EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DOMAIN ENERGY CORPORATION,
DOMAIN GULF ACQUISITION CORP.
AND
GULFSTAR ENERGY, INC.
Dated as of November 21, 1997
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER............................................... 2
Section 1.1 The Merger................................... 2
Section 1.2 Effective Time............................... 2
Section 1.3 Effects of the Merger........................ 2
Section 1.4 Certificate of Incorporation and By-laws..... 2
Section 1.5 Directors and Officers....................... 3
Section 1.6 Additional Actions........................... 3
ARTICLE II CONVERSION OF SECURITIES........................... 3
Section 2.1 Conversion of Capital Stock.................. 3
Section 2.2 Exchange Ratio, Fractional Shares............ 4
Section 2.3 Exchange of Certificates..................... 5
(a) Exchange Agent..................................... 5
(b) Exchange Procedures................................ 5
(c) Distributions with Respect to Unexchanged Shares... 6
(d) No Further Ownership Rights in Company Capital Stock 6
(e) Termination of Exchange Fund....................... 6
(f) No Liability....................................... 6
(g) Investment of Exchange Fund........................ 7
(h) Restricted Securities.............................. 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB... 7
Section 3.1 Organization and Standing.................... 7
Section 3.2 Corporate Power and Authority................ 8
Section 3.3 Capitalization of Parent..................... 8
Section 3.4 Conflicts, Consents and Approvals............ 9
Section 3.5 Absence of Certain Changes................... 10
Section 3.6 Parent SEC Documents......................... 10
Section 3.7 Parent Disclosure Schedule................... 11
Section 3.8 Reliance..................................... 11
Section 3.9 Litigation................................... 11
Section 3.10 Liabilities.................................. 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY............................................ 12
Section 4.1 Organization and Standing.................... 12
Section 4.2 Subsidiaries................................. 12
Section 4.3 Corporate Power and Authority................ 13
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Section 4.4 Capitalization of the Company................ 13
Section 4.5 Conflicts; Consents and Approvals............ 14
Section 4.6 Absence of Certain Changes................... 15
Section 4.7 Taxes........................................ 15
Section 4.8 Compliance with Law.......................... 16
Section 4.9 Company Disclosure Schedule.................. 16
Section 4.10 Litigation................................... 16
Section 4.11 Brokerage and Finder's Fees.................. 16
Section 4.12 Employees; Employee Benefit Plans............ 17
Section 4.13 Contracts.................................... 17
Section 4.14 Permits...................................... 17
Section 4.15 Financial Statements......................... 18
Section 4.16 Liabilities.................................. 18
Section 4.17 Environmental Matters........................ 19
Section 4.18 Insurance.................................... 19
Section 4.19 Title to Assets and Related Matters.......... 20
Section 4.20 Patents and Other Intellectual Property...... 21
ARTICLE V COVENANTS OF THE PARTIES................................. 22
Section 5.1 Mutual Covenants............................. 22
(a) General............................................ 22
(b) Other Governmental Matters......................... 22
(c) Public Announcements............................... 22
(d) Access............................................. 22
(e) Consent Solicitation in Lieu of Stockholders Meetings 23
(f) Notification of Certain Matters.................... 23
Section 5.2 Covenants of Parent.......................... 23
(a) Conduct of Parent's Operations..................... 23
(b) Indemnification.................................... 24
(c) Directors of Parent................................ 25
Section 5.3 Covenants of the Company..................... 25
(a) Conduct of the Company's Operations................ 25
Section 5.4 No Solicitation.............................. 27
Section 5.5 Expenses..................................... 28
Section 5.6 Employee Matters............................. 28
ARTICLE VI CONDITIONS......................................... 29
Section 6.1 Mutual Conditions............................ 29
Section 6.2 Conditions to Obligations of the Company..... 30
Section 6.3 Conditions to Obligations of Parent and Sub.. 30
ARTICLE VII TERMINATION AND AMENDMENT.......................... 31
Section 7.1 Termination.................................. 31
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Section 7.2 Effect of Termination........................ 31
Section 7.3 Amendment.................................... 32
Section 7.4 Extension; Waiver............................ 32
ARTICLE VIII MISCELLANEOUS...................................... 32
Section 8.1 Survival of Representations and Warranties... 32
Section 8.2 Notices...................................... 32
Section 8.3 Interpretation............................... 34
Section 8.4 Counterparts................................. 34
Section 8.5 Entire Agreement............................. 34
Section 8.6 Third Party Beneficiaries.................... 35
Section 8.7 Governing Law................................ 35
Section 8.8 Specific Performance......................... 35
Section 8.9 Assignment................................... 35
Section 8.10 Expenses..................................... 35
Section 8.11 Incorporation of Disclosure Schedules........ 35
Section 8.12 Severability................................. 35
Section 8.13 Subsidiaries................................. 35
Section 8.14 Persons...................................... 36
Section 8.15 Arbitration.................................. 36
(a) Binding Arbitration................................ 36
(b) Governing Rules.................................... 36
(c) Arbitrators........................................ 36
(d) Conduct of Arbitration............................. 36
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PARENT DISCLOSURE SCHEDULE
Schedule 3.1 Parent Subsidiaries and Material Parent Subsidiaries
Schedule 3.3 Exceptions to Capitalization of Parent
Schedule 3.4 Exceptions to Conflicts, Consents and Approvals of Parent
Schedule 3.5 Exceptions to Absence of Changes in the Business of Parent
Schedule 3.9 Litigation
Schedule 3.10 Liabilities
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COMPANY DISCLOSURE SCHEDULE
Schedule 4.2 Company Subsidiaries and Capitalization of Company
Subsidiaries
Schedule 4.4 Exceptions to Capitalization of the Company
Schedule 4.5 Exceptions to Conflicts, Consents and Approvals of the
Company
Schedule 4.6 Exceptions to Absence of Changes in the Business of the
Company
Schedule 4.7 Exceptions to Tax Compliance
Schedule 4.10 Litigation
Schedule 4.11 Brokerage and Finder's Fee
Schedule 4.12 Benefits Plans
Schedule 4.13 Defaults under Contracts
Schedule 4.16 Liabilities
Schedule 4.17 Exceptions to Environmental Compliance
Schedule 4.18 Material Insurance Policies
Schedule 4.19 Oil and Gas Properties
Schedule 4.20 Intellectual Property
Schedule 5.6 Employment Agreements Assumed by Parent
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INDEX OF DEFINED TERMS
AAA............................................................... 8.15(b)
Action............................................................ 3.9
Agreement......................................................... Recitals
Applicable Law.................................................... 2.3(c)
Assets............................................................ 4.15
Certificate of Merger............................................. 1.2
Certificates...................................................... 2.3(b)
Class A Exchange Ratio............................................ 2.1(c)
Class B Exchange Ratio............................................ 2.1(b)
Closing........................................................... 1.2
Closing Date...................................................... 1.2
Code.............................................................. 1.1
Commission........................................................ 2.3(h)
Company........................................................... Recitals
Company Audited Financials........................................ 4.15
Company Capital Stock............................................. 4.4
Company Class A Common Stock...................................... 4.4
Company Common Stock.............................................. 4.4
Company Competing Transaction..................................... 5.4
Company Disclosure Schedules...................................... 4.2
Company Financial Statements...................................... 4.15
Company Stockholders.............................................. 2.3(a)
Company Subsidiaries.............................................. 4.2
Confidentiality Agreement......................................... 5.1(d)
Contract.......................................................... 4.13
Date of Incorporation............................................. 4.15
Delaware Secretary of State....................................... 1.2
DGCL.............................................................. 1.1
Dispute........................................................... 8.15(a)
ECT............................................................... 3.3
EFC............................................................... Recitals
Effective Time.................................................... 1.2
Equipment......................................................... 3.8
ERISA............................................................. 4.12(b)
Exchange Act...................................................... 3.6
Exchange Agent.................................................... 2.3(a)
Exchange Fund..................................................... 2.3(a)
GAAP.............................................................. 3.6
Governmental Authority............................................ 2.3(f)
Indemnified Parties............................................... 5.2(b)(i)
Intellectual Property............................................. 4.20
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Liabilities....................................................... 3.10
Material Parent Subsidiaries...................................... 3.1
Merger............................................................ Recitals
New Member........................................................ 5.2(c)
NYSE.............................................................. 5.1(c)
Oil and Gas Properties............................................ 4.19(a)
Parent............................................................ Recitals
Parent Balance Sheet.............................................. 3.10
Parent Common Stock............................................... 3.3
Parent Disclosure Schedules....................................... 3.1
Parent Preferred Stock............................................ 3.3
Parent SEC Documents.............................................. 3.6
Parent Subsidiaries............................................... 3.1
Permits........................................................... 4.14
Plan.............................................................. Recitals
Preferred Exchange Ratio.......................................... 2.1(d)
Registration Statement............................................ 3.6
Securities Act.................................................... 2.3(h)
Securities Purchase Agreement..................................... Recitals
Stock Purchase Agreement.......................................... 3.3
Sub............................................................... Recitals
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("this Agreement") dated as of
November 21, 1997, among Domain Energy Corporation, a Delaware corporation
("Parent"), Domain Gulf Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"), and Gulfstar Energy, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H
WHEREAS, in accordance with a plan (the "Plan") arranged by Parent,
the Company and Enron Finance Corp., a Delaware corporation and a majority
stockholder of the Company ("EFC"), Parent will purchase, and EFC will sell, all
of EFC's interests in the Company pursuant to the terms of the Securities
Purchase Agreement dated November 21, 1997 by and between Parent and EFC (the
"Securities Purchase Agreement") and, immediately thereafter, Sub will be merged
with and into the Company, with the Company as the surviving corporation (the
"Merger"), pursuant to the terms of this Agreement;
WHEREAS, the intent of Parent, the Company and EFC in adopting the
Plan was to allow Domain to acquire (directly or indirectly) all of the
outstanding equity interests in the Company in a taxable transaction;
WHEREAS, pursuant to the Merger, each share of Company Capital Stock
(as defined in Section ) outstanding at the Effective Time (as defined in
Section ) will be converted into the right to receive (i) $.01 and (ii) shares
of Parent Common Stock (as defined in Section ) in a taxable transaction as more
fully provided herein;
WHEREAS, in accordance with the Plan and this Agreement, the Company
desires to become a wholly owned subsidiary of Parent; and
WHEREAS, the respective Boards of Directors of Sub and the Company
have determined that the Merger in the manner contemplated herein is fair to and
in the best interests of their respective stockholders and, by unanimous duly
adopted resolutions, have approved and adopted this Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
and dependent promises hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company as
soon as practicable following the satisfaction or waiver of the conditions set
forth in Article , but in no event later than two business days thereafter (the
date of such merger being referred to herein as the "Closing Date"). Following
the Merger, the separate corporate existence of Sub shall cease and the Company
shall continue its corporate existence under the laws of the State of Delaware.
The Company, in its capacity as the corporation surviving the Merger, is
hereinafter sometimes referred to as the "Surviving Corporation". The parties
agree the transactions set forth herein and in the Securities Purchase Agreement
will not constitute a "reorganization" as such term is defined by Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code").
Section 1.2 Effective Time. The Merger shall be consummated by filing in
the Office of the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") a certificate of merger (the "Certificate of Merger") in
such form as is required by and executed in accordance with the DGCL. The Merger
shall become effective (the "Effective Time") when the Certificate of Merger has
been filed with the Delaware Secretary of State or at such later time as may be
agreed by Parent and the Company and specified in the Certificate of Merger.
Prior to the filing referred to in this Section , a closing (the "Closing")
shall be held at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx, or such other place as the parties may agree.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in the DGCL.
Section 1.4 Certificate of Incorporation and By-laws. The Certificate of
Incorporation of Sub, as in effect immediately prior to the Effective Time,
shall be the initial Certificate of Incorporation of the Surviving Corporation,
as the same may be amended and restated following the Merger in a manner
satisfactory to Parent. The By-laws of Sub, as in effect immediately prior to
the Effective Time, shall be the initial By-laws of the Surviving Corporation,
until duly amended in accordance with the terms thereof and the DGCL.
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Section 1.5 Directors and Officers. From and after the Effective Time, the
Persons set forth below the heading "Officers" automatically shall be appointed
to the office of the Surviving Corporation set forth opposite the name of each
respective Person and the Persons set forth below the heading "Directors"
automatically shall be the directors of the Surviving Corporation, in each case
until their respective successors are duly elected and qualified.
Officers:
Xxxxxxx X. Xxxxx President & CEO
Xxxxxxx X. Xxxxxxxx Executive Vice President
Xxxxxxxxx X. Xxxxx Executive Vice President & Secretary
Xxxx X. Xxxxxx Vice President, CFO & Treasurer
Directors:
Xxxxxxx X. Xxxxx, Chairman
Xxxxxxx X. Xxxxxxxx
Xxxxxxxxx X. Xxxxx
Xxxx X. Xxxxxx
Section 1.6 Additional Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
carry out the provisions of this Agreement, the proper officers and directors of
Parent and the Company shall take all such necessary action.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Sub or the Company:
(a) Each share of common stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of common stock of the Surviving Corporation.
Such shares shall thereafter constitute all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Each share of Company Class A Common Stock (other than shares to
be canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective
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Time shall be converted into the right to receive (i) $.01 and (ii) .343
shares of Parent Common Stock (the "Class A Exchange Ratio").
(c) Each share of Company Class B Common Stock (other than shares to
be canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (i) $.01
and (ii) 1.512 shares of Parent Common Stock (the "Class B Exchange
Ratio").
(d) Each share of Company Preferred Stock (other than shares to be
canceled in accordance with Section and shares held by stockholders
exercising appraisal rights) issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive (i) $.01
and (ii) 3.172 shares of Parent Common Stock (the "Preferred Exchange
Ratio").
(e) Each share of capital stock of the Company held in the treasury
of the Company or held by Parent or any Parent Subsidiary (as such term is
defined in Section below) shall be canceled and retired and cease to exist
and no payment shall be made in respect thereof.
Section 2.2 Exchange Ratio, Fractional Shares. No certificates for
fractional shares of Parent Common Stock shall be issued as a result of the
conversion provided for in Section . To the extent that an outstanding share of
Company Capital Stock would otherwise have become a fractional share of Parent
Common Stock, the holder thereof, upon presentation to the Exchange Agent in
accordance with Section of such fractional interest represented by an
appropriate certificate for such Company Capital Stock shall be entitled to
receive a cash payment therefor in an amount equal to the product of $19.00
multiplied by such fractional interest. Such payment with respect to fractional
shares is merely intended to provide a mechanical rounding off of, and is not a
separately bargained for, consideration. If more than one certificate
representing shares of Company Capital Stock shall be surrendered for the
account of the same holder, the number of shares of Parent Common Stock for
which certificates have been surrendered shall be computed on the basis of the
aggregate number of shares represented by the certificates so surrendered. In
the event that prior to the Effective Time Parent or the Company shall declare a
stock dividend or other distribution payable in shares of its capital stock or
securities convertible into shares of its capital stock, or effect a stock
split, reclassification, combination or other change with respect to its capital
stock, the Class A Exchange Ratio, the Class B Exchange Ratio and the Preferred
Exchange Ratio, as applicable, shall be adjusted to reflect such dividend,
distribution, stock split, reclassification, combination or other change.
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Section 2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall make
available to an exchange agent designated by Parent and reasonably acceptable to
the Company (the "Exchange Agent"), for the benefit of the holders of Company
Capital Stock (the "Company Stockholders"), for exchange in accordance with this
Section , certificates representing shares of Parent Common Stock issuable
pursuant to Section in exchange for outstanding shares of Company Capital Stock
and shall from time to time deposit cash in an amount reasonably expected to be
paid pursuant to Section and Section (such shares of Parent Common Stock and
cash, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Capital Stock whose shares were
converted into the right to receive $.01 per share in cash and shares of Parent
Common Stock pursuant to Section hereof (i) a letter of transmittal ("Letter of
Transmittal", which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in the form attached hereto as
Exhibit A) and (ii) instructions for effecting the surrender of the Certificates
in exchange for $.01 per share in cash and certificates representing shares of
Parent Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with a duly executed Letter of Transmittal, the holder
of such Certificate shall be entitled to receive in exchange therefor (x) a
check representing the amount of cash which such holder has the right to receive
pursuant to Section , (y) a certificate representing that number of shares of
Parent Common Stock which such holder has the right to receive pursuant to
Section and (z) a check representing the amount of cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, which such
holder has the right to receive pursuant to the provisions of this Article ,
after giving effect to any required withholding tax, and the shares represented
by the Certificate so surrendered shall forthwith be canceled and retired and
cease to exist. No interest will be paid or accrued on the cash to be paid
pursuant to Section and the cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, payable to holders of shares of
Company Capital Stock. In the event of a transfer of ownership of shares of
Company Capital Stock which is not registered on the transfer records of the
Company, a certificate representing the proper number of shares of Parent Common
Stock, together with a check for the cash to be paid pursuant to Section and the
cash to be paid in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, may be issued to such transferee if the Certificate
representing such shares of Company Capital Stock held by such transferee is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
, each Certificate shall be deemed at any time after the
5
Effective Time to represent only the right to receive upon surrender a
certificate representing shares of Parent Common Stock, the cash payable
pursuant to Section and cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, as provided in this Article II.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provisions of this Agreement, no dividends or other
distributions declared or made after the Effective Time with respect to shares
of Parent Common Stock having a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate, and no cash payment in lieu
of fractional shares shall be paid to any such holder, until the holder shall
surrender such Certificate as provided in this Section 2.3(f). Subject to the
effect of all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority (as defined in Section ) (collectively, "Applicable
Law"), following surrender of any such Certificate, there shall be paid to the
holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Parent Common Stock and not paid, less the amount of any withholding taxes
that may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any withholding taxes that may be required
thereon.
(d) No Further Ownership Rights in Company Capital Stock. All shares
of Parent Common Stock issued upon surrender of Certificates in accordance with
the terms hereof (including cash paid pursuant to this Article ) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Capital Stock represented thereby, and from and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Company of shares of Company Capital Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section 2.3.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to Company Stockholders for six months after the
Effective Time shall be delivered to Parent or the Surviving Corporation, upon
demand thereby, and holders of shares of Company Capital Stock who have not
theretofore complied with this Section shall thereafter look only to Parent for
payment of any claim to shares of Parent Common Stock, cash payable pursuant to
Section or cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any Person (as defined in Section 8.14) in
respect of any
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shares of Company Capital Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date on which any cash, any
cash in lieu of fractional shares or any dividends or distributions with respect
to whole shares of Company Common Stock in respect of such Certificate would
otherwise escheat to or become the property of any United States federal, state
or local or any foreign government, governmental, administrative or regulatory
authority, agency or commission or any court, tribunal or judicial or arbitral
body ("Governmental Authority")), any such cash, dividends or distributions in
respect of such Certificate shall, to the extent permitted by Applicable Law,
become the property of Parent, free and clear of all claims or interest of any
Person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent. In the event the Exchange Fund shall realize a loss on any such
investment, Parent shall promptly thereafter deposit, or cause to be deposited,
in such Exchange Fund on behalf of the Surviving Corporation cash in an amount
equal to such loss.
(h) Restricted Securities. The shares of Parent Common Stock to be
issued in the Merger will not be registered under the Securities Act of 1933, as
amended (the "Securities Act") or any state securities laws, and will be issued
under an exemption from the Securities Act's registration requirements provided
for in Regulation D promulgated by the Securities and Exchange Commission (the
"Commission") thereunder. Each certificate representing shares of Parent Common
Stock issued in the Merger will bear a legend to the foregoing effect, and to
the effect that such shares may not be transferred or sold absent registration
under the Securities Act, or an exemption therefrom.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
In order to induce the Company to enter into this Agreement, Parent
and Sub hereby represent and warrant to the Company that the statements
contained in this Article are true, correct and complete.
Section 3.1 Organization and Standing. Schedule 3.1 to the disclosure
schedules delivered by Parent to the Company pursuant to this Agreement
(collectively, the "Parent Disclosure Schedule") contains a complete list of all
the subsidiaries of Parent (the "Parent Subsidiaries") and those Parent
Subsidiaries that are material subsidiaries (the "Material Parent
Subsidiaries"). Each of Parent and the Material Parent Subsidiaries is a
corporation
7
duly organized, validly existing and in good standing under the laws of its
state of incorporation with full power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of Parent and the Parent Subsidiaries
is duly qualified to do business and in good standing in each jurisdiction in
which the nature of the business conducted by it or the property it owns, leases
or operates makes such qualification necessary, except where the failure to be
so qualified or in good standing in such jurisdiction would not have a material
adverse effect on Parent. The copies of the Certificate of Incorporation and
By-laws (or similar organizational documents) of Parent and each Material Parent
Subsidiary, which have previously been made available to the Company, are true,
complete and correct copies of such documents as in effect as of the date of
this Agreement.
Section 3.2 Corporate Power and Authority.
(a) Parent has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and each other agreement to be
executed pursuant to Section
by Parent and the consummation by Parent of the transactions contemplated
hereby and thereby have been duly and validly approved by the Board of Directors
of Parent and no other corporate proceedings on the part of Parent are necessary
to approve this Agreement or such other agreements and to consummate the
transactions contemplated hereby or thereby. This Agreement has been duly and
validly executed and delivered by Parent and constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms.
(b) Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Sub and the consummation by Sub
of the transactions contemplated hereby have been duly and validly approved by
the Board of Directors of Sub and by Parent, as the sole stockholder of Sub, and
no other corporate proceedings on the part of Sub are necessary to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Sub and constitutes a valid and binding obligation of
Sub, enforceable against Sub in accordance with its terms.
Section 3.3 Capitalization of Parent. Parent's authorized capital stock
consists solely of (a) 25,000,000 shares of common stock, $.01 par value per
share ("Parent Common Stock"), and (b) 5,000,000 shares of preferred stock, $.01
par value per share ("Parent Preferred Stock"). As of November 4, 1997, (i)
14,610,121 shares of Parent Common Stock were issued of which 14,607,729 were
outstanding and 2,392 were held by Parent as treasury shares, (ii) 862,547
shares of Parent Common Stock were issuable upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by Parent and
(iii) no shares of Parent Preferred Stock were issued and outstanding. Since
September 30, 1997, with the exception of the Parent Common Stock issued to EFC
pursuant to the Plan
8
and the Securities Purchase Agreement and to Enron Capital & Trade Resources
Corp. ("ECT") pursuant to the Stock Purchase Agreement dated November 21, 1997
(the "Stock Purchase Agreement"), by and between Parent and ECT, Parent has not
issued any shares of its capital stock except upon the exercise of such options,
warrants or convertible securities. Each outstanding share of capital stock of
Parent is, and all shares of Parent Common Stock to be issued in connection with
the Merger will be when issued in accordance with Article II, duly authorized
and validly issued, fully paid and nonassessable and free of any preemptive
rights. As of the date hereof, other than as set forth above or on Schedule 3.3
to the Parent Disclosure Schedule, there are no outstanding shares of capital
stock or subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale or transfer by Parent of any securities of Parent, nor are
there outstanding any securities which are convertible into or exchangeable for
any shares of capital stock of Parent; and Parent has no obligation of any kind
to issue any additional securities, other than the Parent Common Stock to be
issued to EFC pursuant to the Plan and the Securities Purchase Agreement and to
ECT pursuant to the Stock Purchase Agreement or to pay for securities of Parent
or any predecessor. Parent has no outstanding bonds, debentures, notes or other
similar obligations the holders of which have the right to vote generally with
holders of Parent Common Stock.
Section 3.4 Conflicts, Consents and Approvals. Neither the execution and
delivery of this Agreement by Parent or Sub nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of
Parent or any Material Parent Subsidiary;
(b) conflict with, violate or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of Parent or any Material Parent
Subsidiary under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Parent or any
Material Parent Subsidiary is a party or by which any of their respective
properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Parent or any Material Parent Subsidiary or
their respective properties or assets; or
9
(d) require any action or consent or approval of, or review by, or
registration or filing by Parent or any Material Parent Subsidiary with
any third party or any Governmental Authority, other than any actions
required under federal and state securities laws as are contemplated by
this Agreement;
except for any of the foregoing that are set forth in subsections (b), (c) or
(d) of Schedule 3.4 to the Parent Disclosure Schedule and, in the case of (b),
(c) or (d), for any of the foregoing that would neither, in the aggregate, have
a material adverse effect on Parent nor prevent or delay the consummation of the
transactions contemplated hereby.
Section 3.5 Absence of Certain Changes. Except as set forth in the
Parent SEC Documents filed with the Commission as of the date hereof or on
Schedule 3.5 to the Parent Disclosure Schedule, since December 31, 1996, (i)
each of Parent and its subsidiaries has conducted its business in the ordinary
course, consistent with past practice, (ii) no event has occurred which has or
which would reasonably be expected to have, in the aggregate, a material adverse
effect on Parent (but excluding for such purposes events that are generally
applicable in the domestic oil and gas exploration and production industry and
the United States economy), and (iii) neither Parent nor any of its subsidiaries
has taken any action which would be prohibited by Section 5.2(a).
Section 3.6 Parent SEC Documents. Each of Parent and the Material Parent
Subsidiaries has timely filed with the Commission all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since June
23, 1997, under the Securities Exchange Act of 1934, as amended (together with
the rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such documents, as supplemented and amended since the time of filing, together
with Parent's Registration Statement on Form S-1 under the Securities Act, No.
333-24641 (the "Registration Statement"), collectively, the "Parent SEC
Documents"). The Parent SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed (and, in
the case of the Registration Statement, on the date of effectiveness thereof)
(a) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements (including the related notes) of Parent included in the
Parent SEC Documents were prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP") during the periods involved
(except as may be indicated in the notes thereto), and fairly present (subject
in the case of unaudited statements to the absence of notes and to normal,
recurring and year-end audit adjustments) the consolidated financial position of
Parent as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended.
10
Section 3.7 Parent Disclosure Schedule. As of the date hereof, none of the
information provided by Parent or any Material Parent Subsidiary for inclusion
in the Parent Disclosure Schedule contains any untrue statement of a material
fact or omits 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.
Section 3.8 Reliance. Prior to executing this Agreement, Parent and Sub
have been afforded an opportunity to (i) examine the Oil and Gas Properties and
such materials as Parent has requested to be provided to it by the Company, (ii)
discuss with representatives of the Company such materials and the nature and
operation of the Oil and Gas Properties and (iii) investigate the condition,
including subsurface condition, of the Oil and Gas Properties and Contracts and
the condition of the equipment of the Company used in the operation of the Oil
and Gas Properties, including, without limitation, the platforms relating to the
Oil and Gas Properties (collectively, the "Equipment"). In entering into this
Agreement, Parent and Sub have relied solely on the express representations and
covenants of the Company in this Agreement, their independent investigation of,
and judgment with respect to, the Equipment and the Oil and Gas Properties and
the advice of their own legal, tax, economic, environmental, engineering,
geological and geophysical advisors and not on any comments or statements of any
representatives of, or consultants or advisors engaged by, the Company.
Section 3.9 Litigation. Except as set forth on Schedule 3.9 to the Parent
Disclosure Schedule, there is no lawsuit, claim, dispute or action (each, an
"Action") pending or, to the knowledge of Parent, threatened against Parent or
any Material Parent Subsidiary which, in the aggregate, could reasonably be
expected to have a material adverse effect on Parent. Neither Parent nor any
Material Parent Subsidiary is subject to any outstanding order, writ, injunction
or decree which, in the aggregate, could reasonably be expected to have a
material adverse effect on Parent.
Section 3.10 Liabilities. Except as set forth on Schedule 3.10 to the
Parent Disclosure Schedule, Parent has no consolidated liabilities,
indebtedness, obligations, expenses, claims, losses, damages, deficiencies,
guaranties or endorsements of or by any Person, absolute or contingent, accrued
or unaccrued, due or to become due, liquidated or unliquidated (collectively,
"Liabilities"), and no material consolidated assets of Parent are subject to any
Liabilities, except (a) to the extent specifically disclosed on or provided for
in Parent's interim balance sheet as of September 30, 1997 (the "Parent Balance
Sheet"); (b) Liabilities incurred since September 30, 1997, in the ordinary
course of its business; (c) Liabilities that were not required under GAAP to
have been specifically disclosed or reserved for on the Parent Balance Sheet;
and (d) Liabilities under or contemplated by this Agreement or disclosed
hereunder. All Liabilities required under GAAP to be specifically disclosed or
reserved for on the Parent Balance Sheet are disclosed or reserved for thereon.
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Sub to enter into this Agreement, the
Company hereby represents and warrants to Parent and Sub that the statements
contained in this Article are true, correct and complete.
Section 4.1 Organization and Standing. Each of the Company and the Company
Subsidiaries is a corporation or partnership duly organized or formed, validly
existing and in good standing under the laws of its state of incorporation or
formation with full power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of the Company and the Company Subsidiaries is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates makes such qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a material
adverse effect on the Company. The copies of the Certificate of Incorporation
and By-laws (or similar organizational documents) of the Company and each of the
Company Subsidiaries, which have previously been made available to Parent, are
true, complete and correct copies of such documents as in effect as of the date
of this Agreement.
Section 4.2 Subsidiaries. As of the date hereof, other than immaterial
interests, the Company does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except as set forth on Schedule 4.2 (each, a "Company
Subsidiary" and collectively, the "Company Subsidiaries") to the disclosure
schedules delivered by the Company to Parent pursuant to this Agreement
(collectively, the "Company Disclosure Schedule"). Schedule 4.2 to the Company
Disclosure Schedule sets forth as to each Company Subsidiary: (i) its name and,
if applicable, jurisdiction of incorporation or organization, (ii) its
authorized capital stock or share capital, or similar information and (iii) the
number of issued and outstanding shares of its capital stock or share capital,
or similar information. Except as set forth on Schedule 4.2 to the Company
Disclosure Schedule, each of the outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
the Company free and clear of all liens, pledges, security interests, claims or
other encumbrances, other than liens imposed by law which could not reasonably
be expected to have, in the aggregate, a material adverse effect on the Company.
Other than as set forth on Schedule 4.2 to the Company Disclosure Schedule,
there are no outstanding shares of capital stock or subscriptions, options,
warrants, puts, calls, agreements, understandings, claims or other commitments
or rights of any type relating to the issuance, sale or transfer of any
securities of any Company Subsidiary, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of capital stock of
any Company Subsidiary; and no Company Subsidiary has any obligation of
12
any kind to issue any additional securities or to pay for securities of any
Company Subsidiary or any predecessor thereof. As used in this Section ,
"capital stock" shall include capital stock or other ownership interests having
by their terms ordinary voting power to elect directors or others performing
similar functions with respect to such entity.
Section 4.3 Corporate Power and Authority. The Company has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval of the Merger and the
adoption and authorization of this Agreement by the stockholders of the Company
in accordance with the DGCL and this Agreement. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved,
unanimously, by the Board of Directors of the Company. The Board of Directors of
the Company, unanimously, has directed that this Agreement and the transactions
contemplated hereby be submitted to the Company Stockholders for adoption by
written consent in lieu of a stockholders meeting and, except for the adoption
of this Agreement by the affirmative vote of the holders of (i) a majority of
shares of the Company Capital Stock entitled to vote thereon in accordance with
Applicable Law, voting together as a class, and (ii) seventy-five percent of the
shares of Company Class B Common Stock entitled to vote thereon in accordance
with Applicable Law, voting separately as a class, no other corporate
proceedings on the part of the Company are necessary to approve this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
Section 4.4 Capitalization of the Company. The Company's authorized
capital stock consists solely of (a) 700,000 shares of class A common stock,
$.10 par value per share ("Company Class A Common Stock"), (b) 41,500 shares of
class B common stock, $.10 par value per share ("Company Class B Common Stock"
and, together with Company Class A Common Stock, "Company Common Stock") and (c)
200,000 shares of preferred stock, $.10 par value per share ("Company Preferred
Stock" and, together with Company Common Stock, the "Company Capital Stock"),
all of which shares are designated as "12-1/2% Cumulative Preferred Stock,
Series 1". As of the date hereof, (i) 356,689 shares of Company Class A Common
Stock were issued and outstanding, (ii) 34,000 shares of Company Class B Common
Stock were issued and outstanding and (iii) 83,274 shares of Company Preferred
Stock were issued and outstanding. Each outstanding share of Company Capital
Stock is duly authorized and validly issued, fully paid and nonassessable and
free of any preemptive rights. As of the date hereof, other than as set forth
above, or on Schedule 4.4 to the Company Disclosure Schedule, there are no
outstanding shares of capital stock or subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer by the Company of any securities
of the Company, nor are there outstanding any securities which are convertible
into or exchangeable for any shares of capital stock of the Company; and the
13
Company has no obligation of any kind to issue any additional securities or to
pay for securities of the Company or any predecessor. The Company has no
outstanding bonds, debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of Company Capital Stock.
Section 4.5 Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby or by the Securities Purchase Agreement will:
(a) conflict with, or violate any provision of the Certificate of
Incorporation or By-laws (or any similar organizational document) of the
Company or any Company Subsidiary;
(b) conflict with, violate or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the termination, acceleration or cancellation of, or result in
the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company or any of the Company
Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which
the Company or any of the Company Subsidiaries is a party or by which any
of their respective properties or assets may be bound;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of the Company Subsidiaries or
any of their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by the Company or any of the Company Subsidiaries
with any third party or any Governmental Authority, other than (i)
authorization of the Merger and the transactions contemplated hereby by
the Company Stockholders and (ii) any actions required under federal and
state securities laws as are contemplated by this Agreement;
except for any of the foregoing that are set forth in Subsections (b), (c) or
(d) of Schedule 4.5 to the Company Disclosure Schedule and, in the case of
Subsections (b), (c) and (d), for any of the foregoing that would neither, in
the aggregate, have a material adverse effect on the Company nor prevent or
delay the consummation of the transactions contemplated hereby.
14
Section 4.6 Absence of Certain Changes. Except as set forth on Schedule
4.6 to the Company Disclosure Schedule, since December 31, 1996, (i) each of the
Company and the Company Subsidiaries has conducted its business in the ordinary
course, consistent with past practice, (ii) no event has occurred which has or
which would reasonably be expected to have, in the aggregate, a material adverse
effect on the Company (but excluding for such purposes events that are generally
applicable in (A) the domestic oil and gas exploration and production industry,
including, without limitation, the results of the xxxxx currently being drilled
or completed by the Company which xxxxx were spudded after September 1, 1997,
and (B) the United States economy), and (iii) neither the Company nor any of the
Company Subsidiaries has taken any action that would be prohibited by Section
5.3(a).
Section 4.7 Taxes. Except as set forth on Schedule 4.7 to the Company
Disclosure Schedule, (i) each of the Company and the Company Subsidiaries has
duly filed or caused to have been filed all federal and state income tax returns
and all other material tax returns (including, but not limited to, those filed
on a consolidated, combined or unitary basis) required to have been filed by the
Company or any of the Company Subsidiaries prior to the date hereof and will
file, on or before the Effective Time, all such returns which are required to be
filed after the date hereof and on or before the Effective Time, (ii) all of the
foregoing returns and reports are true and correct in all material respects, and
each of the Company and the Company Subsidiaries has paid or, prior to the
Effective Time, will pay all taxes required to be paid in respect of the periods
covered by such returns or reports to any federal, state, foreign, local or
other taxing authority, (iii) each of the Company and the Company Subsidiaries
has paid or made adequate provision (in accordance with generally accepted
accounting principles) in the financial statements of the Company for all taxes
payable in respect of all periods ending on or prior to December 31, 1996, (iv)
neither the Company nor any of the Company Subsidiaries will have any material
liability for any taxes in excess of the amounts so paid or reserves so
established, (v) neither the Company nor any of the Company Subsidiaries is
delinquent in the payment of any material tax, assessment or governmental charge
and none of them has requested any extension of time within which to file any
returns in respect of any fiscal year which have not since been filed, (vi) no
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed in writing (tentatively or definitely), in each case, by
any taxing authority, against the Company or any of the Company Subsidiaries for
which there are not adequate reserves in its financial statements (in accordance
with generally accepted accounting principles), (vii) as of the date of this
Agreement, there are no extensions or waivers or pending requests for extensions
or waivers of the time to assess or collect any such tax, (viii) the federal
income tax returns of the Company and the Company Subsidiaries have been audited
by the Internal Revenue Service through the fiscal year ending December 31,
1996, (ix) neither the Company nor any of the Company Subsidiaries is or has
been a party to any tax sharing agreement, (x) there are no liens for taxes on
any assets of the Company or any of the Company Subsidiaries (other than
statutory liens for taxes not yet due or liens for which adequate reserves have
been established in its financial statements in accordance with generally
accepted accounting principles), (xi) the Company and the Company Subsidiaries
15
have withheld and paid (and until the Effective Time will withhold and pay) all
income, social security, unemployment, and all other material payroll taxes
required to be withheld (including, without limitation, pursuant to Sections
1441 and 1442 of the Code or similar provisions under foreign law) and paid in
connection with amounts paid to any employee, independent contractor,
stockholder, creditor or other third party, and (xii) the Company has not filed
an election under Section 341(f) of the Code to be treated as a consenting
corporation.
Section 4.8 Compliance with Law. With the exception of the Oil and Gas
Properties not operated by the Company (in which case the representations in
this Section 4.8 are limited to the knowledge of the Company and the Company
Subsidiaries), each of the Company and the Company Subsidiaries is in compliance
with, and at all times since November 7, 1990, has been in compliance with, all
Applicable Law relating to it or its business or the Oil and Gas Properties,
except for any such failures to be in compliance therewith which, in the
aggregate, would not have a material adverse effect on the Company.
Section 4.9 Company Disclosure Schedule. As of the date hereof, none of
the information provided by the Company or any of the Company Subsidiaries for
inclusion in the Company Disclosure Schedule or in connection with the
Securities Purchase Agreement contains any untrue statement of a material fact
or omits 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.
Section 4.10 Litigation. Except as set forth on Schedule 4.10 to the
Company Disclosure Schedule, there is no Action pending or, to the knowledge of
the Company, threatened against the Company or any of the Company Subsidiaries
which, in the aggregate, could reasonably be expected to have a material adverse
effect on the Company. Neither the Company nor any of the Company Subsidiaries
is subject to any outstanding order, writ, injunction or decree which, in the
aggregate, could reasonably be expected to have a material adverse effect on the
Company.
Section 4.11 Brokerage and Finder's Fees. Except as set forth on Schedule
4.11 to the Company Disclosure Schedule, the Company has not incurred and will
not incur, directly or indirectly, any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement or by the
Securities Purchase Agreement. The Company is not aware of any claim for payment
of any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiation of this Agreement or in connection with the
transactions contemplated hereby.
16
Section 4.12 Employees; Employee Benefit Plans.
(a) The Company has provided to Parent a list of the names,
addresses, hire date, date of birth and a job description of all employees of
the Company, stating the rates of compensation including, if determined, bonuses
payable to each.
(b) The Company maintains no employee benefit plans, programs,
policies, practices, and other arrangements providing benefits to any employee
or former employee or beneficiary or dependent thereof, whether or not written,
and whether covering one Person or more than one Person, sponsored or maintained
by the Company or any of the Company Subsidiaries or to which the Company or any
of the Company Subsidiaries contributes or is obligated to contribute,
including, without limitation, any employee welfare benefit plans within the
meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended (including the regulations thereunder, "ERISA") and all employee
pension benefit plans within the meaning of Section 3(2) of ERISA.
(c) Except as set forth on Schedule 4.12 to the Company Disclosure
Schedule and except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA, neither the Company nor any of
the Company Subsidiaries has any liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof.
Section 4.13 Contracts. Except as set forth on Schedule 4.13 to the
Company Disclosure Schedule, none of the Company, nor any of the Company
Subsidiaries, or, to the knowledge of the Company, any other party thereto is in
violation of or in default in respect of, nor has there occurred an event or
condition which with the passage of time or giving of notice (or both) would
constitute a default by the Company under, any contract, agreement obligation,
undertaking, commitment or arrangement ("Contract") to which it is a party,
except such violations or defaults under such Contracts which, in the aggregate,
would not have a material adverse effect on the Company.
Section 4.14 Permits. Each of the Company and the Company Subsidiaries is
in possession of all permits, approvals, authorizations, licenses, variances or
permissions required from a Governmental Authority under any Applicable Law
("Permits") necessary to own, lease and, to the extent the Company is the named
operator, operate the Oil and Gas Properties and to carry on its business as it
is now being conducted, except for any such Permits the failure of which to
possess, in the aggregate, would not reasonably be expected to have a material
adverse effect on the Company.
17
Section 4.15 Financial Statements. The Company has delivered to Parent the
audited financial statements of the Company as of and for the respective years
ended December 31, 1996, December 31, 1995 and December 31, 1994 (the "Company
Audited Financials") and the Company's unaudited financial statements consisting
of a balance sheet of the Company as of the end of the respective interim
periods ended June 30, 1996 and 1997 and the related statements of income,
retained earnings and cash flows for the periods then ended (the "Company
Interim Financials" and, together with the Company Audited Financials, the
"Company Financial Statements"). The Company Financial Statements fairly present
in conformity with GAAP applied on a consistent basis the financial position and
assets (collectively, the "Assets") and liabilities of the Company as of the
dates thereof and the Company's results of operations and cash flows for the
periods then ended (subject, in the case of any of the Company Interim
Financials, to the absence of notes and to normal, recurring year-end audit
adjustments). The balance sheet as of June 30, 1997, included as a part of the
Company Interim Financials is referred to herein as the "Company Balance Sheet",
and the date thereof is referred to herein as the "Company Balance Sheet Date".
The Company was incorporated on November 7, 1990 (the "Date of Incorporation")
and is not the successor to any entity which engaged in any operations prior to
that date.
Section 4.16 Liabilities. Except as set forth on Schedule 4.16 to
the Company Disclosure Schedule, the Company has no Liabilities, and no material
Assets of the Company are subject to any Liabilities, except (i) to the extent
specifically disclosed on or provided for in the Company Balance Sheet; (ii)
Liabilities incurred since the Company Balance Sheet Date in the ordinary course
of its business, including, without limitation, (A) those costs and expenses
owing by the Company under any authorization for expenditure for an operation on
the Oil and Gas Properties, signed by the Company prior to the date of this
Agreement, all of which are disclosed on Schedule 4.16 to the Company Disclosure
Schedule, (B) costs and expenses owing by the Company pursuant to the terms of
any operating agreement governing the operations of the Company's Oil and Gas
Properties and (C) liabilities for the payment of bonuses, rentals, purchase
obligations and other similar payments in connection with obtaining oil and gas
leases, seismic options or other similar rights; (iii) Liabilities that were not
required under GAAP to have been specifically disclosed or reserved for on the
Company Balance Sheet; (iv) Liabilities under or contemplated by this Agreement
or disclosed hereunder; (v) Liabilities incurred after the date of this
Agreement that are not prohibited by Section 5.3(a); and (vi) Liabilities
incurred since the Company Balance Sheet Date that are approved in writing by
Parent. All Liabilities required under GAAP to be specifically disclosed or
reserved for on the Company Balance Sheet are disclosed or reserved for thereon.
18
Section 4.17 Environmental Matters.
(a) Except as set forth on Schedule 4.17 to the Company Disclosure
Schedule, and with the exception of the Oil and Gas Properties not operated by
the Company (in which case the representations in this Section are limited to
the knowledge of the Company and the Company Subsidiaries), there are, with
respect to the Company and the Company Subsidiaries, no past or present
violations of Environmental Laws (as hereafter defined), releases of any
materials into the environment, Actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws, other than those which, in the aggregate,
would not reasonably be expected to have a material adverse effect on the
Company and none of the Company or the Company Subsidiaries has received any
notice with respect to any of the foregoing, nor is any Action pending or, to
the knowledge of the Company or the Company Subsidiaries, threatened in
connection with any of the foregoing that, if adversely determined, could
reasonably be expected to have a material adverse effect on the Company.
(b) Except as set forth on Schedule 4.17 to the Company Disclosure
Schedule, and with the exception of the Oil and Gas Properties not operated by
the Company (in which case the representations in this Section are limited to
the knowledge of the Company and the Company Subsidiaries), no Hazardous
Materials (as hereafter defined) are contained on any Oil and Gas Property (as
hereafter defined) currently owned, leased or used by the Company or any of the
Company Subsidiaries and no Hazardous Materials were released on any Oil and Gas
Property previously owned, leased or used by the Company or any of the Company
Subsidiaries during the period the property was so owned, leased or used, other
than those which, in the aggregate, would not reasonably be expected to have a
material adverse effect on the Company.
(c) For purposes of this Section , the term "Environmental Laws"
means all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by any
Governmental Authority and binding on the Company relating to pollution or
protection of the environment as well as any principles of common law binding on
the Company under which the Company may be held liable for the release or
discharge of any materials into the environment. For purposes of this Section
4.17, the term "Hazardous Materials" means any substance, waste, material or
product defined as hazardous, radioactive, extremely hazardous or toxic under
any Environmental Law.
Section 4.18 Insurance. Schedule 4.18 to the Company Disclosure Schedule
contains a list of all material insurance policies currently in effect related
to the Company and the Company Subsidiaries.
19
Section 4.19 Title to Assets and Related Matters.
(a) All of the Company's leasehold interests or operating rights
interests in oil and gas leases or other mineral interests, and all of the
Company's potential leasehold interests or operating rights interests under
farmout agreements, and the Company's "Net Revenue Interest" and "Working
Interest", or in the case of farmout agreements, the Company's potential "Net
Revenue Interest and Working Interest" therein, are set forth on Schedule 4.19
Part I and Part II (collectively, "Schedule 4.19") to the Company Disclosure
Schedule (collectively, the "Oil and Gas Properties") and the Company's interest
or potential interest in the Oil and Gas Properties is not subject to any
payout, back-in or other similar provisions except as noted on Schedule 4.19 to
the Company Disclosure Schedule. Except as disclosed on Schedule 4.19 to the
Company Disclosure Schedule, there are no Contracts to which the Company, and
Company Subsidiary or any of the Oil and Gas Properties are bound: (i) for the
sale, exchange or other disposition of any severed crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, petroleum, natural gas liquids,
condensate, products, liquids and other hydrocarbons and other minerals or
materials of every kind and description produced from the Oil and Gas Properties
produced from the Oil and Gas Properties that is not cancelable without penalty
on not more than 120 days prior written notice; (ii) to sell, lease, farmout or
otherwise dispose of any of its or any Company Subsidiary's interests in any of
the Oil and Gas Properties other than conventional rights of reassignment; or
(iii) relating to operations to which the Company's interest in any of the Oil
and Gas Properties is subject. To the knowledge of the Company, all of the
Contracts listed on Schedule 4.19 to the Company Disclosure Schedule are in full
force and effect.
(b) The Company has title of record to the Oil and Gas Properties as
(i) will enable the Company to receive from a particular Oil and Gas Property at
least the "Net Revenue Interest" for each of the Oil and Gas Properties
identified on Schedule 4.19 Part I to the Company Disclosure Schedule, without
reduction, suspension or termination throughout the productive life of such Oil
and Gas Property, except for any reduction, suspension or termination (A) caused
by Parent, Sub, any of their affiliates, successors in title or assigns, (B)
caused by orders of the appropriate regulatory agency having jurisdiction over a
particular Oil and Gas Property that are promulgated after the Effective Time
and that concern pooling, unitization, communitization or spacing matters
affecting such Oil and Gas Property, (C) caused by any Contract containing a
sliding-scale royalty clause or other similar clause with respect to a
production burden associated with a particular Oil and Gas Property (all of
which Contracts are specifically disclosed on Schedule to the Company Disclosure
Schedule), (D) caused by minor imperfections in title or in instruments which do
not operate to materially reduce the "Net Revenue Interest" of the affected Oil
and Gas Property or (E) otherwise set forth on Schedule 4.19 Part I to the
Company Disclosure Schedule, (ii) will not obligate the Company to bear with
respect to a particular Oil and Gas Property a greater "Working Interest" than
the Working Interest for each of the Oil and Gas Properties identified on
Schedule 4.19 Part I to the Company Disclosure Schedule, without increase
throughout the productive life of such Oil and Gas Property, except for any
increase
20
(A) caused by Parent, Sub, any of their affiliates, successors in title or
assigns, (B) that also results in the Net Revenue Interest associated with such
Oil and Gas Property being proportionately increased, (C) caused by orders of
the appropriate regulatory agency having jurisdiction over a particular Oil and
Gas Property that are promulgated after the Effective Time and that concern
pooling, unitization, communitization or spacing matters affecting such Oil and
Gas Property or (D) otherwise set forth on Schedule 4.19 Part I to the Company
Disclosure Schedule and (iii) is free and clear of all encumbrances, liens,
claims, easements, rights, agreements, rights, instruments, obligations and
burdens except for (A) liens for taxes not yet delinquent, (B) lessors'
royalties, overriding royalties, division orders, reversionary interests, and
similar burdens that do not operate to reduce the Net Revenue Interest of the
Company in any of the Oil and Gas Properties to less than the amount set forth
therefor on Schedule 4.19 Part I to the Company Disclosure Schedule, (C) the
consents and rights described on Schedule 4.5 to the Company Disclosure
Schedule, (D) caused by minor imperfections in title or in instruments which do
not operate to materially reduce the "Net Revenue Interest" of the affected Oil
and Gas Property or increase the "Working Interest" thereof without a
corresponding and proportional increase in the "Net Revenue Interest" and (E)
the Contracts, insofar as the Contracts do not operate to increase the "Working
Interest" of the Company set forth on Schedule 4.19 Part I to the Company
Disclosure Schedule for any of the Oil and Gas Properties without a
corresponding and proportional increase in the "Net Revenue Interest", or reduce
the "Net Revenue Interest" of the Company set forth on Schedule 4.19 Part I to
the Company Disclosure Schedule for any of the Oil and Gas Properties.
Section 4.20 Patents and Other Intellectual Property. Neither the Company
nor any Company Subsidiary uses as of the date of this Agreement, and has not
used prior to such date, in the operation of its business any patent, trademark,
tradename, service xxxx, copyright, or any trade secret, process or know-how in
which a third Person owns a legally protectable right (collectively,
"Intellectual Property") that is material to the business operations of the
Company, except for those disclosed on Schedule 4.20 to the Company Disclosure
Schedule, as to which the Company has obtained valid licenses. All of the
material Intellectual Property used by the Company and each Company Subsidiary
in its business operations is owned or otherwise lawfully used by the Company,
and to its knowledge neither the Company nor any Company Subsidiary infringes
upon or unlawfully or wrongfully uses any material Intellectual Property.
Neither the Company nor any Company Subsidiary is in default, and received any
notice of any claim of infringement or any other claim or proceeding, with
respect to any such Intellectual Property owned or claimed by another Person,
which infringement or claim, if proved, would have a material adverse effect on
the Company. To the Company's knowledge, no employee or consultant of the
Company or other Person has used in the course of his work for the Company any
information that is confidential and owned by any other Person in violation of
any confidentiality agreement to which the Company is a party.
21
ARTICLE V
COVENANTS OF THE PARTIES
The parties hereto agree as follows with respect to the period from
and after the execution of this Agreement.
Section 5.1 Mutual Covenants.
(a) General. Each of the parties shall use its reasonable efforts to
take all action and to do all things necessary, proper or advisable to
consummate the Merger and the transactions contemplated by this Agreement as
promptly as possible (including, without limitation, using its reasonable
efforts to cause the conditions set forth in Article VI for which they are
responsible to be satisfied as soon as reasonably practicable and to prepare,
execute and deliver such further instruments and take or cause to be taken such
other and further action as any other party hereto shall reasonably request).
(b) Other Governmental Matters. Each of the parties shall use its
reasonable efforts to take any additional action that may be necessary, proper
or advisable in connection with any other notices to, filings with, and
authorizations, consents and approvals of any Governmental Authority that it may
be required to give, make or obtain.
(c) Public Announcements. Unless otherwise required by Applicable
Law or the rules of the New York Stock Exchange (the "NYSE"), at all times prior
to the earlier of the Effective Time or termination of this Agreement pursuant
to Section 7.1, Parent and the Company shall not issue any press or public
statement relating to the Merger (excluding any disclosure proposed to be made
in response to comments by the Commission regarding any filing by Parent with
the Commission) without the prior written consent of the other party, which
consent shall not be unreasonably withheld. With respect to any disclosure
required by Applicable Laws or the requirements of the NYSE, Parent and the
Company shall consult with each other before issuing any press release with
respect to the Merger and shall not issue any such press release prior to such
consultation and opportunity to comment.
(d) Access. Subject to Applicable Law, from and after the date of
this Agreement until the Effective Time (or the termination of this Agreement),
each of Parent and the Company shall permit representatives of the other to have
reasonable access to the other's officers, employees, premises, properties,
books, records, Contracts, tax records and documents. Information obtained by
Parent pursuant to this Section 5.1(d) shall be subject to the provisions of the
confidentiality agreement, dated September 17, 1997 (the "Confidentiality
Agreement"), among Parent, ECT and the Company which agreement remains in full
force and effect and shall survive execution and delivery of this Agreement.
After the date of execution hereof and prior to the Company obtaining material
"inside" information pursuant to this Section 5.1(d), the Company, on its own
behalf and on behalf of
22
its affiliates, shall enter into a confidentiality agreement with Parent, which
agreement shall be substantially similar to the Confidentiality Agreement, but
in no event shall it have terms more onerous than the Confidentiality Agreement.
With respect to the access provided by Parent to the Company, the Company hereby
expressly waives and releases all claims against Parent and its agents for
injury to, or death of, persons or damage to property arising in any way from
the exercise of rights granted to the Company hereby or from the activities of
the Company or its employees, agents, or contractors (except for such injuries
or damages caused solely by the negligence or willful misconduct of Parent).
With respect to the access provided by the Company to Parent, Parent hereby
expressly waives and releases all claims against the Company and its agents for
injury to, or death of, persons or damage to property arising in any way from
the exercise of rights granted to Parent hereby or from the activities of Parent
or its employees, agents, or contractors (except for such injuries or damages
caused solely by the negligence or willful misconduct of the Company).
(e) Consent Solicitation in Lieu of Stockholders Meetings. The
Company shall duly solicit the written consent of each holder of Company Capital
Stock to approve this Agreement and the transactions contemplated hereby in lieu
of holding a meeting of its stockholders for such purpose. Sub shall duly
solicit the written consent of Parent, its sole stockholder, to approve this
Agreement and the transactions contemplated hereby in lieu of holding a meeting
for such purpose. Subject to its fiduciary duties under Applicable Law as
advised by counsel, the Board of Directors of each of Sub and the Company will
(i) recommend that its stockholders approve such matters and (ii) use reasonable
efforts to obtain any necessary approvals by its stockholders.
(f) Notification of Certain Matters. Each of Parent and the Company
shall give prompt notice to the other party of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement made by such
party to be untrue or inaccurate at or prior to the Effective Time or which,
with notice or lapse of time or both, would become a default hereunder, and (ii)
any material failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section
5.1(f) shall not limit or otherwise affect the remedies available hereunder to
any party.
Section 5.2 Covenants of Parent.
(a) Conduct of Parent's Operations. During the period from the date
of this Agreement to the Effective Time, Parent shall, and shall cause the
Parent Subsidiaries to, conduct its operations in the ordinary course except as
expressly contemplated by this Agreement and the transactions contemplated
hereby and shall use its reasonable efforts to maintain and preserve its
business organization and its material rights and franchises and to retain the
services of its officers and key employees and maintain relationships with
customers, suppliers and other third parties to the end that their goodwill and
ongoing
23
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time or the earlier termination of this Agreement pursuant to
Section 7.1, Parent shall not, and with respect to clauses (i) and (ii) below,
Sub shall not, and with respect to clause (iii) and (iv) below, Parent shall
cause each of the Parent Subsidiaries not to, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby, without
the prior written consent of the Company:
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital
stock, or (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any of its
securities (except in connection with the use of shares of capital stock
of Parent to pay the exercise price or tax withholding in connection with
stock-based employee benefit plans of Parent);
(ii) make or propose any material change in its Certificate
of Incorporation, By-laws or other organizational documents;
(iii) conduct its business in a manner or take, or cause to
be taken, any other action that would or might reasonably be expected to
prevent or materially delay Parent or Sub from consummating the
transactions contemplated by this Agreement (unless such action is
otherwise permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the ability of
Parent or Sub to consummate the transactions contemplated by this
Agreement as a result of antitrust or securities laws or other regulatory
concerns; or
(iv) agree to take any action prohibited by the foregoing.
(b) Indemnification.
(i) From and after the Effective Time, Parent shall, and
shall cause the Surviving Corporation to, indemnify, defend and hold
harmless to the fullest extent permitted under Applicable Law each Person
who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or employee of
the Company (or any subsidiary or division thereof), including, without
limitation, each Person controlling any of the foregoing Persons (each, an
"Indemnified Party" and collectively, the "Indemnified Parties"), against
all losses, claims, damages, liabilities, costs or expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any Action (and shall pay expenses for legal
fees in advance of the final disposition of any such Action to each
Indemnified Party to the fullest extent permitted under Delaware law,
provided that the Indemnified Party agrees that, in the event that it is
ultimately determined that such Indemnified Party is not entitled to the
payment of such
24
expenses, for any reason, such Indemnified Party shall reimburse Parent or
the Surviving Corporation for such expenses paid in advance) arising, in
whole or in part, out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such, whether commenced,
asserted or claimed at or before the Effective Time and including, without
limitation, liabilities arising in connection with the Merger; provided
that Parent and the Surviving Corporation shall pay for only one law firm
(in addition to local counsel) for all Indemnified Parties, unless the use
of one law firm for all Indemnified Parties would present such law firm
with a conflict of interest. Parent shall cause the Surviving Corporation
to keep in effect the Company's current provisions in its Restated
Certificate of Incorporation and By-laws providing for exculpation of
director and officer liability and indemnification of the Indemnified
Parties to the fullest extent permitted under the DGCL. In the event of
any actual or threatened Action in respect of such acts or omissions,
Parent and the Surviving Corporation shall cooperate in the defense of any
such Action; provided, however, that neither Parent nor the Surviving
Corporation shall be liable for any settlement effected without its
written consent (which consent shall not be unreasonably withheld). Parent
shall cause the Surviving Corporation to maintain the Company's existing
indemnification provisions.
(ii) Survival; Inurement. This Section shall survive the
consummation of the Merger. The provisions of this Section are intended to
be for the benefit of, and shall be enforceable by, each Indemnified
Party, his heirs and his representatives. The rights provided Indemnified
Parties shall be in addition to and not in lieu of any rights to indemnity
which such parties may have under the Restated Certificate of
Incorporation or By-Laws of the Company or the Certificate of
Incorporation or By-Laws of the Surviving Corporation or any other
agreements.
(c) Directors of Parent. Immediately after the Effective Time,
Parent will take such action as may be necessary to create one additional seat
on the Board of Directors of Parent and to cause Xxxxxxx X. Xxxxxx (the "New
Member") to be elected to the Board of Directors of Parent. For a period of two
years following the Effective Time, Parent shall take, or cause to be taken, all
action necessary to nominate the New Member for election to the Board of
Directors of Parent and, in accordance with its normal solicitation efforts,
solicit proxies for his election to such Board of Directors.
Section 5.3 Covenants of the Company.
(a) Conduct of the Company's Operations. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of the Company Subsidiaries to, conduct its operations in the ordinary
course except as expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use its reasonable efforts to maintain and
preserve its business organization and its material rights and franchises and to
retain the services of its officers and key employees and maintain
25
relationships with customers, suppliers and other third parties to the end that
their goodwill and ongoing business shall not be impaired in any material
respect. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time or the earlier termination
of this Agreement pursuant to Section 7.1, the Company shall not, and shall
cause each of the Company Subsidiaries not to, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby, without
the prior written consent of Parent:
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital
stock, (B) make, declare or pay any dividend or distribution on, or
directly or indirectly redeem, purchase or otherwise acquire any of its
securities (except in connection with the use of shares of capital stock
of the Company to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of the Company or any of its
subsidiaries), (C) grant any Person any right or option to acquire any of
its securities, (D) issue, deliver or sell or agree to issue, deliver or
sell any additional securities or amend the terms of any of its
securities, or (E) enter into any agreement, understanding or arrangement
with respect to the sale or voting of its capital stock;
(ii) with the exception of the assignments under the
various participation agreements listed on Schedule 4.19 for Block 206,
West Cameron Area, sell, transfer, lease, pledge, mortgage, encumber or
otherwise dispose of any of its property or assets which are material, in
the aggregate, other than in the ordinary course of business consistent
with past practice;
(iii) make or propose any changes in its Certificate of
Incorporation, as amended, or By-laws, as amended, or other organizational
documents;
(iv) merge or consolidate with any other Person or acquire
a material amount of assets or capital stock of any other Person or enter
into any confidentiality agreement with any Person, other than in
connection with this Agreement and the transactions contemplated hereby;
(v) incur, create, assume or otherwise become liable for
indebtedness for borrowed money, other than in the ordinary course of
business consistent with past practice, or assume, guarantee, endorse or
otherwise as an accommodation become responsible or liable for obligations
of any other individual, corporation or other entity;
(vi) except with respect to the $200,000 bonus payable to
Xxxxxxx X. Xxxxxx upon consummation of the transactions provided for
herein, enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination
26
pay to, any officer, director, consultant or employee other than salary
increases and bonuses granted in the ordinary course of business
consistent with past practice, or otherwise increase the compensation or
benefits provided to any officer, director, consultant or employee except
as may be required by Applicable Law, this Agreement, any applicable
collective bargaining agreement or a binding written Contract in effect on
the date of this Agreement, or adopt any new employee benefit plan;
(vii) materially change its method of doing business or
materially change any method or principle of accounting in a manner that
is inconsistent with past practice;
(viii) settle any Actions, whether now pending or hereafter
made or brought involving, in any Action or related series of Actions, an
amount in excess of $10,000;
(ix) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to, any material
Contract to which the Company is a party or any confidentiality agreement
to which the Company is the "protected party";
(x) incur or commit to any capital expenditures,
obligations or liabilities in respect thereof, other than in the ordinary
course of business consistent with past practice;
(xi) conduct its business in a manner or take, or cause to
be taken, any other action that would or would reasonably be expected to
prevent or materially delay the Company from consummating the transactions
contemplated by this Agreement (regardless of whether such action would
otherwise be permitted or not prohibited hereunder), including without
limitation, any action that may materially limit or delay the ability of
the Company to consummate the transactions contemplated by this Agreement
as a result of antitrust or securities laws or other regulatory concerns;
or
(xii) agree to take any action prohibited by the foregoing.
Section 5.4 No Solicitation. The Company agrees that, during the term of
this Agreement, it shall not, and shall not authorize or permit any of the
Company Subsidiaries or any of its or their respective directors, officers,
employees, agents or representatives, directly or indirectly, to (i) solicit,
initiate, encourage or facilitate, or furnish or disclose information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
the Company, or acquisition of any capital stock or any material portion of the
assets of the
27
Company (except for acquisition of assets in the ordinary course of business
consistent with past practice), or any combination of the foregoing (a "Company
Competing Transaction"), (ii) negotiate, explore or otherwise engage in
discussions with any Person (other than Parent, Sub or their respective
directors, officers, employees, agents and representatives) with respect to any
Company Competing Transaction or (iii) enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement. The Company
will immediately cease all existing activities, discussions and negotiations
with any parties conducted heretofore with respect to any Company Competing
Transaction. From and after the execution of this Agreement, the Company shall
immediately advise Parent orally, to be followed by a confirmation in writing,
of the receipt, directly or indirectly, of any inquiries, discussions,
negotiations, or proposals relating to a Company Competing Transaction
(including the status and a summary of the general terms thereof) and promptly
furnish to Parent a copy of any such proposal or inquiry in addition to any
information provided to or by any third party relating thereto.
Section 5.5 Expenses. The Company shall pay all of the legal, accounting
and other expenses incurred by the Company and the holders of the Company
Capital Stock in connection with the Merger.
Section 5.6 Employee Matters.
(a) Parent will cause service with the Company and its predecessors
prior to the Effective Time to be taken into account for eligibility and vesting
purposes in connection with any benefit or payroll plan, practice, policy or
agreement of Parent or any of its affiliates in which any employee of the
Company may become entitled to participate at or after the Effective Time.
(b) Parent hereby assumes and agrees to perform and pay or cause to
be performed and paid all of the Company's duties and obligations (with the
Company remaining jointly and severally liable) under the employment agreements
listed on Schedule to the Company Disclosure Schedule, to the extent they have
not been terminated prior to the Effective Time.
(c) The obligations of Parent under Sections 5.6(a) and 5.6(b) are
intended to benefit, and be enforceable against Parent directly by, the parties
(other than the Company) to such agreements and the participants or former
participants in such plans and their respective beneficiaries and other
successors in interest, and shall be binding on all successors of Parent.
(d) Parent shall take all actions required, if any, to cause the
shares of Parent Common Stock to be issued in the Merger to be listed on the
NYSE and shall give such notice as may be required to the NYSE with respect to
the Merger.
28
ARTICLE VI
CONDITIONS
Section 6.1 Mutual Conditions. The obligations of the parties hereto to
consummate the Merger shall be subject to fulfillment of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree which prevents the consummation of the
Merger shall have been issued and remain in effect, and no statute, rule
or regulation shall have been enacted by any Governmental Authority which
prevents the consummation of the Merger.
(b) All Permits required to be obtained prior to the Effective Time
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been
obtained.
(c) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the affirmative vote of the holders of
(i) a majority of the Company Capital Stock entitled to vote thereon in
accordance with Applicable Law, voting together as a class, and (ii)
seventy-five percent of the shares of Company Class B Common Stock
entitled to vote thereon, in accordance with Applicable Law, voting
separately as a class pursuant to written consents in lieu of a Company
stockholders' meeting.
(d) No Action shall have been instituted by any Governmental
Authority which seeks to prevent consummation of the Merger or which seeks
material damages in connection with the transactions contemplated hereby,
which Action continues to be outstanding.
(e) All consents, waivers and approvals of third parties and
Governmental Authorities required in connection with the transactions
contemplated hereby shall have been obtained, except where the failure to
obtain such consents, waivers or approvals, in the aggregate, would not
reasonably be expected to result in a material adverse effect on Parent or
the Company, as the case may be, provided that a party which has not used
all reasonable efforts to obtain a consent, approval or waiver may not
assert this condition with respect to such consent, approval or waiver.
(f) The transactions contemplated by the Securities Purchase
Agreement and the transactions contemplated by the Stock Purchase
Agreement shall have been consummated, or shall be consummated
simultaneously with the consummation of the Merger.
29
(g) Each stockholder of the Company and ECT shall have executed and
delivered the Release and Settlement Agreement for the benefit of each
other stockholder of the Company, in the form attached hereto as Exhibit
B.
Section 6.2 Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger and the transactions contemplated hereby
shall be subject to the fulfillment of the following conditions unless waived by
the Company:
(a) The representations and warranties of each of Parent and Sub
shall be true and correct on the date hereof and on and as of the Closing
Date as though made on and as of the Closing Date (except for
representations and warranties made as of a specified date, which need be
true and correct only as of the specified date).
(b) Each of Parent and Sub shall have performed in all respects each
obligation and agreement and shall have complied in all respects with each
covenant to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) The Company shall have received an opinion dated as of the
Closing Date of Weil, Gotshal & Xxxxxx LLP, in form reasonably acceptable
to the Company and its counsel. In rendering such opinion, Weil, Gotshal &
Xxxxxx LLP may require and rely on representations contained in
certificates of Parent, the Company, Sub and others, as deemed reasonably
appropriate.
Section 6.3 Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by each of Parent and Sub:
(a) The representations and warranties of the Company shall be true
and correct on the date hereof and on and as of the Closing Date as though
made on and as of the Closing Date (except for representations and
warranties made as of a specified date, which need be true and correct
only as of the specified date).
(b) The Company shall have performed in all respects each obligation
and agreement and shall have complied in all respects with each covenant
to be performed and complied with by it hereunder at or prior to the
Effective Time.
(c) Parent and Sub shall have received an opinion dated as of the
Closing Date of Xxxxxxxxx & Xxxxxxxxx, L.L.P., in form reasonably
acceptable to Parent and its counsel. In rendering such opinion, Xxxxxxxxx
& Xxxxxxxxx, L.L.P. may require and rely on representations contained in
certificates of Parent, the Company, Sub and others, as deemed reasonably
appropriate.
30
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by Company Stockholders:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company if any permanent injunction or
other order or decree of a court or other competent Governmental Authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(c) by either Parent or the Company if the Merger shall not have
been consummated before December 15, 1997, unless extended by the Boards
of Directors of both Parent and the Company (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be available
to any party whose failure to perform any material covenant or obligation
under this Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(d) by Parent or the Company if written consents representing the
requisite vote of the Company Stockholders to approve this Agreement and
the transactions contemplated hereby shall not have been received by the
Company on or before December 15, 1997; or
(e) by Parent or the Company (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements or any of the representations
or warranties set forth in this Agreement on the part of the other party,
which breach either (i) is not cured within 30 days following written
notice given by the terminating party to the party committing such breach,
or (ii) by its nature, cannot be cured prior to December 15, 1997, but
only if such breach would constitute a failure of a condition contained in
Section 6.2 or Section 6.3, as applicable.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.1, this Agreement, except for the
provisions of the second sentence of Section 5.1(d) and the provisions of
Sections 7.1 and 8.10, shall become void and have no effect, without any
liability on the part of any party or its directors, officers, employees or
stockholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for a material breach of any
provision of this Agreement.
31
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after adoption of this Agreement by the Company
Stockholders, but after such approval or authorization, no amendment shall be
made which by law requires further approval or authorization by the Company
Stockholders, without such further approval or authorization. Notwithstanding
the foregoing, this Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time,
Parent (with respect to the Company) and the Company (with respect to Parent and
Sub) may, to the extent legally allowed, (i) extend the time for the performance
of any of the obligations or other acts hereunder, (ii) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto 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 only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties. The
representations and warranties made herein by the parties hereto shall not
survive the Effective Time. This Section shall not limit any covenant or
agreement of the parties hereto, which by its terms contemplates performance
after either the Effective Time or the termination of this Agreement.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given upon receipt if delivered personally,
telecopied (which is confirmed) or dispatched by a nationally recognized
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub:
Domain Energy Corporation
00000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx
President and CEO
Telecopy No.: (000) 000-0000
32
with a copy to
Xxxxx X. Xxxx III, Esq.
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopy No.: (000) 000-0000
(b) if to the Company:
Gulfstar Energy, Inc.
0000 Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
President
Telecopy No.: (000) 000-0000
with a copy to
Xxxxxxx X. Xxxx, Xx., Esq.
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
and
c/o Enron Capital & Trade Resources Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy No.: (000) 000-0000 or (000) 000-0000
and
Enron Capital & Trade Resources Corp.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: W. Xxxxx Xxxxxxx
Telecopy No.: (000) 000-0000
33
and
Xxxx X. Xxxxxx
Bracewell & Xxxxxxxxx, L.L.P.
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
and
X. XxXxxxxxx Xxxxxxxx, Jr.
Xxxxx, Xxxxxx and Xxxxxxxxxx, P.L.C.
000 Xxxx Xxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxxxxxxxxxxxxx, Xxxxxxxx 00000-0000
Telecopy No.: (000) 000-0000
and
Xxxxx X. Xxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Section 8.3 Interpretation. When a reference is made in this Agreement to
an Article or Section, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The headings and the table of contents
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. For the purposes of
this Agreement, a "material adverse effect" shall mean, as to any party, a
material adverse effect on the assets, liabilities, results of operations,
business or financial condition of such party and its subsidiaries, taken as a
whole, or on such party's ability to consummate the transactions contemplated
hereby.
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
which together shall constitute one and the same Agreement. The parties may
execute more than one copy of this Agreement, each of which shall constitute an
original.
Section 8.5 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein) and the Confidentiality Agreement constitute
the entire agreement among the parties and supersede all prior agreements and
understandings, agreements or representations by or among the parties, written
and oral, with respect to the subject matter hereof and thereof.
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Section 8.6 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries, except for the provisions of Sections 5.2(b) and 5.6, which may
be enforced by the beneficiaries thereof.
Section 8.7 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
Section 8.8 Specific Performance. The transactions contemplated by this
Agreement are unique and monetary damages would not be an adequate remedy for a
breach hereof. Accordingly, each of the parties acknowledges and agrees that, in
addition to all other remedies to which it may be entitled, each of the parties
hereto is entitled to a decree of specific performance, provided that such party
is not in material default hereunder.
Section 8.9 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 8.10 Expenses. Parent and the Company, as the Company's expenses
are more fully set forth in Section 5.5, shall pay their own costs and expenses
associated with the transactions contemplated by this Agreement. The Company
shall pay EFC's costs and expenses incurred in connection with the Securities
Purchase Agreement.
Section 8.11 Incorporation of Disclosure Schedules. The Company Disclosure
Schedule and the Parent Disclosure Schedule are hereby incorporated herein and
made a part hereof for all purposes as if fully set forth herein.
Section 8.12 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 8.13 Subsidiaries. As used in this Agreement, the word
"subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having, in each case, by their terms ordinary voting power to
elect a majority of the board of directors or others performing
35
similar functions with respect to such corporation or other organization, or any
organization of which such party is a general partner.
Section 8.14 Persons. As used in this Agreement, the word "Person" means
any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, institution, entity or
Governmental Authority.
Section 8.15 Arbitration.
(a) Binding Arbitration. On the request of any party hereto, whether
made before or after the institution of any legal proceeding, any Action,
dispute, claim or controversy of any kind now existing or hereafter arising
between any of the parties hereto in any way arising out of, pertaining to or in
connection with this Agreement (a "Dispute") shall be resolved by binding
arbitration in accordance with the terms hereof. Any party hereto may, by
summary proceedings, bring an Action in court to compel arbitration of any
Dispute.
(b) Governing Rules. Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with the terms of
this Section 8.15, the Commercial Arbitration Rules of the AAA, and, to the
maximum extent applicable, the Federal Arbitration Act. Judgment on any award
rendered by an arbitrator may be entered in any court having jurisdiction.
(c) Arbitrators. Any arbitration shall be conducted before a three
person panel of neutral arbitrators. Such panel shall consist of one person from
each of the following categories: (i) an attorney who has practiced in the area
of commercial law for at least ten years or a retired judge at the Texas or
United States District Court or an appellate court level; (ii) a person with at
least ten years' experience in mergers and acquisitions; and (iii) a person with
at least ten years' experience in the petroleum industry (collectively, the
"Arbitrators". The AAA shall submit a list of persons meeting the criteria
outlined above for each category of arbitrator, and the parties shall select one
person from each category in the manner established by the AAA. If the parties
cannot agree on an arbitrator within 30 days after the request for an
arbitration, then any party may request the AAA to select an arbitrator. The
Arbitrators may engage engineers, accountants or other consultants that the
arbitrator deems necessary to render a conclusion in the arbitration proceeding.
(d) Conduct of Arbitration. To the maximum extent practicable, an
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in Houston, Texas. Arbitrators shall be empowered to impose sanctions and to
take such other actions as the arbitrators deem necessary to the same extent a
judge could impose sanctions or take such other actions pursuant to the Federal
Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the Arbitrators shall make specific written findings
36
of fact and conclusions of law. The Arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. The parties hereto each
agrees to keep all Disputes and arbitration proceedings strictly confidential
except for disclosure of information required by Applicable Law or the rules of
the NYSE. It is expressly agreed that the Arbitrators shall have no authority to
award treble, exemplary or punitive damages of any type under any circumstances
regardless of whether such damages may be available under Delaware law, the
parties hereby waiving their right, if any, to recover treble, exemplary or
punitive damages in connection with any Dispute.
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IN WITNESS WHEREOF, Parent, Sub and the Company have signed this
Agreement as of the date first written above.
DOMAIN ENERGY CORPORATION
By:
-----------------------------------
Xxxxxxx X. Xxxxx
President and CEO
DOMAIN GULF ACQUISITION CORP.
By:
-----------------------------------
Xxxxxxx X. Xxxxx
President and CEO
GULFSTAR ENERGY, INC.
By:
-----------------------------------
Xxxxxxx X. Xxxxxx
President
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