conditions to the Merger set forth in Article IX not being satisfied, or
(unless such action is required by applicable law) that would adversely affect
the ability of Gladstone to obtain any of the regulatory approvals required to
consummate the Merger, as contemplated hereby;
(g) Gladstone shall not settle or compromise any claim for dissenters'
rights in respect of the Merger;
(h) Gladstone shall maintain in full force and effect all of its
policies of insurance in existence as of the date hereof or insurance comparable
to the coverage afforded by such policies; and
(i) Gladstone shall not enter into any natural gas or other future or
options trading or be a party to any price swaps, xxxxxx, futures or similar
instruments without first obtaining the consent of the Company, which consent
shall not be unreasonably withheld.
Section 7.2 Obligations of the Company. The Company shall use its
reasonable best efforts to refrain from taking any action that would, or
reasonably might be expected to, result in any of its representations and
warranties set forth in this Agreement being or becoming untrue in any material
respect as of the Effective Time, or in any of the conditions to the Merger set
forth in Article IX not being satisfied, or (unless such action is required by
applicable law) that would adversely affect the ability of the Company to obtain
any of the regulatory approvals required to consummate the Merger, as
contemplated hereby.
Section 7.3 Notice of Breach. Each party shall promptly give written
notice to the other party upon becoming aware of the occurrence or, to its
knowledge, impending or threatened occurrence, of any event that would cause any
of the representations and warranties to be untrue on the Effective Time or
cause a breach of any covenant contained or referenced in this Agreement and
will use its reasonable best efforts to prevent or promptly remedy the same.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Upon reasonable notice, Gladstone
shall afford to the Company and its accountants, lenders, counsel and other
representatives full access, during normal business hours (and at such other
times as the parties may mutually agree) and in a manner so as not to materially
interfere with the normal business operations of Gladstone throughout the period
prior to the Effective Time, to all of their properties (which shall include the
right to conduct an environmental assessment thereof), books, contracts,
commitments, records and personnel. During such period Gladstone shall furnish
promptly to the Company (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal or state
securities laws, and (ii) all other information concerning its business,
properties and personnel as the Company may reasonably request. The Company
shall hold all such information in confidence. During the period prior to the
Effective Time, Gladstone shall make its accountants, counsel, lenders and other
representatives available to the Company and its accountants, lenders, counsel
and other representatives at reasonable times.
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Section 8.2 Proxy Statement. (a) As promptly as reasonably practicable
after the execution of this Agreement, Gladstone shall prepare and file with the
Commission preliminary proxy materials with respect to the actions to be taken
at the Gladstone Meeting, which shall be in form and substance reasonably
satisfactory to the Company. As promptly as reasonably practicable after
comments are received from the Commission with respect to such preliminary proxy
materials, Gladstone shall use its reasonable best efforts to respond to the
comments of the Commission. The Company shall provide Gladstone with such
information as may be required to be included in the proxy statement or as may
be reasonably required to respond to any comment of the Commission. After all
the comments received from the Commission have been cleared by the Commission
staff and all information required to be contained in the proxy statement has
been included therein by Gladstone, Gladstone shall file with the Commission the
Proxy Statement and Gladstone shall use its reasonable best efforts to have the
Proxy Statement cleared by the Commission as soon thereafter as practicable.
Gladstone shall cause the Proxy Statement to be mailed to its stockholders of
record as promptly as reasonably practicable after clearance by the Commission.
Unless Gladstone is advised by outside counsel that such a recommendation is no
longer consistent with the discharge of applicable fiduciary duties of directors
of Gladstone, the Proxy Statement shall include the recommendation of the Board
of Directors of Gladstone in favor of the Merger. If requested by the Company,
Gladstone shall use its reasonable best efforts to obtain an "SAS No. 71 letter"
from Gladstone's independent public accountants addressed to Gladstone, in form
and substance reasonably satisfactory to the Company, with respect to interim
financial statements included in the Proxy Statement.
(b) Gladstone shall retain the services of a proxy soliciting firm
reasonably acceptable to the Company for the purpose of communicating to
Gladstone's stockholders the recommendation of Gladstone's Board of Directors
and of seeking to ensure that sufficient votes are cast to satisfy the
requirements of applicable law for the completion of the Merger.
(c) Gladstone and the Company shall make all necessary filings with
respect to the Merger under the Exchange Act and the rules and regulations
thereunder and shall use their reasonable best efforts to obtain required
clearances with respect thereto.
Section 8.3 Indemnification. (a) The Certificate of Incorporation of
the Surviving Corporation shall contain provisions that acknowledge and agree
that, to the fullest extent permitted by law, the provisions relating to
limitation on liability that are set forth in the Articles of Incorporation of
Gladstone as of the date of this Agreement, shall remain effective for a period
of six years from the Effective Time with respect to individuals who at any time
from and after the date of this Agreement and to and including the Effective
Time were directors, officers, employees, fiduciaries or agents of Gladstone in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the matters contemplated by this Agreement), and
the Surviving Corporation shall not amend (in any manner that would diminish the
effect of such provisions) or repeal such provisions for a period of six years
from the Effective Time.
(b) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 8.3.
(c) The obligations of the Surviving Corporation under this Section 8.3
shall not be terminated or modified in such a manner as to adversely affect any
director, officer, employee, fiduciary and agent to whom this Section 8.3
applies without the consent of each affected director, officer, employee,
fiduciary
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and agent (it being expressly agreed that the directors, officers, employees,
fiduciaries and agents to whom this Section 8.3 applies shall be third-party
beneficiaries of this Section 8.3).
Section 8.4 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to cooperate
with each other and to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, in each case consistent with
the fiduciary duties of their respective Boards of Directors, all things
necessary, proper or advisable (i) under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
soon as reasonably practicable, including to obtain all necessary waivers,
consents and approvals and to effect all necessary registrations and filings and
(ii) to lift any injunction or other legal bar to the Merger as soon as
reasonably practicable (and, in such case, to proceed with the Merger as
expeditiously as possible); provided, however, that nothing in this Section or
elsewhere in this Agreement shall require any party hereto to incur expenses in
connection with the transactions contemplated hereby which are not reasonable
under the circumstances in relation to the size of the transaction contemplated
hereby or to require any party or any affiliate of any party to hold separate or
make any divestiture of a significant asset or otherwise agree to any material
restriction on the operations of any party in order to obtain any waiver,
consent or approval required by this Agreement.
(b) In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the
Surviving Corporation shall take all such necessary action.
(c) If at any time prior to the Effective Time any information, event
or circumstance shall be discovered that should be set forth in a supplement to
the Proxy Statement, the discovering party shall promptly inform the other party
of such information, event or circumstance, and the Company shall as soon as
practicable prepare a supplement to the Proxy Statement, which shall be in form
and substance reasonably satisfactory to the Company, and mail such supplement
to its stockholders.
Section 8.5 No Solicitation. Prior to the Effective Time, Gladstone
shall not, nor shall it authorize or permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it to, directly or indirectly, initiate,
solicit, negotiate or encourage (including by way of furnishing information), or
take any other action to facilitate or entertain, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
proposal or offer to acquire all or substantially all of the business of
Gladstone or all or substantially all of the capital stock of Gladstone, whether
by merger, purchase of assets, tender offer, exchange offer or otherwise,
whether for cash, securities or any other consideration or combination thereof
(any such transaction being referred to herein as an "Other Acquisition
Transaction") or agree to endorse or recommend any such Other Acquisition
Transaction or enter into an agreement relating to an Other Acquisition
Transaction; provided, however, that Gladstone may negotiate with a corporation,
partnership, person or other entity or group (a "Potential Acquirer") if, based
upon the advice of counsel to Gladstone (notice of which advice has been
communicated to the Company), Gladstone's Board of Directors determines in good
faith that there is a significant risk that the failure to negotiate with the
Potential Acquirer could constitute a breach of the Board's fiduciary duty to
the stockholders of Gladstone.
ARTICLE IX
CONDITIONS PRECEDENT
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective
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Time of the following conditions, any one or more of which may be waived in a
writing executed by Gladstone and the Company subject to and in accordance with
Section 10.4 hereof:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of the Gladstone Common Stock.
(b) There shall not be pending any action, proceeding or investigation
brought by any person or entity before any Governmental Entity challenging,
affecting, or seeking material damages in connection with, the transactions
contemplated by this Agreement.
Section 9.2 Conditions to Obligations of the Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject to
approval by its Board of directors and the fulfillment at or prior to the
Effective Time of the following additional conditions, unless waived by the
Company in writing.
(a) Gladstone shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of Gladstone contained
in this Agreement which are qualified with respect to materiality shall be true
and correct in all respects, and such representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case when made and on and at the Effective Time as if made at such time (except
to the extent they expressly relate to the date of this Agreement or any other
particular date), and the Company shall have received a certificate signed on
behalf of Gladstone by its President or Chief Executive Officer, dated the
Closing Date, to that effect. Notwithstanding anything to the contrary herein,
with respect to any representation or warranty in this Agreement which refers to
a Gladstone Material Adverse Effect, a Gladstone Material Adverse Effect shall
mean adverse effects resulting in an aggregate Loss in excess of $100,000.
"Loss" shall mean the amount that would be required to be contributed to the
Surviving Corporation at the Effective Time so that the owners of the Surviving
Corporation would be in the same economic position as they would have been if
such adverse effects had not occurred and would not occur.
(b) The net working capital (current assets less current liabilities)
at the Effective Time shall be greater than or equal to the difference between
$219,000 and the cost of drilling and completion (if necessary) of the following
four xxxxx:
(i) Xxxxxxx Xx. 0 xxxx, Xxxxxxx Xxxxxx, Xxxxx (estimated
drilling and completion costs of $55,547.05 to
Gladstone's 1/8 working interest);
(ii) Xxxxxxxxx No. 2 Rework, Madison County, Texas
(estimated drilling and completion costs of
$35,946.07 to Gladstone's undivided 14.0086%; working
interest)
(iii) Xxxxxxxx Xx. 0 xxxx, Xxxxxxxxx Xxxxxx, Xxxxx
(estimated drilling and completion costs of
$50,069.00 to Gladstone's 20% working interest); and
(iv) Xxxxxxxx Xx. 0 xxxx, Xxxxxxxxx Xxxxxx, Xxxxx
(estimated drilling and completion costs of
$54,109.00 to Gladstone's 20% working interest).
(c) The number of Dissenting Shares shall not exceed 10% of the number
of outstanding shares of Company Common Stock.
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ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of Gladstone:
(a) by mutual consent of the Board of Directors of Gladstone and the
Board of Directors of the Company;
(b) by either Gladstone or the Company if the Merger shall not have
been consummated on or before September 1, 1998 (unless, such circumstance is
the result of a breach of the terms hereof by the party exercising the
termination right);
(c) by the Company if there has been a material breach on the part of
Gladstone, or by Gladstone if there has been a material breach on the part of
the Company, of any representation, warranty, covenant or agreement set forth in
this Agreement, which breach has not been cured within fifteen business days
following receipt by the breaching party of written notice of such breach;
(d) by either Gladstone or the Company upon written notice to the other
party if any Governmental Entity of competent jurisdiction shall have issued (i)
a final permanent order enjoining or otherwise prohibiting the consummation of
any of the transactions contemplated by this Agreement, and in any such case the
time for appeal or petition for reconsideration of such order shall have expired
without such appeal or petition being granted, or (ii) any order or directive
that does not directly enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, but that would, if Gladstone or the
Company were to comply with such order or directive as a condition to
consummating the transactions contemplated hereby, have a material adverse
effect on the business, operations or financial condition of the Surviving
Corporation;
(e) by either Gladstone or the Company if the required approval of
Gladstone's stockholders is not received in a vote duly taken at the Gladstone
Meeting contemplated by Section 3.5 hereof;
(f) by the Company if the Board of Directors of Gladstone or any
committee thereof (i) shall have amended, modified, rescinded or repealed the
recommendation of the Gladstone's Board of Directors to the stockholders of
Gladstone to approve the Merger and the adoption of this Agreement, or (ii)
shall have adopted any other resolution in connection with this Agreement and
the transactions contemplated hereby inconsistent with such recommendation of
the consummation of the transactions contemplated hereby;
Section 10.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 10.1, no party hereto shall have any obligation or
liability to any other party hereto except as set forth herein, nothing herein
and no termination pursuant hereto will relieve any party from liability for any
breach of this Agreement.
Section 10.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval hereof by the stockholders of Gladstone,
but, after such approval, no amendment shall be made that under applicable law
requires further approval of such stockholders without such further approval.
This
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Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 10.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of any other party contained
herein or in any documents delivered pursuant hereto by any other party and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Non-Survival of Representations and Warranties. All
representations, warranties, agreements and covenants set forth in this
Agreement shall terminate at the Effective Time or upon termination of this
Agreement pursuant to Section 10.1, as the case may be, except that (i) the
agreements set forth in Sections 8.3, 8.4(b) and Articles III and XII shall
survive the Effective Time indefinitely
Section 11.2 Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile transmission
(with a hard copy delivered by overnight delivery service) or by overnight
delivery service, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Company:
EXCO Resources, Inc.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
With a copy to:
Xxxxxx and Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Boeing
Telecopy No.: (000) 000-0000
If to Gladstone:
Gladstone Resources, Inc.
000 Xxxxxxx Xxxxxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Telephone No.: (214)
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or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section 11.2.
Section 11.3 Expenses; Termination Fees.
(a) Whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
herein shall be paid by the party incurring such expenses.
Section 11.4 Publicity. So long as this Agreement is in effect, neither
Gladstone or the Company shall issue any press release or otherwise make any
public statement with respect to the transactions contemplated by this Agreement
without the consent of the other, which consent shall not be unreasonably
withheld, unless such press release or public statement is required by law,
regulation or rules of any applicable market or exchange, in which case such
press release or public statement may be made after providing the other parties
hereto a reasonable opportunity to comment thereon.
Section 11.5 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.
Section 11.6 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated to the
fullest extent possible.
Section 11.7 Miscellaneous. This Agreement: (i) constitutes the entire
agreement and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (ii) is not intended to confer upon any other person any rights
or remedies hereunder and shall be binding upon and inure to the benefit solely
of each party hereto, and their respective successors and assigns, (iii) shall
not be assigned by operation of law or otherwise, and (iv) shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Texas with respect to all matters (without giving effect to the
provisions thereof relating to conflicts of law). This Agreement may be executed
in any number of counterparts which together shall constitute a single
agreement.
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IN WITNESS WHEREOF, Gladstone and the Company have caused this
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
EXCO RESOURCES, INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
GLADSTONE RESOURCES, INC.
By: /s/ X.X. XXXXXX, XX.
-----------------------------
X. X. Xxxxxx, Xx.
President
