Exhibit 10.2
EXCHANGE AND FINANCING AGREEMENT
AMONG
CARBON ENERGY CORPORATION
CEC RESOURCES LTD.
AND
YORKTOWN ENERGY PARTNERS III, L.P.
DATED
OCTOBER 14, 1999
TABLE OF CONTENTS
PAGE
Article 1 Articles and Bylaws of Carbon........................................2
Article 2 Authorization and Sale of Carbon Common Stock........................2
2.1 Authorization and Sale of Shares .....................................2
2.2 Closing for Shares ...................................................2
2.3 Use of Proceeds ......................................................2
Article 3 Assignment of Stock Purchase Agreement...............................3
3.1 Assignment ...........................................................3
3.2 Assumption; Reimbursement of Deposit .................................3
3.3 Amendments ...........................................................3
Article 4 Exchange Offer.......................................................3
4.1 The Offer ............................................................3
4.2 Compliance With Applicable Law .......................................4
4.3 CEC Canada Approval ..................................................4
4.4 Shareholder Information ..............................................5
Article 5 Stock Options........................................................5
5.1 Stock Option Plan ....................................................5
5.2 Replacement of Stock Options .........................................5
5.3 Employment Agreements ................................................6
5.4 Related Actions ......................................................6
5.5 [Other Employee Plans] ...............................................6
Article 6 Board of Directors of Carbon.........................................6
6.1 Definitions ..........................................................6
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6.2 Board of Directors After BFC Closing .................................7
6.3 Yorktown Designations ................................................7
6.4 XxXxxxxx as a Director ...............................................7
6.5 Nominating Committee .................................................7
6.6 Nomination of Directors ..............................................8
6.7 Vacancies ............................................................8
6.8 Voting of Shares .....................................................8
6.9 Super Majority .......................................................9
6.10 Termination of this Article .........................................9
Article 7 Representations and Warranties of Carbon.............................9
7.1 Organization and Authority ...........................................9
7.2 No Subsidiaries ......................................................9
7.3 Capitalization ......................................................10
7.4 Authorization; No Conflict ..........................................10
7.5 No Operations .......................................................11
7.6 Brokers and Finders .................................................11
Article 8 Representations and Warranties of CEC Canada........................11
8.1 Organization and Authority ..........................................11
8.2 No Subsidiaries .....................................................11
8.3 Capitalization ......................................................11
8.4 Authorization; No Conflict ..........................................12
8.5 Brokers and Finders .................................................13
8.6 SEC Reports .........................................................13
Article 9 Representations and Warranties of Yorktown..........................13
ii
9.1 Organization and Authority ..........................................13
9.2 Authorization .......................................................14
9.3 Brokers and Finders .................................................14
9.4 Investment Matters ..................................................15
Article 10 Covenants..........................................................15
10.1 Covenants of Carbon ................................................15
10.2 Covenants of CEC Canada ............................................18
10.3 Covenants of Yorktown ..............................................20
Article 11 Conditions.........................................................21
11.1 Conditions Precedent to Obligation of Carbon and CEC Canada ........21
11.2 Condition Precedent to Obligation of Yorktown ......................21
Article 12 Termination and Miscellaneous......................................22
12.1 Obligation to Make Exchange Offer ..................................22
12.2 Termination of Agreement ...........................................22
12.3 HSR Act Filing .....................................................23
12.4 Expenses ...........................................................23
12.5 Successors and Assigns .............................................23
12.6 Third Party Beneficiaries ..........................................23
12.7 Notices ............................................................24
12.8 Complete Agreement .................................................25
12.9 Captions ...........................................................25
12.10 Waiver and Other Action ...........................................25
12.11 Amendment .........................................................25
12.12 Governing Law .....................................................25
iii
12.13 Non-Survival of Representations and Warranties ....................25
12.14 Attorneys' Fees ...................................................25
12.15 Counterparts ......................................................25
iv
EXCHANGE AND FINANCING AGREEMENT
This Agreement is made as of October 14, 1999 among Carbon Energy
Corporation ("Carbon"), a Colorado corporation, CEC Resources Ltd. ("CEC
Canada"), an Alberta corporation, and Yorktown Energy Partners III, L.P.
("Yorktown").
Recitals
A. CEC Canada has entered into a Stock Purchase Agreement dated August 11,
1999 (as it may be amended from time to time, called the "Stock Purchase
Agreement") with Bonneville Pacific Corporation ("Bonneville Pacific"). The
Stock Purchase Agreement provides for the purchase by CEC Canada from Bonneville
Pacific of all outstanding shares of Bonneville Fuels Corporation ("BFC") for
$24,000,000 in cash, subject to certain adjustments. After this transaction, BFC
will continue to have outstanding certain indebtedness.
B. The parties desire that the purchase of BFC stock under the Stock
Purchase Agreement be completed by Carbon which is a corporation organized under
the laws of a state in the United States and which has its principal executive
offices in the United States. The Stock Purchase Agreement permits the
assignment of rights and obligations of CEC Canada under the Stock Purchase
Agreement to Carbon as an affiliate of Yorktown.
C. Yorktown has committed to purchase equity of Carbon for $24,750,000 in
order to provide equity financing for the total purchase price of the BFC shares
under the Stock Purchase Agreement.
D. All parties to this Agreement require that, in connection with the
assignment of the Stock Purchase Agreement to Carbon and as part of an overall
plan to contribute cash, securities and other property by CEC Canada, Yorktown
and shareholders of CEC Canada to Carbon, Carbon shall make an offer to all
shareholders of CEC Canada to exchange one share of Carbon for each outstanding
share of CEC Canada.
E. The Boards of Directors of CEC Canada and Carbon have unanimously
approved of the making of the exchange offer described in paragraph D above and
later in this Agreement. The Board of Directors of CEC Canada has also resolved
to recommend that the holders of shares of CEC Canada tender their shares
pursuant to that exchange offer.
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Agreement
In consideration of the mutual promises and covenants contained in this
Agreement, the parties, intending to be legally bound, agree as follows:
Article 1
Articles and Bylaws of Carbon
The parties concur and approve of the Articles of Incorporation of Carbon
and Bylaws of Carbon as currently in effect, subject to any changes to be made
in the future.
Article 2
Authorization and Sale of Carbon Common Stock
2.1 Authorization and Sale of Shares.
--------------------------------
Carbon shall authorize the sale and issuance of 4,500,000 shares of its
common stock to Yorktown. Subject to the terms and conditions of this
Agreement, Carbon shall issue and sell to Yorktown, and Yorktown shall purchase
from Carbon, 4,500,000 shares of Carbon common stock at a total purchase price
of $24,750,000 in cash, which is $5.50 per share.
2.2 Closing for Shares.
------------------
The closing of the purchase and sale of the Carbon common stock to Yorktown
as provided in Section 2.1 shall be held at a date, time and place mutually
agreeable to all parties to this Agreement but in any event no later than the
closing of the purchase of BFC stock under the Stock Purchase Agreement (the
"BFC Closing"). At the closing for the sale of Carbon shares as provided in
Section 2.1, Carbon shall deliver to Yorktown a certificate or certificates,
registered in Yorktown's name, representing 4,500,000 shares, free and clear of
any liens, security interests or encumbrances (other than any transfer
restrictions imposed by securities laws); and at that closing Yorktown shall pay
to Carbon the purchase price of $24,750,000 in immediately available funds by
wire transfer per instructions of Carbon.
2.3 Use of Proceeds.
---------------
The proceeds of the sale of shares to Yorktown as provided in this
Agreement shall be used for the purchase of BFC shares under the Stock Purchase
Agreement, and any remaining proceeds after that purchase shall be added to and
be part of the working capital of Carbon.
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Article 3
Assignment of Stock Purchase Agreement
3.1 Assignment.
----------
On a date mutually agreed upon by all parties to this Agreement but in any
event immediately prior to the BFC Closing, CEC Canada shall assign all rights
and obligations of CEC Canada under the Stock Purchase Agreement to Carbon,
including the right to purchase all outstanding BFC shares. CEC Canada shall
cause prior notice of this assignment to be given to Bonneville Pacific under
the terms of the Stock Purchase Agreement. It is further understood that, in
accordance with the terms of the Stock Purchase Agreement, CEC Canada shall
remain fully liable for all of its obligations under the Stock Purchase
Agreement.
3.2 Assumption; Reimbursement of Deposit.
------------------------------------
Carbon, upon receipt of that assignment of the Stock Purchase Agreement,
shall perform and comply with all obligations and terms applicable to CEC Canada
under the Stock Purchase Agreement, as if Carbon were named as the Buyer in the
Stock Purchase Agreement instead of CEC Canada. Also, upon receipt of that
assignment of the Stock Purchase Agreement, Carbon shall pay $1,200,000 to CEC
Canada as reimbursement of the deposit made by CEC Canada on the purchase price
under the Stock Purchase Agreement.
3.3 Amendments.
----------
Neither CEC Canada nor Carbon will make any amendment to the Stock Purchase
Agreement or grant any waiver under the Stock Purchase Agreement without the
permission and consent of the other parties to this Agreement, including
Yorktown.
Article 4
Exchange Offer
4.1 The Offer.
---------
Carbon shall, and Yorktown and CEC Canada shall cause Carbon to, make an
offer to all holders of shares of CEC Canada to exchange one share of common
stock of Carbon for each outstanding share of CEC Canada (the "Exchange Offer")
as promptly as reasonably practicable after the BFC Closing. The obligation of
Carbon to make the Exchange Offer is subject only to the assignment of the Stock
Purchase Agreement by CEC Canada to Carbon as provided above and the
consummation of the BFC Closing. In order for any specific term to be included
in the Exchange Offer, the term must be approved by Yorktown, CEC Canada and
Carbon, whose approval shall not be unreasonably withheld. Promptly after the
expiration of any
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withdrawal rights for tendered shares in the Exchange Offer or the expiration of
the Exchange Offer, as the case may be, Carbon shall exchange its shares for all
shares of CEC Canada validly tendered in the Exchange Offer and not withdrawn.
4.2 Compliance With Applicable Law.
------------------------------
Carbon shall take, and CEC Canada and Yorktown shall cause Carbon to take,
all necessary steps to comply with applicable law in making the Exchange Offer,
including without limitation (a) filing with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-4 (together with any
amendments and supplements, called the "Registration Statement") under the
Securities Act of 1933 (the "Securities Act"), (b) filing with the SEC a tender
offer statement on Schedule 14D-1 (together with all amendments and supplements,
called the "Schedule 14D-1") with respect to the Exchange Offer, and (c) filing
all documents required to obtain any permits and approvals, if any, required to
carry out the transactions contemplated by this Agreement under any applicable
Canadian laws or state securities laws and will use its best efforts to obtain
such permits and approvals. The Registration Statement and Schedule 14D-1 shall
include summary advertisements, letters of transmittal and such other documents
as necessary to make the Exchange Offer (the Registration Statement, Schedule
14D-1 and other documents, together with all supplements and amendments, are
called collectively the "Offer Documents").
4.3 CEC Canada Approval.
-------------------
CEC Canada hereby approves of the Exchange Offer and represents that the
Board has unanimously determined that this Agreement and the transactions
contemplated by this Agreement, including the Exchange Offer, are fair to and in
the best interests of the shareholders of CEC Canada. The Board of Directors of
CEC Canada shall recommend that the shareholders of CEC Canada accept the
Exchange Offer, and CEC Canada consents to the inclusion in the Registration
Statement and other Offer Documents of the recommendation of the Board of
Directors as described above. Also CEC Canada represents that it has been
advised by each of its directors and executive officers that each of them
intends either to tender or cause to be tendered all shares of CEC Canada
beneficially owned by them in the Exchange Offer. As soon as reasonably
practical and no later than the date of commencement of the Exchange Offer, CEC
Canada shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 (which, together with all amendments and supplements, is called
the "Schedule 14D-9") containing the recommendation of the Board described in
this Section and shall disseminate the Schedule 14D-9 to the extent required by
rules of the SEC under the Securities Exchange Act of 1934 (the "Exchange Act")
and any other applicable federal securities laws. CEC Canada agrees to correct
promptly any information provided by it for use in the Schedule 14D-9 which
shall have become false or misleading and to take all steps necessary to cause
the Schedule 14D-9 as so corrected to be filed with
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the SEC and disseminated to holders of shares of CEC Canada to the extent
required by applicable federal securities laws.
4.4 Shareholder Information.
-----------------------
CEC Canada shall promptly furnish to Carbon mailing labels containing the
name and addresses of all record holders of shares of CEC Canada and with
security position listings of all shares held in stock depositories, each as of
a recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of shares of CEC Canada. CEC Canada shall furnish Carbon with
such additional information, including without limitation, updated listings and
computer files of shareholders, mailing labels and security position listings
and such other assistance as Carbon may reasonably request for the Exchange
Offer. Carbon shall, subject to the requirements of applicable law and except
as necessary to disseminate the Exchange Offer and any Offer Documents, hold in
confidence the information contained in those labels, listings and files and
shall use such information only in connection with the Exchange Offer.
Article 5
Stock Options
5.1 Stock Option Plan.
-----------------
Each of the parties shall approve the 1999 Stock Option Plan of Carbon (the
"Carbon Stock Option Plan") and the 1999 Restricted Stock Plan, both attached
as Exhibit 1, and shall cause these Plans to be in effect prior to the BFC
---------
Closing.
5.2 Substitution of Stock Options.
-----------------------------
Carbon shall grant under the Carbon Stock Option Plan substitute options
for each option outstanding under the CEC Resources Ltd. Stock Option Plan (the
"CEC Canada Stock Option Plan"). Any option granted by Carbon in substitution
for an option granted under the CEC Stock Option Plan shall expressly provide
that it is being granted in full satisfaction of, and in substitution for, any
and all options for CEC Resources, Ltd. Stock previously granted under the CEC
Stock Option Plan. The following terms and conditions of the substitute options
granted pursuant to the Carbon Stock Option Plan shall be the same as the terms
and conditions relating to the specific options granted pursuant to an
optionee's Stock Option Agreement executed under the terms of CEC Stock Option
Plan: (1) the grant and exercise prices of the option; (2) the character of the
option as an "incentive stock option" or a "nonqualified stock option" (as
defined in the Code); (3) the vesting provisions applicable to the option
(except to the extent previously modified in executed employment agreements
between the optionee and CEC Canada); (4) the change in
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control provisions applicable to the option (except to the extent previously
modified in executed employment agreements between the optionee and CEC Canada);
(5) the provisions addressing the consequences of the optionee's termination of
employment for any reason; (6) the limitations on assignability of the option;
(7) the expiration date of the option; and (8) the payment method for the
purchase of the shares subject to the option.
5.3 Employment Agreements.
---------------------
The parties approve of the Employment Agreements with Xxxxxxx X. XxXxxxxx
("XxXxxxxx") and Xxxxx Xxxxxxxxx ("Struzeski") in the forms attached as Exhibit
-------
2 to this Agreement and will cause Carbon to enter into these Employment
-
Agreements on or prior to the BFC Closing.
5.4 Related Actions.
---------------
Concurrently with acquiring shares of Carbon as provided below, Yorktown
shall, as a shareholder of Carbon, approve of the Carbon Stock Option Plan,
Carbon's 1999 Restricted Stock Plan and the above-described Employment
Agreements. Carbon and Yorktown shall cause the Board of Directors of Carbon to
approve and adopt the Carbon Stock Option Plan, Carbon's 1999 Restricted Stock
Plan and the Employment Agreements.
5.5 Other Employee Plans.
--------------------
CEC Canada may, in its discretion, transfer the sponsorship of all employee
benefit plans formerly sponsored by CEC Canada, including but not limited to the
CEC Resources Ltd. 401(k) Profit Sharing Plan, to Carbon as soon as practicable
following the completion of the Exchange Offer.
Article 6
Board of Directors of Carbon
6.1 Definitions.
-----------
For purposes of this Article 6, the following terms have the following
meanings:
"Beneficial ownership" or "owned beneficially" with respect to any voting
stock means stock of which a person or entity is a beneficial owner as defined
at the date hereof in Rule 13d-3 of the SEC under the Exchange Act.
"Independent director" means a person who is not an officer or employee of
Carbon, is not related to an officer of Carbon and does not represent Yorktown
or any other beneficial owner of 10% or more of the outstanding voting stock of
Carbon.
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"Super majority vote of the Board" means approval by a majority of the
entire Board of Directors of Carbon, which majority includes a majority of all
Yorktown directors and at least one independent director.
"Voting stock" means securities having the right to vote generally in any
election of directors of Carbon.
6.2 Board of Directors After BFC Closing.
------------------------------------
After consummation of the BFC Closing, the Board of Directors of Carbon
shall consist of five directors, and these five directors shall be: Xxxxx X.
Xxxxxxx; Xxxxxxx X. Xxxxxxx; Xxxxx X. Xxxxxxxx; Xxxxx X. Xxxxxx; and XxXxxxxx.
Upon completion of the Exchange Offer, and if Xxxxx X. Xxxxxxxxx accepts the
Exchange Offer for all CEC shares owned beneficially by him, the Board of
Directors of Carbon shall consist of six directors, and these six directors
shall be the above-named five persons and Xxxxx X. Xxxxxxxxx.
6.3 Yorktown Designations.
---------------------
Xxxxx X. Xxxxxxxx and Xxxxx X. Xxxxxx named above are persons designated by
Yorktown. So long as Yorktown is the beneficial owner of voting shares with 50%
or more of the outstanding votes in the election of directors of Carbon,
Yorktown shall have the right to designate for nomination two directors of
Carbon ("Yorktown Directors"). If Yorktown owns beneficially voting stock with
25% or more but less than 50% of the outstanding votes in the election of
directors of Carbon, then Yorktown shall have the right to designate for
nomination one director of Carbon. Yorktown will not have the right, as a
contractual matter under this Agreement, to designate any persons for nomination
as directors if Yorktown owns beneficially voting stock with less than 25% of
the outstanding votes in the election of directors of Carbon.
6.4 XxXxxxxx as a Director.
----------------------
So long as XxXxxxxx is an officer of Carbon, XxXxxxxx shall be designated
for nomination as a director of Carbon.
6.5 Nominating Committee.
--------------------
The Board of Directors of Carbon shall establish, empower and maintain a
nominating committee. The nominating committee shall be responsible for
determining, on behalf of the Carbon Board of Directors, nominees for the
position of director of Carbon or persons to be elected by the Board of
Directors or shareholders to fill any vacancy in the Board of Directors. The
nominating committee shall be comprised of one Yorktown director, XxXxxxxx so
long as he is a director of Carbon and two independent directors. The Yorktown
director to serve on the nominating
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committee shall be selected by a majority vote of the Yorktown directors. A
majority of the independent directors shall designate the independent directors
to serve on the nominating committee. Any Yorktown or independent director may
select himself or herself to serve on the nominating committee. A quorum of the
nominating committee, which shall be required for any action of the nominating
committee, shall be all members of the nominating committee. The nominating
committee shall act by a majority vote of the entire nominating committee.
6.6 Nomination of Directors.
-----------------------
The directors of Carbon shall be nominated at all times from and after the
consummation of the BFC Closing as follows (a nomination includes any nomination
of an incumbent director to be reelected to the Board):
(a) The nominating committee shall nominate for director each Yorktown
director which Yorktown has the right to designate and has so designated;
(b) The nominating committee shall nominate XxXxxxxx if he is entitled to
be so nominated as provided in Section 6.4 above; and
(c) The nominating committee shall nominate the remaining directors and at
least two of the persons so nominated shall be independent directors unless the
size of the Board has been changed by a super majority vote of the Board and
there are not sufficient positions for the election of two independent directors
after taking into account Yorktown directors and the nomination of XxXxxxxx.
6.7 Vacancies.
---------
Upon the death, resignation, retirement, disqualification or removal from
office, with or without cause, of any independent director or Yorktown director,
the nominating committee (in the case of an independent director) and the
remaining Yorktown director (in the case of the vacancy relating to a Yorktown
director) shall have the right to designate any replacement to fill the vacancy.
Any vacancy on the Board of Directors caused by the death, resignation,
retirement, disqualification or removal of XxXxxxxx, shall be designated by the
nominating committee. The Board of Directors shall take any action necessary to
duly appoint or elect as a director each person so designated to fill a vacancy
on the Board.
6.8 Voting of Shares.
----------------
Each party shall take such actions as a shareholder of Carbon, or as is
otherwise reasonably in the party's control, to effectuate the election of
directors and the filling of vacancies as provided in this Article 6. In
addition, Carbon shall use all reasonable efforts to solicit from shareholders
of Carbon eligible to vote in the election of directors proxies in favor of the
nominees selected in accordance with this
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Article 6. In any election of directors or any meeting of shareholders for the
removal of directors, Yorktown and XxXxxxxx shall be present for purposes of
establishing a quorum and shall vote all of their voting stock in favor of any
nominee for director selected in accordance with this Article 6 and against the
removal of any director selected in accordance with this Article 6, except that
Yorktown and XxXxxxxx may vote for the removal of any Yorktown director for
which Yorktown has indicated approval of the removal and Yorktown and XxXxxxxx
may vote for the removal of any independent director as to which the nominating
committee has recommended removal.
6.9 Super Majority.
--------------
No action by Carbon shall be taken with respect to the following without
approval of the Board of Directors of Carbon which approval shall be by a super
majority vote of the Board: Any change in the size or composition of the Board
of Directors of Carbon or the nominating committee.
6.10 Termination of this Article.
---------------------------
This Article shall cease to be effective and shall not apply to any Carbon
matters (a) 10 years after the consummation of the BFC Closing or, if earlier,
(b) when and if Yorktown owns beneficially voting shares with less than 25% of
the outstanding votes in the election of directors and XxXxxxxx is no longer an
officer of Carbon.
Article 7
Representations and Warranties of Carbon
Carbon represents and warrants at the date hereof to Yorktown and CEC
Canada as follows:
7.1 Organization and Authority.
--------------------------
Carbon is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado, is duly qualified to do
business and is in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and failure to be so qualified would have a material adverse effect on
the business, financial condition or results of operations (a "Material Adverse
Effect") of Carbon and has corporate power and authority to own its properties
and assets and to carry on its business as it is now being conducted. Carbon
has furnished Yorktown and CEC Canada true and correct copies of its articles of
incorporation and bylaws, as amended.
7.2 No Subsidiaries.
---------------
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Prior to the BFC Closing, Carbon has no subsidiaries.
7.3 Capitalization.
--------------
The authorized capital stock of Carbon consists of 10,000,000 shares of
preferred stock, no par value, of which no shares are outstanding, and
20,000,000 shares of common stock, no par value, of which as of the date of this
Agreement 100 shares issued to Yorktown were outstanding. Except for the
options required by Article 5 above, there are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, calls, preemptive rights or
other rights obligating Carbon to issue, sell or otherwise dispose of, or to
purchase, redeem or otherwise acquire, any shares of capital stock of Carbon.
7.4 Authorization; No Conflict.
--------------------------
Carbon has the corporate power and authority to enter into this Agreement
and to carry out its obligations under this Agreement. The execution, delivery
and performance of this Agreement by Carbon and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Carbon This Agreement is a valid and binding obligation of Carbon
enforceable against Carbon in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
contracting parties generally and except as enforceability may be subject to
general principles of equity.
Neither the execution, delivery and performance by Carbon of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
compliance by Carbon with any of the provisions hereof, will (a) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event of which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Carbon under any of the terms,
conditions or provisions of (i) its articles of incorporation or bylaws or (ii)
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Carbon is a party or by which it may be
bound, or to which Carbon or any of the properties or assets of Carbon may be
subject, or (b) subject to compliance with the statutes and regulations referred
to in the next paragraph, to the knowledge of Carbon, violate any judgment,
ruling, order, writ, injunction, decree, statute, rule or regulation applicable
to Carbon or any of its properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act and the rules and
10
regulations thereunder, the securities or blue sky laws of the various states or
Canadian provinces, no notice to, filing with, exemption or review by, or
authorization, consent or approval of, any public body or authority is necessary
for the consummation by Carbon of the transactions contemplated by this
Agreement.
7.5 No Operations.
-------------
Carbon was incorporated in September, 1999 and has not conducted any active
business between its date of incorporation and the date of this Agreement,
except any actions to enter into this Agreement, complete the purchase of BFC
Stock under the Stock Purchase Agreement and make the Exchange Offer.
7.6 Brokers and Finders.
-------------------
Neither Carbon nor any of its officers, directors or employees has employed
any broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder has acted
directly or indirectly for Carbon in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF CEC CANADA
CEC Canada represents and warrants at the date hereof to Yorktown and
Carbon as follows:
8.1 Organization and Authority.
--------------------------
CEC Canada is a corporation duly organized, validly existing and in good
standing under the laws of the Province of Alberta, is duly qualified to do
business and is in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and failure to be so qualified would have a Material Adverse Effect on
CEC Canada and has corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted. CEC Canada
has furnished the other two parties true and correct copies of its articles of
incorporation and bylaws, as amended.
8.2 No Subsidiaries.
---------------
CEC Canada has no subsidiaries.
8.3 Capitalization.
--------------
The authorized capital stock of CEC Canada consists of an unlimited number
of shares of preferred stock, no par value, of which no shares are outstanding,
and an
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unlimited number of shares of common stock, no par value, of which as of the
close of business on August 31, 1999, 1,521,400, shares were outstanding. The
maximum number of shares of CEC Canada common stock (assuming for this purpose
that phantom shares and other share-equivalents constitute CEC Canada common
stock) that would be outstanding as of August 31, 1999, if all options,
warrants, conversion rights and other rights with respect thereto were exercised
is 1,785,900. All of the outstanding shares of capital stock of CEC Canada have
been duly and validly authorized and issued and are fully paid and
nonassessable. Except as set forth in Exhibit 3, there are no outstanding
---------
subscriptions, contracts, conversion privileges, options, warrants, calls,
preemptive rights or other rights obligating CEC Canada to issue, sell or
otherwise dispose of, or to purchase, redeem or otherwise acquire, any shares of
capital stock of CEC Canada. Since May 31, 1999, no shares of CEC Canada common
stock have been purchased, redeemed or otherwise acquired, directly or
indirectly, by CEC Canada, and no dividends or other distributions have been
declared, set aside, made or paid to the shareholders of CEC Canada.
8.4 Authorization; No Conflict.
--------------------------
CEC Canada has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery
and performance of this Agreement by CEC Canada and the consummation of this
Agreement by CEC Canada have been duly authorized by the Board of Directors of
CEC Canada. This Agreement is a valid and binding obligation of CEC Canada
enforceable against CEC Canada in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors and
contracting parties generally and except as enforceability may be subject to
general principles of equity.
Except as set forth on Exhibit 4 attached hereto, neither the execution,
---------
delivery and performance of CEC Canada of this Agreement, nor the consummation
of the transactions contemplated hereby, nor compliance by CEC Canada with any
of the provisions hereof, will (a) violate, conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration of, or result in the creation of, any lien,
security interest, charge or encumbrance upon any of the properties or assets of
CEC Canada under any of the terms, conditions or provisions of (i) its articles
of incorporation or bylaws or (ii) any material note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which CEC Canada is a party or by which it may be bound, or to which CEC Canada
or any of the properties or assets of CEC Canada may be subject, or (b) subject
to compliance with the statutes and regulations referred to in the next
paragraph, to the knowledge of CEC Canada, violate any judgment, ruling, order,
12
writ, injunction, decree, statute, rule or regulation applicable to CEC Canada
or any of its material properties or assets.
Other than in connection or in compliance with the provisions of the
Securities Act and the rules and regulations thereunder, the Exchange Act and
the rules and regulations thereunder, the securities or blue sky laws of the
various states or Canadian provinces, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by CEC Canada of the transactions
contemplated by this Agreement.
8.5 Brokers and Finders.
-------------------
Neither CEC Canada nor any of its officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for CEC Canada in connection with this
Agreement or the transactions contemplated hereby.
8.6 SEC Reports.
-----------
Since December 1, 1998, CEC Canada has filed all reports, registrations and
statements, together with any required amendments thereto, that it was required
to file with the SEC, including, but not limited to, Forms 10-K, Forms 10-Q and
proxy statements. All such reports and statements filed with the SEC are
collectively referred to herein as the "CEC Canada Reports." As of their
respective dates the CEC Canada Reports complied in all material respects with
all the rules and regulations promulgated by the SEC, and as of their respective
dates, the CEC Canada Reports filed with the SEC did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Copies of all the
CEC Canada Reports have been made available to Yorktown and Carbon by CEC
Canada.
Article 9
Representations and Warranties of Yorktown
Yorktown represents and warrants at the date hereof to Carbon and CEC
Canada.
9.1 Organization and Authority.
--------------------------
Yorktown is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to do
business and is in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and failure to be so qualified
13
would have a Material Adverse Effect on Yorktown and has full power and
authority to own its properties and assets and to carry on its business as it is
now being conducted.
9.2 Authorization.
-------------
Yorktown has the full power and authority to enter into this Agreement and
to carry out its obligations hereunder. The execution, delivery and performance
of this Agreement by Yorktown and the consummation of the transactions
contemplated hereby have been duly authorized by the governing board of
Yorktown. No approval or consent by the members of Yorktown is necessary for
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement is a valid and binding
obligation of Yorktown enforceable against Yorktown in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors and contracting parties generally and except as enforceability may be
subject to general principles of equity.
Neither the execution, delivery and performance by Yorktown of this
Agreement nor the consummation of the transactions contemplated hereby, nor
compliance by Yorktown with any of the provisions hereof; will (a) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration of,
or result in the creation of, any lien, security interest, charge or encumbrance
upon any of the properties or assets of Yorktown under any of the terms,
conditions or provisions of (i) its organizational documents or operating
agreements or (ii) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Yorktown is
a party or by which it may be bound, or to which Yorktown or any of the
properties or assets of Yorktown may be subject, or (b) subject to compliance
with the statutes and regulations referred to in the next paragraph, to the
knowledge of Yorktown, violate any judgment, ruling, order, writ, injunction,
decree, statute, rule or regulation applicable to Yorktown or any of its
properties or assets.
Other than in connection with or in compliance with the provisions of the
Securities Act and the rules and regulations thereunder, the Exchange Act and
the rules and regulations thereunder, the securities or blue sky laws of the
various states or Canadian provinces, no notice to, filing with, exemption or
review by, or authorization, consent or approval of, any public body or
authority is necessary for the consummation by Yorktown of the transactions
contemplated by this Agreement.
9.3 Brokers and Finders.
-------------------
14
Neither Yorktown nor any of its respective managers, officers, directors,
partners, members or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Yorktown in connection with this Agreement or the transactions contemplated
hereby.
9.4 Investment Matters.
------------------
Yorktown has substantial experience in evaluating and investing in private
placement transactions of securities in companies similar to Carbon so that it
is capable of evaluating the merits and risks of its investment in Carbon and
has the capacity to protect its own interests.
It is acquiring Carbon shares as provided in Article 2 for investment for
its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. It understands that Carbon
shares have not been, and will not be registered, under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of Yorktown's
representations as expressed in this Section.
Yorktown has had an opportunity to discuss Carbon's business, management
and financial affairs with Carbon's management and has had the opportunity to
review Carbon's existing and proposed properties and operations. It has also
had an opportunity to ask questions of officers of Carbon, which questions were
answered to its satisfaction.
Article 10
Covenants
10.1 Covenants of Carbon.
-------------------
Carbon covenants and agrees with CEC Canada and Yorktown as follows:
(a) From the date hereof until completion of the Exchange Offer, Carbon
will maintain its corporate existence in good standing; after acquisition of the
stock of BFC pursuant to the Stock Purchase Agreement, maintain the general
character of BFC's business and conduct BFC's business in its ordinary and usual
manner; maintain all books and records of Carbon and, after the purchase of
BFC's stock, of BFC, including all financial statements, in accordance with the
accounting principles and practices consistent with those used for CEC Canada
financial statements, except for changes in such principles and practices
required under generally accepted accounting principles or as to which Yorktown
and CEC Canada concur.
15
(b) As promptly as practicable after the execution of this Agreement,
Carbon will file with the SEC the Registration Statement under the Securities
Act, the Schedule 14D-1 and any other applicable documents, relating to the
Exchange Offer and the shares of Carbon common stock to be delivered to the
stockholders of CEC Canada pursuant to this Agreement and the Exchange Offer,
and will use its best efforts to cause the Registration Statement to become
effective as soon as practicable. At the time the Registration Statement becomes
effective, the Registration Statement will comply in all material respects with
the provisions of the Securities Act and the published rules and regulations
thereunder, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not false or misleading, and at the times of making and
completing the Exchange Offer the prospectus included as part of the
Registration Statement, as amended or supplemented by any amendment or
supplement filed by Carbon (called the "Prospectus"), will not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not false or misleading; provided, however, that
-------- -------
none of the provisions of this paragraph shall apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information furnished by Yorktown or CEC Canada for
use in the Registration Statement or the Prospectus. The Schedule 14D-1 shall
comply in all material respects with provisions of applicable law.
(c) Carbon will file all documents required to be filed to list Carbon
common stock to be issued pursuant to this Agreement and the Exchange Offer on
the American Stock Exchange and use its best efforts to effect said listing at
or prior to completion of the Exchange Offer.
(d) The shares of Carbon common stock to be issued by Carbon to the
shareholders of CEC Canada pursuant to this Agreement and the shares of Carbon
to be issued by Carbon to Yorktown will, upon such issuance and delivery to said
shareholders and Yorktown pursuant to this Agreement, be duly authorized,
validly issued, fully paid and nonassessable. The shares of Carbon common stock
to be delivered to the shareholders of CEC Canada and to Yorktown pursuant to
this Agreement are and will be free of any preemptive rights of any shareholders
of Carbon and free and clear of any liens, security interests or encumbrances
(other than transfer restrictions imposed by securities laws).
(e) Carbon will file all documents required to obtain, prior to commencing
the Exchange Offer, all necessary Blue Sky and Canadian Province permits and
approvals, if any, required to carry out the transactions contemplated by this
Agreement, will pay all expenses incident thereto and will use its best efforts
to obtain such permits and approvals.
16
(f) Carbon will hold in confidence all documents and information
concerning CEC Canada and Yorktown furnished to it and its representatives in
connection with the transactions contemplated by this Agreement and will not
release or disclose such information to any other person, except as required by
law or in connection with the Exchange Offer or the Registration Statement and
except to its outside professional advisers in connection with this Agreement,
with the same undertaking from such professional advisers. If the transactions
contemplated by this Agreement shall not be consummated, such confidence shall
be maintained and, upon request, all such documents, copies thereof or extracts
therefrom shall immediately thereafter be returned to CEC Canada or Yorktown, as
the case may be.
(g) Carbon shall consult with CEC Canada and Yorktown as to the form and
substance of any proposed press release or other proposed public disclosure by
Carbon of matters related to this Agreement or any of the transactions
contemplated hereby, except Carbon may make any press release or statement
believed in good faith by Carbon to be required by law or under the rules and
regulations of any stock exchange on which its shares are listed.
(h) With respect to the indemnification of officers and directors and
officers' and directors' insurance, Carbon agrees as follows:
(i) Carbon shall ensure that all rights to indemnification and all
limitations of liability existing in favor of any person who is now, or has
been at any time prior to the date hereof, or who becomes prior to the
completion of the Exchange Offer, a director or officer of CEC Canada (an
"Indemnified Party" and, collectively, the "Indemnified Parties"), in CEC
Canada's Articles of Incorporation or Bylaws or similar governing documents
shall, with respect to claims arising from (A) facts or events that occurred
before the completion of the Exchange Offer, or (B) this Agreement or any of
the transactions contemplated by this Agreement, whether in any case
asserted or arising before or after the completion of the Exchange Offer,
survive the Exchange Offer and shall continue in full force and effect.
Nothing contained in this paragraph 10.1(h)(i) shall be deemed to preclude
the liquidation, consolidation or merger of CEC Canada, in which case all of
such rights to indemnification and limitations on liability shall be deemed
to survive and continue as contractual rights notwithstanding any such
liquidation or consolidation or merger; provided, however, that in the event
-------- -------
of liquidation or sale of substantially all of the assets of CEC Canada,
Carbon shall guarantee, to the extent of the net asset value of Carbon as of
the completion of the Exchange Offer, the indemnification obligations of CEC
Canada to the extent of indemnification obligations of Carbon described
above.
(ii) any Indemnified Party wishing to claim indemnification under
paragraph 10.1(h)(i), upon learning of any such claim, action, suit,
proceeding
17
or investigation, shall promptly notify Carbon thereof, but the failure to
so notify shall not relieve Carbon of any liability it may have to such
Indemnified Party. In the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after completion of the Exchange
Offer), (A) Carbon shall have the right to assume the defense thereof and
Carbon shall not be liable to any Indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, except that if
Carbon elects not to assume such defense or counsel for the Indemnified
Party advises that there are issues which raise conflicts of interest
between Carbon and the Indemnified Party, the Indemnified Party may retain
counsel satisfactory to them, and Carbon shall pay the reasonable fees and
expenses of such counsel for the Indemnified Party promptly as statements
therefor are received; provided, however, that Carbon shall be obligated
-------- -------
pursuant to this subparagraph (ii) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest and (B) such Indemnified Party shall cooperate in the defense of
any such matter. In any event, Carbon shall not be liable for the settlement
of any claim, action, suit, proceeding or investigation unless Carbon
consents to the settlement, which consent shall not be unreasonably
withheld.
(iii) if Carbon or any of its successors or assigns (A) shall
consolidate with or merge into any other corporation or entity and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (B) shall transfer all or substantially all of its properties
and assets to any individual, corporation or other entity, then and in each
such case, proper provision shall be made so that the successors and assigns
of Carbon shall assume the obligations set forth in this paragraph 10.1(h).
(iv) the provisions of this paragraph 10.1(h) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
10.2 Covenants of CEC Canada.
-----------------------
CEC Canada covenants and agrees with Carbon and Yorktown as follows:
(a) Except as otherwise permitted or required by this Agreement, from the
date hereof until completion of the Exchange Offer, CEC Canada will: maintain
its corporate existence in good standing; maintain the general character of its
business and conduct its business in its ordinary and usual manner; maintain
proper business and accounting records in accordance with generally accepted
principles; maintain in all material respects presently existing insurance
coverage; use its reasonable efforts to preserve its business organization
intact, to keep the services of its present
18
principal employees and to preserve its good will and the good will of its
suppliers, customers and others having business relationships with it; use its
reasonable efforts to obtain any approvals or consents required to maintain
existing leases and other contracts in effect following the Exchange Offer; and
furnish monthly financial reports, in the form submitted by CEC Canada to its
management, to Carbon and Yorktown.
(b) Except as otherwise contemplated or required by this Agreement, from
the date hereof until completion of the Exchange Offer, CEC Canada will not
(without the prior written consent of Carbon and Yorktown): amend or otherwise
change its articles of incorporation or association or Bylaws; issue or sell or
authorize for issuance or sale, or grant any options or make other agreements
with respect to the issuance or sale or conversion of, any shares of its capital
stock, phantom shares or other share-equivalents or any other of its securities,
except that CEC Canada may issue shares of CEC Canada common stock upon the
exercise of any outstanding options; authorize or incur any long-term debt
(other than borrowings under a revolving line of credit in the ordinary course
of business or borrowings to replace any existing borrowings or borrowings as to
which Yorktown and Carbon approve); mortgage, pledge or subject to lien or other
encumbrance any of its properties, except in the ordinary course of business or
in connection with borrowings permitted by this paragraph; amend or terminate
any employee plan except as required by law; make any contributions to any
employee plan except as required by the terms of such plan in effect as of the
date hereof except discretionary contributions made in the ordinary course of
business in accordance with past practices; declare, set aside, make or pay any
dividend or other distribution with respect to its capital stock; redeem,
purchase or otherwise acquire, directly or indirectly, any of the capital stock
of CEC Canada; increase the compensation of any officers, directors or executive
employees, except pursuant to existing compensation plans and practices; or sell
or otherwise dispose of any of its assets or properties other than in the
ordinary course of business.
(c) CEC Canada will furnish or cause to be furnished to Carbon all the
information concerning CEC Canada required for inclusion in the Registration
Statement or other Offer Documents. Any financial statement for any fiscal year
provided under this paragraph must include the audit opinion and the consent of
the relevant auditor to use such opinion in such Registration Statement. The
information regarding CEC Canada furnished by CEC Canada will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, not false or
misleading, at the time of any filing of the Registration Statement or other
Offer Documents with the SEC or any other regulatory authority, at the time of
making the Exchange Offer and throughout the making of the Exchange Offer. CEC
Canada shall correct promptly any information provided by CEC Canada for use in
the Registration Statement or other Offer Documents which is or shall become
false or misleading. All documents
19
which CEC Canada is responsible for filing with the SEC in connection with the
Exchange Offer will comply as to form in all material respects with the
provisions of applicable law.
(d) CEC Canada will cooperate in obtaining and file any documents which
may be required to obtain all necessary Blue Sky and Canadian Province permits
and approvals, if any, required to carry out the transactions contemplated by
this Agreement.
(e) CEC Canada shall consult with Carbon and Yorktown as to the form and
substance of any proposed press release or other proposed public disclosure, by
CEC Canada or any of its representatives of matters related to this Agreement or
any of the transactions contemplated hereby, except that CEC Canada may make any
press release or statement believed in good faith by CEC Canada to be required
by law or under the rules and regulations of any stock exchange on which its
shares are listed.
(f) CEC Canada will take all action necessary or required to terminate or
amend, if requested by Carbon, all qualified pension and welfare benefit plans
to facilitate the merger of such plans with Carbon plans without gaps in
coverage for participants in the plans and without duplication of costs caused
by the continuation of such plans after coverage is available under Carbon
plans, [and all non-qualified benefit plans and compensation arrangements as of
the completion of the Exchange Offer].
10.3 Covenants of Yorktown.
---------------------
Yorktown covenants and agrees with Carbon and CEC Canada as follows:
(a) From the date hereof until completion of the Exchange Offer, Yorktown
will maintain its existence in good standing.
(b) Yorktown will furnish to Carbon all the information concerning
Yorktown required for inclusion in the Registration Statement or other Offer
Documents. Such information will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not false or misleading, at the time of filing
the Registration Statement or other Offer Document with the SEC or any other
regulatory authority, the making of the Exchange Offer and throughout the making
of the Exchange Offer. Yorktown shall correct promptly any information provided
by Yorktown for use in the Registration Statement or other Offer Documents which
is or shall become false or misleading.
(c) Yorktown will cooperate in obtaining and file any documents which may
be required to obtain all necessary Blue Sky and Canadian Province permits and
20
approvals, if any, required to carry out the transactions contemplated by this
Agreement.
(d) Yorktown will hold in confidence all documents and information
concerning Carbon and CEC Canada furnished to it and its representatives in
connection with the transactions contemplated by this Agreement and will not
release or disclose such information to any other person, except as required by
law and except to its outside professional advisers or its limited partners in
connection with this Agreement, with the same undertaking from such professional
advisers or limited partners, as the case may be. If the transactions
contemplated by this Agreement shall not be consummated, such confidence shall
be maintained (except to the extent that such information can be shown to be
previously known to Yorktown, in the public domain, or later acquired by
Yorktown from other legitimate sources) and, upon request, all such documents,
copies thereof or extracts therefrom shall immediately thereafter be returned by
Carbon or CEC Canada, as the case may be.
(e) Yorktown shall consult with Carbon and CEC Canada as to the form and
substance of any proposed press release or other proposed public disclosure of
matters related to this Agreement or any of the transactions contemplated hereby
except that Yorktown may make a press release or statement believed in good
faith to be required by law.
Article 11
Conditions
11.1 Conditions Precedent to Obligation of Carbon and CEC Canada.
-----------------------------------------------------------
The obligation of Carbon to make and complete the Exchange Offer and CEC
Canada to recommend favorably the Exchange Offer to its shareholders shall be
subject to the satisfaction of the following
(a) No court or governmental authority of competent jurisdiction shall
have issued an order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(b) The Registration Statement (as amended or supplemented) shall have
become effective under the Securities Act and shall not be subject to any stop
order. Carbon shall have received all state securities law or blue sky and
Canadian Province authorizations necessary in any material respect to carry out
the transactions contemplated by this Agreement.
11.2 Condition Precedent to Obligation of Yorktown.
---------------------------------------------
The obligation of Yorktown to effect the purchase of Carbon common stock as
required by Article 2 shall be subject to the satisfaction at or before the
21
consummation of the BFC Closing of the following condition, which may be waived
in writing by Yorktown: No court or governmental authority of competent
jurisdiction shall have issued an order restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement.
Article 12
Termination and Miscellaneous
12.1 Obligation to Make Exchange Offer.
---------------------------------
On and after the BFC Closing has been consummated, the parties shall
cause the Exchange Offer to be made subject only to the conditions stated
expressly in Article 11, whether or not there has been a breach of any provision
of this Agreement by any party. The obligations of the parties regarding the
Exchange Offer are independent of any other provisions of this Agreement, and
the remedy of any party for breach of any covenant or other provisions of this
Agreement shall be limited to damages or specific performance and shall not
include any right under this Agreement or applicable law to terminate this
Agreement.
12.2 Termination of Agreement.
------------------------
(a) This Agreement may be terminated at any time prior to the consummation
of the BFC Closing:
(i) by mutual written consent of the parties hereto;
(ii) by any of the parties hereto upon written notice to the other
parties if the BFC Closing shall not have been consummated by April 1, 2000
unless such failure of consummation shall be due to the failure of the
party seeking to terminate to perform or observe in all material respects
the covenants and agreements hereof to be performed or observed by such
party; or
(iii) by a party upon written notice to the other parties if any
court or governmental authority of competent jurisdiction shall have issued
a final order restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement.
(b) Termination of this Agreement under this Section 12.1 shall not
release, or be construed as so releasing, any party hereto from any liability or
damage to the other parties hereto arising out of the breaching party's willful
and material breach of the warranties and representations made by it, or willful
and material failure in performance of any of its covenants, agreements, duties
or obligations arising hereunder, and the obligations under paragraphs 10.1(f),
10.1(g), 10.2(d), 10.3(e) and 10.3(f) and Article 12 shall survive such
termination.
22
12.3 HSR Act Filing
--------------
Carbon and Yorktown shall, as promptly as possible, make or cause to be
made any required filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976 and the rules and regulations thereunder (the "HSR Act") with respect to
the purchase of BFC shares and the Exchange Offer and shall cooperate with each
other regarding these matters. Each party shall promptly inform the other
parties of any material communication between the party and the Federal Trade
Commission, the Department of Justice or any other governmental authority
regarding any of the transactions contemplated by this Agreement. If any party
receives a request for additional information or documents from any such
governmental authority with respect to the transactions contemplated by this
Agreement, then the parties shall use its reasonable efforts, as soon as
reasonably practicable, and after consultation with the other parties, an
appropriate response in substantial compliance with the request. Each party
shall take all reasonable actions necessary to cause the expiration of the
waiting periods under the HSR Act as promptly as possible.
12.4 Expenses.
--------
All expenses in connection with this Agreement and the transactions
contemplated hereby, including without limitation legal and accounting fees,
incurred by a party shall be borne by the party, except that Carbon shall
reimburse CEC Canada for any and all expenses in connection with this Agreement,
the transactions contemplated hereby and the Stock Purchase Agreement upon
consummation of the BFC Closing and for those expenses incurred by CEC Canada
after consummation of the BFC Closing and except Carbon shall reimburse Yorktown
for all its reasonable out-of-pocket legal expenses (including, without
limitation, reasonable, attorneys fees), and any out-of-pocket expenses of
Yorktown relating to any filings under the HSR Act, in connection with this
Agreement and the transactions contemplated hereby.
12.5 Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, but shall not be
assignable by either party hereto without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, Yorktown may assign this
Agreement to any party controlled by, under common control with or controlling
Yorktown with prior notice to Carbon and CEC Canada, and in that event Yorktown
shall nevertheless remain fully liable for all obligations of Yorktown contained
in this Agreement.
12.6 Third Party Beneficiaries.
---- -------------------------
23
Each party hereto intends that except as otherwise expressly provided
herein, this Agreement shall not benefit or create any right or cause of action
in or on behalf of any person other than the parties hereto.
12.7 Notices.
---- -------
Any notice or other communication provided for herein or given hereunder to
a party hereto shall be in writing and shall be delivered in person or shall be
mailed by first class registered or certified mail, postage prepaid, addressed
as follows or may be delivered by fax or other electronic transmission to the
appropriate address:
If to Carbon:
Carbon Energy Corporation
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Attention: President
Telephone Number: (000) 000-0000
Fax Number: (000) 000-0000
Email Address: xxxxxxxxx@xxxxxxxxxxxx.xxx
If to CEC Canada:
CEC Resources Ltd.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000-0000
Attention: President
Telephone Number: (000) 000-0000
Fax Number: (000) 000-0000
Email Address: xxxxxxxxx@xxxxxxxxxxxx.xxx
If to Yorktown:
Yorktown Energy Partners III, L.P.
Attention: Xxxxx X. Xxxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Telephone Number: (000) 000-0000
Fax Number: (000) 000-0000
Email Address: xxxxxxx@xxxxxxxxxxxxxx.xxx
or to such other address with respect to a party as such party shall notify the
other in writing as above provided.
24
12.8 Complete Agreement.
---- ------------------
This Agreement contains the complete agreement between the parties hereto
with respect to the Exchange Offer and other transactions contemplated hereby
and supersede all prior agreements and understandings between the parties hereto
with respect thereto.
12.9 Captions.
---- --------
The captions contained this Agreement are for convenience of reference only
and do not form a part of this Agreement.
12.10 Waiver and Other Action.
----- -----------------------
Either party hereto may, by a signed writing, given any consent or waiver.
The waiver by any party of a breach of any term or provision of this Agreement
shall not construed as a waiver of any subsequent breach.
12.11 Amendment.
----- ---------
The parties hereto, by action taken by all of their respective Boards of
Directors or governing authorities or pursuant to authority delegated by all of
their respective Boards of Directors or governing authorities, may amend this
Agreement. Any amendment of this Agreement must be in writing signed by the
party against which enforcement of the amendment is sought.
12.12 Governing Law.
----- -------------
This Agreement shall be construed and enforced in accordance with the laws
of the State of Colorado.
12.13 Non-Survival of Representations and Warranties.
----- ----------------------------------------------
No representation or warranty contained in this Agreement shall survive the
consummation of the BFC Closing.
12.14 Attorneys' Fees.
----- ---------------
A prevailing party in any legal proceeding brought under or to enforce this
Agreement shall be entitled to recover court costs, reasonable costs of the
legal proceeding and reasonable attorneys' fees from the non-prevailing parties.
12.15 Counterparts.
----- ------------
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute but one
instrument.
25
The parties hereto have executed this Agreement as of the day and year
first above written.
CARBON ENERGY CORPORATION CEC RESOURCES LTD.
By: /s/ Xxxxxxx X. XxXxxxxx By: /s/ Xxxxxxx X. XxXxxxxx
------------------------ ------------------------
Name: Name:
------------------------ ------------------------
Title: President Title: President
----------------------- -----------------------
YORKTOWN ENERGY PARTNERS III, L.P.
By: /s/ Xxxxx Xxxxxx
-------------------------------
General Partner
By:
---------------------
Name:
-------------------
Title:
------------------
DENVER:0938621.08
26
