AGREEMENT AND PLAN OF MERGER
AMONG
PLANTATION PETROLEUM HOLDINGS, LLC,
PLANTATION PETROLEUM ACQUISITION CORP.
AND
XXXXXXX OIL COMPANY
APRIL 25, 2002
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER...................................................................................2
1.1. The Merger.....................................................................................2
1.2. Closing........................................................................................2
1.3. Effective Time.................................................................................2
1.4. Certificate of Incorporation; Bylaws; Directors; and Officers..................................2
1.5. Dissenter's Rights.............................................................................3
1.6. Escrow.........................................................................................3
ARTICLE II EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE
OF CERTIFICATES.........................................................................................4
2.1. Effect on Stock................................................................................4
2.2. Exchange of Certificates.......................................................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................6
3.1. Organization...................................................................................6
3.2. Capital Structure..............................................................................6
3.3. Subsidiaries...................................................................................7
3.4. Authority......................................................................................7
3.5. Consents and Approvals; No Violations..........................................................7
3.6. SEC Documents and Other Reports................................................................8
3.7. Absence of Certain Changes.....................................................................8
3.8. Information Supplied...........................................................................8
3.9. Compliance with Laws...........................................................................9
3.10. Tax Matters....................................................................................9
3.11. Liabilities...................................................................................10
3.12. Litigation....................................................................................10
3.13. Benefit Plans.................................................................................10
3.14. Brokers.......................................................................................11
3.15. Voting Requirements...........................................................................12
3.16. Environmental Matters.........................................................................12
3.17. Contracts.....................................................................................13
3.18. Company Oil and Gas Properties................................................................15
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TABLE OF CONTENTS
(continued)
Page
3.19. Intellectual Property.........................................................................17
3.20. Reserve Report................................................................................17
3.21. Additional Drilling Obligations...............................................................17
3.22. Xxxxx.........................................................................................17
3.23. Facilities....................................................................................18
3.24. Xxxxx to Be Plugged and Abandoned.............................................................18
3.25. Asset Value...................................................................................18
3.26. Confidentiality Agreements....................................................................18
3.27. Insurance.....................................................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............................................18
4.1. Organization..................................................................................18
4.2. Authority.....................................................................................19
4.3. Consents and Approvals; No Violations.........................................................19
4.4. Financial Statements..........................................................................20
4.5. Absence of Certain Changes....................................................................20
4.6. Information Supplied..........................................................................20
4.7. Compliance with Laws..........................................................................20
4.8. Liabilities...................................................................................21
4.9. Interim Operations of Sub.....................................................................21
4.10. Litigation....................................................................................21
4.11. Brokers.......................................................................................21
4.12. Availability of Funds.........................................................................21
4.13. Ownership of Shares...........................................................................22
4.14. Fair Market Value Determination...............................................................22
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...................................................22
5.1. Conduct of Business by the Company Pending the Merger.........................................22
5.2. No Solicitation; Acquisition Proposals........................................................24
5.3. Modifications to Recommendations; Subsequent Determination....................................26
5.4. Hedge.........................................................................................26
ARTICLE VI ADDITIONAL AGREEMENTS.......................................................................27
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TABLE OF CONTENTS
(continued)
Page
6.1. Employee Benefits.............................................................................27
6.2. Stockholder Approval..........................................................................28
6.3. Access to Information.........................................................................28
6.4. March 2002 Form 10-Q..........................................................................29
6.5. Title Defects.................................................................................29
6.6. Environmental Defects.........................................................................30
6.7. Material Oil and Gas Contract Defects.........................................................30
6.8. Termination Fee...............................................................................31
6.9. Public Announcements..........................................................................31
6.10. Transfer Taxes................................................................................31
6.11. State Takeover Laws...........................................................................31
6.12. Indemnification; Directors and Officers Insurance.............................................32
6.13. Reasonable Best Efforts.......................................................................33
ARTICLE VII CONDITIONS PRECEDENT........................................................................34
7.1. Conditions to Each Party's Obligation to Effect the Merger....................................34
ARTICLE VIII TERMINATION AND AMENDMENT...................................................................34
8.1. Termination...................................................................................34
8.2. Effect of Termination.........................................................................36
8.3. Amendment.....................................................................................36
8.4. Extension; Waiver.............................................................................36
ARTICLE IX GENERAL PROVISIONS..........................................................................36
9.1. Non-Survival of Representations and Warranties and Agreements.................................36
9.2. Notices.......................................................................................36
9.3. Interpretation; Definitions...................................................................37
9.4. Counterparts..................................................................................48
9.5. Arbitration...................................................................................48
9.6. Entire Agreement; No Third-Party Beneficiaries................................................49
9.7. Governing Law.................................................................................49
9.8. Assignment....................................................................................49
9.9. Severability..................................................................................49
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TABLE OF CONTENTS
(continued)
Page
9.10. Enforcement of this Agreement.................................................................50
9.11. Obligations of Subsidiaries...................................................................50
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, is made and entered into as of April
25, 2002 (this "AGREEMENT") by and among Plantation Petroleum Holdings, LLC, a
Delaware limited liability company ("Parent"), Plantation Petroleum Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("SUB"),
and Xxxxxxx Oil Company, a Delaware corporation (the "COMPANY") (Sub and the
Company being hereinafter collectively referred to as the "CONSTITUENT
CORPORATIONS"). Except as otherwise set forth herein, capitalized (and certain
other) terms used herein shall have the meanings set forth in Section 9.3.
WHEREAS, the respective Boards of Directors of Sub and the Company have
approved, and deem it to be advisable and in the best interests of their
respective stockholders, and the Board of Managers of Parent has approved, and
deems it to be advisable and in the best interests of Parent and its members, to
consummate the acquisition of the Company by Parent on the terms and conditions
set forth herein;
WHEREAS, the acquisition will be accomplished by Sub merging with and
into the Company (the "MERGER") and each share of common stock, par value $0.10
per share, of the Company ("COMPANY COMMON STOCK" or the "SHARES") (other than
Dissenting Shares) will be converted in the Merger into the right to receive an
amount equal to $17.00 per Share in cash (the "MERGER CONSIDERATION");
WHEREAS, the Board of Directors of the Company has determined that this
Agreement and the Merger are fair to, and in the best interests of, the
Company's stockholders and has resolved to recommend that the Company's
stockholders adopt this Agreement;
WHEREAS, the respective Boards of Directors of Sub, Guarantors and the
Company, and the Board of Managers of Parent, have each approved this Agreement
and the Merger, and the transactions contemplated hereby and thereby;
WHEREAS, as a condition and an inducement to Parent and Sub entering
into this Agreement, Xxxxx X. Xxxxxxx, as trustee, Xxxx X. Xxxxxxx, as trustee,
and BCTM, Inc. have entered into a Voting Agreement with Parent (the "VOTING
AGREEMENT") pursuant to which each such stockholder has agreed to vote all of
their, respective, Company Common Stock in favor of this Agreement and the
Merger;
WHEREAS, as a condition and an inducement to the parties entering into
this Agreement, Parent shall, contemporaneously with the execution of this
Agreement, pay Two Million Dollars ($2,000,000) into an escrow account pursuant
to Section 1.6 in exchange for the right to conduct the additional
investigations of the Company's Material Oil and Gas Properties described on
Exhibit A attached hereto;
WHEREAS, as a condition and an inducement to the parties entering into
this Agreement, Plantation Petroleum Ventures, Ltd., a Texas limited partnership
affiliated with Parent and Sub, and Plantation Petroleum Corp., a Texas
corporation affiliated with Parent and
Sub (collectively, "GUARANTORS"), have agreed to unconditionally guarantee the
obligations of Parent and Sub under this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, Parent, Sub and the Company agree as
set forth below.
ARTICLE I
THE MERGER
1.1. THE MERGER. The Merger shall be effected in accordance with the
DGCL. The Sub shall be merged with and into the Company at the Effective Time,
and the surviving corporation shall thereby become a wholly-owned subsidiary of
Parent. Following the Effective Time, the separate existence of Sub shall cease
and the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and shall succeed to and assume all the rights and obligations of
Sub and the Company in accordance with the DGCL. The Merger shall have the
effects set forth in the DGCL.
1.2. CLOSING. The closing of the Merger will take place at 10:00 a.m.
on a date mutually agreed to by Parent and the Company, which shall be as soon
as practicable after satisfaction or waiver of the conditions set forth in
Article VII (the "CLOSING DATE"), at the offices of XxXxxxxxx, Will & Xxxxx, 000
Xxxx Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, unless another date, time or place
is agreed to in writing by the parties hereto.
1.3. EFFECTIVE TIME. Sub and the Company will cause a Certificate of
Merger (the "CERTIFICATE OF MERGER") to be executed and filed on the Closing
Date. The Merger shall become effective when the Certificate of Merger, executed
in accordance with the relevant provisions of the DGCL, is duly filed with the
Secretary of State of the State of Delaware, or at such other time as Sub and
the Company shall agree, as specified in the Certificate of Merger. When used in
this Agreement, the term "EFFECTIVE TIME" shall mean the later of the date and
time at which the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or such later time established by the Certificate
of Merger.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; AND OFFICERS.
(a) At the Effective Time, the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The Bylaws of Company, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided by the Certificate of Incorporation of
the Surviving Corporation or by applicable law.
(c) The directors of Sub immediately prior to the Effective Time shall
be the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
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(d) The officers of the Company immediately prior to the Effective Time
shall be the officers of the Surviving Corporation until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.5. DISSENTER'S RIGHTS. Notwithstanding anything in this Agreement to
the contrary, any shares of Company Common Stock outstanding immediately prior
to the Effective Time and held by a holder who has properly exercised the
holder's appraisal rights in accordance with Section 262 of the DGCL or any
successor provision ("DISSENTING SHARES"), shall not be converted into, or
represent the right to receive, the Merger Consideration, unless and until such
holder fails to perfect or effectively withdraws or otherwise loses his right to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be treated as if they had been
converted as of the Effective Time into the right to receive the Merger
Consideration to which such holder is entitled, without interest or dividends
thereon, upon the surrender of the certificate(s) which formerly represented
Shares, in the manner provided in Section 2.2. The Company shall give Parent
prompt notice of any demands received by the Company for appraisal of Shares.
1.6. ESCROW. Parent, Company and Bank One, a national association (the
"ESCROW AGENT") shall execute an Escrow Agreement substantially in the form
attached hereto as Exhibit C (the "ESCROW AGREEMENT"), and Parent shall pay and
deliver to the Escrow Agent, either by cashier's check or wire transfer of
immediately available funds, an xxxxxxx money deposit (the "DEPOSIT") of
$2,000,000 (Two Million Dollars). Parent and the Company agree to execute
written instructions to the Escrow Agent in accordance with the Escrow Agreement
to release the Deposit as follows:
(i) to Parent at Closing;
(ii) unless the Company has also breached this Agreement, to
Company, if (A) the Company terminates this Agreement pursuant to
Section 8.1(e) or (B) the Merger is not consummated on or before the
Outside Date and the failure to consummate the Merger is the result of
a breach of this Agreement by Parent; and
(iii) to Parent, if Parent terminates this Agreement pursuant to
Section 8.1(c), 8.1(f) or 8.1(g), if Company terminates this Agreement
pursuant to Section 8.1(d), or if Closing does not otherwise occur on
or before the Outside Date for any reason other than (ii) above.
The fees of the Escrow Agent shall be borne by Parent.
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ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1. EFFECT ON STOCK. As of the Effective Time, by virtue of the Merger
and without any action on the part of any of Sub, the Company or the holders of
any securities of the Constituent Corporations:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock, $0.10 par value, of the Surviving
Corporation;
(b) Treasury Stock and Parent Owned Stock. Each Share that is owned by
the Company, Parent, Sub or any other Subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor; and
(c) Conversion of Shares. Each Share issued and outstanding (other than
Shares to be cancelled in accordance with Section 2.1(b)) shall be converted
into the right to receive the Merger Consideration. As of the Effective Time,
all such Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration.
2.2. EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. At or before the Effective Time, Parent or Sub
shall deposit, or shall cause to be deposited, with a banking or other financial
institution mutually acceptable to Parent and the Company (the "EXCHANGE
AGENT"), for the benefit of the holders of Shares, cash in an amount equal to
the product of the number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (reduced by the sum of the
number of Shares owned by Parent, Sub or the Company) times the Merger
Consideration for exchange in accordance with this Article II. Such funds shall
be invested by the Exchange Agent as directed by Parent. Parent shall pay all
charges and expenses of the Exchange Agent.
(b) Exchange Procedure. As soon as practicable after the Effective
Time, Parent or the Surviving Corporation shall cause the Exchange Agent to mail
and make available to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented Shares (the
"CERTIFICATES"), (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates for payment of the Merger Consideration. Upon surrender of a
Certificate to the Exchange Agent, together with a duly executed letter of
transmittal, the Exchange Agent shall, and the Parent shall cause the Exchange
Agent to, promptly pay out to the
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holder of such Certificate a check representing the Merger Consideration that
such holder has the right to receive in respect of the Certificate surrendered,
after giving effect to any required withholding tax. Shares represented by the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash payable to holders of Shares. In the event of a transfer
of ownership of Shares that is not registered in the transfer records of the
Company, Merger Consideration to be paid pursuant to this Section 2.2 may be
paid to a transferee, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the transferee shall pay any
transfer or other taxes required by reason of the payment to a Person other than
the registered holder of such Certificate or establish to the satisfaction of
Parent or the Surviving Corporation that such tax has been paid or is not
applicable. Parent or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of Shares such amounts as Parent or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Exchange Agent, withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made by Parent or the Exchange Agent. Until surrendered as contemplated by
this Section 2.2, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive the Merger Consideration in cash as
contemplated by this Section 2.2.
(c) No Further Ownership Rights in Shares. The Merger Consideration
paid upon the surrender for exchange of Certificates in accordance with the
terms of this Article II shall be deemed to have been paid in full satisfaction
of all rights pertaining to such Shares. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
Parent, the Surviving Corporation or the Exchange Agent for any reason, they
shall be cancelled and exchanged as provided in this Article II. (d) No
Liability. At any time following one (1) year after the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been made available to the Exchange Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, none of Parent, Sub, the
Company or the Exchange Agent shall be liable to any Person in respect of any
amount properly delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Lost Certificates. If any Certificate shall have been lost, stolen,
mislaid or destroyed, then, upon receipt of (i) an affidavit of that fact from
the holder claiming such Certificate to be lost, mislaid, stolen or destroyed,
and (ii) such bond, security or indemnity as Parent or the Exchange Agent may
reasonably require, the Merger Consideration with respect to the Shares of
Company Common Stock represented by such Certificate may be paid. Each lost,
stolen, mislaid or destroyed Certificate with respect to which any Merger
Consideration shall be paid in
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accordance with the provisions of this Section 2.2(e) shall forthwith be deemed
surrendered and cancelled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company SEC Documents or in the disclosure
letter of even date herewith delivered by the Company (the "COMPANY DISCLOSURE
LETTER"), the Company represents and warrants to Parent and Sub as set forth
below as of the date of this Agreement and as of the Effective Time (except to
the extent expressly made as of an earlier date, in which case as of such date):
3.1. ORGANIZATION. Each of the Company and MOC Resources, Inc., a
Nevada corporation and wholly owned Subsidiary of the Company (the "COMPANY
SUBSIDIARY"), is validly existing and in good standing under the laws of the
jurisdiction of its organization and has requisite power and authority to carry
on its business as now being conducted, except where the failure to be so
existing and in good standing or to have such power and authority would not have
a Material Adverse Effect on the Company. Each of the Company and the Company
Subsidiary is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Merger. The
Company has made available to Parent complete and correct copies of its
certificate of incorporation and bylaws and the articles of incorporation and
bylaws of the Company Subsidiary, in each case as amended through the date
hereof.
3.2. CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 20,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $.50 per share (the "COMPANY PREFERRED STOCK"). At
the close of business on the date hereof, (i) 4,880,368 shares of Company Common
Stock were issued and outstanding, all of which were duly authorized, validly
issued, fully paid and nonassessable and free of preemptive rights, (ii) no
shares of Company Common Stock were held by the Company in its treasury, (iii)
no shares of Company Common Stock or Company Preferred Stock were reserved for
issuance pursuant to outstanding options or warrants to purchase, and (iv) no
shares of Company Preferred Stock were issued or outstanding. Except as set
forth above, no shares of capital stock were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights, phantom stock
or other contractual rights the value of which is determined in whole or in part
by the value of any capital stock of the Company ("STOCK EQUIVALENTS"). There
are no outstanding bonds, debentures, notes or other indebtedness of the Company
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matter on which the Company's stockholders may
vote. There are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or the
Company Subsidiary is a party or by which any of them is bound obligating the
Company or the Company Subsidiary to issue, deliver or sell or create, or cause
to be issued, delivered or sold or created, or evidencing any right to subscribe
for, additional shares of capital
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stock or other voting securities or Stock Equivalents of the Company or the
Company Subsidiary or obligating the Company or the Company Subsidiary to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
rights, commitments, agreements or undertakings of any kind obligating the
Company or the Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of capital stock or other voting securities of the Company or the Company
Subsidiary or any securities of the type described in the two immediately
preceding sentences.
3.3. SUBSIDIARIES. Except for the capital stock of the Company
Subsidiary, the Company does not own, directly or indirectly, any capital stock
or other ownership interest in any Person. All of the outstanding shares of
capital stock or ownership interest of the Company Subsidiary have been validly
issued and are fully paid and nonassessable, and are owned by the Company free
and clear of all Liens (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock). The Company Subsidiary holds assets of
approximately $190,000 in the form of cash or cash equivalents, has no
liabilities (whether fixed or contingent) or employees and is not actively
engaged in any operations.
3.4. AUTHORITY. The Company has the requisite corporate power and
authority to execute and deliver this Agreement and, subject to Company
Stockholder Approval, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to Company Stockholder Approval. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by Parent and Sub)
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity.
3.5. CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the respective certificate or articles of
incorporation or respective by-laws or of the Company or the Company Subsidiary,
(b) require any Consent of, or filing with or notification to, any Governmental
Entity, except (i) a proxy or information statement relating to the Company
Stockholders' Meeting (as amended or supplemented from time to time, the "PROXY
STATEMENT"), (ii) pursuant to the applicable requirements of the Exchange Act,
(iii) the filing of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in which the
Company is authorized to do business, (iv) as may be required by any applicable
state securities or "blue sky" laws or state takeover laws or (v) where the
failure to obtain such Consents, or to make such filings or notifications, would
not have a Material Adverse Effect on the Company, or (c) assuming the Consents,
filings or notifications referred to in this Section 3.5 are duly and timely
obtained or made and Company Stockholder Approval has been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation in effect as of the
date of this Agreement and applicable to the Company, except for violations
which would not have a Material Adverse Effect on the Company.
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3.6. SEC DOCUMENTS AND OTHER REPORTS. The Company has timely filed with
the SEC all required reports, schedules, forms, statements and other documents
required to be filed by it since December 31, 2001 through the date of this
Agreement under the federal securities laws and the SEC rules and regulations
thereunder (the "COMPANY SEC DOCUMENTS"). As of their respective filing dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, each
as in effect on the date so filed, and at the time filed with the SEC none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company (including the
related notes thereto) included in the Company SEC Documents complied in form
and substance as of their respective dates in all material respects with the
then applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP (except
in the case of the unaudited statements, as permitted by Form 10-Q under the
Exchange Act) applied on a basis consistent with prior periods (except as may be
indicated therein or in the notes thereto) and fairly present, in conformity
with GAAP, in all material respects the consolidated financial position of the
Company and the Company Subsidiary as at the dates thereof and the consolidated
results of their operations and their consolidated cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein).
3.7. ABSENCE OF CERTAIN CHANGES. Since December 31, 2001, the Company
has conducted its business in all material respects only in the ordinary course
and in a manner consistent with past practice and there has not been (i) any
changes, circumstances or events which have had a Material Adverse Effect on the
Company, (ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to its capital
stock or any redemption, purchase or other acquisition of any of its capital
stock, (iii) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) any change in accounting methods, principles or practices by
the Company, except insofar as may have been required by a change in GAAP, (v)
any increase in compensation, severance or termination pay to any current or
former director, officer or employee of the Company or (vi) any damage,
destruction or loss (whether or not covered by insurance) that has had a
Material Adverse Effect on the Company.
3.8. INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement, will, at the time the Proxy Statement is first mailed to
the Company's stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
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3.9. COMPLIANCE WITH LAWS. The Company and the Company Subsidiary are
in compliance in all material respects with all applicable Laws, except for any
non-compliance that would not have a Material Adverse Effect on the Company, and
neither the Company nor the Company Subsidiary has received any notice from any
Governmental Entity or any other Person that either the Company or the Company
Subsidiary is in violation of, or has violated, any applicable Laws, except for
violations that would not have a Material Adverse Effect on the Company. The
Company has in effect all Federal, state and local governmental Permits
necessary for it to own, lease or operate its properties and assets and to carry
on its business as now conducted, and there has occurred no default under any
such Permit, except for the absence of Permits and for defaults under Permits,
which absence or defaults, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. Neither the execution and delivery of
this Agreement by the Company nor the consummation by the Company of the
transactions contemplated hereby will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to a right of termination or cancellation) of any Permit.
3.10. TAX MATTERS. Each of the Company and the Company Subsidiary has
filed (after taking into account any extensions to file) all Tax Returns
required to be filed by it either on a separate or combined or consolidated
basis, except where the failure to timely file a Tax Return (other than a
Federal or state income Tax Return) would not have a Material Adverse Effect on
the Company. All such Tax Returns are complete and accurate, except where the
failure to be complete or accurate would not have a Material Adverse Effect on
the Company. Each of the Company and the Company Subsidiary has paid and
discharged or caused to be paid and discharged all Taxes reflected on such Tax
Returns which have become due and payable by it (except Taxes being contested in
good faith and reserved against, and has made adequate provision in reserves
established in its financial statements and accounts for all Taxes which have
accrued but are not yet due and payable, except where the failure to file Tax
Returns, pay Taxes or provide reserves for Taxes would not have a Material
Adverse Effect on the Company. Neither the Company nor the Company Subsidiary
has waived any statute of limitations in respect of the assessment and
collection of Taxes. Neither the Company nor the Company Subsidiary is a party
to any Tax allocation or sharing agreement outside the ordinary course of
business, other than between themselves. Neither of the Company or the Company
Subsidiary has been a member of an affiliated group filing a consolidated U.S.
federal Tax Return, other than Tax Returns as to which the Company is the common
parent. As of the date of this Agreement, there are no pending or, to the
Knowledge of the Company, threatened in writing audits, examinations,
investigations or other proceedings with respect to Taxes relating to the
Company or the Company Subsidiary, which, if determined adversely to the Company
or the Company Subsidiary, would have a Material Adverse Effect on the Company.
Neither the Company nor the Company Subsidiary is or was either a "distributing
corporation" or "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution qualifying for tax-free treatment
under Section 355 of the Code in the two years prior to the date of this
Agreement. No written requests for waivers of the time to assess any material
Taxes of the Company or the Company Subsidiary are pending.
None of the Company's assets constitutes either an interest in, or
property of, an unincorporated organization that files a Tax Return as a
partnership for federal income tax purposes. The Company does not own any
interest in any controlled foreign corporation (as
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defined in section 957 of the Code), passive foreign investment company (as
defined in section 1296 of the Code) or other entity the income of which is
required to be included in the income of the Company.
3.11. LIABILITIES. Neither the Company nor the Company Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) whether or not any such liability or obligation would
have been required by GAAP to be set forth on a consolidated balance sheet of
the Company or in the notes thereto, other than (i) liabilities and obligations
set forth on the audited consolidated balance sheet of the Company and the
Subsidiary as of December 31, 2001 (or in the notes thereto) contained in the
Company SEC Documents, (ii) liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby (iii)
liabilities and obligations incurred since December 31, 2001 in the ordinary
course of business (none of which is a material liability for breach of
contract, breach of warranty, tort or infringement) or (iv) liabilities which
would not have a Material Adverse Effect on the Company.
3.12. LITIGATION. Except as disclosed in the Company SEC Reports or as
set forth in the Company Disclosure Letter, as of the date of this Agreement,
there is no, nor has there been since December 31, 2001 any, suit, action,
claim, audit, proceeding or investigation pending or, to the Knowledge of the
Company, threatened against the Company or the Company Subsidiary or to the
Knowledge of the Company against any member of the Company's Board of Directors
or any of the Company's officers in their capacity as such, by or before any
Governmental Entity or by any third party that, individually or in the
aggregate, would (i) have a Material Adverse Effect on the Company, (ii) impair
the ability of the Company to perform its obligations under this Agreement or
(iii) prevent or delay the Merger; nor is there any outstanding judgment, order,
writ, injunction, rule or decree of any Governmental Entity or arbitrator
outstanding against the Company or the Company Subsidiary that would have any
such effect, and neither the Company nor the Company Subsidiary has any
Knowledge of any fact or circumstance that the Company believes, or reasonably
should believe, would be likely to form the basis for any such claim, suit,
proceeding, audit or governmental investigation.
3.13. BENEFIT PLANS.
(a) The Company Disclosure Letter sets forth a complete and accurate
list of all Benefit Plans of the Company. The Company Subsidiary does not have,
and, since January 1, 1997, has not had, any Benefit Plans. Except as required
by law, the Company has not adopted or amended in any material respect any
Benefit Plan since December 31, 2001. The Company has made available to Parent a
copy of each Benefit Plan.
(b) Except as would not have a Material Adverse Effect on the Company,
each ERISA Benefit Plan maintained by the Company has been maintained and
operated in compliance with its terms, the applicable requirements of applicable
law, including the Code and ERISA. Each ERISA Benefit Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code has received a
current favorable determination letter from the IRS. None of the Company, the
Company Subsidiary or any other Person or entity that together with the Company
is treated as a single employer under Section 414 of the Code (each, an "ERISA
AFFILIATE") has at any time during the five-year period preceding the date
hereof contributed to any ERISA Benefit Plan that
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is a "multiemployer plan" (as defined in Section 3(37) of ERISA) or maintained
any ERISA Benefit Plan that is subject to Title IV of ERISA or Section 412 of
the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability. Insofar as the
representation made in this Section 3.13(c) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which the
Company or any ERISA Affiliate made, or was required to make, contributions
during the five-year period ending on the last day of the most recent plan year
ending prior to the Closing Date.
(d) No Benefit Plan provides medical, surgical, hospitalization or
death benefits (whether or not insured) for employees or former employees of the
Company for periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law, (ii) death benefits
under any "pension plan," or (iii) benefits the full cost of which is borne by
the current or former employee (or his or her beneficiary) or (iv) exceptions
which would not have a Material Adverse Effect on the Company.
(e) The Company is not a party to any collective bargaining or other
labor union contract. There is no pending or, to the Knowledge of the Company,
threatened in writing labor dispute, strike or work stoppage against the Company
which would have a Material Adverse Effect on the Company, nor is the Company
aware of any labor organization activity involving its employees. The employment
of each officer and employee of the Company is terminable at the will of the
Company.
(f) The consummation of the transactions contemplated by this Agreement
will not give rise to an obligation on behalf of the Company to make severance
or change of control payments to any employees or directors of the Company or
the Company Subsidiary, or increase benefits or accelerate vesting or payments
under any Benefit Plans.
(g) No payments made to any employees or directors of the Company or
the Company Subsidiary by the Company or the Company Subsidiary as a result of
the consummation of the transactions contemplated by this Agreement would be
non-deductible under Section 280G of the Code, except as would not have a
Material Adverse Effect on the Company.
(h) Neither the Company nor the Company Subsidiary has taken any action
or failed to take any action which would result in the imposition of an excise
tax on the Company pursuant to Sections 4975, 4980B and 4999 of the Code that
would have a Material Adverse Effect on the Company.
3.14. BROKERS. No broker, investment banker, financial advisor or other
Person, other than Xxxxxxx Xxxxx & Company LLC ("XXXXXXX XXXXX"), the fees and
expenses of which will be paid by the Company, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or the Company Subsidiary.
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3.15. VOTING REQUIREMENTS.
(a) Approval of the Merger requires the affirmative vote of a majority
of the outstanding Shares (the "COMPANY STOCKHOLDER APPROVAL"). The Company
Stockholder Approval is the only vote of the holders of the Company's capital
stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby.
(b) The Board of Directors of the Company, at a meeting duly called and
held, has unanimously duly adopted resolutions (i) determining that this
Agreement and the transactions contemplated hereby, including the Merger, are
advisable and are fair to and in the best interest of the Company's
stockholders, (ii) approving this Agreement and the transactions contemplated
hereby, including the Merger (and for purposes of Section 203 of the DGCL, the
Voting Agreement) which approval satisfies in full the requirements of the DGCL
that the Agreement be approved by the Company's Board of Directors, and (iii)
resolving to recommend approval and adoption of this Agreement by the Company's
stockholders at the Company Stockholders Meeting (the recommendations referred
to in this clause (iii) are collectively referred to in this Agreement as the
"RECOMMENDATIONS" and are subject to the right of the Board of Directors of the
Company to make Subsequent Determinations in accordance with Section 5.3 below).
The Company has received the opinion, dated the date hereof, of Xxxxxxx Xxxxx
that, as of such date and on the basis of and subject to the matters described
therein, the Merger Consideration was fair to the Company's stockholders (other
than Parent and Sub) from a financial point of view. The Company has been
advised that all of its directors who hold Company Common Stock intend to vote
in favor of the Merger.
3.16. ENVIRONMENTAL MATTERS.
(a) The Company is in compliance with all applicable Environmental
Laws, including possessing or filing all Permits, exemptions and other
governmental authorizations required for its operations under applicable
Environmental Laws, except for such non-compliance that would not have a
Material Adverse Effect on the Company.
(b) There is no pending or, to the Knowledge of the Company, threatened
claim, lawsuit or administrative proceeding against the Company or the Company
Subsidiary, under or pursuant to any Environmental Law. The Company has not
received written notice from any Person, including any Governmental Entity,
alleging that the Company has been or is in violation or potentially in
violation of any applicable Environmental Law or otherwise may be liable under
any applicable Environmental Law, which violation or liability is unresolved.
The Company has not received any written request for information from any
Person, including any Governmental Entity, related to liability under or
compliance with any applicable Environmental Law.
(c) With respect to the real property that is currently owned, leased
or operated by the Company, there have been no spills, discharges or releases
(as such term is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, 42, U.S.C. 9601, et seq.) of Hazardous
Substances or any other contaminant or pollutant on or underneath any of such
real property that would have a Material Adverse Effect on the Company.
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(d) With respect to real property that was formerly owned, leased or
operated by the Company or any of its predecessors in interest, to the Knowledge
of the Company, there were no spills, discharges or releases (as such term is
defined by the Comprehensive Environmental Response, Compensation and Liability
Act, 42, U.S.C. 9601, et seq.) of Hazardous Substances or any other contaminant
or pollutant on or underneath any of such real property during or prior to the
Company's ownership or operation of such real property that would have a
Material Adverse Effect on the Company.
(e) The Company has not entered into any written agreement to pay to,
reimburse, guarantee, pledge, defend, indemnify or hold harmless any Person from
or against any liabilities or costs arising out of or related to the generation,
manufacture, use, transportation or disposal of Hazardous Substances, or
otherwise arising in connection with or under Environmental Laws, which would
have a Material Adverse Effect on the Company.
(f) To the Knowledge of the Company, the Company has not disposed or
arranged for the disposal of Hazardous Substances (or any waste or substance
containing Hazardous Substances) at any location that is: (i) listed on the
Federal National Priorities List ("NPL") or identified on the Comprehensive
Environmental Response, Compensation and Liability Information System
("CERCLIS"), each established pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42, U.S.C. 9601, et seq.; (ii) listed
on any state list of hazardous waste sites that is analogous to the NPL or
CERCLIS; or (iii) has been subject to environmental investigation or redemption,
other than, in each case, exceptions which would not have a Material Adverse
Effect on the Company.
(g) The Company has made available to Parent all material environmental
audits and studies which are in the Company's possession or control.
3.17. CONTRACTS.
(a) The Company Disclosure Letter and the Company's Annual Report on
Form 10-K for the year ended December 31, 2001 and the exhibits contained or
incorporated by reference therein together set forth a complete and accurate
list of all material agreements to which the Company is a party, as of the date
of this Agreement and the Closing Date, including: (i) any contract covering
compensation and employment or service of any officer, employee or consultant or
relating to any loan from the Company to an officer, director or Affiliate; (ii)
any indenture, mortgage, loan, credit or similar contract under which the
Company has borrowed any money or issued any note, bond, indenture or other
evidence of indebtedness for borrowed money, sold and leased back assets or
guaranteed indebtedness for others (including hedge, swap, exchange or similar
contracts entered into in the ordinary course of business), whether or not
reflected in the Company SEC Documents; (iii) any guarantee by the Company of
any obligation of another or any Hedge; (iv) any agreement under which it has
granted any individual or entity any registration rights (including demand and
piggyback registration rights); (v) any agreement between the Company and its
stockholders or among its stockholders (of which the Company has Knowledge)
concerning corporate governance or related matters; (vi) any agreement
respecting any partnership, joint venture or right of first refusal; (vii) any
agreement requiring capital expenditures, other than those on the capital
expenditure budget for 2002 in the form included in the Company Disclosure
Letter (the "2002 CAPITAL EXPENDITURE BUDGET") in
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excess of $100,000; (viii) any contract (A) by which the Company or the Company
Subsidiary is obligated to make future payments in excess of $50,000 or sell
assets with a book value in excess of $50,000 in the aggregate, and (B) which is
not entered into in the ordinary course of the conduct of its business
consistent with past practices; (ix) any non-competition agreements or any other
agreements or obligations which purport to limit in any material respect the
manner in which, or the localities in which, all or any substantial portion of
the business of the Company is conducted; (x) any contract not terminable at
will without penalty with any stockholder of the Company or any affiliate of any
stockholder of the Company; (xi) any plan, contract or arrangement providing for
bonuses, pensions, deferred compensation, retirement plan payments, profit
sharing, incentive pay or any other employee right or benefit (the agreements,
contracts and obligations specified above, collectively the "COMPANY
Contracts").
(b) The Company has made, and, prior to the Closing Date, will continue
to make, available to Parent at the Company's offices for copying each Lease,
and each agreement or other contract related to the Oil and Gas Properties
listed in the Reserve Report as having a PW 10 Value of $100,000 or greater
(each of such Oil and Gas Properties a "MATERIAL OIL AND GAS PROPERTY" of a type
described below which it has in its possession or control (collectively with
each Lease related to the Material Oil and Gas Properties, "MATERIAL OIL AND GAS
CONTRACTS"):
(i) for the future sale, lease, farmout or other disposition of
any Lease or Xxxxx;
(ii) under which exists a gas or oil imbalance;
(iii) which constitutes a partnership, joint venture or agreement
pursuant to which the Company has granted any Person a right of first
refusal, preemptive rights of purchase, or other option to acquire any
Material Oil and Gas Property;
(iv) which constitutes a farmin or farmout agreement,
participation agreement or other contract that will increase or
decrease the Company's Working Interest or Net Revenue Interest in any
Lease or Well from the Working Interest or Net Revenue Interest set
forth in the Reserve Report including any such increase or decrease
resulting from any reversion, "back-in," "carried" interest
arrangement, non-consent arrangement, conversion option or other
similar provision; and
(v) (A) joint and other operating agreements; (B) exploration
agreements; (C) participation agreements; (D) area of mutual interest
agreements; (E) agreements for the purchase of producing properties;
(F) unitization agreements; (G) assessment agreements; (H) any
prepayment arrangement; (I) agreements containing a "take-or-pay" or
similar provision; (J) agreements providing for a production payment;
(K) "gas balancing" agreements; (L) any other arrangement to deliver
hydrocarbons at some future time; (M) bottom hole agreements; (N)
acreage contribution agreements; (O) pooling and communitization
agreements; (P) processing agreements; or (Q) agreements containing
seismic licenses, permits and other rights to geological and/or
geophysical data and information directly or indirectly relating to
the leases held by the Company.
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(c) All Company Contracts and Material Oil and Gas Contracts are valid
and binding, in full force and effect and, to the Company's Knowledge,
enforceable against the parties thereto in accordance with their respective
terms, except where the failure to be so valid and binding, in full force and
effect or enforceable would not have a Material Adverse Effect on the Company.
The Company has performed all material obligations and is not in breach or
default under any Company Contract or Material Oil and Gas Contract and no event
has occurred, which after notice or lapse of time, or both, would constitute a
default by the Company, or to the Company's Knowledge, any other party, other
than any such defaults or events which would not have a Material Adverse Effect
on the Company. Neither the execution of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration of lien, other charge or encumbrance or
preferential right to purchase or trigger any change in operator provisions)
under any Company Contract or any Material Oil and Gas Contract, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or liens or other charges or Liens) as to which Consents have been
obtained or which would not have a Material Adverse Effect on the Company. There
are no Consents related to the Material Oil and Gas Properties required in
connection with the Merger. There are no preferential purchase rights or (with
respect to the Material Oil and Gas Properties operated by the Company) change
in operator provisions related to the Material Oil and Gas Properties that would
be triggered by the Merger.
3.18. COMPANY OIL AND GAS PROPERTIES. (a) Except for goods and other
property sold, used or otherwise disposed of since December 31, 2001, without
breaching any Company warranty, representation or covenant set forth in this
Agreement, the Company has Defensible Title in and to all the Xxxxx, Units and
Leases as to the Working Interests and Revenue Interests described in the
Reserve Report, as owned by the Company, free and clear of Liens, except
Permitted Encumbrances.
(b) The Company's interest in production from each Well, Unit or Lease
included in the Oil and Gas Properties entitles the holder thereof to receive
not less than the Net Revenue Interest set forth in the Reserve Report hereto
with respect to such Well, Unit or Lease under the caption "Revenue Interest" or
"NRI" without reduction during the life of such Well, Unit or Lease, except as
set forth in the Reserve Report, and obligates the holder thereof to pay costs
and expenses relating to each such Well, Unit or Lease in an amount not greater
than the Working Interest set forth in the Reserve Report with respect to such
Well, Unit or Lease, without increase over the life of such Well, Unit or Lease.
(c) As to Oil and Gas Properties operated by the Company, and to the
Knowledge of the Company as to Oil and Gas Properties operated by third parties,
all Leases and other agreements pursuant to which the Company leases or
otherwise acquires or obtains operating rights affecting real or personal
property are in good standing, valid and effective, and all royalties, rentals
and other payments and expenses due by the Company to any lessor of any such
Leases have been timely paid by the Company. The Company Disclosure Letter sets
forth all suspense funds held by the Company for the account of a third party or
an Affiliate that are associated with the Oil and Gas Properties.
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(d) Except for Hydrocarbon sales contracts with a term not greater than
ninety (90) days, no Hydrocarbons produced from the Oil and Gas Properties are
subject to a sales contract or other agreement relating to the marketing of
Hydrocarbons, and no Person has any option to purchase or similar rights with
respect to Hydrocarbons produced from such Oil and Gas Properties at less than
market value.
(e) The Company has, and to the Knowledge of the Company as to Oil and
Gas Properties operated by third parties the operator has, the ability and right
to obtain access to, produce, treat, compress, dehydrate, transport, process, or
otherwise market Hydrocarbons from the Xxxxx, Units, Lands and Leases related to
the Oil and Gas Properties without the need for any additional agreements.
(f) The Company Disclosure Letter sets forth all of the Company's gas
or oil imbalances. Except for gas balancing agreements containing customary
provisions, the Company is not obligated, by virtue of a prepayment arrangement,
a "take or pay" arrangement, a production payment or any other arrangement, to
deliver Hydrocarbons produced from the Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, and no take or
pay credits must be provided before gas can be transported through any
interstate carrier under FERC Order 500, et al, and there are no obligations on
the Oil and Gas Properties under FERC Order 451.
(g) The Company has not entered into any Xxxxxx.
(h) As to Oil and Gas Properties operated by the Company, the Company
has caused the Oil and Gas Properties to be maintained and operated in a
reasonable and prudent manner in accordance with typical and customary standards
of the oil and gas industry.
(i) The Company Disclosure Letter sets forth, as of the date set forth
for each Well included in the Oil and Gas Properties, to the Knowledge of the
Company and for purposes of this representation such Knowledge is based on the
information given to the Company by third-party operators for all Xxxxx not
operated by the Company, the Payout Balances for each Well included in the Oil
and Gas Properties. "PAYOUT BALANCES" means the status, as of the date of the
Company's calculations, of the recovery in the contract relating to a Well out
of the revenue from such Well where the Net Revenue Interest of the Company
therein will be reduced or increased when such amount has been recovered.
(j) The Company is currently receiving from all purchasers of
production from the Xxxxx or Leases included in the Oil and Gas Properties
revenues not less than the Net Revenue Interest described in the Reserve Report
with respect thereto without suspense or any indemnity other than the normal
division order warranty of title.
(k) The Company Disclosure Letter sets forth, as of the date of this
Agreement, all currently outstanding and expected internal Company and third
party authorizations for expenditures (commonly known as "AFE's") which require
a future expenditure in excess of $25,000.
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(l) Except as set forth in the Company Disclosure Letter, since the
effective date of the Reserve Report, the Company has not sold or abandoned any
Xxxxx included in the Oil and Gas Properties listed in the Reserve Report.
3.19. INTELLECTUAL PROPERTY. The Company and the Company Subsidiary
either own or have valid licenses or other rights to use all patents,
copyrights, trademarks, software, databases, geological data, geophysical data,
engineering data, maps, interpretations and other technical information used in
their businesses as presently conducted, subject to the limitations contained in
the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of oil,
gas, condensate and other hydrocarbons, with such exceptions as would not result
in a Material Adverse Effect on the Company. There are no limitations contained
in the agreements of the type described in the immediately preceding sentence
which, upon consummation of the transactions contemplated by this Agreement,
will alter or impair any such rights, breach any such agreement with any third
party vendor, or require payments of additional sums thereunder, except any such
limitations that would not have a Material Adverse Effect on the Company.
3.20. RESERVE REPORT. The Estimates of Oil & Gas Reserves as of
December 31, 2001 (in both paper and ARIES database formats, a copy of each of
which has been provided to Parent) prepared by the Company and audited by
Netherland, Xxxxxx & Associates, Inc. (the "RESERVE REPORT"), list all producing
Oil and Gas Properties, and are accurate and complete in all material respects.
The Company has good and defensible title to all of the Oil and Gas Properties,
free and clear of all Liens, except for Permitted Encumbrances and Title Defects
and Liens that would not have a Material Adverse Effect on the Company. The
Company enjoys and is in peaceful and undisturbed possession of the Oil and Gas
Properties. The estimates of future capital expenditures and other exploration
and development costs were prepared in good faith and with a reasonable basis.
3.21. ADDITIONAL DRILLING OBLIGATIONS. There are no current obligations
or assessments of the Company (other than implied obligations under the Leases
concerning protection from drainage and further development that is customary in
the oil and gas industry) that require the drilling of additional Xxxxx or other
material development operations (including re-entry of existing xxxxx) in order
to earn or to continue to hold all or any portion of the Oil and Gas Properties,
and the Company has never been advised by a lessor of any requirements or
demands to drill additional Xxxxx on any of the Land (whether pursuant to any
implied covenant to protect from drainage, further development, or otherwise),
which requirements or demands have not been resolved.
3.22. XXXXX . To the Knowledge of the Company, all Xxxxx have been
located, drilled and completed on the Land in substantial accordance with all
Laws applicable thereto. To the Knowledge of the Company, there are no Permits
required to be obtained by the Company to discharge, dispose of or transport
water, whether or not across lease lines, with respect to the operation of its
Xxxxx, other than Well Permits obtained by the Company from the jurisdictions
where the Well is located or the United States Environmental Protection Agency
in connection with the normal drilling and operation of each Well.
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3.23. FACILITIES. To the Knowledge of the Company, (i) the Facilities
owned by the Company which are material to the operation of the Company are in
good working order, are in a state of good repair subject to ordinary wear and
tear, and are suitable for the purposes for which such Facilities are being
used, and (ii) the Company has all material easements, rights of way, licenses
and Consents from appropriate property owners and all licenses and Consents from
appropriate Governmental Entities necessary to access, construct, operate,
maintain and repair the Facilities owned by the Company in material compliance
with all applicable Laws. Except for gathering systems for the Company
production associated with the Leases, the Company does not own any downstream
transportation or gas processing facilities.
3.24. XXXXX TO BE PLUGGED AND ABANDONED. As to Xxxxx operated by the
Company, and to the Knowledge of the Company, as to Xxxxx operated by third
parties, there are no Xxxxx that: (i) the Company is currently obligated by Law
or contract to plug and abandon; (ii) are subject to exceptions to a requirement
to plug and abandon issued by a Government Entity; or (iii) have been plugged
and abandoned in a manner that does not comply in all material respects with
applicable Law.
3.25. ASSET VALUE. The aggregate fair market value (without netting
liabilities) of the reserves of oil, natural gas, shale or tar sands (or the
rights thereto) and associated exploration or production assets, held by the
Company in the aggregate is less than $500 million and the aggregate fair market
value (without netting liabilities) of all other assets held by Company is less
than $50 million. For these purposes associated exploration or production assets
has the meaning set out in 16 C.F.R. ss. 802.3 (2001).
3.26. CONFIDENTIALITY AGREEMENTS. The confidentiality agreements
entered into with any other potential purchasers of the Company are in
substantially the same form as the Confidentiality Agreement, and all benefits
under such agreements shall inure to the Company as of the Effective Time.
3.27. INSURANCE. The Company and the Company Subsidiary maintain, and
there are currently in full force and effect, policies of insurance with respect
to their respective assets and operations against casualties and contingencies
of such types and such amounts as is customary for corporations of similar size
engaged in similar lines of business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as set forth below
as of the date of this Agreement and as of the Effective Time (except to the
extent expressly made as of an earlier date, in which case as of such date):
4.1. ORGANIZATION. Each of Parent and Sub is validly existing and in
good standing under the laws of the jurisdiction of its organization and has
requisite power and authority to carry on its business as now being conducted,
except where the failure to be so existing and in good standing or to have such
power and authority would not have a Material Adverse Effect on Parent. Each of
Parent and Sub is duly qualified or licensed to do business and in good standing
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in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Material Adverse Effect on Parent
or prevent or materially delay the consummation of the Merger. Parent has
delivered to the Company complete and correct copies of its certificate of
formation and limited liability company agreement, and Sub has delivered to the
Company complete and correct copies of its certificate of incorporation and
bylaws. Sub is a wholly-owned subsidiary of Parent.
4.2. AUTHORITY. Parent has requisite limited liability company power
and authority, and Sub has requisite corporate power and authority, to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by each of
Parent and Sub and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Parent and Sub. This Agreement has been duly executed and delivered
by each of Parent and Sub and (assuming the valid authorization, execution and
delivery of this Agreement by the Company) constitutes the valid and binding
obligation of each of Parent and Sub enforceable against each of them in
accordance with its terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
4.3. CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of Parent or Sub under, (i) the
certificate of formation or limited liability company agreement of Parent or the
certificate of incorporation or bylaws of Sub, (ii) any loan or credit
agreement, mortgage, indenture, lease, license, contract or other agreement to
which Parent or Sub is a party or by which any of their respective properties or
assets may be bound or (iii) subject to the governmental filings and other
matters referred to in Section 4.3(b), any judgment, order, injunction, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Sub or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a Material Adverse Effect on
Parent, (y) materially impair Parent's or Sub's ability to perform its
obligations under this Agreement or (z) prevent or materially delay the
consummation of the Merger.
(b) No Consent by a Governmental Entity is required by or with respect
to Parent or Sub in connection with the execution and delivery of this Agreement
by Parent or Sub or the consummation by Parent or Sub of the transactions
contemplated by this Agreement, except for (i) the filing with the SEC of such
reports, schedules, forms and statements under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, (ii) such filings as may be required under state securities or "blue
sky" laws, (iii) the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate
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documents with the relevant authorities of other states in which Parent is
qualified to do business, and (iv) such other Consents and filings the failure
of which to be made or obtained individually or in the aggregate would not (x)
have a Material Adverse Effect on Parent, (y) impair Parent's or Sub's ability
to perform its obligations under this Agreement or (z) prevent or materially
delay the consummation of the Merger.
4.4. FINANCIAL STATEMENTS. Parent has delivered to the Company accurate
and complete copies of its unaudited statements for the period ended April 23,
2002 ("PARENT FINANCIAL STATEMENTS"). The Parent Financial Statements were
prepared in accordance with GAAP and fairly present the consolidated financial
position of Parent and its consolidated Subsidiaries as at the dates thereof and
the consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein).
4.5. ABSENCE OF CERTAIN CHANGES. Since April 23, 2002, Parent and its
subsidiaries have conducted their respective businesses in all material respects
only in the ordinary course consistent with past practice, and there has not
been (i) any changes, circumstances or events which have, had or would
reasonably be expected to have, a Material Adverse Effect on the Parent or its
subsidiaries, (ii) except for ordinary quarterly distributions paid or payable
to members of Parent, any declaration, setting aside or payment of any
distribution with respect to its membership interests or any redemption,
purchase or other acquisition of any of its membership interests, (iii) any
split, combination or reclassification of any of its membership interests or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for its membership interests, or (iv) any
change in accounting methods, principles or practices by Parent, except insofar
as may have been required by a change in GAAP.
4.6. INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will at the respective times they are filed
with the SEC or first published, sent or given to the Company's stockholders,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by Parent or Sub
in connection with any of the foregoing with respect to statements made or
incorporated by reference therein based on information supplied by the Company
or any of its representatives specifically for inclusion or incorporation by
reference therein.
4.7. COMPLIANCE WITH LAWS. Parent and its subsidiaries are in
compliance in all material respects with all applicable Laws, except for any
non-compliance that would not have a Material Adverse Effect on Parent, and
neither Parent nor any of its subsidiaries has received any notice from any
Governmental Entity or any other Person that either Parent or any of its
subsidiaries is in violation of, or has violated, any applicable Laws, except
for violations that would not have a Material Adverse Effect on Parent. Each of
Parent and its subsidiaries has in effect all Federal, state, local and foreign
governmental Permits necessary for it to own, lease or operate properties and
assets and to carry on its business as now conducted, and there has
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occurred no default under any such Permit, except for the absence of Permits and
for defaults under Permits, which absence or defaults would not have a Material
Adverse Effect on Parent.
4.8. LIABILITIES. Neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) whether or not any such liability or obligation would have been
required by GAAP to be set forth on a consolidated balance sheet of Parent and
its subsidiaries or in the notes thereto, other than (i) liabilities and
obligations set forth on the Parent Financial Statements, (ii) liabilities or
obligations under this Agreement or incurred in connection with the transactions
contemplated hereby, (iii) liabilities and obligations incurred since December
31, 2001 in the ordinary course of business (none of which is a material
liability for breach of contract, breach of warranty, tort or infringement) or
(iv) liabilities which would not reasonably be expected to have a Material
Adverse Effect on Parent.
4.9. INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
4.10. LITIGATION. There is no suit, action, proceeding or investigation
pending or, to the Knowledge of Parent, threatened against Parent or any of its
Subsidiaries that would (i) have a Material Adverse Effect on Parent, (ii)
materially impair the ability of Parent or Sub to perform their respective
obligations under this Agreement, or (iii) prevent or materially delay the
Merger; nor is there any outstanding judgment, order, writ, injunction or decree
of any Governmental Entity or arbitrator outstanding against Parent or Sub that
would have such effect.
4.11. BROKERS. No broker, investment banker, financial advisor or other
Person, other than Xxxxxxx & Company International, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
4.12. AVAILABILITY OF FUNDS.
(a) Parent has received and executed a commitment letter, dated the
date of this Agreement, from EnCap Energy Capital Fund IV, L.P., EnCap Energy
Acquisition IV-B, Inc. and Bank of Texas, N.A. (collectively, the "COMMITMENT
LETTERS"), pursuant to which each of the foregoing have separately committed,
subject to the terms and conditions set forth therein, to provide financing for
the transactions contemplated hereby (the "FINANCING"). Correct and complete
copies of the Commitment Letters are attached hereto as Exhibit B. Parent has
fully paid any and all commitment fees or other fees required by the Commitment
Letters to be paid as of the date hereof (and will duly pay any such fees after
the date hereof). The Commitment Letters are valid and in full force and effect,
have not been amended, modified or revoked, and no event has occurred which
(with or without notice, lapse of time or both) would constitute a default
thereunder on the part of Parent or Sub.
(b) Each of the Commitment Letters has been obtained, subject to the
terms and conditions thereof, to pay in part the aggregate Merger Consideration,
to pay all related fees and
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expenses, and to provide additional financing for future working capital and
general corporate needs of the Parent and its Subsidiaries. The obligations to
fund under the Commitment Letters are not subject to any conditions, other than
as set forth in the Commitment Letter. It is the good faith belief of Parent and
Sub, that the Financing will be obtained. Each of Parent and Sub will use its
reasonable best efforts to cause the Financing to be completed.
(c) The Financing, together with the other funds available to Parent,
will provide sufficient funds to consummate the Merger and the other
transactions contemplated hereby. Immediately after the consummation of the
Merger, the Surviving Corporation (i) will not be insolvent, (ii) will not be
left with unreasonably small capital, and (iii) will not have debts beyond its
ability to pay such debts as they mature.
4.13. OWNERSHIP OF SHARES. Neither Parent nor Sub nor Guarantor
beneficially owns any Company Common Stock.
4.14. FAIR MARKET VALUE DETERMINATION. Parent has determined, in
accordance with 16 C.F.R. ss. 801.10 (2001), that the aggregate fair market
value (without netting liabilities) of the reserves of oil, natural gas, shale
or tar sands (or the rights thereto) and associated exploration or production
assets to be held as a result of the Merger is less than $500 million and that
the aggregate fair market value (without netting liabilities) of all other
assets to be held as a result of the Merger is less than $50 million. For these
purposes "associated exploration or production assets" has the meaning set out
in 16 C.F.R. ss. 802.3 (2001).
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. From the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement, the Company shall, and shall cause the Company
Subsidiary to, in all material respects, carry on its business in the ordinary
course in a manner consistent with operations during the prior twelve month
period and in compliance with applicable Laws. Without limiting the generality
of the foregoing, and except as otherwise contemplated by this Agreement or as
disclosed in the Company Disclosure Letter, during such period, the Company
shall not, and shall not permit the Company Subsidiary to, without the prior
written consent of Parent (which consent shall not be unreasonably withheld or
delayed):
(a) split, combine, subdivide or reclassify any Shares or declare, set
aside for payment or pay any dividend, or make any other actual, constructive or
deemed distribution in respect of any Shares or otherwise make any payments to
stockholders in their capacity as such, other than dividends by the Company
Subsidiary to the Company;
(b) authorize or propose the issuance, sale, disposition or pledge or
other encumbrance of (i) any additional shares of capital stock of any class
(including the Shares), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of capital
stock, or any rights, warrants, options, calls, commitments or any other
agreements of any character to purchase or acquire any shares
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of capital stock or any securities or rights convertible into, exchangeable for,
or evidencing the right to subscribe for, any shares of capital stock or (ii)
any other securities in respect of, in lieu of, or in substitution for, Shares
outstanding on the date hereof;
(c) adopt any amendments to its certificate of incorporation or by-laws
or alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of the Company or the Company
Subsidiary;
(d) acquire, or agree to acquire, in a single transaction or series of
related transactions, any business or assets having a value in excess of $50,000
individually or $100,000 in the aggregate, other than transactions that are in
the ordinary course of business or as permitted under Section 5.1(e);
(e) make or agree to make any capital expenditure, other than
expenditures within the Company's 2002 Capital Expenditure Budget;
(f) sell, lease, license, farmout, subject to Lien or otherwise dispose
of any of its Material Oil and Gas Properties (other than Hydrocarbons in the
ordinary course of business);
(g) enter into any material joint venture agreement, partnership
agreement or similar agreement not in conjunction with acquisitions or capital
expenditures contemplated in this Section 5.1 or the Company Disclosure Letter;
(h) except as may be required as a result of a change in law or GAAP,
make any material change in its method of accounting;
(i) make any material Tax election (unless required by law), enter into
any settlement or compromise of any material Tax liability or amend any Tax
Return;
(j) (i) incur any Indebtedness or guarantee any Indebtedness of another
Person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or the Company Subsidiary, guarantee any debt
securities of another Person, or (ii) make any loans, advances or capital
contributions to, or investments in, any other Person, except pursuant to an
agreement existing on the date hereof and which is referenced in the Company
Disclosure Letter;
(k) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or the Company Subsidiary (other than the Merger); or redeem,
purchase or otherwise acquire any of its outstanding Shares;
(l) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice in accordance with
their terms, or liabilities reflected or reserved against in, or contemplated
by, the Company SEC Documents or incurred since December 31, 2001
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in the ordinary course of business consistent with past practice, or waive any
benefits of, or agree to modify in any respect, any confidentiality, standstill
or similar agreements to which the Company, or the Company Subsidiary, is a
party;
(m) modify or amend in any material respect or terminate any Company
Contract (including any Xxxxxx) or Material Oil and Gas Contract to which the
Company or the Company Subsidiary is a party, or waive, release or assign any
rights or claims thereunder;
(n) except as required to comply with applicable law, (i) adopt, enter
into, terminate or amend any Benefit Plans, (ii) increase in any manner the
compensation or fringe benefits of any director, officer, employee or consultant
(except for normal increases or bonuses to non-officers and non-directors in the
ordinary course of business consistent with past practice), (iii) pay any
benefit not provided for under any Benefit Plan, (iv) grant any equity-based
awards under any Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Benefit Plans
or agreement or awards made thereunder), (v) other than in the ordinary course
of business consistent with past practice, take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan or (vi) alter the
composition of the Board of Directors or change the title of, hire, terminate
the employment of, modify the job description or duties of, or waive any
material right under any employment or consulting agreement with, any senior
management, consultant or employee whose annual compensation rate exceeds
$60,000 other than in the ordinary course of business and consistent with past
practice);
(o) allow any insurance policy naming the Company or the Company
Subsidiary as beneficiary or loss payee to be cancelled or terminated, other
than in the ordinary course, or cause or permit the decrease in any current
policy coverage limits;
(p) settle or compromise any pending or threatened litigation involving
the Company or the Company Subsidiary;
(q) enter into any contract, agreement, arrangement or understanding
that materially limits or otherwise materially restricts the Company or the
Company Subsidiary or any successor thereto, or that would, after the Effective
Time, limit or restrict the Surviving Corporation or any successor thereto, from
engaging in or competing in any line of business or in any geographic area
(except for confidentiality agreements relating to specific prospects); or
(r) enter into any contract, agreement, commitment or arrangement to do
any of the foregoing.
5.2. NO SOLICITATION; ACQUISITION PROPOSALS.
(a) From the date of this Agreement until the Effective Time or, if
earlier, the termination of this Agreement, (i) the Company shall, and shall use
its reasonable best efforts to
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cause its Representatives to, (X) immediately cease and terminate any existing
solicitation, discussion or negotiation with any Third Party with respect to any
Acquisition Proposal and (Y) use its best efforts to recover or cause to be
destroyed all nonpublic information concerning the Company in the possession of
such Persons and their Representatives and advisors, and (ii) the Company shall
not, nor shall it permit the Company Subsidiary to, nor shall it authorize or
permit its Representatives to, directly or indirectly, (A) solicit or initiate
the submission of any Acquisition Proposal; (B) enter into any agreement
requiring the Company to abandon or terminate its participation in the Merger;
(C) participate in any discussions or negotiations regarding, or furnish any
nonpublic information relating to the Company to any Third Party with respect
to, or take any other action knowingly to facilitate the making of any proposal
that constitutes or would reasonably be expected to lead to any Acquisition
Proposal; (D) grant any waiver or release under any standstill or similar
agreement with respect to any class of the Company's equity securities; or (E)
enter into any letter of intent, agreement or similar document relating to any
Acquisition Proposal, other than in the manner contemplated by Section 5.3.
(b) Notwithstanding the restrictions set forth in Section 5.2(a), if at
any time prior to consummation of the Merger, (i) the Company receives an
Acquisition Proposal, and (ii) the Board of Directors of the Company concludes
in good faith (after consultation with an investment bank of nationally
recognized reputation) that such Acquisition Proposal may reasonably be expected
to lead to a Superior Proposal, the Company may, subject to its giving Parent 24
hours prior written notice of the terms and conditions of such Acquisition
Proposal to the extent known and of the Company's intention to furnish
information to, or enter into discussions or negotiations with, a Third Party,
(x) furnish information to any Third Party pursuant to a confidentiality
agreement containing terms not materially less restrictive than the terms of the
Confidentiality Agreement, dated September 24, 2001, between the Company and
Parent (including the standstill provisions), as the same may be amended,
supplemented or modified (the "CONFIDENTIALITY AGREEMENT") and (y) participate
in discussions or negotiations regarding such proposal or take any of the
actions described in Section 5.2(a).
(c) Nothing contained in this Section 5.2 shall prohibit or restrict
the Board of Directors of the Company from taking any action necessary to
fulfill its fiduciary duties to the Company's stockholders under applicable law
in connection with an Acquisition Proposal, so long as the Board of Directors
(i) receives the advice of outside counsel to the Company that is reasonably
competent to render such advice to the effect that taking such action is
required to satisfy the fiduciary duties of the Board of Directors under
applicable law and (ii) determines in good faith that taking such action is
required to satisfy the fiduciary duties of the Board of Directors under
applicable law; provided that the Company shall have otherwise complied in all
respects with Sections 5.2 and 5.3.
(d) For purposes of this Agreement,
"ACQUISITION PROPOSAL" means any inquiry, offer, proposal or indication
of interest by a Third Party which relates to a transaction or series of
transactions (including any merger, consolidation, recapitalization, liquidation
or other direct or indirect business combination) involving the Company or any
Subsidiary of the Company or the purchase or acquisition of fifteen percent
(15%) or more of the outstanding Shares or any tender or exchange offer that if
consummated would result in any Person, together with all affiliates thereof,
Beneficially
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Owning fifteen percent (15%) or more of the outstanding Shares, or the
acquisition, purchase or other disposition of fifteen percent (15%) or more of
the assets of the Company or any Subsidiary of the Company immediately prior to
such transaction; and
"SUPERIOR PROPOSAL" means any bona fide written Acquisition Proposal
(provided that for the purposes of this definition, the applicable percentages
in the definition of Acquisition Proposal shall be fifty percent (50%) as
opposed to fifteen percent (15%), which the Board of Directors of the Company
determines in good faith, after consultation with an investment banker of
nationally recognized reputation and outside legal counsel, taking into account,
among other things, all legal, financial, regulatory and other aspects of the
proposal and the Third Party making the proposal (i) would, if consummated,
result in a transaction that is more favorable to the Company's stockholders,
other than Parent and Sub (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by this Agreement
and (ii) is reasonably capable of being consummated.
5.3. MODIFICATIONS TO RECOMMENDATIONS; SUBSEQUENT DETERMINATION. Except
as permitted by the second sentence of this Section 5.3, neither the Board of
Directors of the Company nor any committee thereof shall (a) withdraw or modify,
or publicly propose to withdraw or modify, in a manner adverse to Parent, the
Recommendations, or make any public statement, filing or release inconsistent
with the Recommendations, (b) approve or recommend, or publicly propose to
approve or recommend, any Acquisition Proposal or (c) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
similar agreement related to any Acquisition Proposal (each such determination,
a "SUBSEQUENT DETERMINATION"). The Board of Directors of the Company may make a
Subsequent Determination, if the Board of Directors shall have determined (x) to
approve or recommend an Acquisition Proposal after concluding that the
Acquisition Proposal constitutes a Superior Proposal and (y) to enter into a
binding agreement concerning the Acquisition Proposal; provided, however, that
the Company shall have provided to Parent at least three (3) Business Days'
prior written notice that its Board of Directors intends to make a Subsequent
Determination (a "SUBSEQUENT DETERMINATION NOTICE"), which Subsequent
Determination Notice shall specify the material terms and conditions of the
Acquisition Proposal and identify the person making the Acquisition Proposal.
Parent may make, within three (3) Business Days of receiving the notice, an
offer such that a majority of the Company's Board of Directors determines that
(x) the foregoing Acquisition Proposal no longer constitutes a Superior Proposal
or (y) its fiduciary duties no longer require it to make a Subsequent
Determination.
5.4. HEDGE. The Company agrees to consider a proposal by Parent for
entering into a Hedge of certain of the Company's oil and gas production on
terms and conditions acceptable to the Company in its sole discretion; provided,
however, that the Company shall be under no obligation to enter into a Hedge;
and provided, further, that failure to enter into a Hedge shall not constitute a
breach of this Agreement or constitute a basis for termination of this
Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. EMPLOYEE BENEFITS.
(a) Parent shall take all necessary action so that each employee of the
Company immediately prior to the consummation of the Merger (including each such
Person who is on vacation, temporary layoff, approved leave of absence, sick
leave or short- or long-term disability) (a "RETAINED EMPLOYEE") shall remain an
employee of Parent, the Company or the Surviving Corporation or a subsidiary of
Parent, as the case may be, immediately following the consummation of the
Merger. Parent shall take all necessary action so that each Retained Employee
shall after the consummation of the Merger continue to be credited with the
unused vacation and sick leave credited to such employee under the applicable
vacation and sick leave policies of the Company, and Parent shall permit or
cause the Company, the Surviving Corporation and their Subsidiaries to permit
such employees to use such vacation and sick leave. Parent shall take all
necessary action so that, for purposes of eligibility and vesting service under
each employee benefit plan and determination of benefits under each paid time
off, vacation, severance, short-term disability and service award plans
maintained by Parent or any of its subsidiaries in which Retained Employees or
former employees of the Company become eligible to participate upon or after the
consummation of the Merger, each such Person shall be given credit for all
service with the Company and the Company Subsidiary to the same extent as if
rendered to Parent or its subsidiaries. The preceding sentence shall not
preclude Parent or the Surviving Corporation or its subsidiaries at any time
following the Effective Time from terminating the employment of any Company
employee.
(b) Except as otherwise provided in this Section 6.1, nothing in this
Agreement shall be interpreted as limiting the power of the Surviving
Corporation to amend or terminate any particular Benefit Plan or any other
particular employee benefit plan, program, agreement or policy or as requiring
the Surviving Corporation to offer to continue (other than as required by its
terms) any written employment contract, subject to the terms and conditions of
the applicable plan, program, agreement or policies.
(c) Parent shall honor or cause to be honored by the Company, the
Surviving Corporation and their subsidiaries all employment agreements, bonus
agreements, severance agreements, indemnification agreements and severance plans
with the Persons who are directors, officers and employees of the Company or the
Company Subsidiary (it being understood that nothing herein shall be deemed to
mean that the Company, the Surviving Corporation and their subsidiaries shall
not be required to honor any of their obligations under any such agreement).
(d) Parent shall, or shall cause the Company and the Surviving
Corporation to, (i) waive all preexisting condition limitations and waiting
periods with respect to participation and coverage requirements applicable to
the Retained Employees and former employees of the Company and the Company
Subsidiary under any health or disability plan in which such employees and
former employees may be eligible to participate, other than limitations or
waiting periods that are in effect with respect to such employees and that have
not been satisfied under the corresponding welfare or fringe benefit plan
maintained by the Company for the Retained
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Employees and former employees prior to the consummation of the Merger, and (ii)
provide each Retained Employee and former employee with credit under any welfare
plans in which such employee or former employee becomes eligible to participate
for any co-payments and deductibles paid by such Retained Employee or former
employee for the then current plan year under the corresponding welfare plans
maintained by the Company prior to the consummation of the Merger.
(e) Notwithstanding subsections (a), (b), (c) and (d) of this Section
6.1, nothing contained in this Section 6.1 shall confer upon any former, present
or future employee of the Company, or any other Person not a party to this
Agreement, any rights or remedies.
6.2. STOCKHOLDER APPROVAL.
(a) The Company shall cause a meeting of its stockholders (the "COMPANY
STOCKHOLDERS MEETING") to be duly called and held as soon as reasonably
practicable following the date upon which all other conditions to the closing of
the Merger are expected to be satisfied for the purpose of considering and
taking action upon this Agreement and the Merger and (with the consent of
Parent) such other matters as may in the reasonable judgment of the Company be
appropriate for consideration at the Company Stockholders Meeting. Once the
Company Stockholders Meeting has been called and noticed, the Company shall not
postpone or adjourn the Company Stockholders Meeting (other than for the absence
of a quorum) without the consent of Parent. Unless otherwise required by its
fiduciary duties under applicable law, the Board of Directors of the Company
shall include the Recommendations in the Proxy Statement. The Company shall use
commercially reasonable efforts to solicit from stockholders of the Company
proxies for use at the Company Stockholders Meeting and in favor of this
Agreement and the Merger and shall take all other actions reasonably necessary
to secure the vote or consent of stockholders required by the DGCL to effect the
Merger.
(b) The Company shall not file the Proxy Statement without consultation
with Parent and its counsel. The Company shall notify Parent promptly of the
receipt of any comments on, or any requests for amendments or supplements to,
the Proxy Statement by the SEC, and the Company shall supply Parent with copies
of all correspondence between it and its representatives, on the one hand, and
the SEC or members of its staff, on the other, with respect to the Proxy
Statement. The Company, Parent, and Sub shall each use its reasonable best
efforts to obtain and furnish the information required to be included in the
Proxy Statement, and the Company, after consultation with Parent, shall use its
reasonable best efforts to respond promptly to any comments made by the SEC with
respect to the Proxy Statement. The Company, Parent, and Sub each agrees
promptly to correct any information provided by it for use in the Proxy
Statement if and to the extent that such information shall have become false or
misleading in any material respect, and the Company further agrees to take all
steps necessary to cause the Proxy Statement as so corrected to be filed with
the SEC and to be disseminated to holders of shares of Company Stock, in each
case as and to the extent required by applicable federal securities laws.
6.3. ACCESS TO INFORMATION. Upon reasonable notice and subject to the
terms of the Confidentiality Agreement, each of Company and Parent shall, and
shall cause each of its respective subsidiaries to, afford to the other party,
and its respective Representatives, all reasonable access, during normal
business hours during the period prior to the Effective Time, to
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all their respective properties, books, contracts, commitments, records and
Representatives. During such period, each of Company and Parent shall (and shall
cause each of its respective subsidiaries to) make available to the other party
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of the
Federal or state securities laws or the Federal tax laws and (b) all other
information concerning its business, properties and personnel as the other party
may reasonably request. All information exchanged pursuant to this Section 6.3
shall be subject to the Confidentiality Agreement. In the event of a termination
of this Agreement for any reason, each party shall promptly return or destroy,
or cause to be returned or destroyed, all nonpublic information so obtained from
the other party or any of its Subsidiaries.
6.4. MARCH 2002 FORM 10-Q. The Company shall deliver to Parent a copy
of its March 2002 Form 10-Q promptly following the date on which the Company
files such report with the SEC. The financial statements of the Company
(including the related notes thereto) included in the Form 10-Q will comply in
form and substance as of their respective dates in all material respects with
the then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP (except in the case of the unaudited statements, as permitted by Form 10-Q
under the Exchange Act) applied on a basis consistent with prior periods (except
as may be indicated therein or in the notes thereto) and fairly present, in
conformity with GAAP, in all material respects the consolidated financial
position of the Company and the Company Subsidiary as at the date thereof and
the consolidated results of their operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein.
6.5. TITLE DEFECTS. At any time on or before 5:00 P.M. (Dallas time) on
June 20, 2002 (the "NOTICE DEADLINE"), Parent may give the Company notice (a
"TITLE DEFECT NOTICE") of any Title Defect on the Material Oil and Gas
Properties. Such Title Defect Notice shall be in writing and shall include:
(a) a description of each Material Oil and Gas Property affected by the
Title Defect (a "DEFECTIVE INTEREST");
(b) a statement of the nature of the Title Defect, a statement of the
basis for treating such Oil and Gas Property as a Defective Interest and copies
of supporting documents reasonably necessary for the Company to verify the
existence of the asserted Title Defect;
(c) the Allocated Value of the affected Oil and Gas Property; and
(d) Parent's good faith estimate of the amount by which the Allocated
Value of a Defective Interest has been reduced by the Title Defect (the "DEFECT
VALUE").
The "ALLOCATED VALUE" of each Material Oil and Gas Property shall be as
set forth in Exhibit A attached hereto. In determining which portion of Material
Oil and Gas Property is a Defective Interest, the Defect Value may not exceed
the Allocated Value and shall be determined by Parent in good faith taking into
account all relevant factors, including the following:
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(i) The potential for or actual reduction in the NRI of the
Defective Interest, or the potential for or actual increase in
the WI to the extent such increase is not accompanied by a
corresponding increase in NRI;
(ii) The legal effect of the Title Defect and whether
applicable limitations periods regarding such Title Defect have
run; and
(iii) If the Title Defect is a Lien (other than a Permitted
Encumbrance), the cost of removing such Lien.
6.6. ENVIRONMENTAL DEFECTS. Prior to the Notice Deadline, Parent may
give the Company notice (an "ENVIRONMENTAL DEFECT NOTICE") of any violation of
Environmental Laws (an "ENVIRONMENTAL DEFECT") related to the Oil and Gas
Properties. Such Environmental Defect Notice shall be in writing and shall
include:
(a) a description of each Oil and Gas Property affected by the
Environmental Defect (an "ENVIRONMENTAL DEFECTIVE INTEREST");
(b) a statement of the nature of the Environmental Defect, a statement
of the basis for treating such Oil and Gas Property as an Environmental
Defective Interest and copies of supporting documents reasonably necessary for
the Company to verify the existence of the asserted Environmental Defect;
(c) a description in reasonable detail of Parent's good faith estimate
of the investigation, removal, remediation or other action required to remedy
the Environmental Defect (the "CLEANUP") and a calculation of the amount
necessary to carry out the Cleanup, itemized in reasonable detail; and
(d) if applicable, a statement of the amount of losses or liabilities
likely to be incurred by the Company on account of the Environmental Defect,
including the likely expense of defense in connection with any probable Third
Party action. The aggregate of claimed amounts in Section 6.6(c) and (d) is
herein called the "ENVIRONMENTAL DEFECT VALUE." The Environmental Defect Value
shall be the Lowest Cost Response applicable to such Environmental Defect and
shall not include any internal costs of Parent, Guarantor or the Company
associated with the Cleanup.
6.7. MATERIAL OIL AND GAS CONTRACT DEFECTS. Prior to the Notice
Deadline, Parent may give the Company notice (a "MATERIAL OIL AND GAS CONTRACT
DEFECT NOTICE") of any condition that constitutes a breach of the Company's
representations and warranties set forth in Section 3.17 (a "MATERIAL OIL AND
GAS CONTRACT Defect") related to the Material Oil and Gas Contracts. Such
Material Oil & Gas Contract Defect Notice shall be in writing and shall include:
(a) a description of each Oil and Gas Property affected by the Material
Oil and Gas Contract Defect (an "MATERIAL CONTRACT DEFECTIVE INTEREST");
(b) the nature of the Material Oil and Gas Contract Defect and the
basis for treating such contract as a Material Oil and Gas Contract Defective
Interest and copies of supporting documents reasonably necessary for the Company
to verify the existence of the asserted Material Contract Defective Interest;
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(c) a description in reasonable detail of Parent's good faith estimate
of the action required to remedy the Material Oil and Gas Contract Defect (the
"MATERIAL OIL AND GAS CONTRACT CURE"), including a calculation of the amount
necessary to effect the carry out the Material Oil and Gas Contract Cure; and
(d) if applicable, a statement of the amount of losses or liabilities
likely to be incurred by the Company on account of the Material Oil and Gas
Contract Defect, including the likely expense of defense in connection with any
probable Third Party action. The aggregate of claimed amounts in Section 6.7(c)
and (d) is herein called the "MATERIAL OIL AND GAS CONTRACT DEFECT VALUE."
6.8. TERMINATION FEE .
(a) The Company agrees to pay Parent a termination fee (a "TERMINATION
FEE") equal to One Million Five Hundred Thousand Dollars ($1,500,000), if Parent
terminates this Agreement pursuant to Section 8.1(c) or if the Company
terminates this Agreement pursuant to Section 8.1(d). Upon termination pursuant
to Section 8.1(c) and 8.1(d), all fees due hereunder shall be payable in full by
wire transfer of same day funds on the date termination becomes effective.
(b) Parent and the Company agree that the agreements contained in this
Section 6.8 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty and shall be in
lieu of any other damages arising out of this Agreement for the termination of
this Agreement pursuant to Section 8.1(c) or 8.1(d).
(c) Except as set forth in this Section 6.8, all fees and expenses
incurred in connection herewith and the transactions contemplated hereby shall
be paid by the party incurring expenses, whether or not the Merger is
consummated.
6.9. PUBLIC ANNOUNCEMENTS. The initial press release with respect to
the execution of this Agreement shall be a joint press release acceptable to
Parent and the Company. Thereafter, so long as this Agreement is in effect,
neither the Company, Parent nor any of their respective affiliates shall issue
or cause the publication of any press release or other announcement with respect
to the Merger, this Agreement or the other transactions contemplated hereby
without prior consultation with the other party and without using reasonable
efforts to agree upon the text of any press release, except as may be required
by law, the rules and regulations of any national securities exchange or over
the counter market or by obligations pursuant to any listing agreement or other
requirement of a national market system.
6.10. TRANSFER TAXES. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interest, penalties or additions to tax, "TRANSFER TAXES"). Transfer
Taxes shall not be a liability of any holder of Company Common Stock.
6.11. STATE TAKEOVER LAWS. If any "fair price" or "control share
acquisition" statute or other similar statute or regulation shall become
applicable to the transactions contemplated
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hereby, Parent and its Board of Managers and the Company and its Board of
Directors shall use best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated hereby may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
6.12. INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
(a) Parent shall, or shall cause the Surviving Corporation to, honor
for a period of not less than six (6) years from the Effective Time (or, in the
case of matters that have not been resolved prior to the sixth anniversary of
the Effective Time, until such matters are finally resolved), all rights to
indemnification or exculpation, existing in favor of a director, officer,
employee or agent (an "INDEMNIFIED PERSON") of the Company or the Company
Subsidiary (including rights relating to advancement of expenses and
indemnification rights to which such Persons are entitled because they are
serving as a director, officer, agent or employee of another entity at the
request of the Company), as provided in the certificate of incorporation of the
Company, the bylaws of the Company, or any agreement with any of the foregoing,
in each case, as in effect on the date of this Agreement, and relating to
actions or events through the Effective Time.
(b) The indemnification provided for in Section 6.12(a) shall be
subject to the following:
(i) Any determination required to be made as to whether an
Indemnified Person's conduct complies with the standards set
forth under the DGCL, the certificate of incorporation, the
bylaws or other agreement, as the case may be, shall be made by
independent legal counsel which is selected by such Indemnified
Person reasonably acceptable to Parent, and paid by Parent or
Surviving Corporation;
(ii) Nothing in this Section 6.12 shall impair any other
legal or contractual rights of any Indemnified Person;
(iii) The Indemnified Person must notify the Surviving
Corporation of a claim against an Indemnified Person (a "CLAIM")
within 30 days of the date on which the Indemnified Person
becomes aware of the Claim (failure to provide the notification
provided for in this subsection (iii) shall constitute a
unconditional bar to indemnification if the Surviving Corporation
is materially prejudiced by such failure);
(iv) The Surviving Corporation shall have the right to
control the defense of such Claim with counsel selected by the
Surviving Corporation, and reasonably acceptable to the
Indemnified Person;
(v) The Indemnified Person shall be permitted to participate
in the defense of such Claim through counsel reasonably
acceptable to the Surviving Corporation selected by the
Indemnified Person, at the Surviving Corporation's expense; and
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(vi) If any Indemnified Person becomes involved in any
actual or threatened action, suit, claim, proceeding or
investigation after the Effective Time, Parent shall, or shall
cause the Surviving Corporation to, promptly advance to such
Indemnified Person his or her legal and other expenses (including
the cost of any investigation and preparation incurred in
connection therewith), subject to an undertaking by such
Indemnified Person to reimburse all amounts so advanced in the
event of a non-appealable determination of a court of competent
jurisdiction that such Indemnified Person is not entitled
thereto.
(c) The Company shall obtain and pay for in full a "tail" coverage
directors' and officers' liability insurance policy ("D&O INSURANCE") covering a
period of not less than six (6) years after the Effective Time providing
coverage in amounts and on terms consistent with the Company's existing D&O
Insurance. In the event the Company is unable to obtain such insurance, Parent
shall cause the Surviving Corporation to maintain the Company's D&O Insurance
for a period of not less than six (6) years after the Effective Time; provided,
that the Surviving Corporation may substitute therefor policies of substantially
similar coverage and amounts containing terms no less advantageous to such
former directors or officers; provided further that if the existing D&O
Insurance expires or is cancelled during such period, Parent or the Surviving
Corporation shall use its best efforts to obtain substantially similar D&O
Insurance; and provided further that neither Parent nor the Surviving
Corporation shall be required to expend, in order to maintain or procure an
annual D&O Insurance policy, in lieu of a tail policy, an amount per year in
excess of $110,000, but in such case shall purchase as much coverage as possible
for such amount.
(d) The provisions of this Section 6.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Person, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, the Company and the Surviving Corporation.
(e) The Company agrees to consider a proposal by Parent for an
alternative to funding a cash escrow under the Company's indemnification
agreements with its directors on terms and conditions acceptable to the Company
in its sole discretion; provided, however, that the Company shall be under no
obligation to enter into any alternative to the cash escrow; and provided,
further, that failure to enter into an alternative to the cash escrow shall not
constitute a breach of this Agreement or constitute a basis for termination of
this Agreement.
6.13. REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein provided, each of the parties agrees to use its reasonable best efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger, and the other transactions contemplated by this
Agreement, including (i) promptly effecting all necessary registrations,
submissions and filings, which may be necessary or required in connection with
the consummation of the transactions contemplated by this Agreement, (ii)
defending any lawsuit or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, (iii) preparing and filing the
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Proxy Statement, and (iv) taking all other actions and doing all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by, and to fully carry out the
purposes of, this Agreement, in each case subject to the Company Board of
Director's fiduciary duties under applicable law and the requisite vote of the
stockholders of the Company.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
(b) No Injunction or Restraint. There shall not be in effect any
temporary restraining order, decree, ruling or injunction or other order of a
court or other Governmental Entity of competent jurisdiction directing that the
transactions contemplated herein not be consummated, or making such consummation
unlawful, or otherwise materially limiting or restricting ownership or operation
of the business of the Surviving Corporation; provided, however, that each of
the parties shall have used their reasonable best efforts to prevent the entry
of any such temporary restraining order, injunction or other order.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and the
Merger by the stockholders of the Company or Sub:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either of Parent, Sub or the Company, if:
(i) the Merger shall not have been consummated on or before
October 31, 2002 (the "OUTSIDE DATE"), unless the failure to
consummate the Merger is the result of a breach of this Agreement
by the party seeking to terminate this Agreement (provided,
however, that if any matter or matters have been submitted to
arbitration in accordance with Section 9.5, the Outside Date
shall mean the date that is October 31, 2002 plus the aggregate
number of days that any such matter or matters have been in
arbitration); or
(ii) if there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining Parent, Sub
or the Company from consummating the Merger is
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entered and such judgment, injunction, order or decree shall
become final and nonappealable.
(c) by Parent, if the Company gives a Subsequent Determination Notice
that is not withdrawn prior to the third Business Day following delivery
thereof;
(d) by the Company, if the Company makes a Subsequent Determination and
has paid the Termination Fee;
(e) by the Company (i) if Sub or Parent shall have breached in any
material respect any of their respective covenants, obligations or other
agreements under this Agreement, or (ii) if the representations and warranties
of Parent and Sub set forth in this Agreement that are qualified as to
materiality shall not be true and correct as of the date of this Agreement and
as of the Effective Time (except to the extent expressly made as of an earlier
date, in which case as of such date), or any of the representations and
warranties set forth in this Agreement that are not so qualified by materiality
shall not be true and correct in any material respect as of the date of this
Agreement and as of the Effective Time (except to the extent expressly made as
of an earlier date, in which case as of such date); provided that this right of
termination shall not be deemed to exist unless any such breaches of
representation or warranty (without regard to any "Materiality" or "Material
Adverse Effect" or similar qualifier or threshold), individually or in the
aggregate, has had a Material Adverse Effect on the Parent; provided further
that the breach of the covenant, obligation, agreement, representation or
warranty is incapable of being or has not been cured by Parent or Sub on or
prior to the date which is fifteen (15) Business Days immediately following
written notice by the Company to Parent of such breach or failure to perform;
(f) by Parent (i) if the Company shall have breached in any material
respect any of its covenants, obligations or other agreements under this
Agreement, or (ii) if the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be true
and correct as of the date of this Agreement and as of the Effective Time
(except to the extent expressly made as of an earlier date, in which case as of
such date), or any of the representations and warranties set forth in this
Agreement that are not so qualified by materiality shall not be true and correct
in any material respect as of the date of this Agreement and as of the Effective
Time (except to the extent expressly made as of an earlier date); provided that
this right of termination shall not be deemed to exist unless any such breaches
of representation or warranty (without regard to any "Materiality" or "Material
Adverse Effect" or similar qualifier or threshold), individually or in the
aggregate, has had a Material Adverse Effect on the Company; provided further
that the breach of the covenant, obligation, agreement, representation or
warranty is incapable of being or has not been cured by the Company on or prior
to the date which is fifteen (15) Business Days immediately following written
notice by Parent to the Company of such breach or failure to perform;
(g) by Parent on or prior to the Notice Deadline, if the aggregate of
the (i) Title Defect Values, (ii) Environmental Defect Values, and (iii)
Material Oil and Gas Contract Defect Values exceeds Two Million Five Hundred
Thousand Dollars ($2,500,000); provided, that the Company does not request
arbitration under Section 9.5 of this Agreement within ten (10) Business Days
following written notice by Parent to the Company of its intent to terminate
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pursuant to this Section 8.1(g), accompanied by the appropriate Title Defect
Notices, Environmental Defect Notices, and/or Material Oil and Gas Contract
Defect Notices.
The party desiring to terminate this Agreement pursuant to clauses
8.1(b) through 8.1(g) shall give written notice of such termination to the other
parties in accordance with Section 9.2.
8.2. EFFECT OF TERMINATION. In the event of a termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company, except with respect to
Section 3.14, Section 4.11, the last sentence of Section 6.3, this Section 8.2
and Article IX; provided, however, that nothing herein shall relieve any party
for liability for any knowing breach hereof.
8.3. AMENDMENT. Subject to Section 6.2 and Section 6.12, this Agreement
may be amended by the parties at any time prior to the Effective Time, but if
the Company Stockholder Approval shall have been obtained, thereafter no
amendment shall be made which by law requires further approval by the Company's
stockholders without obtaining such further approval. This Agreement may not be
amended except by a written instrument signed by each of the parties.
8.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties, by action taken or authorized by their respective Board of Directors or
Board of Managers, as the case may be, subject to Section 6.2 and Section 6.12,
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
9.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND AGREEMENTS.
None of the representations and warranties in this Agreement or in any
instrument or document delivered pursuant to this Agreement shall survive the
Effective Time. This Section 9.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
9.2. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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if to Parent or Sub, to:
Plantation Petroleum Holdings, LLC
00000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Chamberlain, Hrdlicka, White, Xxxxxxxx and Xxxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. XxXxxxxx, Xx.
Facsimile: (000) 000-0000
if to the Company, to:
Xxxxxxx Oil Company
0000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: President
Facsimile: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
9.3. INTERPRETATION; DEFINITIONS. When a reference is made in this
Agreement to an Article or a Section, such reference shall be to an Article or a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 9.3 and shall be equally applicable to
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented or modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"2002 CAPITAL EXPENDITURE BUDGET" shall have the meaning set forth in
Section 3.17(a). "
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ACQUISITION PROPOSAL" shall have the meaning set forth in Section
5.2(d).
"AFFILIATE" means, with respect to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including the correlative terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"AGREEMENT" shall have the meaning set forth in the introductory
paragraph hereof.
"ALLOCATED VALUE" shall have the meaning set forth in Section 6.5.
"BENEFICIAL OWNER" or "BENEFICIALLY OWNING" shall have the meaning set
forth in Rule 13d-3 promulgated under the Exchange Act.
"BENEFIT PLAN" means any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, employee stock
purchase, stock appreciation, restricted stock or other employee benefit plan,
agreement or arrangement, in each case that is maintained, sponsored,
contributed to or required to be contributed to by the Company or any ERISA
Affiliate for the benefit of providing benefits to any current or former
employee, officer, director or consultant of the Company or the Company
Subsidiary.
"BUSINESS DAY" means any day, other than a Saturday, Sunday or one on
which banks are authorized to close in Dallas, Texas.
"CERCLIS" shall have the meaning set forth in Section 3.16 (f).
"CERTIFICATE OF MERGER" shall have the meaning set forth in Section
1.3.
"CERTIFICATES" shall have the meaning set forth in Section 2.2(b).
"CLAIM" shall have the meaning set forth in Section 6.12 (b)(iii).
"CLEANUP" shall have the meaning set forth in Section 6.6(c).
"CLOSING DATE" shall have the meaning set forth in Section 1.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT LETTER" shall have the meaning set forth in Section 4.12.
"COMPANY" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"COMPANY COMMON STOCK" shall have the meaning set forth in the second
recital provision of this Agreement.
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"COMPANY CONTRACTS" shall have the meaning set forth in Section
3.17(a).
"COMPANY DISCLOSURE LETTER" shall have the meaning set forth in Section
3.5.
"COMPANY PREFERRED STOCK" shall have the meaning set forth in Section
3.2.
"COMPANY SEC DOCUMENTS" shall have the meaning set forth in Section
3.6.
"COMPANY STOCKHOLDER APPROVAL" shall have the meaning set forth in
Section 3.15.
"COMPANY STOCKHOLDERS MEETING" shall have the meaning set forth in
Section 6.2.
"COMPANY SUBSIDIARY" shall have the meaning set forth in Section 3.1.
"CONFIDENTIALITY AGREEMENT" shall have the meaning set forth in Section
5.2(b).
"CONSENTS" means with respect to a Governmental Entity or Person, any
consent, approval, waiver, order or authorization of, or registration,
declaration or filing with or exemption by such Governmental Entity or Person,
as the case may be.
"CONSTITUENT CORPORATIONS" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"D&O INSURANCE" shall have the meaning set forth in Section 6.12(c).
"DEFECTIVE INTEREST" shall have the meaning set forth in Section
6.5(a).
"DEFECT VALUE" shall have the meaning set forth in Section 6.5(d).
"DEFENSIBLE TITLE" means for each Well, Unit or Lease specified in the
Reserve Report, such title (any element of a Net Revenue Interest which is
attributable to a non-consent or sole risk election shall be deemed to be record
title) that (i) entitles the Company to receive and retain without reduction or
termination throughout the life of such Well, Unit or Lease a Net Revenue
Interest in, to and from that Well, Unit or Lease not less than the Net Revenue
Interest specified for such Well, Unit or Lease in the Reserve Report (except
for such reductions or terminations, if any, as are reflected therein), (ii)
obligates the Company to pay and bear throughout the life of such Well, Unit or
Lease a share of the costs and risks of exploring, drilling, developing,
operating and abandoning that Well, Unit or Lease not greater than the Working
Interest specified for such Well, Unit or Lease in the Reserve Report (prior to
giving effect to rights of non-consents hereafter exercised by others), (iii)
does not have a Material Adverse Effect on the Company's ability to obtain
access, produce or otherwise market Hydrocarbons from the Well, Unit or Lease at
market rates, and (iv) is free and clear of all Liens, except Permitted
Encumbrances.
"DEPOSIT" shall have the meaning set forth in Section 1.6.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended.
"DISSENTING SHARES" shall have the meaning set forth in Section 1.5.
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"EFFECTIVE TIME" shall have the meaning set forth in Section 1.3.
"ENVIRONMENTAL DEFECT" shall have the meaning set forth in Section 6.6.
"ENVIRONMENTAL DEFECTIVE INTEREST" shall have the meaning set forth in
Section 6.6(a).
"ENVIRONMENTAL DEFECT NOTICE" shall have the meaning set forth in
Section 6.6.
"ENVIRONMENTAL DEFECT VALUE" shall have the meaning set forth in
Section 6.6(d).
"ENVIRONMENTAL LAWS" shall mean all Federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection of the
environment or human health and safety, including laws relating to releases or
threatened releases of Hazardous Substances into the indoor or outdoor
environment (including ambient air, surface water, groundwater, land, surface
and subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport or handling of
Hazardous Substances; all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances; and all laws relating to endangered or threatened species of fish,
wildlife and plants and the management or use of natural resources.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall have the meaning set forth in Section 3.13(b).
"ERISA BENEFIT PLAN" means a Benefit Plan maintained as of the date of
this Agreement which is also an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) or which is also an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA).
"ESCROW AGENT" shall have the meaning set forth in Section 1.6.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 1.6.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning set forth in Section 2.2(a).
"FACILITIES" means gas and water pipelines and gathering systems and
water disposal systems, compressors, wellhead equipment and facilities, central
production facilities, saltwater disposal xxxxx and facilities, together with
all machinery, equipment, pipe, appliances, material, supplies, buildings,
structures, improvements and fixtures used in connection with the exploration,
development or operation of a Lease, Well or Unit or the production, treatment,
storage, dehydrating, compression, sale, marketing, gathering or transportation
of Hydrocarbons from a Lease, Well or Unit.
"FINANCING" shall have the meaning set forth in Section 4.12.
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"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL ENTITY" means any Federal, state, local or tribal
government or authority, or any court, tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency.
"GUARANTOR" shall have the meaning set forth in the recitals.
"HAZARDOUS SUBSTANCES" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous substances," "toxic substances,"
"contaminants" or "pollutants" or words of similar meaning and regulatory
effect; or (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any applicable Environmental Law."
"XXXXXX" means any future, derivative, swap, collar, put, call, cap,
option or other contract that is intended to benefit from, relate to, or reduce
or eliminate the risk of fluctuations in interest rates, basis risk or the price
of commodities, including Hydrocarbons or securities, to which either of the
Company or the Company Subsidiary is bound.
"HYDROCARBONS" means oil, gas, other liquid or gaseous hydrocarbons, or
any of them or any combination thereof.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (a) obligations for borrowed money, (b) obligations evidenced by
bonds, debentures, notes or similar instruments, (c) letters of credit issued
for the account of such Person (excluding letters of credit issued for the
benefit of suppliers to support accounts payable to suppliers incurred in the
ordinary course of business), (d) capitalized lease obligations, and (e)
guarantees and arrangements having the economic effect of a guarantee of any
indebtedness of any other Person.
"INFORMATION" means technical information pertaining to Xxxxx and/or
reserves or deposits or potential reserves or deposits of Hydrocarbons,
including all geological, geochemical and geophysical information, geographic
and structural geological maps, well logs and related analyses and correlations,
paleontological data, stratigraphic studies and data pertaining to permeability
or porosity, seismic and gravitational data and production records, engineering
and geological data, consultants' studies or reports regarding any of the
foregoing and any and all interpretative analyses of the foregoing; insurance
policies and bonds, all original books, records, files, documents (including,
accounts payable and receivable, accounting records, Leases, deeds, and Company
Contracts) that pertain to the Material Oil and Gas Properties; all title
information (including, but not limited to, title opinions, abstracts, evidence
that rentals, royalties and other payments due under the Leases and Company
Contracts have been paid, evidence that Taxes have been paid, evidence that
Taxes have been paid, maps and surveys, lease records and data sheets),
computer-sensible copies of all computer records pertaining to the Material Oil
and Gas Properties; and all written plans for exploration and development,
applications, inspection
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reports, environmental impact statements, assessments and studies, permits,
licenses, orders, consents, notices, correspondence and other statements and
instruments pertaining to environmental matters and requirements that have been
filed with or supplied to or by any Governmental Entity.
"INDEMNIFIED PERSON" shall have the meaning set forth in Section
6.12(a).
"KNOWLEDGE" shall mean the actual knowledge of the executive officers
of the Company or the executive officers of Parent, as the case may be.
"LAND" means the lands covered by a Lease and lands within an area
covered by a unitization, communitization or pooling agreement or order.
"LAW" means any law, statute, ordinance, decree, order, judgment, rule
or regulation of, including the terms of any license or permit issued by, any
Governmental Entity.
"LEASES" means oil, gas and/or mineral leases, leasehold estates,
operating rights and other rights authorizing the owner thereof to explore or
drill for and produce Hydrocarbons and other minerals, contractual rights to
acquire any such of the foregoing interests, which have been earned by
performance, and fee mineral, royalty and overriding royalty interests, in each
case, in which the Company has an interest.
"LIENS" means any pledges, security interests, mortgages, claims,
liens, charges and encumbrances of any kind or nature whatsoever.
"LOWEST COST RESPONSE" means the response required or allowed under
Environmental Laws that addresses the condition present at the lowest cost
considered as a whole as compared to any other response that is consistent with
Environmental Laws. Taking no action shall constitute the Lowest Cost Response
if, after investigation, taking no action is determined to be consistent with
Environmental Laws, any requirements of contracts, leases or other agreements
binding on the property and any requirements of any Governmental Entity with
jurisdiction (collectively, the "Environmental Requirements"). If taking no
action is not consistent with the Environmental Requirements, the least costly
non-permanent remedy (such as mechanisms to contain or stabilize Hazardous
Substances, including caps, dikes, encapsulation, leachate collection systems,
etc.) shall be the Lowest Cost Response, provided that such non-permanent remedy
is consistent with the Environmental Requirements and less costly than a
permanent remedy.
"MARCH 2002 FORM 10-Q" means the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2002.
"MATERIAL ADVERSE EFFECT" means, when used in connection with the
Company or Parent, as the case may be, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that, individually or taken with all other such changes or effects,
is materially adverse to the business, properties, assets, condition (financial
or otherwise) or results of operations of the Company and the Company Subsidiary
taken as a whole, or Parent and its Subsidiaries taken as a whole, as the case
may be; provided, however, that any adverse change, effect or development that
is caused by or results
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from (i) conditions affecting the United States economy generally or the economy
of any region in which the Company or Parent, as the case may be, or any of its
Subsidiaries conducts business, (ii) conditions generally affecting the oil and
gas industry, including the market price for Hydrocarbons, and (iii) the
announcement or pendency of this Agreement, the Merger or the transactions
contemplated hereby shall not be taken into account in determining whether there
has been (or whether there could reasonably be foreseen) a "Material Adverse
Effect" with respect to the Company or Parent, as the case may be.
"MATERIAL OIL AND GAS CONTRACT CURE" shall have the meaning set forth
in Section 6.7(c).
"MATERIAL OIL AND GAS CONTRACT DEFECT" shall have the meaning set forth
in Section 6.7.
"MATERIAL OIL AND GAS CONTRACT DEFECTIVE INTEREST" shall have the
meaning set forth in Section 6.7(a).
"MATERIAL OIL AND GAS CONTRACT DEFECT NOTICE" shall have the meaning
set forth in Section 6.7.
"MATERIAL OIL AND GAS CONTRACT DEFECT VALUE" shall have the meaning set
forth in Section 6.7(d).
"MATERIAL OIL AND GAS CONTRACTS" shall have the meaning set forth in
Section 3.17(b).
"MATERIAL OIL AND GAS PROPERTY" shall have the meaning set forth in
Section 3.17(b).
"MERGER" shall have the meaning set forth in the recitals of this
Agreement.
"MERGER CONSIDERATION" shall have the meaning set forth in the recitals
of this Agreement.
"NET REVENUE INTEREST" or "NRI" means the interest (expressed as a
percentage or decimal fraction) of the Company listed in the Reserve Report in
and to Hydrocarbons produced from or allocated to a Well or Unit, as the case
may be, after deducting all applicable Production Burdens.
"NOTICE DEADLINE" shall have the meaning set forth in Section 6.5.
"NPL" shall have the meaning set forth in Section 3.16(f).
"OIL AND GAS PROPERTIES" means, with respect to Company, all of
Company's right, title and interest in, to and under, or derived from, Leases,
Xxxxx and Units listed in the Reserve Report together with all property, whether
real, personal or mixed, used in or related to the operation and maintenance of
Leases, Xxxxx and Units, including its right, title and interest in Land,
Facilities, Company Contracts and Information pertaining or relating thereto.
"OUTSIDE DATE" shall have the meaning set forth in Section 8.1(b)(i).
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"PARENT" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"PARENT FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 4.4.
"PAYOUT BALANCES" shall have the meaning set forth in Section 3.18(i).
"PERMITS" means approvals, authorizations, certificates, filings,
franchises, licenses or permits.
"PERMITTED ENCUMBRANCES" means the following:
(i) liens for Taxes or assessments or charges of any
Governmental Entity (A) not yet due and payable and (B) to the
extent identified in the Company Disclosure Letter, Taxes and
assessments and charges due but being contested in good faith,
and for which adequate reserves have been established in
accordance with GAAP;
(ii) materialmen's, mechanics', repairmen's, employees',
contractors', operators', or other similar liens or charges
arising in the ordinary course of business incidental to
construction, maintenance or operation of the Oil and Gas
Properties (A) if they have not been filed pursuant to law and
the time for filing them has expired, (B) if filed, they have not
yet become due and payable or payment is being withheld as
provided by law, (C) to the extent identified in the Company
Disclosure Letter, or (D) if their validity is being contested in
good faith by appropriate action and for which adequate reserves
have been established in accordance with GAAP;
(iii) Production Burdens which do not operate to reduce the
Company's Net Revenue Interest in a Well, Lease or Unit below the
Net Revenue Interest set forth in the Reserve Report for such
Well, Lease or Unit;
(iv) Liens under contracts (excluding area of mutual
interest agreements) and pooling and unitization orders of a
scope and nature customary in the oil and gas industry and Liens
customarily acceptable to prudent oil and gas operators in the
area where the Well, Unit, Land, or Lease is located, insofar as
they: (A) do not cause the Company's Net Revenue Interest in a
Well, Lease or Unit to be less than the Net Revenue Interest set
forth in the Reserve Report for such Well, Lease or Unit; (B) do
not cause the Company to bear more than the share of the costs
and risks of exploring, drilling, developing, operating and
abandoning such Well, Lease or Unit equal to the Working Interest
set forth in the Reserve Report for such Well, Lease or Unit
(prior to giving effect to rights of non-consent hereafter
exercised by others and claims with respect to non-payment by
defaulting parties other than the Company to operating agreements
and similar contracts); and (C) do not materially and adversely
affect the Company's ability to access, produce and market
Hydrocarbons from a Well, Lease or Unit at market rates.
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(v) statutory liens securing the payment of production
proceeds to Persons entitled thereto;
(vi) all Consents by any Governmental Entity (if any) in
connection with the change of ownership or control of an interest
in any federal, state or other Lease if the same are customarily
obtained after such change of ownership or control by timely
filings or other actions;
(vii) the terms of contracts relating to the Oil and Gas
Properties insofar as they: (A) do not cause the Company's Net
Revenue Interest in a Well, Lease or Unit to be less than the Net
Revenue Interest set forth in the Reserve Report for such Well,
Lease or Unit; (B) do not cause the Company to bear more than the
share of the costs and risks of exploring, drilling, developing,
operating and abandoning such Well, Lease or Unit equal to the
Working Interest set forth in the Reserve Report for such Well,
Lease or Unit (prior to giving effect to rights of non-consent
hereafter exercised by others and claims with respect to
non-payment by defaulting parties to operating agreements and
similar contracts); and (C) do not materially and adversely
affect the Company's ability to access, produce and market
Hydrocarbons from a Well, Lease or Unit at market rates.
(viii) easements, rights of way and the like incidental to
the conduct of the Company's business or the ownership of the Oil
and Gas Properties;
(ix) any preferential rights to purchase and required Third
Party Consents to assignments of contracts or property and
similar agreements that are not triggered by or required in
connection with, the Merger or the Financing;
(x) such Title Defects set forth in the Company Disclosure
Letter or as Parent has waived in writing pursuant to the
execution of this Agreement;
(xi) rights reserved to or vested in any Governmental Entity
to control or regulate any of the assets in any manner; and all
applicable laws, rules, regulations and orders of general
applicability in the area of the assets;
(xii) the litigation and claims set forth in the Company
Disclosure Letter; and
(xiii) liens arising under operating agreements, unitization
and pooling agreements and production sales contracts securing
amounts not yet due or, if set forth in the Company Disclosure
Letter as due, being contested in good faith in the ordinary
course of business and for which adequate reserves have been
established in accordance with GAAP.
"PERSON" means an individual, corporation, partnership, association,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity (including any Person as defined in Section
13(d)(3) of the Exchange Act) or Governmental Entity.
"PROXY STATEMENT" shall have the meaning set forth in Section 3.5(b).
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"PRODUCTION BURDENS" means all royalty interests, overriding royalty
interests, production payments, net profit interests or other similar
non-operating interests that constitute a burden on, and are measured by or are
payable out of, the production of Hydrocarbons or the proceeds realized from the
sale or other disposition thereof, other than Taxes and assessments of
Governmental Entities.
"RECOMMENDATIONS" shall have the meaning set forth in Section 3.15.
"REPRESENTATIVE" means with respect to any Person, its officers,
directors, investment bankers, attorneys, accountants, consultants or other
agents, advisors or representatives.
"RESERVE REPORT" shall have the meaning set forth in Section 3.20.
"RETAINED EMPLOYEE" shall have the meaning set forth in Section 6.1(a).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"SHARES" shall have the meaning set forth in the second recital
provision of this Agreement.
"STOCK EQUIVALENTS" shall have the meaning set forth in Section 3.2.
"SUB" shall have the meaning set forth in the introductory paragraph of
this Agreement.
"SUBSEQUENT DETERMINATION" shall have the meaning set forth in Section
5.3.
"SUBSEQUENT DETERMINATION NOTICE" shall have the meaning set forth in
Section 5.3.
"SUBSIDIARY" or "SUBSIDIARY" of any person means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which is owned directly or indirectly by
such first person).
"SUPERIOR PROPOSAL" shall have the meaning set forth in Section 5.2(d).
"SURVIVING CORPORATION" shall have the meaning set forth in Section
1.1.
"TAX" and "TAXES" means any Federal, state or local net income, gross
income, gross receipts, windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding, alternative
or add-on minimum or any other tax, custom, duty, levy, tariff, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Entity.
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"TAX RETURN" means any return, report or similar statement (including
any related or supporting information) required to be filed with respect to any
Tax, including any information return, claim for refund, amended return or
declaration of estimated Tax.
"TERMINATION FEE" shall have the meaning set forth in Section 6.8.
"THIRD PARTY" means any Person (or group of Persons) other than Parent
and its affiliates.
"TITLE DEFECT" means any lien, encumbrance, adverse claim,
encroachment, irregularity, defect in or objection to real property title,
excluding Permitted Encumbrances, that alone or in combination with other
defects renders the title of the Company to a Material Oil and Gas Property to
be less than Defensible Title. Notwithstanding the foregoing, the following
shall not be considered Title Defects:
(i) defects based solely on lack of information in the
Company's files provided that the public records contain such
information;
(ii) defects in the early chain of title consisting of the
mere failure to recite marital status in a document or omissions
of successors of heirship or estate proceedings, unless Parent
provides affirmative evidence that such failure or omission has
resulted in another party's actual and superior claim of title to
the relevant Material Oil and Gas Property;
(iii) defects arising out of lack of survey, unless a survey
is required by applicable laws or regulations; and
(iv) defects that are shown by the Company by a
preponderance of evidence to be defensible by possession under
applicable statutes of limitation for adverse possession or for
prescription.
"TITLE DEFECT NOTICE" shall have the meaning set forth in Section 6.5.
"TRANSFER TAXES" shall have the meaning set forth in Section 6.10.
"TREASURY REGULATIONS" means the final and temporary (but not proposed)
income tax regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"UNITS" means the area covered by a unitization, communitization or
pooling agreement or order applicable to Leases (or any portion thereof) or
Xxxxx in which the Company has an interest, but only as to those formations in
which a Well or Xxxxx are currently completed and producing Hydrocarbons.
"VOTING AGREEMENT" shall have the meaning set forth in the recitals of
this Agreement.
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"WELL" means a well for the purpose of producing Hydrocarbons or
disposing of fluids produced in connection with the production of Hydrocarbons,
in which the Company has an interest.
"XXXXXXX XXXXX" shall have the meaning set forth in Section 3.14.
"WORKING INTEREST" or "WI" means the interest (expressed as a
percentage or decimal fraction) of the Company in any Lease, Well or Unit listed
in the Reserve Report before giving effect to any applicable Production Burdens
which equals the percentage of all costs and expenses associated with the
exploration, drilling, development, operation and abandonment of such Well or
Unit required to be borne by the Company or any of its Subsidiaries (prior to
giving effect to rights of non-consent hereafter exercised by others and claims
with respect to non-payment by defaulting parties to operating agreements and
similar contracts).
9.4. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart. Delivery of an executed counterpart by facsimile
shall be effective to the fullest extent permitted by applicable law.
9.5. ARBITRATION. Disputes arising concerning whether Parent has the
right to terminate this Agreement pursuant to Section 8.1(g) shall be resolved
by arbitration as set forth herein and shall be governed by the United States
Arbitration Act, 9 U.S.C. Sections 1-16, and with any disputes over the scope of
discovery to be determined by the arbitrators. The party hereto desiring
arbitration shall commence arbitration by written notice to the other party
setting forth its claim or its understanding of the dispute in reasonable detail
with supporting documentation as necessary for an arbitrator to understand the
dispute.
(a) The chief executive officer of each of Parent and the Company shall
select independent and impartial arbitrators pursuant to the following
provisions: (i) for disputes concerning Environmental Defect Values or Lowest
Cost Responses, the arbitrator shall be an environmental engineer (ii) for
disputes concerning Title Defect Values, the arbitrator shall be an oil and gas
title expert and (iii) for disputes concerning Material Oil and Gas Contract
Defect Values, the arbitrator shall be an attorney selected by the United States
District Judge then senior in service for the Southern District of Texas,
Houston Division. Each arbitrator shall be generally familiar with the oil and
gas industry, preferably with no fewer than ten years of practical experience in
the relevant field of the oil and gas industry in dispute. In the event that the
parties fail to select arbitrators as required above, the arbitrator shall be
selected by the United States District Judge then senior in service for the
Southern District of Texas, Houston Division.
(b) All matters arbitrated hereunder shall be arbitrated in Dallas,
Texas.
(c) The arbitrator(s) shall conduct a hearing no later than fifteen
(15) days after initiation of arbitration, and a decision shall be rendered
within fifteen (15) days following the hearing. At the hearing, the parties
shall present such evidence and witnesses as they may choose, with or without
counsel. Adherence to formal rules of
-48-
evidence shall not be required, but arbitrators shall consider any evidence and
testimony deemed relevant, in accordance with procedures that it determines to
be appropriate. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. The role of the arbitrator(s) shall be
the determination of the amount in controversy for any given dispute and
arbitrators may not award any other remedy or relief, whether legal or
equitable.
(d) The arbitrator(s) shall be entitled to a fee commensurate with
their fees for professional services requiring similar time and effort. The fees
of the arbitrator(s) and other costs of the arbitration shall be borne 50% by
the Company and 50% by Parent.
(e) The submission and agreement to arbitrate shall be governed by and
specifically enforceable in accordance with the laws of the State of Delaware.
Arbitration may proceed in the absence of any party if notice of the proceedings
has been given to such party. Each of the Company and Parent agrees to abide by
all awards rendered in such proceedings and such awards shall be final and
binding on each of the Company and Parent.
(f) The arbitration procedures provided by this Section 9.5 are
provided for the limited purpose of resolving the types of disputes enumerated
above and no party hereto shall have the right to cause the other party to
arbitrate a dispute pursuant to the provisions hereof if such dispute does not
stem from one of the types of express claims for which dispute resolution is
provided under this Section 9.5, or if such claim is not brought within the
specified time frame for such claim as provided for herein.
9.6. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
including the Company Disclosure Letter and all exhibits and schedules hereto,
and the Confidentiality Agreement constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. This Agreement, except for
the provisions of Section 6.12, is not intended to confer upon any Person other
than the parties any rights or remedies.
9.7. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof; provided, however, that issues related to Land shall be governed by the
laws of the state in which the Land in question is located.
9.8. ASSIGNMENT. Neither this Agreement nor any rights, interests or
obligations hereunder shall be assigned in whole or in party by any party
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
9.9. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the
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economic and legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the transactions contemplated by this
Agreement may be consummated as originally contemplated to the fullest extent
possible.
9.10. ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, such remedy being in addition to any
other remedy to which any party is entitled at law or in equity. It is further
agreed that the Company may enforce this Agreement and seek damages for and on
behalf of its stockholders.
9.11. OBLIGATIONS OF SUBSIDIARIES. Whenever this Agreement requires any
subsidiary of Parent (including Sub) or of the Company to take any action, such
requirement shall be deemed to include an undertaking on the part of Parent or
the Company, as the case may be, to cause such Subsidiary to take such action.
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SIGNATURE PAGE TO
XXXXXXX/PLANTATION MERGER AGREEMENT
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
PLANTATION PETROLEUM XXXXXXX OIL COMPANY
HOLDINGS, LLC
By: By:
-------------------------------------- --------------------------
Xxxxxx X. Xxxxxxx, President Xxxxx X. Xxxxxxx, Chairman
PLANTATION PETROLEUM ACQUISITION CORP.
By:
--------------------------------------
Xxxxxx X. Xxxxxxx, President
GUARANTEE
Plantation Petroleum Corp. and Plantation Petroleum Ventures, Ltd.
hereby jointly and severally unconditionally guarantee the prompt payment and
performance of all liabilities and obligations of Parent and Sub under this
Agreement.
PLANTATION PETROLEUM CORP.
By:
--------------------------------------
Xxxxxx X. Xxxxxxx, President
PLANTATION PETROLEUM VENTURES, LTD., by
Plantation Petroleum Management, LLC, its
general partner
By:
------------------------------------
Xxxxxx X. Xxxxxxx
