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EXHIBIT 2.5
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
AMONG
CHESAPEAKE ENERGY CORPORATION,
CHESAPEAKE MERGER II CORP.
AND
ANSON PARTNERS LIMITED PARTNERSHIP
OCTOBER 22, 1997
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TABLE OF CONTENTS
Page
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1. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation . . . . . . . . . . . . . . . . 2
1.5 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Payment and Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Payment; Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Adjustment to Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Representations and Warranties of AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Organization, Good Standing, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Capital Stock of APC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 The Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 No Breach of Statute or Contract; Governmental Authorizations . . . . . . . . . . . . . . . . . . . 6
3.5 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.7 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Prior Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Title to the Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Oil and Gas Leases in Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.13 Claims or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.14 Contracts, Consents and Preferential Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Tax Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.16 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.19 Planned Future Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.20 Environmental and Safety Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.21 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.22 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.23 Plugging Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.24 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.25 Payout Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.26 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.27 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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4. Representations and Warranties of the CEC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Organization, Good Standing, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Capital Stock of CEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 No Breach of Statute or Contract; Governmental Authorizations . . . . . . . . . . . . . . . . . . . 12
4.5 Authorization of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.6 Broker's or Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 The Oklahoma Act Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.11 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Conduct and Transactions Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Investigation by AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Investigation by CEC/Operation of Business of the AP Group . . . . . . . . . . . . . . . . . . . . . 14
5.3 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3.1 Status of Active Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3.2 Status of Active Employees with CEC Group . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3.3 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.4 Salaries and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4.1 AP's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4.2 CEC Group's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4.3 CEC Employee Benefit Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4.4 Preexisting Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4.5 AP Group's Retirement and Savings Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4.6 WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.6 Conduct of Business by the CEC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6. Conditions to Obligations of the CEC Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Transfer of the Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.8 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.10 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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7. Conditions to Obligations of AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Resolutions of Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Statutory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8. Termination of Agreement and Abandonment of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Mutual Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.2 By CEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.3 By AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 By Either CEC or AP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.5 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. Additional Agreements of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Closing/Post Closing Working Capital Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1.1 Net Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1.2 Actual Net Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1.3 Agreement on Conclusive Worksheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.2 Production Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.3 Royalty, Working Interest and Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4 Intercompany Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.5 Schedule Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Tax Return and Reorganization Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.7 Preservation of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Survival of Covenants, Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 28
10.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.4 Survival and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4.1 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4.2. Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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10.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.12 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.13 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.15 Partial Illegality or Unenforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SCHEDULES
"3.3.1" Oil and Gas Properties Description
"3.3.6" Excluded Assets Description
"3.4" Governmental and Contractual Violations
"3.8" Contractual Obligations Disclosures
"3.9" Title Exceptions and Production Payments Information
"3.10" Legal Compliance Disclosures
"3.11" Oil and Gas Leases Exceptions
"3.13" Claims and Litigation Disclosures
"3.14" Contracts, Consents and Preferential Rights Disclosures
"3.15" Tax Partnerships Disclosures
"3.16" Liabilities Disclosures
"3.19" Future Commitments Disclosures
"3.20" Environmental and Safety Matters Disclosures
"3.25" Payout and Balancing Disclosures
"4.9" CEC Consents and Approvals Disclosures
"4.10" CEC Litigation Disclosures
"5.3.1" Active Employees List
"5.3.3" Employee Benefit Plans Disclosure
"9.1.1" Capital Costs to Develop Proved Undeveloped Reserves
EXHIBITS
"1.2" Form of Certificate of Merger
"1.9" Form of Registration Rights Agreement
"6.8.1" Form of Goodwill Protection Agreement
"6.8.2" Form of Sublease and Use Agreement
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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement"), is entered into this 22nd day of October, 1997, among CHESAPEAKE
ENERGY CORPORATION, an Oklahoma corporation ("CEC"), CHESAPEAKE MERGER II
CORP., an Oklahoma corporation ("CMC"), ANSON PARTNERS LIMITED PARTNERSHIP, an
Oklahoma limited partnership ("AP") and ANSON PRODUCTION CORPORATION, an
Oklahoma corporation ("APC").
R E C I T A L S :
A. AP owns one hundred percent (100%) of the capital stock of APC and as
of the Closing Date (hereinafter defined) APC will own and conduct as an
ongoing concern all of the exploration and production of oil and gas business
of AP and its affiliates (the "Oil and Gas Business"), which includes all of
the producing and non-producing Interests (hereinafter defined) of AP and its
affiliates as set forth in Section 3.3 hereof. AP and AP's partners and
affiliates including, without limitation, APC are referred to collectively
herein as the "AP Group."
B. CMC is a wholly owned subsidiary of CEC. CEC and CMC are referred to
collectively herein as the "CEC Group."
C. The CEC Group and all of the limited and general partners of AP (the
"Partners") deem it advisable and in the best interests of the CEC Group's
shareholders and AP's Partners that CMC use shares of CEC common stock, par
value of $0.01 per share (the "CEC" Common Stock") to effect the merger of APC
into CMC (the "Merger") pursuant to this Agreement and the applicable
provisions of the Oklahoma General Corporation Act (the "Oklahoma Act").
D. Upon consummation of the Merger pursuant to this Agreement, all of the
issued and outstanding capital stock of APC (the "APC Shares") will be
converted into a number of shares of CEC Common Stock as determined in
accordance with the terms of this Agreement.
E. The CEC Group and the AP Group, respectively, have approved and
adopted this Agreement with respect to the Merger as a transaction that
qualifies as a tax free reorganization under the provisions of Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, for and in consideration of the recitals and
the mutual covenants and agreements set forth in this Agreement and for the
purpose of prescribing the terms and conditions for the Merger, the parties
hereby agree as follows:
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1. Merger. The Merger will be consummated as follows:
1.1 The Merger. In accordance with the Oklahoma Act, on the
Closing Date (as defined in Section 2 below), APC will be
merged with and into CMC, in a transaction intended to
qualify as a tax free reorganization under Section
368(a)(2)(D) of the Code. Immediately following the
Merger, the separate corporate existence of APC will cease
and CMC, as the surviving corporation (the "Surviving
Corporation"), will continue to exist under and be governed
by the Oklahoma Act as an indirect, wholly-owned subsidiary
of CEC.
1.2 Certificate of Merger. As soon as practicable after the
satisfaction or waiver of all of the conditions to the
Merger, at the Closing (as defined in Section 2), the
parties shall cause the Merger to be consummated by causing
a Certificate of Merger (the "Filed Agreement")
substantially in the form of Exhibit 1.2, to be executed
and filed in accordance with the relevant provisions of the
Oklahoma Act.
1.3 Effects of the Merger. The Merger shall have the effect
set forth in Section 1081 of the Oklahoma Act. Without
limiting the generality of the foregoing, at the Effective
Time, (as defined in Section 2) all the properties, rights,
privileges, powers and franchises of APC and CMC shall vest
in the Surviving Corporation, and all debts, liabilities
and duties of APC and CMC shall become the debts,
liabilities and duties of the Surviving Corporation in the
same manner as if the Surviving Corporation had itself
incurred them.
1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation. The Certificate of Incorporation of CMC, as
in effect immediately prior to the Closing Date, shall be
the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended in accordance with
the provisions thereof and applicable law. The Bylaws of
CMC in effect at the Closing Date shall be the Bylaws of
the Surviving Corporation until amended in accordance with
the provisions thereof and applicable law.
1.5 Directors. The directors of CMC immediately prior to the
Closing Date shall be the directors of the Surviving
Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier
death, resignation or removal.
1.6 Officers. The officers of CMC immediately prior to the
Effective Time shall be the officers of the Surviving
Corporation and shall hold office until their respective
successors are duly elected and qualified, or their earlier
death, resignation or removal.
1.7 Payment and Conversion. Subject to the terms and
conditions of this Agreement, on the Closing Date, pursuant
to the Oklahoma Act, APC will be merged with and into CMC
and upon such Merger, the APC Shares will be automatically
converted into the right to receive the number of shares of
CEC
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Common Stock determined by dividing FORTY-THREE MILLION
DOLLARS ($43,000,000.00) by the Exchange Price (the
"Exchange Shares"). The Exchange Price will be determined
by adding the closing price of the CEC Common Stock as
quoted on the New York Stock Exchange as of the close of
business on the third (3rd) through the twelfth (12th)
business trading days preceding the Closing Date and
dividing the sum by ten (10). The number of Exchange
Shares will be rounded up to the nearest whole number and
no fractional shares will be issued.
1.8 Payment; Stock Certificates. On the Closing Date, AP will
surrender all certificates evidencing the APC Shares and
deliver them to CMC and CMC will cause the Exchange Shares
to be registered in AP's name in one or more certificates,
as reasonably requested by AP, and deliver it or them to
AP. After the Closing Date and until delivered to CMC, the
APC Shares will be deemed to represent only the right to
receive, upon surrender, the portion attributable thereto
of the Exchange Shares.
1.9 Adjustment to Merger Consideration. CEC and AP hereby
agree that in connection with the sale of any Exchange
Shares pursuant to a Piggyback Registration occurring prior
to April 30, 1998, or a Requested Registration requested
prior to April 30, 1998, as set forth in the Registration
Rights Agreement attached hereto as Exhibit 1.9 (the
"Registration Rights Agreement"): (a) to the extent that
the proceeds received by AP net of the amount of the
underwriting discounts and commissions on a per share basis
as adjusted to account for any stock splits, stock
dividends or other distributions in respect of the Exchange
Shares (the "Per Share Price") does not equal or exceed the
Exchange Price, CEC will or will cause CMC to pay to AP an
amount equal to the difference between the Per Share Price
and the Exchange Price multiplied by the number of Exchange
Shares included in such registration; and (b) to the extent
the Per Share Price exceeds one-hundred twenty percent
(120%) of the Exchange Price, AP will pay CEC an amount
equal to the difference in the Per Share Price and one
hundred twenty percent (120%) of the Exchange Price
multiplied by the number of Exchange Shares included in
such registration. Any cash adjusting payments to be made
pursuant to this Section 1.9 will be made by the party
owing payment within five (5) days after the final account
of the registration proceeds has been made and agreed to by
CEC and AP.
2. Closing. Subject to the terms and provisions hereof, the closing of
the transactions provided for herein (the "Closing") shall occur at 10:00 a.m.
at the offices of Self, Xxxxxxx & Xxxx, Inc., 0000 Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxx, Xxxxxxxx on October 31, 1997 (the "Closing Date") unless another date,
time or place is agreed to in writing by the parties hereto, but in any event
will be effective as of 12:01 a.m. Oklahoma time on November 1, 1997 (the
"Effective Time").
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3. Representations and Warranties of AP. AP represents and warrants to
the CEC Group as follows:
3.1 Organization, Good Standing, Etc. AP is a limited
partnership duly formed, validly existing and in good
standing under the laws of the State of Oklahoma and has
the partnership authority to own AP's property and to carry
on AP's business as now being considered. APC is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Oklahoma and has
the corporate power to own APC's property and to carry on
APC's business as now being conducted. AP has the
partnership power to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. On the
Closing Date, APC will be duly qualified and/or licensed,
as may be required, and in good standing in each of the
jurisdictions in which the nature of the business conducted
by APC or the character of the property owned, leased or
used by APC makes such qualification and/or licensing
necessary, except where the failure to be so qualified
and/or licensed, and in good standing would not singly or
in the aggregate have a material adverse effect on APC. AP
has made available to CMC copies of the certificate of
incorporation, bylaws and the records of meetings of the
shareholders and boards of directors of APC which are
complete and correct in all respects. All material
corporate actions taken by APC since its organization and
incorporation through the date hereof have been duly
authorized or subsequently ratified as necessary. APC is
not in default under or in violation of any provision of
APC's certificate of incorporation or bylaws.
3.2 Capital Stock of APC. The authorized capital stock of APC
consists of 50,000 shares of common stock, par value $1.00
per share ("APC Common Stock"), of which 42,920 shares are
issued and outstanding and all of which are owned by AP.
There are no treasury shares held by APC. The issued APC
Common Stock is validly authorized and issued and fully
paid and nonassessable. APC has not ever declared or paid
any dividend, or declared or made any distribution on, or
authorized the creation or issuance of, or issued, or
authorized or effected any split-up or any other
recapitalization of, any of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any
of its outstanding capital stock and, except as permitted
by this Agreement, will not do so between the date of this
Agreement and the Closing Date. There are no contractual
obligations of APC to repurchase, redeem or otherwise
acquire any outstanding shares of APC's capital stock.
Further, there are no options, warrants or other rights to
acquire any additional shares of capital stock of APC.
3.3 The Interests. APC is a wholly-owned affiliate of AP and
as of the Closing Date, APC will own and conduct as an
ongoing concern all of AP and its affiliates' Oil and Gas
Business. APC has not ever engaged in an activity
unrelated to the Oil and Gas Business. The Oil and Gas
Business consists of the following:
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3.3.1 Oil, gas and mineral leases and the operating
rights, mineral interests, royalty interests,
overriding royalty interests, payments out of
production and interests in or under unit or
pooling agreements covering lands located
onshore in the continental United States and
all real estate owned and leased in
connection with the ownership or operation
thereof including, without limitation, the
interests described in Schedule "3.3.1"
attached hereto as a part hereof (the "Real
Property Interests");
3.3.2 All other contracts, agreements, leases,
licenses, permits, rights (including without
limitation rights in warranty and other
choses in action), easements and orders
relating to: (a) the Real Property Interests
(or the lands covered thereby or pooled,
unitized, or directly used or held for use in
connection therewith), the operations
conducted or to be conducted thereon, or the
production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or
attributable thereto; and (b) the Other
Interests (as hereinafter defined);
3.3.3 All xxxxx (including, without limitation,
disposal, supply or injection xxxxx),
personal property, fixtures (including,
without limitation, plants, gathering
systems, pipelines, compressors and
dehydration and other treatment facilities),
equipment (including, without limitation,
inventory, field trucks and vehicles and
supplies) and improvements located on the
Real Property Interests, or upon lands
pooled, unitized, or directly used or held
for use in connection therewith or with the
operation or maintenance thereof, or with the
production, treatment, sale or disposal of
hydrocarbons or water produced therefrom or
attributable thereto, and all original books,
files, seismic records and tapes (to the
extent the AP Group may convey ownership or
rights concerning the use of same), other
records and information of the AP Group
(including without limitation all land,
geological, geophysical and accounting files
and records) pertaining to the Real Property
Interests and the Oil and Gas Business;
3.3.4 All other businesses, operations, rights,
titles and interests relating to the
drilling, exploration, development,
operation, marketing, sale or other disposal
of oil, gas and other minerals including,
without limitation, all of the businesses and
activities conducted in APC's affiliates,
AnSon Gas Marketing ("AGM") and AnSon
Corporation and all other businesses and
activities relating to any of the foregoing
(the "Other Interests"); and
3.3.5 All other rights and interests in, to or
under or derived from the Other Interests or
the Real Property Interests, the lands
covered
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thereby or pooled, unitized or directly used
or held for use in connection therewith.
3.3.6 As used herein, the term "Interests" means
the aggregate of all rights, titles and
interests owned by AP and/or any of its
affiliates, or any of them, insofar as they
relate to the Oil and Gas Business. The
Interests shall not include the main frame
computer and server and related equipment
described in Schedule "3.3.6" attached hereto
(the "Excluded Equipment") owned by AP, but
will include all other computer and office
equipment, furniture, fixtures, accessories
and supplies. In addition, the New Mexico
oil and gas interests and the salt water
disposal xxxxx described in Schedule "3.3.6"
(collectively with the Excluded Equipment,
the "Excluded Assets") will not be included
in the Interests. AP will allow CMC access
to and use of the Excluded Equipment from the
Closing Date through March 31, 1998, as
provided in the Sublease and Use Agreement
attached hereto as Exhibit "6.8.2".
3.4 No Breach of Statute or Contract; Governmental
Authorizations. Neither the execution and delivery of this
Agreement nor compliance with the terms and provisions of
this Agreement by the AP Group will violate any law,
statute, rule or regulation of any governmental authority,
or will on the Closing Date conflict with or result in a
breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree or ruling of any court
or governmental agency or authority to which the AP Group
is subject or, except as set forth in Schedule "3.4," of
any material agreement or instrument to which the AP Group
is a party or by which any of them is bound, or constitute
a material default thereunder, or result in the creation of
any material lien, charge or encumbrance upon any of the
Interests or cause any acceleration of maturity of any
material obligation or loan, or give to others any material
interest or rights, including rights of termination or
cancellation, in or with respect to any of the Interests.
3.5 Authorization of Agreement. The execution, delivery and
performance of this Agreement by the members of the AP
Group have been duly and validly authorized by all
requisite partnership action. The execution, delivery and
performance by the AP Group of all other agreements and
transactions contemplated hereby have been, or prior to
Closing will be, duly authorized and approved by all
requisite partnership or corporate action on the part of
the AP Group. This Agreement has been, and the other
agreements and instruments contemplated hereby, when
executed and delivered, will be, duly executed and
delivered by each member of the AP Group as required and,
assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto or thereto,
this Agreement constitutes and, when executed, each of the
other agreements contemplated hereby will constitute, a
valid and binding obligation of each member of the AP Group
that is a party hereto or thereto, as the case may be,
enforceable against each of them in
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accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance and similar laws affecting creditors'
rights generally from time to time and to general
principles of equity, and in the case of the Registration
Rights Agreement (as hereinafter defined), considerations
of public policy.
3.6 Broker's or Finder's Fees. None of AP or any of its
subsidiaries has incurred any liability, contingent or
otherwise, for brokers' or finders' fees in respect of this
Agreement for which any member of the CEC Group or APC will
have any responsibility whatsoever.
3.7 Permits. On the Closing Date, to the best of the AP
Group's knowledge, APC will have all approvals,
authorizations, consents, licenses, orders, franchises,
rights, registrations and permits of all governmental
agencies, whether federal, state or local, United States or
foreign, required to permit the operation of APC's
businesses as presently conducted (the "Permits") and each
will be in full force and effect and will have been duly
and validly issued, except where the absence of which,
singly or in the aggregate, would not have a material
adverse effect on APC. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby will not result in any revocation,
cancellation, suspension or modification of any such Permit
except where such revocation, cancellation, suspension or
modification would not have a material adverse effect on
APC. On the Closing Date, there will be no outstanding
violation of any of the Permits singly or in the aggregate
that would have a material adverse effect on APC.
3.8 Prior Obligations. None of the AP Group have any
contractual obligation relating to the disposition, by
merger or otherwise, of all or any of the equity securities
of APC or of all or any significant portion of the
Interests except as contained in this Agreement, except for
obligations arising in the ordinary course of business of
APC and except as disclosed in Schedule "3.8."
3.9 Title to the Interests. Except as set forth in Schedule
"3.9," APC will have on the Closing Date good and
defensible title of record to APC's respective properties
comprising the Interests free and clear of all liens,
pledges, claims, charges, security interests, production
payments or other encumbrances except: (a) liens for
current taxes and assessments not yet due, or being
contested in good faith by appropriate proceedings; (b)
such imperfections of title and encumbrances, if any, which
do not have singly or in the aggregate a material adverse
effect on APC; and (c) the volumetric production payment in
favor of Cactus Hydrocarbon III Limited Partnership, the
details of which are described in Schedule "3.9" attached
hereto (the "Production Payments").
3.10 Compliance with Laws. Except as disclosed in Schedule
"3.10," neither AP nor any of its subsidiaries is in
violation of any applicable law, ordinance, regulation,
writ, judgment, decree or order of any court or government
or
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governmental unit in connection with the Interests, the
consequences of which singly or in the aggregate would have
a material adverse effect on APC.
3.11 Oil and Gas Leases in Good Standing. Except as disclosed
in Schedule "3.11," all oil and gas leases which are
material singly or in the aggregate to APC are in full
force and effect, and APC is not in default thereunder.
3.12 Taxes. All ad valorem, property, production, severance and
similar taxes and assessments based on or measured by the
ownership of property comprising the Interests or the
production or removal of hydrocarbons or the receipt of
proceeds therefrom have been timely paid when due and are
not in arrears, except such things as are being contested
in good faith by appropriate proceedings and as to which
adequate reserves have been established in accordance with
generally accepted accounting principles.
3.13 Claims or Litigation. Except as disclosed in Schedule
"3.13," there is no material suit, action or other
proceeding pending before any court or governmental agency
and, to the knowledge of AP, there is no material claim,
dispute, suit, action or other proceeding threatened,
against APC, any of the Interests or AP.
3.14 Contracts, Consents and Preferential Rights. AP has
described in Schedule "3.14"; (a) all partnership, joint
venture, farmin/farmout, dry hole, bottom hole, acreage
contribution, area of mutual interest, purchase and/or
acquisition agreements of which any terms remain executory
which materially affect the Interests; (b) all other
executory contracts to which APC is a party which
materially affect any item of the Interests; (c) all
governmental or court approvals and third party contractual
consents required in order to consummate the transactions
contemplated by this Agreement, other than routine consents
required in connection with transfers of U.S. federal,
state and Indian leases; (d) all agreements pursuant to
which third parties have preferential rights or similar
rights to acquire any portion of the Interests upon the
exchange contemplated by this Agreement; and (e) all other
contracts and agreements which are in any single case of
material importance to the business of APC.
3.15 Tax Partnerships. No item of the Real Property Interests
nor any oil and gas property owned by APC is treated for
income tax purposes as being owned by a partnership except
for AGM and except as disclosed in Schedule "3.15."
3.16 Financial Statements. The cash flow and operating
statements for the years ended December 31, 1995 and 1996,
and for the six months ended June 30, 1997, for the AP
Group Oil and Gas Business are true and correct in all
material respects. To the best of the AP Group's
knowledge, APC has no liabilities of any kind whatsoever,
whether accrued, contingent or otherwise except as
disclosed in Schedule "3.16" attached hereto and trade
payables arising in the ordinary course of business.
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3.17 Tax Matters. APC has never filed a tax return or report of
any kind with any taxing jurisdiction, except an initial
franchise tax return in the State of Oklahoma will be filed
prior to Closing and no tax returns or taxes are due.
3.18 Insurance. AP will maintain or cause APC to maintain
through the Closing Date, with financially sound and
reputable insurers, insurance to the extent and against
such hazards and liabilities and in such types and amounts
as is commonly maintained by entities similarly situated.
3.19 Planned Future Commitments. APC has not planned or
budgeted future expenditure commitments relating to the
Real Property Interests (drilling of xxxxx, workovers,
contract settlements, pipeline projects, production
facilities, etc.) or Other Interests in excess of
$100,000.00 in the aggregate which are not disclosed in
Schedule "3.19."
3.20 Environmental and Safety Matters. Except as set forth in
Schedule "3.20" and insofar as it pertains to the
Interests:
3.20.1 The AP Group is not aware, and has not
received notice from any person, entity or
governmental body, agency or commission, of
any release, disposal, event, condition,
circumstance, activity, practice or incident
concerning any land, facility, asset or
property that: (a) interferes with or
prevents compliance or continued compliance
by the AP Group (or by any member of the CEC
Group after the Closing Date) with any United
States, state or local law, regulation, code
or ordinance or the terms of any license or
permit issued pursuant thereto; or (b) gives
rise to or results in any common law or other
liability of APC to any person, entity or
governmental body, agency or commission for
damage or injury to natural resources,
wildlife, human health or the environment
which would have a material adverse effect on
APC in each case.
3.20.2 The AP Group is not aware of any civil,
criminal or administrative action, lawsuit,
demand, litigation, claim, hearing, notice of
violation, investigation or proceeding,
pending or threatened, against any of the AP
Group or operator of any of the lands,
facilities, assets and properties owned or
formerly owned, operated, leased or used by
any of the AP Group as a result of the
violation or breach of any federal, state, or
local law, regulation, code or ordinance or
any duty arising at common law to any person,
entity or governmental body, singly or in the
aggregate, which if determined adversely
would have a material adverse effect on APC.
3.21 Investment Intent. Neither AP nor any of its affiliates
presently own nor will they own prior to the Closing Date
any CEC Common Stock. On the date first above written and
the Closing Date, AP has and will have no present
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15
intention to sell or otherwise dispose of any CEC Common
Stock to be issued to it pursuant to this Agreement. On
the Closing Date, AP is acquiring the CEC Common Stock for
investment purposes and not with a view to or in connection
with a distribution within the meaning of the Securities
Act of 1933, as amended (the "33 Act"). AP understands and
agrees that the certificates representing the CEC Common
Stock will have a legend imprinted thereon to the following
effect:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER STATE SECURITIES LAWS.
SUCH SHARES OF COMMON STOCK MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID SECURITIES ACT COVERING THE TRANSFER OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT
REGISTRATION UNDER SAID SECURITIES ACT IS NOT
REQUIRED."
3.22 Powers of Attorney. There are no outstanding powers of
attorney relating to or affecting APC or any of the
Interests.
3.23 Plugging Status. All xxxxx on the Interests that have been
permanently plugged and abandoned have been so plugged and
abandoned in accordance in all material respects with all
applicable requirements of each governmental authority
having jurisdiction over APC and the Interests.
3.24 Equipment. The equipment has been installed, maintained
and operated by the AP Group as a prudent operator in
accordance with oil and gas industry standards, and is
currently in a state of repair so as to be adequate for
normal operations of the Interests.
3.25 Payout Balances. Schedule 3.25 attached hereto, contains a
complete and accurate list of the status of any "payout"
balance and gas balancing obligations and rights, as of
September 30, 1997, for each oil and gas Interest that is
subject to a reversion or other adjustment at some level of
cost recovery or payout (or passage of time or other event,
other than cessation of production).
3.26 Full Disclosure. The representations, warranties or other
statements by the AP Group in this Agreement or in the
Schedules hereto, taken as a whole, do not contain any
untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained
herein or therein not misleading.
3.27 Affiliate Transactions. There are no transactions
affecting any of the Interests between APC and any of its
affiliates, except as set forth in Schedule "3.14"
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attached hereto. As used in this Agreement, "affiliate"
means, with respect to any person or entity, each other
person or entity directly or indirectly controlling,
controlled by or under common control with such person.
3.28 Intangible Property. There are no material trademarks,
trade names, patents, service marks, brand names, computer
programs, databases, industrial designs, copyrights or
other intangible property that are necessary for the
operation, or continued operation, or for the ownership and
operation, or continued ownership and operation, of any of
the Interests.
4. Representations and Warranties of the CEC Group. CEC and CMC
represent and warrant to AP as follows:
4.1 Organization, Good Standing, Etc. CEC and CMC are
corporations duly organized, validly existing and in good
standing under the laws of the State of Oklahoma. CEC and
CMC have the corporate power to own their property and to
carry on their business as now being conducted. CEC and
CMC have the corporate power to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. On the Closing Date, CEC and CMC will be duly
qualified and/or licensed and in good standing in each of
the jurisdictions in which the nature of the business
conducted by them or the character of the property owned,
leased or used by any of them makes such qualification
and/or licensing necessary, except in such jurisdictions
where the failure to be so qualified or licensed would not
have a material adverse effect on CEC and its consolidated
subsidiaries considered as one enterprise. CMC is a wholly
owned subsidiary of CEC. Neither CEC nor CMC is in default
under or in violation of any provision of their respective
certificate of incorporation or bylaws.
4.2 Capital Stock of CEC. The authorized capital stock of CEC
consists of 100,000,000 shares of CEC Common Stock and
10,000,000 shares of preferred stock of which 70,376,462
shares of CEC Common Stock and no shares of preferred stock
were issued and outstanding as of September 30, 1997. Each
share of CEC Common Stock to be issued pursuant to this
Agreement will be subject to the Registration Rights
Agreement.
4.3 SEC Documents. CEC has delivered or made available to AP
each registration statement, report, definitive proxy
statement or definitive information statement and all
exhibits thereto filed since December 31, 1996, each in the
form (including exhibits and any amendments thereto) filed
with the SEC (collectively, the "CEC Reports"). The CEC
Reports, which, except as otherwise disclosed, were filed
with the SEC in a timely manner, constitute all forms,
reports and documents required to be filed by CEC under the
33 Act, the Securities Exchange Act of 1934, as amended
(the "34 Act") and the rules and regulations promulgated
thereunder. As of their respective dates, the CEC Reports
(i) complied as to form in all material respects with the
applicable requirements of the 33 Act and the 34 Act and
(ii) did not contain
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any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
Each of the balance sheets of CEC included in or
incorporated by reference into the CEC Reports (including
the related notes and schedules) fairly presents the
financial position of CEC as of its date and each of the
statements of income, retained earnings and cash flows of
CEC included in or incorporated by reference into the CEC
Reports (including any related notes and schedules) fairly
presents the results of operations, retained earnings or
cash flows, as the case may be, of CEC for the periods set
forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which
would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles
consistently applied during the periods involved, except as
may be noted therein and except, in the case of any
unaudited statements, as permitted by Form 10-Q promulgated
under the 34 Act.
4.4 No Breach of Statute or Contract; Governmental
Authorizations. Neither the execution and delivery of this
Agreement nor compliance with the terms and provisions of
this Agreement by the CEC Group will violate any law,
statute, rule or regulation of any governmental authority,
or will on the Closing Date conflict with or result in a
breach of any of the terms, conditions or provisions of any
judgment, order, injunction, decree or ruling of any court
or governmental agency, authority to which CEC or its
subsidiaries is subject or of any agreement or instrument
to which CEC or its subsidiaries is a party or by which any
of them is bound, or constitute a material default
thereunder, or result in the creation of any material lien,
charge or encumbrance upon any property or assets of CEC or
its subsidiaries or cause any acceleration of maturity of
any material obligation or loan, or give to others any
material interest or rights, including rights of
termination or cancellation, in or with respect to any of
the properties, assets, agreements, contracts or business
of CEC or its subsidiaries.
4.5 Authorization of Agreement. As of the Closing Date, the
execution, delivery and performance of this Agreement by
the members of the CEC Group will have been duly and
validly authorized and approved by all requisite corporate
action on the part of each member of the CEC Group. The
execution, delivery and performance by each member of the
CEC Group of all other agreements and transactions
contemplated hereby have been or prior to Closing will be,
duly authorized and approved by all requisite corporate
action on the part of each member of the CEC Group. This
Agreement has been, and the other agreements contemplated
hereby, when executed and delivered, will be, duly executed
and delivered by each member of the CEC Group as required
and, assuming the due authorization, execution and delivery
hereof and thereof by the other parties hereto or thereto,
this Agreement constitutes and, when executed, each of the
other agreements contemplated hereby will constitute, a
valid and binding obligation of each
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member of the CEC Group that is a party hereto or thereto,
as the case may be, enforceable against each of them in
accordance with its terms subject to applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent
conveyance and similar laws affecting creditors' rights
generally from time to time and to general principles of
equity, and in the case of the Registration Rights
Agreement, considerations of public policy.
4.6 Broker's or Finder's Fees. No member of the CEC Group has
incurred any liability, contingent or otherwise, for
brokers' or finders' fees in respect of this Agreement for
which any member of the AP Group shall have any
responsibility whatsoever.
4.7 The Oklahoma Act Provisions. Section 1090.3 of the
Oklahoma Act does not prohibit or restrict the issuance of
shares of CEC Common Stock to AP pursuant hereto or the
other transactions contemplated hereby. The Control Share
Acquisition Act as set forth in Sections 1145 through 1155
of the Oklahoma Act is not applicable to CEC and will not
be applicable to this Agreement and the issuance of the
shares of CEC Common Stock to be issued to AP pursuant
hereto and the other transactions contemplated hereby.
4.8 No Violations. The execution and delivery of this
Agreement does not, and the consummation of the transaction
contemplated hereby will not conflict with, result in any
violation of or default (with or without notice or lapse of
time or both) under, give rise to a right of termination,
cancellation, acceleration of any obligation or to the loss
of a material benefit under, or result in the creation of
any lien or encumbrance on any of the properties or assets
of the CEC Group under, any provision of (a) the
certificate of incorporation or by-laws of the CEC Group,
(b) any loan or credit agreement, note, bond, mortgage,
indenture, lease, permit, concession, franchise, license or
other agreement, instrument or obligation applicable to the
CEC Group, or (c) assuming the consents, approvals,
authorizations or permits and filings or notifications
referred to in Section 4.8 are duly and timely obtained or
made, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the CEC Group or
properties or assets of the CEC Group, other than, in the
case of clause (b) above, any conflict, violation, default,
right, loss or lien that, individually or in the aggregate,
would not have a material Adverse Effect on the CEC Group.
4.9 Consents and Approvals. Except as otherwise set forth in
Schedule 4.9, no consent, approval, order or authorization
of, registration, declaration or filing with, or permit
from, any governmental authority is required by or with
respect to CEC or CMC in connection with the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for: (a) consents,
approvals, orders, authorizations, registrations,
declarations, filings or permits which the failure to
obtain or make would not, individually or in the aggregate,
have a material adverse effect on CEC and CMC; (b) the
filing of the Certificate of Merger with the Secretary of
State
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of Oklahoma pursuant to the provisions of the Oklahoma Act;
(c) if required, the filing of a pre- merger notification
report by CEC under the HSR Act and the expiration or
termination of the applicable waiting period. Except as
otherwise set forth in Schedule 4.9, no third-party consent
is required by or with respect to the CEC Group in
connection with the execution and delivery of this
Agreement or the consummation of the transactions
contemplated hereby except for any third party consent
which the failure to obtain would not, individually or in
the aggregate, have a material adverse effect on the CEC
Group.
4.10 Litigation. There is no litigation, proceeding or
investigation pending or, to the knowledge of the CEC Group
threatened against or affecting the CEC Group that
questions the validity or enforceability of this Agreement
or any other document, instrument or agreement to be
executed and delivered by the CEC Group in connection with
the transaction contemplated hereby. Except as otherwise
set forth in Schedule 4.10 or the CEC Reports, no
litigation, arbitration or other proceeding of any
governmental authority is pending, or to the CEC Group's
knowledge, threatened against the CEC Group which if
adversely determined, would individually or in the
aggregate, have a material adverse effect on the CEC Group.
4.11 Vote Required. No vote of the matters of any class or
series of CEC capital stock or other voting securities is
necessary to approve this Agreement, the merger of the
transactions contemplated hereby.
5. Conduct and Transactions Prior to Closing Date. Between the effective
date of this Agreement and the Closing Date, the CEC Group and the AP Group
will each comply with the following:
5.1 Investigation by AP. Between the date of this Agreement
and the Closing, CEC shall give AP, its agents and
representatives, copies of any registration statement,
report, definitive proxy statement or definitive
information statement and all exhibits thereto, each in the
form filed with the SEC.
5.2 Investigation by CEC/Operation of Business of the AP Group.
Between the date of this Agreement and the Closing Date:
5.2.1 Insofar as related to the Interests, the AP
Group will give the CEC Group and their
agents and representatives, reasonable access
to all of the books and records of the APC
Group and the properties of AP Group and
agrees to cause their respective officers to
furnish the CEC Group and their agents and
representatives with such financial and
operating data and other information with
respect to the respective businesses and
properties of the AP Group, as the CEC Group,
its agents and representatives shall from
time to time reasonably request; provided,
however, that any such investigation shall
not affect any of the representations and
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warranties of AP hereunder and shall be
conducted in such manner as not to interfere
unreasonably with the operation of the
business of APC. In the event of termination
of this Agreement, except as prevented by
law, the CEC Group will, and will cause its
agents and representatives to, return to AP
all documents, work papers and other
materials obtained from AP, in connection
with the transactions contemplated hereby,
and all copies, extracts or other
reproductions thereof in whole or in part
(the "AP Confidential Material"). The AP
Confidential Material does not include
information which: (a) is or becomes public
information without violation of this
Agreement; (b) was already known to the CEC
Group; (c) is developed by the CEC Group
independently from the information supplied
to the CEC Group pursuant to this Agreement;
or (d) is furnished to the CEC Group by a
third party who is not an employee, agent,
representative or advisor of AP independently
from the CEC Group's investigation pursuant
to the transactions contemplated by this
Agreement. The CEC Group agrees to keep
confidential in accordance with this Section
5.2 any AP Confidential Material obtained
pursuant to this Agreement. If this Agreement
is terminated, the CEC Group shall not use
any of the AP Confidential Material to the
financial advantage of the CEC Group or any
other person or to the detriment of AP.
5.2.2 Subject to Subsection 5.2.3 below or except
as required by law, the AP Confidential
Material will be kept confidential and will
not, without the prior written consent of AP,
be disclosed by the CEC Group in whole or in
part, and will not be used by the CEC Group,
directly or indirectly, for any purpose other
than in connection with this Agreement, the
other transactions contemplated by this
Agreement or evaluating, negotiating or
advising the CEC Group with respect to the
transactions contemplated herein.
5.2.3 In the event that the CEC Group or anyone to
whom the CEC Group supplies the AP
Confidential Material are requested or
required (by oral questions, interrogatories,
requests for information or documents,
subpoena, civil investigative demand, any
informal or formal investigation by any
governmental body or otherwise in connection
with legal processes) to disclose any of the
AP Confidential Material, the CEC Group
agrees: (a) to immediately notify AP of the
existence, terms and circumstances of such a
request; (b) to consult with AP on the
advisability of taking legally available
steps to resist or narrow such request; and
(c) if disclosure of such information is
required, to furnish only that portion of the
AP Confidential Material which, in the
opinion of CEC's counsel, the CEC Group is
legally compelled to disclose and to
cooperate with any action by AP to obtain an
appropriate
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protective order or other reliable assurance
that confidential treatment will be accorded
the AP Confidential Material.
5.2.4 AP will, to the extent required for continued
operation of the Interests without
impairment, use its reasonable efforts to
preserve substantially intact the books and
records relative thereto, and to preserve the
present relationships of the AP Group to the
extent related to the Interests with persons
having significant business relations
therewith such as suppliers, customers,
brokers, agents or otherwise and to promptly
notify the CEC Group of an emergency or other
change which would have a significant adverse
effect on AP.
5.2.5 The AP Group APC will conduct the Oil and Gas
Business only in the ordinary course and, by
way of amplification and not limitation, they
will not, without the prior written consent
of the CEC Group: (a) issue, sell or
otherwise dispose of shares of its capital
stock; or (b) grant any other options or
warrants or other rights to purchase or
otherwise acquire any shares of capital stock
or issue any securities convertible into
shares of capital stock of APC; or (c) adopt
any Employee Plans (hereinafter defined); or
(d) declare, set aside, or pay any dividend
or distribution with respect to the capital
stock of APC other than as permitted with
respect to the working capital adjustments as
set forth in Section 9.1 hereof; or (e)
directly or indirectly redeem, purchase or
otherwise acquire any capital stock of APC;
or (f) effect a split or reclassification of
any capital stock of APC or a
recapitalization of APC; or (g) change the
charter or bylaws of APC; or (h) permit APC
to grant any increase in the compensation
payable or to become payable to their Active
Employees (hereinafter defined) other than
regularly scheduled merit increases; or (i)
borrow, except for working capital purposes
and except in the ordinary course of
business, or agree to borrow any funds, or
guarantee or agree to guarantee the
obligations of others; or (j) waive any
rights of substantial value; or (k) except in
the ordinary course of business enter into an
agreement, contract or commitment which, if
entered into prior to the date of this
Agreement, would be required to be listed in
a Schedule attached to this Agreement, or
materially amend or change the terms of any
such agreement, contract or commitment; or
(l) take any action or omit to take any
action which would result in any of its
representations or warranties set forth in
this Agreement becoming untrue.
5.2.6 APC will maintain its books of account in the
usual, regular and ordinary manner.
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5.3 Employees.
5.3.1 Status of Active Employees. For the purpose
of this Agreement, the term "Active
Employees" shall mean the full-time employees
listed in Schedule "5.3.1" attached hereto
employed by the AP Group (excluding APC) in
the conduct of the Oil and Gas Business,
inclusive of any such employees on temporary
leave of absence (including military leave,
temporary disability or sick leave). Within
fifteen (15) days after execution of this
Agreement, AP will provide the CEC Group with
a list of Active Employees, stating job
title, date of hire and salary as of the date
thereof. AP will update such list from time
to time to reflect changes in the work force,
and the current list of Active Employees, as
such changes occur.
5.3.2 Status of Active Employees with CEC Group.
The CEC Group is under no obligation to
retain or hire any Active Employee. At least
five (5) days before the Closing Date, the
CEC Group will provide to AP a list of those
Active Employees to whom an offer of
employment has been or will be made to be
effective on the Closing Date. Upon
reasonable prior notice during normal
business hours, the CEC Group and its
representatives will be given reasonable
access to the facilities and to personnel,
safety and other relevant records of the AP
Group (to the extent access to such records
does not violate any law or the legitimate
privacy rights of the Active Employee
concerned) for the purpose of preparing for
and conducting employment interviews with any
Active Employees. Interviews will be
conducted during normal business hours. On
the Closing Date, AP will terminate the
employment of the Active Employees who have
received and accepted an offer of employment
from CMC or any of its affiliates (the "Newly
Hired Employees"). On or before the Closing
Date, AP will provide other employment for or
terminate the employment of all Active
Employees who are not Newly Hired Employees.
As used in this Section 5.3.2, the term
"affiliates" of CEC or any member of the CEC
Group shall not include AP, APC or their
subsidiaries.
5.3.3 Employee Benefit Plans. Except as set forth
in Schedule "5.3.3" attached hereto, the AP
Group has never sponsored or participated in
any Employee Plans up to the Closing Date. As
used herein "Employee Plans" shall mean any
bonus, deferred compensation, incentive
compensation, stock purchase, stock option,
employment, consulting, severance or
termination pay, hospitalization or other
medical, life or other insurance,
supplemental unemployment benefit, profit
sharing, pension or retirement plan, program,
agreement or arrangement, or any other
benefit plan of any kind
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whatsoever that is provided to employees or
former employees of the AP Group, or their
beneficiaries, and each other "employee
benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether formal
or informal, written or oral, and whether
contributed to, or required to be contributed
to, by the AP Group. If any claims, demands
or liabilities of any kind whatsoever ever
arise due to the existence of any Employee
Plan up to the Closing Date, AP will be
solely responsible for such claims, demands,
liabilities or obligations.
5.4 Salaries and Benefits.
5.4.1 AP's Obligations. With respect to their
services as employees of the AP Group up to
the Closing Date, AP will be solely
responsible for: (a) the payment of all
wages, remuneration or other obligations of
any kind whatsoever (including obligations
under any Employee Plans sponsored by AP) due
to Active Employees; (b) notices of
termination or pay in lieu thereof or the
payment of any termination or severance
payments, if any; and (c) the obligation of
health plan continuation coverage in
accordance with the Consolidated Budget
Reconciliation Act of 1984 ("COBRA") and
Sections 601 through 608 of ERISA and with
respect to Active Employees of the AP Group,
compliance with any such similar law which
requires health care continuation after
termination of employment.
5.4.2 CEC Group's Obligations. After the Closing
Date and arising solely from the employment
relationship of the Newly Hired Employees
with the CEC Group or its affiliates, the CEC
Group will be solely responsible for: (a) the
payment of all wages, remuneration or other
obligations of any kind whatsoever (including
obligations under any employee benefit plans
sponsored by CEC due to the Newly Hired
Employees; (b) notices of termination or pay
in lieu thereof or the payment of any
termination or severance payments, if any,
under severance plans sponsored by CEC; and
(c) the obligation to pay medical benefits
under CEC's medical plan, provided, with
respect to obligations for medical benefits
provided to Newly Hired Employees, CEC will
be responsible for charges incurred by the
Newly Hired Employees after the Closing Date.
A charge will be deemed incurred, in the case
of medical (other than hospitalization) or
dental benefits, when the services that are
the subject to the charge are performed. In
the case of hospitalization benefits, a
charge will be deemed incurred by the Newly
Hired Employees on the date that
hospitalization begins, and charges for
hospitalization which
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began before the Closing Date will be the
responsibility of AP even if such
hospitalization continues after the Closing
Date.
5.4.3 CEC Employee Benefit Programs. Under the
employee benefit programs of the CEC Group,
subject to approval by the Internal Revenue
Service, Newly Hired Employees shall be
credited with employment service with APC:
(a) for purposes of determining any period of
eligibility to participate or to vest in
benefits provided under CEC's 401(k)
incentive savings, defined benefit, medical,
disability and life insurance plans, but not
for purposes of determining the amount or
accrual of benefits under CEC's defined
benefit plan; and (b) for purposes of
calculating vacation benefits pursuant to
CEC's vacation policies. It is understood
that the Newly Hired Employees will not have
any carryover vacation from the AP Group in
excess of five (5) days, but will be entitled
to earn days of vacation according to CEC's
vacation policies by taking into account
their prior employment service.
5.4.4 Preexisting Conditions. For each Newly Hired
Employee (and his or her eligible dependents)
who become covered under CEC's medical plan
on the Closing Date and who were covered by
the AP Group's medical plan at the Closing
Date, CEC's medical plan will waive any
preexisting conditions, exclusion or
limitations if permitted under applicable
laws and regulations and if approved by the
insurance carrier which provides medical
insurance to CEC's employees on either an
indemnity or "stop loss" basis.
5.4.5 AP Group's Retirement and Savings Plans.
Prior to but to be effective as of the
Closing Date, AP will cause the AP Group's
defined benefit retirement plan to be amended
to provide that all Newly Hired Employees who
are participants in such retirement plan will
cease to accrue future benefits and AP shall
retain sole liability for the payment of such
benefits as and when the Newly Hired
Employees become eligible therefor under such
retirement plan. Prior to but to be
effective as of the Closing Date, AP will
cause the AP Group's savings investment plan
and employee stock ownership plan (if any) to
be amended in order to provide that Newly
Hired Employees shall be 100% vested in their
accounts under such plans. As of the Closing
Date, all employee contributions by Newly
Hired Employees and all obligations of the AP
Group to make employer contributions in
respect to such employees under any defined
contribution, registered retirement savings,
money purchase pension or stock purchase
plans shall cease unless otherwise required
by applicable law or regulation.
5.4.6 WARN Act. AP will, if required under the
Worker Adjustment and Retraining Notification
Act ("WARN"), provide timely and
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effective notice to the Active Employees with
respect to any employment loss suffered by
such Active Employees as the result of the
termination of their employment with the AP
Group. In the event that WARN (or any
similar law) requires notice to such
employees and the AP Group fails to provide
timely and effective notice under WARN, AP
will indemnify and hold the CEC Group and its
affiliates harmless from and against any
liability to such employees or any unit of
local government that may result to the CEC
Group or its affiliates from such failure,
including, but not limited to, fines, back
pay and reasonable attorney's fees. The CEC
Group will indemnify and hold AP and its
affiliates harmless from any liabilities AP
or its affiliates would not otherwise have
incurred due to terminations after the
Closing Date of Newly Hired Employees with
respect to, arising under or relating to
WARN.
5.5 Consents. Prior to Closing, the AP Group and the CEC Group
will each use its respective reasonable efforts to obtain
the consent or approval of each person whose consent or
approval shall be required in order to permit the closing
of the transactions contemplated by this Agreement.
5.6 Conduct of Business by the CEC Group. The CEC Group
covenants and agrees with APC that from the date of this
Agreement until the Closing Date, CEC will conduct its
business in the ordinary course consistent with past
practices and will use its reasonable best efforts to
preserve intact its business organizations and
relationships with third parties. Without limiting the
generality of the foregoing, from the date hereof until the
Closing Date:
(a) CEC will not (i) declare, set aside or pay any
dividends or other distributions (whether payable in cash,
property or securities) with respect to its capital stock
other than a regular quarterly dividend not in access of
$0.05 per share per quarter; (ii) merge or consolidate
with, or transfer all or substantially of its assets to,
another corporation or other business entity; (iii)
liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution); or (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of
the foregoing;
(b) CEC will not adopt or propose any material change in
its certificate of incorporation or bylaws; and
(c) CEC will not, and will not permit any of its
subsidiaries to, take any action that would make any
representation and warranty of the CEC Group hereunder
inaccurate.
6. Conditions to Obligations of the CEC Group. The obligations of the CEC
Group to effect the transactions contemplated by this Agreement will be subject
to the following conditions:
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6.1 Authorizations. AP shall have furnished CEC with certified
copies of resolutions and partnership authorizations duly
adopted by all of the Partners of AP authorizing all
necessary and proper partnership or corporate action to
enable the AP Group to comply with the terms of this
Agreement and approving the execution, delivery and
performance of this Agreement.
6.2 Representations and Warranties. Except to the extent waived
in writing by the CEC Group, (a) the representations and
warranties of the AP Group herein contained shall be
Substantially True (hereinafter defined) at the Closing
with the same effect as though made at such time (except if
a representation and warranty speaks as of a different
date, in which case it shall be Substantially True as of
such date); and (b) AP shall have performed all material
obligations and complied with all material covenants
required by this Agreement to be performed or complied with
by it at or prior to the Closing. AP shall have also
delivered to the CEC Group a certificate of AP, dated the
Closing Date and signed by two of its officers, to the
effect of the foregoing.
6.3 Third Party Consents. AP shall have obtained and delivered
to the CEC Group consents to the transactions contemplated
by this Agreement from the parties whose consent is
required by contract or otherwise.
6.4 No Material Adverse Change. There shall not have occurred
since June, 30, 1997: (a) any material adverse change in
the financial condition, results of operations or business
of the AP Group's Oil and Gas Business excluding any change
or effect resulting from general economic conditions, any
occurrence or condition affecting the oil and gas industry
generally and any occurrence or condition arising out of
the transactions contemplated by this Agreement or the
public announcement thereof; or (b) any loss or damage to
any of the properties or assets (whether or not covered by
insurance) of the AP Group or the Interests, which, in any
case, would have a Material Adverse Effect (as defined in
Section 10.3) on APC.
6.5 Statutory Requirements. All statutory requirements for the
valid consummation by the AP Group of the transactions
contemplated by this Agreement shall have been fulfilled
and all authorizations, consents and approvals of all
governmental bodies required to be obtained in order to
permit consummation by the AP Group of the transactions
contemplated by this Agreement shall have been obtained,
including, without limitation, the expiration or early
termination of any applicable waiting period required under
the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if
required. Between the date of this Agreement and the
Closing, no action or proceeding shall have been instituted
or, to the knowledge of the AP Group shall have been
threatened by any party (public or private) before a court
or other governmental body to restrain or prohibit the
transactions contemplated by this Agreement or to obtain
damages in respect thereof.
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6.6 Opinion of Counsel. The CEC Group shall have received from
legal counsel of AP an opinion dated the Closing Date, in
form and substance satisfactory to CEC's counsel, to the
effect that: (a) APC is a corporation duly incorporated and
validly existing and in good standing under the laws of the
State of Oklahoma; (b) APC has the corporate power to carry
on its business as now being conducted; (c) the authorized
capital stock of APC and the number of shares of capital
stock outstanding are as set forth in Section 3.2 of this
Agreement, and that such issued shares have been duly
authorized, are validly issued and outstanding, and are
fully paid and nonassessable; (d) the AP Group has the
requisite partnership or corporate power and authority and
has taken all requisite partnership or corporate action
necessary to enable each member of the AP Group to execute
and deliver this Agreement and to consummate the
transactions contemplated thereby; and (e) this Agreement
has been duly and validly executed and delivered by AP.
In rendering such opinion, counsel may rely, to the extent
counsel determines such reliance necessary or appropriate,
upon opinions of local counsel as to matters of law other
than that of the United States and Oklahoma and, as to
matters of fact, upon certificates of state officials or of
any officer or officers of AP provided the extent of such
reliance is stated in the opinion.
6.7 Transfer of the Interests. As of the Closing Date:
6.7.1 AP and its affiliates shall have sold,
assigned, transferred or otherwise conveyed
any and all of the Oil and Gas Business owned
by them to APC, other than the Excluded
Assets, with warranties of title in form and
substance reasonably acceptable to the CEC
Group, except for the one percent (1%)
partnership interest in AGM owned by AnSon
Gas Corporation ("AGC") to be transferred by
AGC to CAC on the Closing Date.
6.7.2 AP shall be the owner and holder of all of
the issued and outstanding capital stock of
APC.
6.7.3 AP and its affiliates shall not have sold,
assigned, transferred, or otherwise conveyed
any of the Interests to any person other than
APC.
6.8 Other Agreements. As of the Closing Date:
6.8.1 AP and its Partners and affiliates shall have
executed and delivered to the CEC Group a
Goodwill Protection Agreement in the form
attached as Exhibit "6.8.1" hereto.
6.8.2 AP and any other appropriate parties shall
have executed and delivered to the CEC Group
a Sublease and Use Agreement in the form
attached as Exhibit "6.8.2" hereto.
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6.8.3 AP shall have executed and delivered to CEC a
Registration Rights Agreement.
6.8.4 The directors and officers of APC shall have
submitted written resignations from office.
6.9 Fairness Opinion. CEC shall have received a written
opinion from a nationally recognized investment banking
firm that the transactions contemplated by this Agreement
are fair to CEC from a financial point of view.
6.10 Schedules and Exhibits. The CEC Group shall have received
and reviewed all of the Schedules and Exhibits to be
provided by the AP Group which are not attached hereto as
of the date of execution of this Agreement and such
Schedules and Exhibits shall not be materially different
than anticipated by the CEC Group.
7. Conditions to Obligations of AP. The obligations of the AP Group to
effect the transactions contemplated by this Agreement shall be subject to the
following conditions:
7.1 Resolutions of Boards of Directors. CEC shall have
furnished AP with certified copies of resolutions or
written consents duly adopted by the boards of directors of
the CEC and CMC, authorizing all necessary and proper
corporate action to enable the CEC Group to comply with the
terms of this Agreement and approving the execution,
delivery and performance of this Agreement.
7.2 Representations and Warranties. Except to the extent
waived in writing by AP hereunder: (a) the representations
and warranties of the CEC Group herein contained shall be
Substantially True at the Closing with the same effect as
though made at such time (except if a representation and
warranty speaks as of a different date, in which case it
shall be Substantially True as of such date); and (b) the
CEC Group shall have performed all material obligations and
complied with all material covenants required by this
Agreement to be performed or complied with by it at or
prior to the Closing. CEC shall have also delivered to AP
a certificate of CEC, dated the Closing Date and signed by
two of its officers, to the effect of the foregoing.
7.3 Third Party Consents. CEC shall have obtained and
delivered to AP consents to the transactions contemplated
by this Agreement (if any) from the parties to all material
contracts which require such consent.
7.4 Statutory Requirements. All statutory requirements for the
valid consummation by the CEC Group of the transactions
contemplated by this Agreement shall have been fulfilled
and all authorizations, consents and approvals of all
governmental bodies required to be obtained in order to
permit consummation by the CEC Group of the transactions
contemplated by this Agreement shall have been obtained,
including, without limitation, the expiration or early
termination of any applicable waiting period required
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under the provisions of the HSR Act. Between the date of
this Agreement and the Closing, no action or proceeding
shall have been instituted or, to the knowledge of the CEC
Group, shall have been threatened by any party (public or
private) before a court or other governmental body to
restrain or prohibit the transactions contemplated by this
Agreement or to obtain damages in respect thereof.
7.5 Opinion of Counsel. AP shall have received an opinion of
legal counsel to CEC, dated the Closing Date, in form and
substance satisfactory to AP's counsel, to the effect that:
(a) CEC and CMC each is a corporation duly incorporated and
validly existing and in good standing under the laws of the
State of Oklahoma; (b) CEC and CMC each has the corporate
power to carry on its business as now being conducted; (c)
the Exchange Shares to be issued in exchange for the APC
Common Stock have been duly authorized and, immediately
after the Closing Date, will be duly and validly issued and
will be fully paid and nonassessable; (d) CEC and CMC each
has the requisite corporate power and authority and has
taken all requisite corporate action necessary to enable it
to execute and deliver this Agreement and to consummate the
transactions contemplated thereby; and (e) this Agreement
has been duly and validly executed and delivered by CEC and
CMC.
In rendering such opinion, counsel may rely, to the extent
counsel determines such reliance necessary or appropriate,
upon opinions of local counsel as to matters of law other
than that of the United States and Oklahoma and, as to
matters of fact, upon certificates of state officials and
of any officer or officers of CEC provided the extent of
such reliance is specified in this opinion.
7.6 Registration Rights Agreement. CEC shall have executed and
delivered to AP a Registration Rights Agreement.
7.7 CEC Common Stock Price. As of the last trading day
preceding the Closing Date, the per share closing price of
the CEC Common Stock shall not be less than Four Dollars
($4.00).
7.8 Schedules and Exhibits. The AP Group shall have received
and reviewed all of the Schedules and Exhibits to be
provided by the CEC Group which are not attached hereto as
of the date of execution of this Agreement and such
Schedules and Exhibits shall not be materially different
than anticipated by the AP Group.
8. Termination of Agreement and Abandonment of Transaction. Anything
herein to the contrary notwithstanding, this Agreement and the transaction
contemplated hereby may be terminated at any time before the Closing, whether
before or after approval of this Agreement by the Partners of AP and CEC as
follows, and in no other manner:
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8.1 Mutual Consent. By mutual consent of CEC and the Partners
of AP.
8.2 By CEC. By the CEC Group if, by the Closing Date, the
conditions set forth in Section 6 shall not have been met
(or waived as provided in this Agreement).
8.3 By AP. By the Partners of AP if, by the Closing Date, the
conditions set forth in Section 7 shall not have been met
(or waived as provided in this Agreement).
8.4 By Either CEC or AP. By CEC or AP if any governmental body
shall have issued an order, decree or ruling, or taken any
other action, permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated hereby
and such order, decree, ruling or other action shall have
become final and non-appealable.
8.5 Termination of Agreement. In the event of termination of
this Agreement as provided in this Section 8, this
Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of any
party hereto. Nothing contained in this Section shall
relieve any party from liability for any breach of the
representations, warranties, covenants or agreements set
forth in this Agreement.
9. Additional Agreements of the Parties.
9.1 Closing/Post Closing Working Capital Adjustments. On or
prior to the Closing Date, APC shall declare a dividend to
APC's stockholders of record on the day preceding the
Closing Date in an amount equal to APC's positive Net
Working Capital (as hereinafter defined) as of the
Effective Time. Once declared, the dividend shall not be
rescinded, modified or otherwise changed without the
written consent of APC and CMC and shall be treated as an
obligation of APC. The dividends shall be paid as
hereinafter provided in this Section 9. If the Net Working
Capital of APC is a negative number, AP shall make a
capital contribution to APC (or shall make a payment to CEC
after the exchange) of the Net Working Capital negative
amount. Payment of the capital contribution shall be made
as hereinafter provided in this Section 9.1 as of the
Effective Time.
9.1.1 Net Working Capital. As used herein, the
"Net Working Capital" of APC and AGM shall
mean the excess of APC's and AGM's cash and
cash equivalents, inventory, accounts
receivable, including joint interest xxxxxxxx
and accrued oil and gas revenues, net of bad
debt reserves, over their respective accrued
and unpaid federal, state and local tax
liabilities, accounts payable, including
lease operating expenses, severance taxes,
revenues and royalties due others and accrued
capital items, including drilling costs,
recompletion costs, capitalized workover
costs, leasehold
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acquisition costs, etc., determined as of the
Effective Time in accordance with generally
accepted accounting principles, as
historically applied to APC, AGM or their
respective predecessors in interest. As
further adjusted to credit AP for the capital
costs incurred to develop proved undeveloped
reserves as set forth in Schedule "9.1.1" and
adjusted for any booked financial liability
owing on the Production Payments.
9.1.2 Actual Net Working Capital. Within 90 days
after the Closing Date, AP and CEC will agree
on the actual Net Working Capital of APC. If
AP and CEC do not agree on the actual Net
Working Capital of APC within 90 days after
the Closing Date, then all items remaining in
dispute will be submitted within ten (10)
days thereafter to an independent accounting
firm of national reputation mutually
acceptable to AP and CEC (the "Neutral
Auditors"). If AP and CEC are unable to
agree on the Neutral Auditors, then AP and
CEC shall request the American Arbitration
Association to appoint the Neutral Auditors.
All fees and expenses relating to appointment
of the Neutral Auditors and the work, if any,
to be performed by the Neutral Auditors will
be borne equally by AP and CEC. The Neutral
Auditors will deliver to AP and CEC a written
determination (such determination to include
a worksheet setting forth all material
calculations used in arriving at such
determination and to be based solely on
information provided to the Neutral Auditors
by CEC and AP, or their respective
affiliates) of the disputed items within 30
days of receipt of the disputed items, which
determination will be final, binding and
conclusive. The final, binding and conclusive
Closing Date Worksheet, which either is
agreed upon by AP and CEC or is delivered by
the Neutral Auditors in accordance with this
Section 9.1.2 is referred to herein as the
"Conclusive Worksheet."
9.1.3 Agreement on Conclusive Worksheet. Promptly
following agreement on or delivery of the
Conclusive Worksheet, the parties shall
account to each other, by cash payments, so
that: (a) if the Net Working Capital as
reflected in the Conclusive Worksheet is a
positive number as of the Effective Time, AP
shall receive, after giving effect to
previous payments, if any, received by AP, an
aggregate amount of cash payments equal to
the actual Net Working Capital as so
reflected; or (b) if the Net Working Capital
as reflected in the Conclusive Worksheet is a
negative number, APC shall have received,
after giving effect to the previous payments,
if any, received by APC, an aggregate amount
of cash payments equal to the actual Net
Working Capital deficit as so reflected.
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9.2 Production Payments. The Real Property Interests owned by
APC include a group of producing oil and gas leases (the
"Subject Interests") which are burdened by certain
production payments created under certain instruments
entitled "Conveyance of Production Payment," which
instruments and amendments thereto are described in
Schedule "3.9" attached hereto (collectively, the
"Production Payments"). AP will cooperate and assist the
CEC Group in any manner reasonably requested by the CEC
Group in connection with the Production Payments.
9.3 Royalty, Working Interest and Tax Liabilities. During the
survival period set forth in Section 10.4 of this
Agreement, AP will assume, defend and be solely responsible
for any claim that royalty, production payment, net profits
interest, working interest, production tax or similar
payments made by APC, AP or any of its subsidiaries on
crude oil, condensate, natural gas, natural gas liquids or
other hydrocarbon products: (a) sold by the AP Group or any
of its subsidiaries to an affiliate of any of them; or (b)
transferred by the AP Group or any of its subsidiaries
under in-kind exchange agreements; were inaccurate or
insufficient by reason of the price of or value ascribed to
the products sold or transferred; provided, however, AP
shall not be required to defend or have any liability for
any claim arising after the Closing Date and CMC shall
defend and be solely responsible for all post Closing Date
claims even if asserted in the same action as claims for
which AP is responsible.
9.4 Intercompany Payables. AP shall pay and cause the AP Group
(excluding APC) to pay all sums owed by the AP Group to
APC, including without limitation, any and all gas
balancing obligations, promptly in accordance with the
applicable operating agreement.
9.5 Schedule Disclosures. A disclosure by AP or the CEC Group
in any schedule to this Agreement shall be deemed an
exception to any representation or warranty herein made by
either of them to the extent that the information disclosed
would be necessary to make a particular representation or
warranty true.
9.6 Tax Return and Reorganization Information. The CEC Group
shall prepare the 1997 federal and state income tax returns
for APC for the period after the Effective Time and deliver
them to AP except to the extent they are included in
consolidated tax returns of CEC. AP will prepare the
federal and state tax returns for APC for the period
preceding the Effective Time and will deliver them to CEC.
AP and CEC shall cooperate with each other in the
preparation of those returns. The CEC Group and AP agree to
file as a part of their federal tax return for the taxable
year during which the Closing Date occurs all information
required by U.S. Treasury Regulation sec. 1.368-3.
9.7 Preservation of Books and Records. For a period of five
(5) years after the Closing Date, CEC and AP shall, using
procedures consistent with their current record retention
procedures: (a) preserve and retain all books and
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records held by either of them or their subsidiaries that
relate to the Oil and Gas Business including, but not
limited to, any documents relating to any governmental or
nongovernmental actions, suits, proceedings or
investigations arising out of the conduct of those
businesses before the Closing Date (the "Records"); and (b)
subject to mutually acceptable confidentiality requirement,
make the Records available to each other and their
respective agents upon reasonable notice and at reasonable
times, it being understood that either party shall be
entitled to make copies of any of the Records at the
copying party's expense. CEC and AP further agree not to
destroy any of the Records in their possession for a period
of five (5) years after the Closing Date unless the party
proposing to destroy the Records, or some portion thereof,
gives the other party notice of the proposed destruction
and a reasonable opportunity, at the other party's expense,
to take possession of the Records designated for
destruction. CEC and AP further agree to cooperate with
each other, including reasonable access to their respective
employees, in providing additional information and
explanations concerning the Records.
10. General Provisions.
10.1 Amendments. Subject to applicable law, this Agreement and
the form of any exhibit attached hereto may be amended upon
written agreement of the parties hereto at any time prior
to the Closing.
10.2 Survival of Covenants, Representations and Warranties. The
respective representations and warranties of the CEC Group
and AP contained in this Agreement shall be deemed made as
of the Closing and all covenants and undertakings required
to be performed, unless otherwise specifically herein
provided, shall survive the Closing, but shall terminate
two (2) years after the Closing Date.
10.3 Certain Definitions. As used in Section 6.4 of this
Agreement, a "Material Adverse Effect" on APC is an event
or condition that has an adverse financial impact of more
than One Million Dollars ($1,000,000.00) on APC. The
statement that the representations and warranties of the AP
Group are to be "Substantially True" at the Closing shall
be true if the cumulative adverse financial impact of all
untrue representations and warranties of the AP Group at
Closing is less than One Million Dollars ($1,000,000.00).
Notwithstanding anything else in this Agreement to the
contrary, no event resulting from general economic
conditions, no occurrence or condition affecting oil and
gas industry generally and no occurrence or condition
arising out of the transactions contemplated by this
Agreement or the public announcement thereof shall be
considered adverse or make any representation or warranty
herein untrue. With respect to the Real Property Interests
representations and warranties "good and defensible title"
means with respect to each Oil and Gas Interest, such title
that: (i) entitles APC to receive (free and clear of all
royalties, overriding royalties, net profits interests or
other burdens on or measured by production of hydrocarbons
and associated gases) not less than
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the "Net Revenue Interests" set forth on Schedule 3.3.1 of
all oil, gas, sulfur and associated liquid and gaseous
hydrocarbons and other associated gases produced, saved and
marketed from the Oil and Gas Interest for the productive
life of such Oil and Gas Interest (ii) obligates APC to
bear costs and expenses relating to the maintenance,
development and operation of such Oil and Gas Property in
an amount not grater than the "Working Interests" set forth
on Schedule 3.3.1 for the productive life of such Oil and
Gas Property; and (iii) is free and clear of any and all
encumbrances, liens and defects, other than the Production
Payments.
10.4 Survival and Indemnification. The AP Group shall indemnify
and hold the CEC Group harmless, at all times from and
after the Closing Date, against and in respect to any
Damages, provided that the AP Group shall not be liable for
any Damages unless the amount of all such Damages exceed
$1,000,000 in the aggregate and, in such event, the amount
of Damages shall not include the first such $1,000,000
thereof. The term "Damages" means any claims, actions,
demands, lawsuits, costs, expenses, liabilities, penalties
and damages (including counsel fees incidental thereto or
incidental to the enforcement by the CEC Group of this
Agreement) resulting to the CEC Group, net of any insurance
proceeds received by the CEC Group in reimbursement of such
Damages, from: (a) any inaccurate representation made to
the CEC Group in or pursuant to this Agreement; and (b) any
breach of any of the warranties made to the CEC Group in or
pursuant to this Agreement.
10.4.1. Indemnification Procedure. If any
party hereto discovers or otherwise becomes
aware of an indemnification claim arising
under this Agreement, such indemnified party
shall give written notice to the indemnifying
party, specifying such claim, and may
thereafter exercise any remedies available to
such party under this Agreement; provided,
however, that the failure of any indemnified
party to give notice as provided herein shall
not relieve the indemnifying party of any
obligations hereunder, to the extent the
indemnifying party is not materially
prejudiced thereby. Further, promptly after
receipt by an indemnified party hereunder of
written notice of the commencement of any
action or proceeding with respect to which a
claim for which indemnification may be made
against any indemnifying party, give written
notice to the latter of the commencement of
such action; provided however that the
failure of any indemnified party to give
notice as provided herein shall not relieve
the indemnifying party of any obligations
hereunder, to the extent the indemnifying
party is not materially prejudiced thereby.
10.4.2. Defense. If any such action is brought
against an indemnified party, the
indemnifying party shall be entitled to
participate in and to assume the defense
thereof, jointly with any other indemnifying
party similarly notified, to the extent that
it may wish, with
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counsel reasonably satisfactory to such
indemnified party, and after such notice from
the indemnifying party to such indemnified
party of its election so to assume the
defense thereof, the indemnifying party shall
not be liable to such indemnified party for
any legal or other expenses subsequently
incurred by the latter in connection with the
defense thereof unless the indemnifying party
has failed to assume the defense of such
claim and to employ counsel reasonably
satisfactory to such indemnified person. An
indemnifying party who elects not to assume
the defense of a claim shall not be liable
for the fees and expenses of more than one
counsel in any single jurisdiction for all
parties indemnified by such indemnifying
party with respect to such claims or with
respect to claims separate but similar or
related in the same jurisdiction arising out
of the same general allegations.
Notwithstanding any of the foregoing to the
contrary, the indemnified party will be
entitled to select its own counsel and assume
the defense of any action brought against it
if the indemnifying party fails to select
counsel reasonably satisfactory to the
indemnified party, the expenses of such
defense is to be paid by the indemnifying
party. No indemnifying party shall consent
to entry of any judgment or enter into any
settlement with respect to a claim without
the consent of the indemnified party, which
consent shall not be unreasonably withheld,
or unless such judgment or settlement
includes as an unconditional term thereof the
giving by the claimant or plaintiff to such
indemnified party of a release from all
liability with respect to such claim. No
indemnified party shall consent to entry of
any judgment or enter into any settlement of
any such action, the defense of which has
been assumed by an indemnifying party,
without the consent of such indemnifying
party, which consent shall not be
unreasonably withheld.
10.5 Governing Law. This Agreement and the legal relations
between the parties shall be governed by and construed in
accordance with the laws of the State of Oklahoma.
10.6 Notices. All notices, requests, demands or other
communications required or permitted by this Agreement
shall be in writing and effective when received, and
delivery shall be made personally or by registered or
certified mail, return receipt requested, postage prepaid,
or overnight courier or confirmed facsimile transmission,
addressed as follows:
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IF TO THE CEC GROUP:
Chesapeake Energy Corporation
Chesapeake Merger II Corp.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxxx
Chairman and Chief
Executive Officer
Facsimile No. (000) 000-0000
WITH A COPY TO:
Self, Xxxxxxx & Lees, Inc.
2725 Oklahoma Tower, 000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: C. Xxx Xxxx, Esquire
Facsimile No. (000) 000-0000
IF TO THE AP GROUP:
AnSon Partners Limited Partnership
AnSon Production Corporation
0000 Xxxxxxxxx Xxxxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Mr. Xxxx Xxxxxxxx, III
Facsimile No. (000) 000-0000
WITH A COPY TO:
Xxxxx Xxxxxxx Mock Xxxxxxx Xxxxx Xxxxxxxx
000 Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esquire
Facsimile No. (000) 000-0000
10.7 No Assignment. This Agreement may not be assigned by
operation of law or otherwise
10.8 Fees and Expenses. All fees and expenses, including
attorneys' fees, incurred in connection with this Agreement
and the transactions contemplated hereby shall be borne by
the respective party who has incurred such fee or expense.
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10.9 Headings. The descriptive headings of the Sections and
paragraphs of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
10.10 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties
hereto and delivered to each of the other parties hereto.
10.11 Entire Agreement. This Agreement and the other agreements
contemplated hereby constitutes the entire agreement among
the CEC Group and AP with respect to the subject matter
hereof. Unless this Agreement is specifically amended in
writing, it supersedes all other agreements and
understandings among the parties with respect to the
subject matter hereof and thereof.
10.12 Publicity. The initial press release relating to this
Agreement shall be a joint press release and thereafter AP
and CEC shall, subject to their respective legal
obligations (including requirements of the stock exchange
and other similar regulatory bodies), consult with each
other, and use reasonable efforts to agree upon the text of
any press release before issuing any such press release or
otherwise making public statements with respect to the
transactions contemplated hereby.
10.13 No Third Party Beneficiaries. Nothing in this Agreement,
whether express or implied, is intended to confer any
rights or remedies under or by reason of this Agreement on
any person other than the parties to it, nor is anything in
this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party
to this Agreement, nor shall any provision give any third
persons any rights of subrogation or action over or against
any party to this Agreement.
10.14 Specific Performance. The CEC Group and the AP Group each
acknowledge that neither the CEC Group nor AP would have an
adequate remedy at law for money damages in the event that
this Agreement were not performed in accordance with its
terms, and therefore, agree that the CEC Group and AP each
shall be entitled to specific enforcement of the terms
hereof in addition to any other remedy to which it may be
entitled, at law or in equity.
10.15 Partial Illegality or Unenforceability. Wherever possible,
each provision hereof shall be interpreted in such manner
as to be effective under applicable law, but in case any
one or more of the provisions contained herein shall, for
any reason, be held to be illegal or unenforceable in any
respect, such illegality or unenforceability shall not
affect any other provision of this Agreement, and this
Agreement shall be construed as if such illegal or
unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or
provisions would result in such a material
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change as to cause completion of the transactions
contemplated hereby to be unreasonable.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
CHESAPEAKE ENERGY CORPORATION,
an Oklahoma Corporation
By: /s/ XXXXXX X. XxXXXXXXX
----------------------------
Xxxxxx X. XxXxxxxxx
Chief Executive Officer
CHESAPEAKE MERGER II CORP., an
Oklahoma Corporation
By: /s/ XXXXXX X. XxXXXXXXX
----------------------------
Xxxxxx X. XxXxxxxxx,
President
ANSON PARTNERS LIMITED
PARTNERSHIP, an Oklahoma
Limited Partnership
By: /s/ XXXX X. XXXXXXXX, III
----------------------------
Xxxx X. Xxxxxxxx, III, Sole
General Partner
ANSON PRODUCTION CORPORATION,
an Oklahoma corporation
By: /s/ XXXX X. XXXXXXXX, III
----------------------------
Xxxx X. Xxxxxxxx, III,
President
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