Exhibit 2.01
AGREEMENT AND PLAN OF MERGER
Dated as of June 24, 1998
By and Among
AVIVA PETROLEUM INC.,
AVIVA MERGER INC.
and
GARNET RESOURCES CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions................................................1
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SECTION 1.02 Rules of Construction......................................1
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ARTICLE II
TERMS OF MERGER
SECTION 2.01 Statutory Merger...........................................2
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SECTION 2.02 Effective Time.............................................2
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SECTION 2.03 Effect of the Merger.......................................2
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SECTION 2.04 Certificate of Incorporation; Bylaws.......................2
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SECTION 2.05 Directors and Officers.....................................2
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ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Merger Consideration; Conversion and Cancellation of
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Securities.................................................3
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SECTION 3.02 Exchange of Certificates...................................4
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SECTION 3.03 Closing....................................................7
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SECTION 3.04 Stock Transfer Books.......................................7
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 Organization and Qualification; Subsidiaries................7
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SECTION 4.02 Certificate of Incorporation and Bylaws.....................8
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SECTION 4.03 Capitalization..............................................8
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SECTION 4.04 Authorization of Agreement..................................9
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SECTION 4.05 Approvals...................................................9
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SECTION 4.06 No Violation...............................................10
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SECTION 4.07 Reports....................................................10
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SECTION 4.08 No Material Adverse Effect; Conduct........................11
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SECTION 4.09 Title to Properties........................................12
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SECTION 4.10 Certain Obligations........................................15
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AGREEMENT AND PLAN OF MERGER
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SECTION 4.11 Authorizations; Compliance.................................15
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SECTION 4.12 Litigation; Compliance with Laws...........................16
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SECTION 4.13 Employee Benefit Plans. ..................................16
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SECTION 4.14 Taxes......................................................16
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SECTION 4.15 Environmental Matters......................................17
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SECTION 4.16 Insurance..................................................18
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SECTION 4.17 Affiliates.................................................18
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SECTION 4.18 Certain Business Practices.................................18
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SECTION 4.19 Brokers....................................................18
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
SECTION 5.01 Organization and Qualification; Subsidiaries. ............19
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SECTION 5.02 Certificate of Incorporation and Bylaws....................19
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SECTION 5.03 Capitalization.............................................19
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SECTION 5.04 Authorization of Agreement.................................20
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SECTION 5.05 Approvals..................................................20
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SECTION 5.06 No Violation...............................................21
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SECTION 5.07 Reports....................................................21
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SECTION 5.08 No Material Adverse Effect; Conduct........................22
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SECTION 5.09 Title to Properties........................................22
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SECTION 5.10 Certain Obligations........................................26
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SECTION 5.11 Authorizations; Compliance.................................26
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SECTION 5.12 Litigation; Compliance with Laws...........................26
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SECTION 5.13 Employee Benefit Plans. ..................................27
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SECTION 5.14 Taxes......................................................29
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SECTION 5.15 Environmental Matters......................................30
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SECTION 5.16 Insurance. ...............................................30
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SECTION 5.17 Certain Business Practices.................................31
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SECTION 5.18 Newco......................................................31
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SECTION 5.19 Brokers....................................................31
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ARTICLE VI
COVENANTS
SECTION 6.01 Affirmative Covenants......................................31
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SECTION 6.02 Negative Covenants.........................................32
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SECTION 6.03 No Solicitation............................................37
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SECTION 6.04 Access and Information.....................................39
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AGREEMENT AND PLAN OF MERGER
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ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Meetings of Stockholders...................................39
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SECTION 7.02 Registration Statement; Proxy Statements...................40
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SECTION 7.03 Appropriate Action; Consents; Filings......................42
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SECTION 7.04 Affiliates.................................................43
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SECTION 7.05 Public Announcements.......................................43
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SECTION 7.06 Stock Exchange Listings....................................44
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SECTION 7.07 State Takeover Statute.....................................44
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SECTION 7.08 Indemnification of Directors and Officers..................44
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SECTION 7.09 Event Notices..............................................45
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ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.01 Conditions to Obligations of Each Party Under This Agreement
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...............................................................45
SECTION 8.02 Additional Conditions to Obligations of the Acquiror
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Companies..................................................46
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SECTION 8.03 Additional Conditions to Obligations of the Company........48
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination................................................48
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SECTION 9.02 Effect of Termination......................................50
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SECTION 9.03 Amendment..................................................50
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SECTION 9.04 Waiver.....................................................50
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SECTION 9.05 Fees, Expenses and Other Payments..........................51
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Effectiveness of Representations, Warranties and Agreements
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...........................................................51
SECTION 10.02 Notices....................................................52
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SECTION 10.03 Headings...................................................53
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SECTION 10.04 Severability...............................................53
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SECTION 10.05 Entire Agreement...........................................53
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SECTION 10.06 Assignment.................................................53
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AGREEMENT AND PLAN OF MERGER
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SECTION 10.07 Parties in Interest........................................53
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SECTION 10.08 Failure or Indulgence Not Waiver; Remedies Cumulative......53
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SECTION 10.09 Governing Law..............................................53
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SECTION 10.10 Specific Performance.......................................54
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SECTION 10.11 Counterparts...............................................54
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AGREEMENT AND PLAN OF MERGER
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ANNEXES
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Annex A Schedule of Defined Terms
Annex B Affiliate's Agreement (Garnet Resources Corporation Affiliates)
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 24, 1998 (this
"Agreement"), is by and among Aviva Petroleum Inc., a Texas corporation (the
"Acquiror"), Aviva Merger Inc., a Delaware corporation and a wholly owned,
indirect subsidiary of the Acquiror ("Newco"), and Garnet Resources Corporation,
a Delaware corporation (the "Company"). The Acquiror and Newco are sometimes
referred to herein as the "Acquiror Companies."
RECITALS:
The Board of Directors of the Company has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the business strategy of the Company and is fair to, and in the
best interests of, the Company and its stockholders and has approved and adopted
this Agreement and recommended approval and adoption of this Agreement by the
stockholders of the Company.
The Board of Directors of the Acquiror has determined that the business
combination to be effected by means of the Merger is consistent with and in
furtherance of the long-term business strategy of the Acquiror and is fair to,
and in the best interests of, the Acquiror and its stockholders and has approved
and adopted this Agreement and recommended approval and adoption of this
Agreement by the stockholders of the Acquiror.
Upon the terms and subject to the conditions of this Agreement and in
accordance with the GCL, Newco will merge with and into the Company and the
Company will be the Surviving Corporation.
The parties hereto have acknowledged that the Merger will not qualify
as a reorganization within the meaning of the provisions of Section 368(a) of
the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. Certain capitalized and other terms used in
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this Agreement are defined in Annex A hereto and are used herein with the
meanings ascribed to them therein.
SECTION 1.02 Rules of Construction. Unless the context otherwise
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requires, as used in this Agreement: (a) a term has the meaning ascribed to it
in Annex A; (b) an accounting term not otherwise defined has the meaning
ascribed to it in accordance with GAAP; (c) "or" is not exclusive; (d)
"including" means "including without limitation;" (e) words in the singular
include the plural; (f) words in the plural include the singular; (g) words
applicable to one gender shall be construed to apply to each gender; (h) the
terms "hereof," "herein," "hereby," "hereto" and derivative or similar words
refer to this entire Agreement; (i) the terms "Article" or "Section" shall refer
to the specified
Article or Section of this Agreement; and (j) the phrase "oil and gas properties
of a party hereto" or any variant thereof shall include the oil and gas
properties of a Subsidiary of such party.
ARTICLE II
TERMS OF MERGER
SECTION 2.01 Statutory Merger. Subject to the terms and conditions and
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in reliance upon the representations, warranties, covenants and agreements
contained herein, Newco shall merge with and into the Company at the Effective
Time. The terms and conditions of the Merger and the mode of carrying the same
into effect shall be as set forth in this Agreement. As a result of the Merger,
the separate corporate existence of each of the Constituent Corporations shall
cease and the Company shall continue as the Surviving Corporation.
SECTION 2.02 Effective Time. As soon as practicable after the
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satisfaction or, if permissible, waiver of the conditions set forth in Article
VIII, the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware, in
such form as required by, and executed in accordance with the relevant
provisions of, the GCL.
SECTION 2.03 Effect of the Merger. At the Effective Time, the effect of
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the Merger shall be as provided in the applicable provisions of the GCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, the Surviving Corporation shall
possess all the rights, privileges, power and franchises as well of a public as
of a private nature and shall be subject to all the restrictions, disabilities
and duties of each of the Constituent Corporations; and all and singular, the
rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all debts due to
either of the Constituent Corporations on whatever account, as well for stock
subscriptions as all other things in action or belonging to each of such
Constituent Corporations shall be vested in the Surviving Corporation as they
were of the respective Constituent Corporations, and the title to any real
estate vested by deed or otherwise, under the laws of the State of Delaware, in
either of such Constituent Corporations, shall not revert or be in any way
impaired by reason of the Merger; but all rights of creditors and all liens upon
any property of either of such Constituent Corporation shall be preserved
unimpaired. and all debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it.
SECTION 2.04 Certificate of Incorporation; Bylaws. At the Effective
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Time, the certificate of incorporation and the bylaws of Newco, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation and the bylaws of the Surviving Corporation.
SECTION 2.05 Directors and Officers. The directors of Newco immediately
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prior to the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in accordance with the certificate of incorporation and
bylaws of the Surviving Corporation, and the officers of the Company immediately
prior to the Effective Time shall be the officers of the
AGREEMENT AND PLAN OF MERGER
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Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Merger Consideration; Conversion and Cancellation of
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Securities. At the Effective Time, by virtue of the Merger and without any
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action on the part of the Acquiror Companies, the Company or the holders of any
of the following securities:
(a) (i) Subject to the other provisions of this Article III,
each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (excluding any Company Common Stock
described in Section 3.01(c)) shall be converted into one-tenth (0.1)
of one share of the Acquiror Common Stock. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time
the outstanding shares of the Acquiror Common Stock or the Company
Common Stock shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, the Common Stock Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(ii) Notwithstanding the provisions of subsection 3.01(a)(i)
above, if any former holder of Company Common Stock would be entitled
to receive less than 100 shares of Acquiror Common Stock pursuant to
the provisions of subsection 3.01(a)(i), then no shares of Aquiror
Common Stock shall be issued to such holder and, in lieu thereof, the
Acquiror shall pay such holder cash in the amount of $0.20 for each
share of Acquiror Common Stock to which such holder would, but for this
subsection 3.01(a)(ii), have been entitled.
(b) All shares of Company Common Stock shall, upon conversion
thereof into shares of Acquiror Common Stock at the Effective Time,
cease to be outstanding and shall be automatically canceled and
retired, and each certificate previously evidencing Company Common
Stock outstanding immediately prior to the Effective Time (other than
Company Common Stock described in Section 3.01(c)) shall thereafter be
deemed, for all purposes other than the payment of dividends or
distributions, to represent that number of shares of Acquiror Common
Stock determined pursuant to the Common Stock Exchange Ratio and, if
applicable, the right to receive cash pursuant to Section 3.02(d) or
(e) or both. The holders of certificates previously evidencing Company
Common Stock shall cease to have any rights with respect to such
Company Common Stock except as otherwise provided herein or by law.
(c) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Common Stock held in the treasury of
the Company and each share of Company Common Stock, if any, owned by
the Acquiror or any direct or indirect wholly owned
AGREEMENT AND PLAN OF MERGER
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Subsidiary of the Acquiror or of the Company immediately prior to the
Effective Time shall be canceled and extinguished without conversion
thereof.
(d) Each share of common stock, par value $0.01 per share, of
Newco issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation.
SECTION 3.02 Exchange of Certificates.
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(a) Exchange Fund. At the Closing, the Acquiror shall
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deposit, or cause to be deposited, with the Exchange Agent, for the
benefit of the former holders of Company Common Stock and for exchange
through the Exchange Agent in accordance with this Article III, (i)
certificates evidencing that number of shares of the Acquiror Common
Stock equal to the product of the Common Stock Exchange Ratio and the
number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (exclusive of any such shares
to be canceled pursuant to Section 3.01(c)) and (ii) cash in an amount
sufficient to cover the Acquiror's obligations pursuant to subsection
3.01(a)(ii). The Exchange Agent shall, pursuant to irrevocable
instructions from the Acquiror, deliver certificates evidencing the
Acquiror Common Stock to the Depositary for deposit pursuant to the
Deposit Agreement and shall obtain from the Depositary Depositary
Receipts registered in the names of the holders of record of Company
Common Stock immediately prior to the Effective Time on the basis of
one Depositary Share for each five shares of Acquiror Common Stock to
which such holders are entitled pursuant to this Agreement. The
Exchange Fund shall also include any dividends or other distributions
made with respect to the Acquiror Common Stock to which the former
holders of Company Common Stock would be entitled pursuant to
subsection (d) and the funds obtained by the Exchange Agent from the
sale of Depositary Shares pursuant to subsection (e) of this Section
3.02. The Exchange Fund shall not be used for any purpose other than as
expressly provided in this Section 3.02.
(b) Letter of Transmittal. Promptly after the Effective
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Time, the Acquiror will cause the Exchange Agent to send to each record
holder of Company Common Stock immediately prior to the Effective Time
a letter of transmittal and other appropriate materials for use in
surrendering to the Exchange Agent certificates that prior to the
Effective Time evidenced shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
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the Exchange Agent shall distribute to each holder of record of Company
Common Stock immediately prior to the Effective Time, upon surrender to
the Exchange Agent for cancellation of one or more certificates that
theretofore evidenced shares of Company Common Stock, either (i)
Depositary Receipts evidencing the appropriate number of shares of the
Acquiror Common Stock into which such shares of Company Common Stock
were converted pursuant to the Merger or (ii), in the case of those
holders subject to subsection 3.01(a)(ii), cash in the amount required
by that subsection, together, in each instance, with any cash to be
paid in lieu of fractional interests in shares of Acquiror Common Stock
pursuant to Section 3.02(e) and any dividends or distributions related
to Acquiror Common Stock to be paid pursuant
AGREEMENT AND PLAN OF MERGER
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to Section 3.02(d). If Depositary Shares are to be issued to a Person
other than the Person in whose name the surrendered certificate or
certificates are registered, it shall be a condition of issuance of the
Acquiror Common Stock that the surrendered certificate or certificates
shall be properly endorsed, with signatures guaranteed, or otherwise in
proper form for transfer and that the Person requesting such payment
shall pay any transfer or other taxes required by reason of the
issuance of the Acquiror Common Stock to a Person other than the
registered holder of the surrendered certificate or certificates or
such Person shall establish to the satisfaction of the Acquiror that
such tax has been paid or is not applicable.
(d) Distributions with Respect to Unexchanged Shares of
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Company Common Stock. No dividends or other distributions declared or
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made with respect to the Acquiror Common Stock with a record date after
the Effective Time shall be paid to the holder of any certificate that
theretofore evidenced shares of Company Common Stock until the holder
of such certificate shall surrender such certificate. Subject to the
effect of any applicable escheat laws, following surrender of any such
certificate, there shall be paid to the holder of the Depositary
Receipts evidencing shares of the Acquiror Common Stock issued in
exchange for Company Common Stock, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional Depositary
Share to which such holder is entitled pursuant to Section 3.02(e) and
the amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole shares
of the Acquiror Common Stock and (ii), at the appropriate payment date,
the amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of
the Acquiror Common Stock.
(e) No Fractional Shares.
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(1) Notwithstanding anything herein to the contrary, no
certificates or scrip evidencing fractional shares of the
Acquiror Common Stock or Depositary Shares shall be issued in
connection with the Merger.
(2) Any fractional interests in shares of Acquiror
Common Stock to which a holder of record of Company Common
Stock at the Effective Time would otherwise be entitled shall
not entitle such holder to vote or to any rights of a
stockholder of the Acquiror. In lieu of any such fractional
interests in shares of Acquiror Common Stock, each holder of
record of Company Common Stock at the Effective Time who but
for the provisions of this Section 3.02(e) would be entitled
to receive a fractional interest of a share of the Acquiror
Common Stock by virtue of the Merger shall be paid cash,
without any interest thereon, as hereinafter provided. The
Acquiror shall instruct the Exchange Agent to determine the
number of whole shares and fractional shares of the Acquiror
Common Stock allocable to each holder of record of Company
Common Stock at the Effective Time, to aggregate all such
fractional shares into whole shares, to deposit such whole
shares in the name of the Exchange Agent with the Depositary
pursuant to the Deposit Agreement, to sell the whole
Depositary Shares obtained thereby in the open market at then
prevailing
AGREEMENT AND PLAN OF MERGER
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prices on behalf of holders who otherwise would be entitled to
receive fractional share interests and to distribute to each
such holder such holder's ratable share of the total proceeds
of such sale based on the fractional interests in shares of
Acquiror Common Stock to which such holder would otherwise
have been entitled compared with the aggregate number of such
fractional interests, after making appropriate deductions of
the amount, if any, required for federal income tax
withholding purposes and after deducting any applicable
transfer taxes. All brokers' fees and commissions incurred in
connection with such sales, as well as the price of any
remaining shares of Acquiror Common Stock that are
insufficient to obtain a whole Depositary Share under the
Deposit Agreement, shall be paid by the Acquiror.
(3) To the extent that a holder of Company Common Stock
would be entitled hereunder to a number of shares of Acquiror
Common Stock that is not evenly divisible by five (5), the
Exchange Agent, after depositing with the Depositary all such
shares of Acquiror Common Stock to which such holder would be
so entitled as will entitle the holder to receive Depositary
Shares pursuant to the Deposit Agreement, shall distribute to
each such holder a certificate evidencing the remaining shares
of Acquiror Common Stock together with the Depositary Receipts
evidencing the Depositary Shares so obtained by the Exchange
Agent.
(f) Termination of Exchange Fund. Any portion of the
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Exchange Fund that remains unclaimed by the former holders of Company
Common Stock for 12 months after the Effective Time shall be delivered
to the Acquiror, upon demand, and any former holders of Company Common
Stock who have not theretofore complied with this Article III shall
thereafter look only to the Acquiror for the Acquiror Common Stock (or
Depositary Shares in lieu thereof) and any cash to which they are
entitled. Notwithstanding any other provisions herein, neither the
Exchange Agent nor any party hereto shall be liable to any former
holder of Company Common Stock for any Acquiror Common Stock, any
Depositary Shares, cash in lieu of fractional share interests or
dividends or distributions thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
If any certificates evidencing Company Common Stock shall not have been
surrendered prior to the seventh anniversary of the Effective Time (or
such earlier date on which any shares of the Acquiror Common Stock, any
Depositary Shares, any cash in lieu of fractional share interests or
dividends or distributions with respect to the Acquiror Common Stock to
which the holder of such certificates would otherwise be entitled would
escheat to or become the property of any governmental entity), then,
immediately prior to such date, any such shares, cash, dividends or
distributions in respect of such shares shall, to the extent permitted
by applicable Law, become the property of the Acquiror, free and clear
of all adverse claims and interests of any Person previously entitled
thereto.
(g) Withholding of Tax. The Acquiror shall be entitled to
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deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any former holder of Company Common Stock such
amounts as the Acquiror (or any affiliate thereof) or the Exchange
Agent is required to deduct and withhold with respect to the making of
such payment under the Code or state, local or foreign tax Law. To the
extent that amounts are
AGREEMENT AND PLAN OF MERGER
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so withheld by the Acquiror, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the former holder
of Company Common Stock in respect of which such deduction and
withholding was made by the Acquiror.
(h) Investment of Exchange Fund. The Exchange Agent may
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invest any cash included in the Exchange Fund in deposit accounts or
short-term money market instruments, as directed by the Acquiror, on a
daily basis. Any interest and other income resulting from such
investments shall be paid to the Acquiror. The Acquiror shall deposit
with the Exchange Agent as part of the Exchange Fund cash in an amount
equal to any loss of principal resulting from such investments promptly
after the incurrence of such a loss.
SECTION 3.03 Closing. The Closing shall take place at the offices of
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Xxxxxx & Xxxxxx L.L.P., 4000 Xxxxxxx Xxxx Center, 0000 Xxxx Xxxxxx, Xxxxxx,
Xxxxx 00000, at 10:00 a.m. on the fifth Business Day following the date on which
the conditions to the Closing have been satisfied or waived or at such other
place, time and date as the parties hereto may agree. At the conclusion of the
Closing on the Closing Date, the parties hereto shall cause the Certificate of
Merger to be filed with the Secretary of State of the State of Delaware.
SECTION 3.04 Stock Transfer Books. At the close of business on the
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date of the Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the provisions of Section 10.01(b), the Company hereby
represents and warrants to the Acquiror as follows:
SECTION 4.01 Organization and Qualification; Subsidiaries. The
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Company and each Significant Subsidiary of the Company, including the
Partnership, are legal entities duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of incorporation or
organization, have all requisite corporate power and authority to own, lease and
operate their respective properties and to carry on their businesses as they are
now being conducted and are duly qualified and in good standing to do business
in the jurisdictions in which the nature of the businesses conducted by them or
the ownership or leasing of their respective properties makes such qualification
necessary, other than any matters, including the failure to be so qualified and
in good standing, that could not reasonably be expected to have a Material
Adverse Effect on the Company. Section 4.01 of the Company's Disclosure Letter
sets forth a true and complete list of all the Company's directly or indirectly
owned Significant Subsidiaries, together with (A) a specification of the nature
of legal organization of such Subsidiary, and (B) the jurisdiction of
incorporation or other organization of such Subsidiary.
AGREEMENT AND PLAN OF MERGER
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SECTION 4.02 Certificate of Incorporation and Bylaws. The Company has
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heretofore marked for identification and delivered to the Acquiror complete and
correct copies of the certificate of incorporation and the bylaws or the
equivalent organizational documents, in each case as amended or restated to the
date hereof, of the Company and each Significant Subsidiary, including the
Partnership. The Company is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
SECTION 4.03 Capitalization.
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(a) The authorized capital stock of the Company consists of (i)
75,000,000 shares of Company Common Stock, of which, as of April 30,
1998, 11,492,162 shares were issued and outstanding, all of which are
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, the Company's
certificate of incorporation or bylaws or any agreement to which the
Company is a party or is bound. Since April 30, 1998, (x) no shares of
Company Common Stock have been issued by the Company, except upon
exercise of Company Stock Options outstanding under the Company Option
Plans, and (y) the Company has not granted any options for, or other
rights to purchase, shares of Company Common Stock.
(b) Except for shares reserved for issuance (i) upon exercise of
Company Stock Options granted pursuant to the Company Option Plans and
listed in Section 4.03(b) of the Company's Disclosure Letter and (ii)
upon conversion of the Debentures, no shares of Common Stock are
reserved for issuance, and, except for Company Stock Options, there are
no contracts, agreements, commitments or arrangements obligating the
Company to offer, sell, issue or grant any Equity Security of the
Company or to redeem, purchase or acquire, or offer to purchase or
acquire, any outstanding Equity Security of the Company.
(c) Section 4.03(c) of the Company's Disclosure Letter sets forth
with respect to each Significant Subsidiary of the Company (i) the
numbers of shares of authorized, issued and outstanding capital stock
of, or other equity interests in, each such Subsidiary, (ii) the number
of such shares of capital stock or other equity interests owned of
record and beneficially by the Company or another Subsidiary of the
Company, together with the name of such holder or holders, and (iii)
the names and addresses of any holders, other than the Company or
another Subsidiary, of record or beneficially of the capital stock or
other equity interests of such Subsidiary. Except as set forth in
Section 4.03(c) of the Company's Disclosure Letter, (x) the issued and
outstanding shares of capital stock of, or other equity interests in,
each of the Significant Subsidiaries of the Company that are owned by
the Company or any of its Subsidiaries have been duly authorized and
are validly issued, and, with respect to capital stock, are fully paid
and nonassessable, and were not issued in violation of any preemptive
or similar rights of any past or present equity holder of such
Subsidiary; (y) all such issued and outstanding shares, or other equity
interests, that are indicated as owned by the Company or one of its
Subsidiaries in Section 4.03(c) of the Company's Disclosure Letter are
owned (A) beneficially as set forth therein and (B) free and clear of
all Liens; (z) no shares of capital stock of, or other equity interests
in, any Significant Subsidiary of the Company are reserved for
issuance, and there are no contracts, agreements,
AGREEMENT AND PLAN OF MERGER
-8-
commitments or arrangements obligating the Company or any of its
Significant Subsidiaries (A) to offer, sell, issue, grant, pledge,
dispose of or encumber any Equity Security of any of the Subsidiaries
of the Company or (B) to redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Security of any of the
Subsidiaries of the Company or (C) to grant any Lien on any outstanding
shares of capital stock of, or other equity interest in, any of the
Significant Subsidiaries of the Company; except for any matter under
clause (x), (y) or (z) of this Section 4.03(c) that could not
reasonably be expected to have a Material Adverse Effect on the
Company.
(d) Except for the revocable proxies granted by the Company or its
Subsidiaries with respect to the capital stock of Subsidiaries owned by
the Company or its Subsidiaries, there are no voting trusts, proxies or
other agreements, commitments or understandings of any character to
which the Company or any of its Significant Subsidiaries is a party or
by which the Company or any of its Significant Subsidiaries is bound
with respect to the voting of any shares of capital stock of the
Company or any of its Significant Subsidiaries.
SECTION 4.04 Authorization of Agreement. The Company has all
--------------------------
requisite corporate power and authority to execute and deliver this Agreement
and, subject to approval of this Agreement by the majority of the stockholders
of the Company as required by the applicable provisions of the GCL and the
Company's certificate of incorporation, each instrument required hereby to be
executed and delivered by it at the Closing, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby.
The execution and delivery by the Company of this Agreement and each instrument
required hereby to be executed and delivered by it at the Closing and the
performance of its obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of the Company
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the holders of a majority of the outstanding shares of Company
Common Stock in accordance with the applicable provisions of the GCL and the
Company's certificate of incorporation). This Agreement has been duly executed
and delivered by the Company and (assuming due authorization, execution and
delivery hereof by the other parties hereto) constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as the same may be limited by legal principles of general
applicability governing the application and availability of equitable remedies.
SECTION 4.05 Approvals. Except for the applicable requirements, if
---------
any, of (a) the Securities Act, (b) the Exchange Act, (c) state securities or
blue sky laws, (d) the HSR Act, (e) the applicable Colombian Laws and the
applicable Regulations and Orders of Colombian Governmental Authorities as set
forth in Section 4.05 of the Company's Disclosure Letter, including any required
consent of Ecopetol, the Colombian Ministry of the Environment, the taxing
authority of the Colombian government, the Colombian Superintendency of
Corporations and the Colombian Chamber of Commerce, (f) the OTC Bulletin Board,
(g) the filing and recordation of appropriate merger documents as required by
the GCL and (h) those Laws, Regulations and Orders noncompliance with which
could not reasonably be expected to have a Material Adverse Effect on the
Company, no filing or registration with, no waiting period imposed by and no
Authorization of, any Governmental Authority is required under any Law,
Regulation or Order applicable to the
AGREEMENT AND PLAN OF MERGER
-9-
Company or any of its Subsidiaries to permit the Company to execute, deliver or
perform this Agreement or any instrument required hereby to be executed and
delivered by it at the Closing.
SECTION 4.06 No Violation. Assuming effectuation of all filings and
------------
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Authorizations of Governmental Authorities
indicated as required in Section 4.05 and receipt of the approval of the Merger
by the stockholders of the Company as required by the GCL and, except as set
forth in Section 4.06 of the Company's Disclosure Letter, neither the execution
and delivery by the Company of this Agreement or any instrument required hereby
to be executed and delivered by it at the Closing nor the performance by the
Company of its obligations hereunder or thereunder will (a) violate or breach
the terms of or cause a default under any Law, Regulation or Order applicable to
the Company, the certificate of incorporation or bylaws of the Company or any
contract or agreement to which the Company or any of its Subsidiaries is a party
or by which it or any of its properties or assets is bound, or (b) with the
passage of time, the giving of notice or the taking of any action by a third
Person, have any of the effects set forth in clause (a) of this Section, except
in any such case for any matters described in this Section that could not
reasonably be expected to have a Material Adverse Effect on the Company. Prior
to the execution of this Agreement, the Board of Directors of the Company has
taken all necessary action to cause this Agreement and the transactions
contemplated hereby to be exempt from the provisions of Section 203 of the GCL.
SECTION 4.07 Reports.
-------
(a) Since December 31, 1994, the Company has filed (i) all SEC
Reports required to be filed by it with the Commission and (ii) the
Company and its Subsidiaries have filed all other Reports required to
be filed by any of them with any other Governmental Authorities, except
where the failure to file any such Reports could not reasonably be
expected to have a Material Adverse Effect on the Company. Such
Reports, including all those filed after the date of this Agreement and
prior to the Effective Time, (x) were prepared in all material respects
in accordance with the requirements of applicable Law (including, with
respect to the Company's SEC Reports, the Securities Act and the
Exchange Act, as the case may be, and the applicable Regulations of the
Commission thereunder) and (y), in the case of the Company's SEC
Reports, did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(b) The Company's Consolidated Financial Statements and any
consolidated financial statements of the Company (including any related
notes thereto) contained in any of the Company's SEC Reports filed by
the Company with the Commission after the date of this Agreement (i)
have been or will have been prepared in accordance with the published
Regulations of the Commission and in accordance with GAAP (except (A)
to the extent required by changes in GAAP and (B), with respect to the
Company's Consolidated Financial Statements, as may be indicated in the
notes thereto) and (ii) fairly present the consolidated financial
position of the Company and its Subsidiaries as of the respective dates
thereof and the consolidated results of their operations and cash flows
for the periods
AGREEMENT AND PLAN OF MERGER
-10-
indicated (including, in the case of any unaudited interim financial
statements, reasonable estimates of normal and recurring year-end
adjustments).
(c) Except as set forth in Section 4.07(c) of the Company's
Disclosure Letter, there exist no liabilities or obligations of the
Company and its Subsidiaries that are Material to the Company, whether
accrued, absolute, contingent or threatened, and that would be required
to be reflected, reserved for or disclosed under GAAP in consolidated
financial statements of the Company as of and for the period ended on
the date of this representation and warranty, other than (i)
liabilities or obligations that are adequately reflected, reserved for
or disclosed in the Company's Consolidated Financial Statements, (ii)
liabilities or obligations incurred in the ordinary course of business
of the Company since December 31, 1997, (iii) liabilities or
obligations the incurrence of which is permitted by Section 6.02(a) and
(iv) liabilities or obligations that are not Material to the Company.
(d) Accounts receivable reflected on the Company's
Consolidated Balance Sheet have been properly stated at their
realizable value after consideration of all allowances and reserves in
accordance with GAAP.
(e) Crude oil inventories reflected on the Company's
Consolidated Balance Sheet are properly stated at the lower of cost or
market value in accordance with GAAP. Materials inventories are stated
at cost as adjusted for excess and obsolete inventories at net
realizable value.
(f) Except as described in Section 4.07(f) of the Company's
Disclosure Letter, all obligations associated with benefits to be
provided to present and former employees of the Company and its
Subsidiaries after retirement or termination have been properly
recognized as liabilities on the Company's Consolidated Balance Sheet
in accordance with Statements of Financial Accounting Standards Nos.
106 and 112.
SECTION 4.08 No Material Adverse Effect; Conduct.
-----------------------------------
(a) Since December 31, 1997, no event (other than any event
that is of general application to all or a substantial portion of the
Company's industry and other than any event that is expressly subject
to any other representation or warranty contained in Article IV) has,
to the Knowledge of the Company, occurred that, individually or
together with other similar events, could reasonably be expected to
constitute or cause a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.08(b) of the Company's
Disclosure Letter, during the period from December 31, 1997 to the date
of this Agreement, neither the Company nor any of its Subsidiaries has
engaged in any conduct that is proscribed during the period from the
date of this Agreement to the Effective Time by subsections (i) through
(xii) of Section 6.02(a).
AGREEMENT AND PLAN OF MERGER
-11-
SECTION 4.09 Title to Properties.
-------------------
(a) The Company or its Subsidiaries, individually or together,
have indefeasible title to all of the properties reflected in the
Company's Consolidated Balance Sheet, other than the Partnership
Properties, any properties reflected in the Company's Consolidated
Balance Sheet that have been sold or otherwise disposed of since the
date of the Company's Consolidated Balance Sheet or are not,
individually or in the aggregate, Material to the Company, free and
clear of Liens, other than (x) Liens the existence of which is
reflected in the Company's Consolidated Financial Statements, (y)
Permitted Encumbrances and (z) Liens that, individually or in the
aggregate, are not Material to the Company. The Company or its
Subsidiaries, individually or together, hold under valid lease
agreements all real and personal properties reflected in the Company's
Consolidated Balance Sheet as being held under capitalized leases, and
all real and personal property that is subject to the operating leases
to which reference is made in the notes to the Company's Audited
Consolidated Financial Statements, and enjoy peaceful and undisturbed
possession of such properties under such leases, other than (i) any
properties as to which such leases have terminated in the ordinary
course of business since the date of the Company's Consolidated Balance
Sheet and (ii) any properties that, individually or in the aggregate,
are not Material to the Company. Except as set forth in Section 4.09(a)
of the Company's Disclosure Letter, neither the Company nor any of its
Subsidiaries has received any written notice of any adverse claim to
the title to any properties owned by them or with respect to any lease
under which any properties are held by them, other than any claims
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 4.09(b) of the Company's
Disclosure Letter, the Partnership has Marketable Title, free of Title
Defects, to the Partnership Properties.
(c) With respect to each of the Partnership Properties, except as
set forth in Section 4.09(c) of the Company's Disclosure Letter:
(i) All royalties, rentals, shut-in payments and other
payments due with respect to such Partnership Property have been
properly and timely paid, except for payments held in suspense for
title or other reasons that are customary in the industry and that will
not result in grounds for a cancellation of the rights of the
Partnership in such Partnership Property;
(ii) The Partnership is not in default under the terms of any
leases, farmout agreements or other contracts or agreements respecting
such Partnership Property which could (i) interfere with the operation,
value or use thereof, (ii) prevent the Partnership from receiving the
proceeds of production attributable to their interest therein, or (iii)
result in cancellation of the interest of the Partnership therein;
AGREEMENT AND PLAN OF MERGER
-12-
(iii) The Partnership is not obligated by virtue of any gas
imbalance, prepayment or advance payment arrangement under any contract
for the sale or production of hydrocarbons, or under any other
arrangement, including any "take-or-pay" or similar arrangement, to
deliver any volume of hydrocarbons produced from or attributable to
such Partnership Property, without then or thereafter being entitled to
receive payment therefor and Partnership has not received any "take-or-
pay" production or similar payment that is subject to refund or
recoupment in cash. The status of any gas imbalances are set forth in
Section 4.09(c) of the Company's Disclosure Letter;
(iv) All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of such Partnership
Property or the production of oil and gas therefrom have, if due, been
properly and timely paid;
(v) All expenses payable under the terms of any contracts
associated with such Partnership Property have been properly and timely
paid except for such expenses as are being currently paid prior to
delinquency in the ordinary course of business; and
(vi) No third party (other than Ecopetrol) has a right to
purchase any hydrocarbon production from such Partnership Property
pursuant to a call, futures contract or similar arrangement.
(d) Except as set forth in Section 4.09(d) of the Company's
Disclosure Letter, the Partnership Properties have been operated in compliance
in all material respects with the provisions and requirements of all laws,
orders, regulations, rules and ordinances issued or promulgated by all
governmental authorities having jurisdiction with respect to the Partnership
Properties. All necessary material governmental certificates, consents, permits,
licenses or other authorizations with regard to the ownership or operation of
the Partnership Properties (including without limitation those required by the
Colombian Ministry of the Environment) have been obtained and no violations
exist or have been recorded in respect of such licenses, permits or
authorizations. None of the documents and materials filed with or furnished to
any governmental authority with respect to the Partnership Properties contains
any untrue statement of a material fact or omits any statement of a material
fact necessary to make the statements therein not misleading.
(e) With respect to the oil, gas and other mineral leases, unit
agreements, pooling agreements, communitization agreements and other documents
creating interests comprising the Partnership Properties (the "Oil and Gas
Leases"): (a) the Partnership has fulfilled all requirements for filings,
certificates, disclosures of parties in interest, and other similar matters
contained in (or otherwise applicable thereto by law, rule or regulation) such
leases or other documents and is fully qualified to own and hold all such leases
or other interests; (b) there are no provisions applicable to such leases or
other documents which increase the royalty share of the lessor thereunder except
as such increases are reflected in Section 4.09(e) of the Company's Disclosure
Letter; and (c) upon the establishment and maintenance of production in
commercial quantities, the Oil and Gas Leases and other interests are to be in
full force and effect until such contracts terminate in accordance with their
terms.
AGREEMENT AND PLAN OF MERGER
-13-
(f) Except as set forth in Section 4.09(f) of the Company's
Disclosure Letter, no parcel of real property so listed as owned is, or its use
is, in violation of any applicable zoning laws nor in violation of any other
local, state or federal laws and regulations affecting the use and occupancy of
such property.
(g) The Partnership enjoys peaceful and undisturbed possession
under all leases of non-mineral interests under which the Partnership holds or
purports to hold a leasehold estate in real property ("Leases"), and all such
Leases are valid, subsisting and in full force and effect. Neither the
Partnership nor the relevant landlord is in default under any Lease. No landlord
has given any written or other notice to the Partnership of any intention of
instituting litigation with respect to any Lease. Complete and correct copies of
each of the Leases as currently in effect have been made available to the
Acquiror, and there is no agreement, written, oral or otherwise, affecting the
Partnership's rights with respect to any Lease, the real property subject to
such Lease, or the Partnership's obligations to or for the benefit of the
landlord under such Lease, except as fully set forth in such Lease or in any
related materials made available to the Acquiror. The Partnership has not
received notice that any landlord under any Lease has commenced any voluntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or similar law nor has any involuntary case or proceeding to be
adjudicated as bankrupt or insolvent been commenced against such landlord nor
has such landlord consented to any entry of any decree or order for relief under
any applicable federal or state bankruptcy, insolvency, reorganization or other
similar law.
(h) Except as set forth in Section 4.09(h) of the Company's
Disclosure Letter, there is no pending or, to the Knowledge of the Company,
threatened condemnation or similar proceeding or special assessment affecting
any real property, or any part thereof, nor has the Company or any of its
Subsidiaries received notification that any such proceeding or assessment is
contemplated by any governmental authority.
(i) Except as set forth in Section 4.09(i) of the Company's
Disclosure Letter or the Company Annual Report, the Partnership Properties have
not experienced any material reduction in the rate of production of oil and gas,
other than changes in the ordinary course of operation, changes that result from
depletion in the ordinary course of operation and changes that result from
variances in markets and market prices for the oil and gas and none of the
Partnership Properties have suffered any material destruction, damage or loss.
(j) All of the xxxxx in which the Partnership has an interest
by virtue of its ownership of the Partnership Properties (the "Xxxxx") have been
drilled and completed within the boundaries of such Partnership Property or
within the limits otherwise permitted by contract, pooling or unit agreement,
and by law; and all drilling and completion of the xxxxx included in each
Partnership Property and all development and operations on such Partnership
Property have been conducted in compliance in all material respects with all
applicable laws, ordinances, rules, regulations and permits, and judgments,
orders and decrees of any court or governmental body or agency.
AGREEMENT AND PLAN OF MERGER
-14-
(k) Except as disclosed on Section 4.09(k) of the Company 's
Disclosure Letter, there are no Xxxxx that
(i) the Partnership is currently obligated by law or contract
to plug and abandon;
(ii) the Partnership will be obligated by law or contract to
plug and abandon with the lapse of time or notice or both because the
Well is not currently capable of producing in commercial quantities;
(iii) are subject to exceptions to a requirement to plug and
abandon issued by a regulatory authority having jurisdiction over the
Leases; or
(iv) have been plugged and abandoned but have not been plugged
in accordance with all applicable requirements of each regulatory
authority having jurisdiction over the Partnership Properties.
(l) Except as set forth in Section 4.09(l) of the Company's
Disclosure Letter, since December 31, 1997, there has not been (i) any damage,
destruction, change in physical condition, or loss to or of any of the
Partnership Properties, or any equipment, facilities, material or other personal
property ("Equipment") used in, on or in connection with the Partnership
Properties, whether or not covered by insurance, other than ordinary wear on
equipment; (ii) any Equipment removed from the Partnership Properties except for
equipment which was surplus to the operation of the Partnership Properties;
(iii) any sale, lease or other disposition of any Partnership Properties (or of
any Equipment other than in the ordinary course); (iv) any contract or
commitment to do any of the foregoing.
SECTION 4.10 Certain Obligations. Except for those listed in Section
-------------------
4.10 of the Company's Disclosure Letter or filed as Exhibits to the Company's
SEC Reports, neither the Company nor any of its Subsidiaries is a party to or
bound by any Material Contract. Except as set forth in Section 4.10 of the
Company's Disclosure Letter, all Material Contracts to which the Company or any
of its Subsidiaries is a party are in full force and effect, the Company or the
Subsidiary of the Company that is a party to or bound by such Material Contract
has performed its obligations thereunder to date and, to the Knowledge of the
Company, each other party thereto has performed its obligations thereunder to
date, other than any failure of a Material Contract to be in full force and
effect or any nonperformance thereof that could not reasonably be expected to
have a Material Adverse Effect on the Company.
SECTION 4.11 Authorizations; Compliance.
--------------------------
(a) The Company and its Subsidiaries have obtained all
Authorizations that are necessary to carry on their businesses as
currently conducted, except for any such Authorizations as to which,
individually or in the aggregate, the failure to possess could not
reasonably be expected to have a Material Adverse Effect on the
Company. Such Authorizations are in full force and effect, have not
been violated in any respect that could
AGREEMENT AND PLAN OF MERGER
-15-
reasonably be expected to have a Material Adverse Effect on the Company
and there is no action, proceeding or investigation pending or, to the
Knowledge of the Company, threatened regarding suspension, revocation
or cancellation of any such Authorizations, except for any suspensions,
revocations or cancellations of any such Authorizations that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries possesses
any rights, privileges, powers or franchises, contracts, arrangements
or understandings that are used in, or are necessary to the business of
any of the Company's Subsidiaries, including the Partnership, as
presently conducted ("Necessary Rights"), except those that will be
transferred to the Acquiror or one of its Subsidiaries as a result of
the Merger and the other transactions contemplated by this Agreement.
The Company and its Subsidiaries, including the Partnership, are
currently vested with all Necessary Rights.
SECTION 4.12 Litigation; Compliance with Laws. There are no
--------------------------------
actions, suits, investigations or proceedings (including any proceedings in
arbitration) pending or, to the Knowledge of the Company, threatened against
the Company or any of its Subsidiaries, at law or in equity, in any Court or
before or by any Governmental Authority, except actions, suits, investigations
or proceedings that are disclosed in the Company's SEC Reports, that are set
forth in Section 4.12 or Section 4.15 of the Company's Disclosure Letter or
that, individually or, with respect to multiple actions, suits or proceedings
that allege similar theories of recovery based on similar facts, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Company. There are no Material claims pending or, to the Knowledge of the
Company, threatened by any Persons against the Company or any of its
Subsidiaries for indemnification pursuant to any statute, organizational
document, contract or otherwise with respect to any claim, action, suit,
investigation or proceeding pending in any Court or before or by any
Governmental Authority. Except as set forth in Section 4.12 and Section 4.15 of
the Company's Disclosure Letter, the Company and its Subsidiaries are in
substantial compliance with all applicable Laws and Regulations and are not in
default with respect to any Order applicable to the Company or any of its
Subsidiaries, except such events of noncompliance or defaults that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 4.13 Employee Benefit Plans. Except as set forth in the
----------------------
Company's SEC Reports or in Section 4.13 of the Company's Disclosure Letter, the
Company is in substantial compliance with each Benefit Plan except for any
noncompliance that could not reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 4.14 Taxes.
-----
(a) Except as set forth in Section 4.14(a) of the Company's
Disclosure Letter and except for such other matters as could not
reasonably be expected to have a Material Adverse Effect on the
Company, all returns and reports of or with respect to any Tax ("Tax
Returns") that are required to be filed by or with respect to the
Company or any of its Subsidiaries on or before the Effective Time have
been or will be timely filed, all Taxes that are due on or
AGREEMENT AND PLAN OF MERGER
-16-
before the Effective Time have been or will be timely paid in full, all
withholding Tax requirements imposed on or with respect to the Company
or any of its Subsidiaries have been or will be satisfied in full in
all respects and no penalty, interest or other charge is or will become
due with respect to the late filing of any such Tax Return or late
payment of any such Tax.
(b) Except as set forth in Section 4.14(b) of the
Company's Disclosure Letter, none of such Tax Returns has been audited
by the applicable Governmental Authority.
(c) Except as set forth in Section 4.14(c) of the
Company's Disclosure Letter, there is not in force any extension of
time with respect to the due date for the filing of any such Tax Return
or any waiver or agreement for any extension of time for the assessment
or payment of any Tax due with respect to the period covered by any
such Tax Return.
(d) Except as set forth in Section 4.14(d) of the
Company's Disclosure Letter, there is no claim against the Company or
any of its Subsidiaries for any Taxes, and no assessment, deficiency or
adjustment has been asserted or, to the knowledge of the Company,
proposed with respect to any such Tax Return, that, in either case,
could reasonably be expected to have a Material Adverse Effect on the
Company.
(e) Except as set forth in Section 4.14(e) of the
Company's Disclosure Letter, none of the Company and its Subsidiaries
has, during the last ten years, been a member of an affiliated group
filing a consolidated federal income Tax Return, other than the
affiliated group of which the Company is the common parent corporation.
(f) The schedule set forth in Section 4.14(f) of the
Company's Disclosure Letter is accurate and sets forth fully the tax
basis information pertaining to the branch operations of the
Partnership including the unamortized capital costs and net loss carry
forwards of the branch operations of the Partnership; provided,
however, that the Company makes no representation or warranty with
respect to the Acquiror's ability to utilize such net loss carry
forwards.
SECTION 4.15 Environmental Matters.
---------------------
(a) Except for matters disclosed in the Company's SEC
Reports or in Section 4.15 of the Company's Disclosure Letter and
except for matters that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the
Company, (i) the properties, operations and activities of the Company
and its Subsidiaries are in compliance with all applicable
Environmental Laws; (ii) the Company and its Subsidiaries and the
properties and operations of the Company and its Subsidiaries are not
subject to any existing, pending or, to the Knowledge of the Company,
threatened action, suit, investigation, inquiry or proceeding by or
before any Court or Governmental Authority under any Environmental Law;
(iii) all Authorizations, if any, required to be obtained or filed by
the Company or any of its Subsidiaries under any Environmental Law in
connection with the business of the Company and its Subsidiaries have
been obtained or filed and are valid
AGREEMENT AND PLAN OF MERGER
-17-
and currently in full force and effect; (iv) there has been no release
of any hazardous substance, pollutant or contaminant into the
environment by the Company or its Subsidiaries or in connection with
their properties or operations; and (v) there has been no exposure of
any Person or property to any hazardous substance, pollutant or
contaminant in connection with the properties, operations and
activities of the Company and its Subsidiaries.
(b) The Company and its Subsidiaries have made available to
the Acquiror all internal and external environmental audits and studies
and all correspondence on environmental matters (in each case relevant
to the Company or any of its Subsidiaries) in the possession of the
Company or its Subsidiaries for such matters as could reasonably be
expected to have a Material Adverse Effect on the Company.
SECTION 4.16 Insurance. The Company and its Subsidiaries own and
---------
are beneficiaries under all such insurance policies underwritten by reputable
insurers that, as to risks insured, coverages and related limits and
deductibles, are customary in the industry in which the Company and its
Subsidiaries operate. All premiums due with respect to all such insurance
policies that are Material have been paid and, to the Knowledge of the Company,
all such policies are in full force and effect.
SECTION 4.17 Affiliates. Section 4.18 of the Company's Disclosure
----------
Letter contains a true and complete list of all Persons who are directors or
executive officers of the Company and any other Persons who, to the Knowledge of
the Company, may be deemed to be Affiliates of the Company. Concurrently with
the execution and delivery of this Agreement, the Company has delivered to the
Acquiror an executed letter agreement, substantially in the form of Annex B
hereto, from each such Person so identified.
SECTION 4.18 Certain Business Practices. As of the date of this
--------------------------
Agreement, neither the Company or any of its Subsidiaries nor any director,
officer, employee or agent of the Company or any of its Subsidiaries has (a)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any unlawful payment
to any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended, or (d)
made any other unlawful payment, except for any such matters that could not
reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.19 Brokers. Except as set forth in Section 4.20 of the
-------
Company's Disclosure Letter, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
AGREEMENT AND PLAN OF MERGER
-18-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
Subject to the provisions of Section 10.01(b), the Acquiror hereby
represents and warrants to the Company as follows:
SECTION 5.01 Organization and Qualification; Subsidiaries. The
--------------------------------------------
Acquiror, Newco and each other Significant Subsidiary of the Acquiror are legal
entities duly organized, validly existing and in good standing under the laws of
their respective jurisdictions of incorporation or organization, have all
requisite corporate power and authority to own, lease and operate their
respective properties and to carry on their businesses as they are now being
conducted and are duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by them or the
ownership or leasing of their respective properties makes such qualification
necessary, other than any matters, including the failure to be so qualified and
in good standing, that could not reasonably be expected to have a Material
Adverse Effect on the Acquiror. Section 5.01 of the Acquiror's Disclosure Letter
sets forth a true and complete list of all the Acquiror's directly or indirectly
owned Significant Subsidiaries, together with (A) a specification of the nature
of legal organization of such Subsidiary and (B) the jurisdiction of
incorporation or other organization of such Subsidiary.
SECTION 5.02 Certificate of Incorporation and Bylaws. The Acquiror
---------------------------------------
has heretofore marked for identification and furnished to the Company complete
and correct copies of the certificate of incorporation and the bylaws or the
equivalent organizational documents, in each case as amended or restated to the
date hereof, of the Acquiror and each of its Significant Subsidiaries. The
Acquiror is not in violation of any of the provisions of its certificate of
incorporation or bylaws.
SECTION 5.03 Capitalization.
--------------
(a) The authorized capital stock of the Acquiror consists of
348,500,000 shares of the Acquiror Common Stock of which as of December 31,
1997, 31,482,716 shares were issued and outstanding, all of which are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Acquiror's certificate of
incorporation or bylaws or any agreement to which the Acquiror is a party or is
bound. Since December 31, 1997, (x) no shares of Acquiror Common Stock have been
issued by the Acquiror except Acquiror Common Stock issued pursuant to the
exercise of outstanding Acquiror Stock Options and (y) the Acquiror has not
granted any options for, or other rights to purchase, shares of Acquiror Common
Stock.
(b) Except as set forth in Section 5.03(b) of the Acquiror's
Disclosure Letter and except for shares reserved for issuance pursuant to the
Acquiror Stock Plans, no shares of Acquiror Common Stock are reserved for
issuance, and, except for the Acquiror Stock Options, there are no contracts,
agreements, commitments or arrangements obligating the Acquiror to offer, sell,
issue or grant any Equity Securities of the Acquiror, to redeem, purchase or
acquire, or offer to purchase or acquire, any outstanding Equity Securities of
the Acquiror or to grant any Lien on any shares of capital stock of the
Acquiror.
AGREEMENT AND PLAN OF MERGER
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(c) Except as set forth in Section 5.03(c) of the Acquiror's
Disclosure Letter, (i) all the issued and outstanding shares of capital stock
of, or other equity interests in, each Significant Subsidiary of the Acquiror
are owned by the Acquiror or one of its Subsidiaries, have been duly authorized
and are validly issued, and, with respect to capital stock, are fully paid and
nonassessable, and were not issued in violation of any preemptive or similar
rights of any past or present equity holder of such Subsidiary; (ii) all such
issued and outstanding shares, or other equity interests, that are owned by the
Acquiror or one of its Subsidiaries are owned free and clear of all Liens; (iii)
no shares of capital stock of, or other equity interests in, any Significant
Subsidiary of the Acquiror are reserved for issuance, and there are no
contracts, agreements, commitments or arrangements obligating the Acquiror or
any of its Significant Subsidiaries (A) to offer, sell, issue, grant, pledge,
dispose of or encumber any Equity Securities of any of the Significant
Subsidiaries of the Acquiror or (B) to redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of any of the Significant
Subsidiaries of the Acquiror or (C) to grant any Lien on any outstanding shares
of capital stock of, or other equity interests in, any of the Significant
Subsidiaries of the Acquiror; except for any matter under clause (i), (ii) or
(iii) of this Section 5.03(c) that could not reasonably be expected to have a
Material Adverse Effect on the Acquiror.
(d) Except for revocable proxies granted by the Acquiror or
its Subsidiaries with respect to the capital stock of Subsidiaries owned by the
Acquiror or its Subsidiaries, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which the Acquiror
or any of its Significant Subsidiaries is a party or by which the Acquiror or
any of its Significant Subsidiaries is bound with respect to the voting of any
shares of capital stock of the Acquiror or any of its Significant Subsidiaries.
SECTION 5.04 Authorization of Agreement. Each of the Acquiror and
--------------------------
Newco has all requisite corporate power and authority to execute and deliver
this Agreement and, subject to approval of this Agreement by the majority of the
stockholders of the Acquiror as required by the applicable provisions of the LSE
and the ASE, each instrument required hereby to be executed and delivered by it
at the Closing, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
each of the Acquiror and Newco of this Agreement and each instrument required
hereby to be executed and delivered by each of them at the Closing and the
performance of their respective obligations hereunder and thereunder have been
duly and validly authorized by all requisite corporate action on the part of the
Acquiror and Newco, respectively (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the
outstanding shares of Acquiror Common Stock in accordance with the applicable
provisions of the LSE and the ASE). This Agreement has been duly executed and
delivered by the Acquiror and Newco and (assuming due authorization, execution
and delivery hereof by the other party hereto) constitutes a legal, valid and
binding obligation of the Acquiror and Newco, enforceable against the Acquiror
and Newco in accordance with its terms, except as the same may be limited by
legal principles of general applicability governing the application and
availability of equitable remedies.
SECTION 5.05 Approvals. Except for the applicable requirements, if
---------
any, of (a) the Securities Act, (b) the Exchange Act, (c) state securities or
blue sky laws, (d) the HSR Act, (e) the
AGREEMENT AND PLAN OF MERGER
-20-
applicable Colombian Laws and the applicable Regulations and Orders of Colombian
Governmental Authorities as set forth in the Acquiror's Disclosure Letter, (f)
the LSE, (g) the ASE, (h) the filing and recordation of appropriate merger
documents as required by the GCL and (i) those Laws, Regulations and Orders
noncompliance with which could not reasonably be expected to have a Material
Adverse Effect on the Acquiror or Newco, no filing or registration with, no
waiting period imposed by and no Authorization of, any Governmental Authority is
required under any Law, Regulation or Order applicable to the Acquiror or Newco
to permit the Acquiror or Newco to execute, deliver or perform this Agreement or
any instrument required hereby to be executed and delivered by it at the
Closing. To the Knowledge of the Acquiror and assuming approval of this
Agreement and the transactions contemplated hereby by the holders of a majority
of outstanding Acquiror Common Stock as required by the LSE and the ASE, there
are no facts or circumstances that could reasonably be expected to preclude the
Acquiror Common Stock to be issued in the Merger from being approved for listing
on the LSE or Depositary Shares representing such Acquiror Common Stock from
being approved for listing on the ASE.
SECTION 5.06 No Violation. Assuming effectuation of all filings and
------------
registrations with, termination or expiration of any applicable waiting periods
imposed by, and receipt of all Authorizations of, Governmental Authorities
indicated as required in Section 5.05, neither the execution and delivery by the
Acquiror or Newco of this Agreement or any instrument required hereby to be
executed and delivered by it at the Closing nor the performance by the Acquiror
or Newco of its obligations hereunder or thereunder will (a) violate or breach
the terms of or cause a default under any Law, Regulation or Order applicable to
the Acquiror or Newco, the certificate of incorporation or bylaws of the
Acquiror or Newco or any contract or agreement to which the Acquiror or any of
its Subsidiaries is a party or by which it or any of its properties or assets is
bound, or (b), with the passage of time, the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in clause (a) of
this Section, except in any such case for any matters described in this Section
that could not reasonably be expected to have a Material Adverse Effect on the
Acquiror or Newco.
SECTION 5.07 Reports.
-------
(a) Since December 31, 1994, (i) the Acquiror has filed all
SEC Reports required to be filed by the Acquiror with the Commission and (ii)
the Company and its Subsidiaries have filed all other Reports required to be
filed by any of them with any other Governmental Authorities, the LSE and the
ASE except where the failure to file any such Reports could not reasonably be
expected to have a Material Adverse Effect on the Company. The Acquiror's
Reports, including those filed after the date of this Agreement and prior to the
Effective Time, (x) were prepared in all material respects in accordance with
the requirements of applicable Law (including, with respect to the Acquiror's
SEC Reports, the Securities Act and the Exchange Act, as the case may be, and
the applicable Regulations of the Commission thereunder) and (y), in the case of
the Acquiror's SEC Reports, did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
AGREEMENT AND PLAN OF MERGER
-21-
(b) The Acquiror's Consolidated Financial Statements and any
consolidated financial statements of the Acquiror (including any related notes
thereto) contained in any of the Acquiror's SEC Reports filed by the Acquiror
with the Commission after the date of this Agreement (i) have been or will have
been prepared in accordance with the published Regulations of the Commission and
in accordance with GAAP (except (A) to the extent required by changes in GAAP
and (B), with respect to the Acquiror's Consolidated Financial Statements, as
may be indicated in the notes thereto) and (ii) fairly present the consolidated
financial position of the Acquiror and its Subsidiaries as of the respective
dates thereof and the consolidated results of their operations and cash flows
for the periods indicated (including, in the case of any unaudited interim
financial statements, reasonable estimates of normal and recurring year-end
adjustments).
(c) Except as set forth in Section 5.07(c) of the Acquiror's
Disclosure Letter, there exist no liabilities or obligations of the Acquiror and
its Subsidiaries that are Material to the Acquiror, whether accrued, absolute or
contingent, that would be required to be reflected, reserved for or disclosed
under GAAP in consolidated financial statements of the Acquiror as of and for
the period ended on the date of this representation and warranty, other than (i)
liabilities or obligations that are adequately reflected, reserved for or
disclosed in the Acquiror's Consolidated Financial Statements, (ii) liabilities
or obligations incurred in the ordinary course of business of the Acquiror since
December 31, 1997, (iii) liabilities or obligations the incurrence of which is
permitted by Section 6.02(b) and (iv) liabilities or obligations that are not
Material to the Acquiror.
SECTION 5.08 No Material Adverse Effect; Conduct.
-----------------------------------
(a) Since December 31, 1997, no event (other than any event
that is of general application to all or a substantial portion of the Acquiror's
industry and other than any event that is expressly subject to any other
representation or warranty contained in Article V) has, to the Knowledge of the
Acquiror, occurred that, individually or together with other similar events,
could reasonably be expected to constitute or cause a Material Adverse Effect on
the Acquiror.
(b) Except as set forth in Section 5.08(b) of the Acquiror's
Disclosure Letter, during the period from December 31, 1997, to the date of this
Agreement, neither the Acquiror nor any of its Subsidiaries has engaged in any
conduct that is proscribed during the period from the date of this Agreement to
the Effective Time by subsections (i) through (viii) of Section 6.02(b).
SECTION 5.09 Title to Properties.
-------------------
(a) The Acquiror or its Subsidiaries, individually or
together, have indefeasible title to all of the properties reflected in
the Acquiror's Consolidated Balance Sheet, other than any properties
reflected in the Acquiror's Consolidated Balance Sheet that have been
sold or otherwise disposed of since the date of the Acquiror's
Consolidated Balance Sheet or are not, individually or in the
aggregate, Material to the Acquiror, free and clear of Liens, other
than (x) Liens the existence of which is reflected in the Acquiror's
Consolidated Financial Statements, (y) Permitted Encumbrances and (z)
Liens that, individually or in the aggregate, are not Material to the
Acquiror. The Acquiror or its Subsidiaries, individually or together,
hold under valid lease agreements all real and personal properties
reflected in the Acquiror's
AGREEMENT AND PLAN OF MERGER
-22-
Consolidated Balance Sheet as being held under capitalized leases, and
all real and personal property that is subject to the operating leases
to which reference is made in the notes to the Acquiror's Audited
Consolidated Financial Statements, and enjoy peaceful and undisturbed
possession of such properties under such leases, other than (i) any
properties as to which such leases have terminated in the ordinary
course of business since the date of the Acquiror's Consolidated
Balance Sheet and (ii) any properties that, individually or in the
aggregate, are not Material to the Acquiror. Neither the Acquiror nor
any of its Subsidiaries has received any written notice of any adverse
claim to the title to any properties owned by them or with respect to
any lease under which any properties are held by them, other than any
claims that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Acquiror.
(b) Except as set forth in Section 5.09(b) of the Acquiror's
Disclosure Letter, the Acquiror has Marketable Title, free of Title
Defects, to its Oil and Gas Properties.
(c) With respect to each of the Oil and Gas Properties, except
as set forth in Section 5.09(c) of the Acquiror's Disclosure Letter:
(i) All royalties, rentals, shut-in payments and other
payments due with respect to such Oil and Gas Property have been
properly and timely paid, except for payments held in suspense for
title or other reasons that are customary in the industry and that will
not result in grounds for a cancellation of the rights of the Acquiror
in such Oil and Gas Property;
(ii) The Acquiror is not in default under the terms of any
leases, farmout agreements or other contracts or agreements respecting
such Oil and Gas Property which could (i) interfere with the operation,
value or use thereof, (ii) prevent the Acquiror from receiving the
proceeds of production attributable to their interest therein, or (iii)
result in cancellation of the interest of the Acquiror therein;
(iii) The Acquiror is not obligated by virtue of any gas
imbalance, prepayment or advance payment arrangement under any contract
for the sale or production of hydrocarbons, or under any other
arrangement, including any "take-or-pay" or similar arrangement, to
deliver any volume of hydrocarbons produced from or attributable to
such Oil and Gas Property, without then or thereafter being entitled to
receive payment therefor and Acquiror has not received any "take-or-
pay" production or similar payment that is subject to refund or
recoupment in cash. The status of any gas imbalances are set forth in
Section 5.09(c) of the Acquiror's Disclosure Letter;
(iv) All ad valorem, property, production, severance and other
taxes based on or measured by the ownership of such Oil and Gas
Property or the production of oil and gas therefrom have, if due, been
properly and timely paid;
AGREEMENT AND PLAN OF MERGER
-23-
(v) All expenses payable under the terms of any contracts
associated with such Oil and Gas Property have been properly and timely
paid except for such expenses as are being currently paid prior to
delinquency in the ordinary course of business; and
(vi) No third party (other than Ecopetrol) has a right to
purchase any hydrocarbon production from such Oil and Gas Property
pursuant to a call, futures contract or similar arrangement.
(d) The Oil and Gas Properties have been operated in compliance in
all material respects with the provisions and requirements of all laws, orders,
regulations, rules and ordinances issued or promulgated by all governmental
authorities having jurisdiction with respect to the Oil and Gas Properties. All
necessary material governmental certificates, consents, permits, licenses or
other authorizations with regard to the ownership or operation of the Oil and
Gas Properties (including without limitation those required by the Colombian
Ministry of the Environment) have been obtained and no violations exist or have
been recorded in respect of such licenses, permits or authorizations. None of
the documents and materials filed with or furnished to any governmental
authority with respect to the Oil and Gas Properties contains any untrue
statement of a material fact or omits any statement of a material fact necessary
to make the statements therein not misleading.
(e) With respect to the oil, gas and other mineral leases, unit
agreements, pooling agreements, communitization agreements and other documents
creating interests comprising the Oil and Gas Properties (the "Oil and Gas
Leases"): (a) the Acquiror has fulfilled all requirements for filings,
certificates, disclosures of parties in interest, and other similar matters
contained in (or otherwise applicable thereto by law, rule or regulation) such
leases or other documents and is fully qualified to own and hold all such leases
or other interests; (b) there are no provisions applicable to such leases or
other documents which increase the royalty share of the lessor thereunder except
as such increases are reflected in Section 5.09(e) of the Acquiror's Disclosure
Letter; and (c) upon the establishment and maintenance of production in
commercial quantities, the Oil and Gas Leases and other interests are to be in
full force and effect until such contracts terminate in accordance with their
terms.
(f) Except as set forth in Section 5.09(f) of the Acquiror's
Disclosure Letter, no parcel of real property so listed as owned is, or its use
is, in violation of any applicable zoning laws nor in violation of any other
local, state or federal laws and regulations affecting the use and occupancy of
such property.
(g) The Acquiror enjoys peaceful and undisturbed possession
under all leases of non-mineral interests under which the Acquiror holds or
purports to hold a leasehold estate in real property ("Leases"), and all such
Leases are valid, subsisting and in full force and effect. Neither the Acquiror
nor the relevant landlord is in default under any Lease. No landlord has given
any written or other notice to the Acquiror of any intention of instituting
litigation with respect to any Lease. Complete and correct copies of each of the
Leases as currently in effect have been made available to the Acquiror, and
there is no agreement, written, oral or otherwise, affecting the Acquiror's
rights with respect to any Lease, the real property subject to such Lease, or
the Acquiror's obligations to or for the benefit of the landlord under such
Lease, except as fully set forth in such
AGREEMENT AND PLAN OF MERGER
-24-
Lease or in any related materials made available to the Acquiror. The Acquiror
has not received notice that any landlord under any Lease has commenced any
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or similar law nor has any involuntary case or
proceeding to be adjudicated as bankrupt or insolvent been commenced against
such landlord nor has such landlord consented to any entry of any decree or
order for relief under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law.
(h) There is no pending or, to the Knowledge of the Acquiror,
threatened condemnation or similar proceeding or special assessment affecting
any real property, or any part thereof, nor has the Acquiror or any of its
Subsidiaries received notification that any such proceeding or assessment is
contemplated by any governmental authority.
(i) Except as set forth in Section 5.09(i) of the Acquiror's
Disclosure Letter, the Oil and Gas Properties have not experienced any material
reduction in the rate of production of oil and gas, other than changes in the
ordinary course of operation, changes that result from depletion in the ordinary
course of operation and changes that result from variances in markets and market
prices for the oil and gas and none of the Oil and Gas Properties have suffered
any material destruction, damage or loss.
(j) All of the xxxxx in which the Acquiror has an interest by
virtue of its ownership of the Oil and Gas Properties (the "Xxxxx") have been
drilled and completed within the boundaries of such Oil and Gas Property or
within the limits otherwise permitted by contract, pooling or unit agreement,
and by law; and all drilling and completion of the xxxxx included in each Oil
and Gas Property and all development and operations on such Oil and Gas Property
have been conducted in compliance in all material respects with all applicable
laws, ordinances, rules, regulations and permits, and judgments, orders and
decrees of any court or governmental body or agency.
(k) Except as disclosed on Section 5.09(k) of the Acquiror's
Disclosure Letter, there are no Xxxxx that
(i) the Acquiror is currently obligated by law or contract
to plug and abandon;
(ii) the Acquiror will be obligated by law or contract to
plug and abandon with the lapse of time or notice or both because the
Well is not currently capable of producing in commercial quantities;
(iii) are subject to exceptions to a requirement to plug and
abandon issued by a regulatory authority having jurisdiction over the
Leases; or
(iv) have been plugged and abandoned but have not been
plugged in accordance with all applicable requirements of each
regulatory authority having jurisdiction over the Oil and Gas
Properties.
AGREEMENT AND PLAN OF MERGER
-25-
(l) Except as set forth in Section 5.09(l) of the Acquiror's
Disclosure Letter, since December 31, 1997, there has not been (i) any damage,
destruction, change in physical condition, or loss to or of any of the Oil and
Gas Properties, or any equipment, facilities, material or other personal
property ("Equipment") used in, on or in connection with the Oil and Gas
Properties, whether or not covered by insurance, other than ordinary wear on
equipment; (ii) any Equipment removed from the Oil and Gas Properties except for
equipment which was surplus to the operation of the Oil and Gas Properties;
(iii) any sale, lease or other disposition of any Oil and Gas Properties (or of
any Equipment other than in the ordinary course); (iv) any contract or
commitment to do any of the foregoing.
SECTION 5.10 Certain Obligations. Except for those listed in Section
-------------------
5.10 of the Acquiror's Disclosure Letter or filed as Exhibits to the Acquiror's
SEC Reports, neither the Acquiror nor any of its Subsidiaries is a party to or
bound by any Material Contract. Except as set forth in Section 5.10 of the
Acquiror's Disclosure Letter, all Material Contracts to which the Acquiror or
any of its Subsidiaries is a party are in full force and effect, the Acquiror or
the Subsidiary of the Acquiror that is a party to or bound by such Material
Contract has performed its obligations thereunder to date and, to the Knowledge
of the Acquiror, each other party thereto has performed its obligations
thereunder to date, other than any failure of any such Material Contract to be
in full force and effect or any nonperformance thereof that could not reasonably
be expected to have a Material Adverse Effect on the Acquiror.
SECTION 5.11 Authorizations; Compliance. To the Knowledge of the
--------------------------
Acquiror, the Acquiror and its Subsidiaries have obtained all Authorizations
that are necessary to carry on their businesses as currently conducted, except
for any such Authorizations as to which the failure to possess, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Acquiror. Such Authorizations are in full force and effect, have
not been violated in any respect that could reasonably be expected to have a
Material Adverse Effect on the Acquiror and there is no action, proceeding or
investigation pending or threatened regarding suspension, revocation or
cancellation of any of such Authorizations, except in the case of any
suspension, revocation or cancellation of such Authorizations that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
SECTION 5.12 Litigation; Compliance with Laws. There are no actions,
--------------------------------
suits, investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Acquiror, threatened against the Acquiror or
any of its Subsidiaries, at law or in equity, in any Court or before or by any
Governmental Authority, except actions, suits, proceedings or investigations
that are disclosed in the Acquiror's SEC Reports, that are set forth in Section
5.12 or Section 5.15 of the Acquiror's Disclosure Letter or that, individually
or, with respect to multiple actions, suits or proceedings that allege similar
theories of recovery based on similar facts, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Acquiror. There
are no Material claims pending or, to the Knowledge of the Acquiror, threatened
by any Persons against the Acquiror or any of its Subsidiaries for
indemnification pursuant to any statute, organizational document, contract or
otherwise with respect to any claim, action, suit, investigation or proceeding
pending in any Court or before or by any Governmental Authority. The Acquiror
and its Subsidiaries are in substantial compliance with all applicable Laws and
Regulations and are not
AGREEMENT AND PLAN OF MERGER
-26-
in default with respect to any Order applicable to the Acquiror or any of its
Subsidiaries, except such events of noncompliance or defaults that, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on the Acquiror.
SECTION 5.13 Employee Benefit Plans. Except as set forth in the Acquiror's
----------------------
SEC Reports or in Section 5.13 of the Acquiror's Disclosure Letter:
(a) With respect to each Acquiror Benefit Plan, no event has
occurred and, to the Knowledge of the Acquiror, there exists no condition
or set of circumstances in connection with which the Acquiror or any of its
Subsidiaries could be subject to any liability under the terms of such
Acquiror Benefit Plan, ERISA, the Code or any other applicable Law, other
than any condition or set of circumstances that could not reasonably be
expected to have a Material Adverse Effect on the Acquiror.
(b) Each Current Acquiror Benefit Plan intended to be qualified
under Section 401 of the Code (i) satisfies in form the requirements of
such Section except to the extent amendments are not required by Law to be
made until a date after the Effective Time, (ii) does not require the
receipt of a favorable determination letter from the IRS regarding such
qualified status and (iii) has not been amended other than by amendments
required by applicable Law.
(c) Except as could not reasonably be expected to result in a
Material Adverse Effect on the Acquiror, there has been no termination or
partial termination of any Current Acquiror Benefit Plan within the meaning
of Section 4.11(d)(3) of the Code and, to the Knowledge of the Acquiror,
each Current Acquiror Benefit Plan has been operated in material compliance
with its provisions and with applicable Law.
(d) Any Terminated Acquiror Benefit Plan intended to have been
qualified under Section 401 of the Code received a favorable determination
letter from the IRS with respect to its termination.
(e) There are no actions, suits or claims pending (other than
routine claims for benefits) or, to the Knowledge of the Acquiror,
threatened against, or with respect to, any Acquiror Benefit Plan or its
assets that could reasonably be expected to have a Material Adverse Effect
on the Acquiror and, to the Knowledge of the Acquiror, no facts or
circumstances exist that could give rise to any such actions, suits or
claims, except as could not reasonably be expected to have a Material
Adverse Effect on the Acquiror.
(f) To the Knowledge of the Acquiror, there is no matter pending
(other than routine qualification determination filings) with respect to
any Acquiror Benefit Plans before the IRS, the Department of Labor, the
PBGC or any other Governmental Authority, except as could not reasonably be
expected to have a Material Adverse Effect on the Acquiror.
(g) All contributions required to be made to Acquiror Benefit Plans
pursuant to their terms and the provisions of ERISA, the Code or any
other applicable Law have been
AGREEMENT AND PLAN OF MERGER
-27-
timely made, except as could not reasonably be expected to have a
Material Adverse Effect on the Acquiror.
(h) As to any Current Acquiror Benefit Plan subject to Title IV of
ERISA, (i) there has been no event or condition that presents a significant
risk of plan termination, (ii) no accumulated funding deficiency, whether
or not waived, within the meaning of Section 302 of ERISA or Section 412 of
the Code has been incurred, (iii) no reportable event within the meaning of
Section 4043 of ERISA (for which the disclosure requirements of Regulation
section 4043.1, et seq., promulgated by the PBGC, have not been waived) has
occurred within six years prior to the date of this Agreement, (iv) no
notice of intent to terminate such Benefit Plan has been given under
Section 4041 of ERISA, (v) no proceeding has been instituted under Section
4042 of ERISA to terminate such Benefit Plan, (vi) no liability to the PBGC
has been incurred (other than with respect to required premium payments)
and (vii) the assets of the Benefit Plan equal or exceed the actuarial
present value of the benefit liabilities, within the meaning of Section
4041 of ERISA, under the Benefit Plan, based upon reasonable actuarial
assumptions and the asset valuation principles established by the PBGC,
except as could not reasonably be expected to have a Material Adverse
Effect on the Acquiror.
(i) In connection with the consummation of the transactions
contemplated by this Agreement, no payment of money or other property,
acceleration of benefits or provision of other rights has been or will be
made under any Current Acquiror Benefit Plan that could reasonably be
expected to be nondeductible under Section 280G of the Code, whether or not
some other subsequent action or event would be required to cause such
payment, acceleration or provision to be triggered.
(j) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (i) require
the Acquiror or any of its Subsidiaries to make a larger contribution to,
or pay greater benefits or provide other rights under, any Current Acquiror
Benefit Plan or any of the programs, agreements, policies or other
arrangements described in the Acquiror's Disclosure Letter in response to
paragraph (k) below than it otherwise would, whether or not some other
subsequent action or event would be required to cause such payment or
provision to be triggered or (ii) create or give rise to any additional
vested rights or service credits under any Current Acquiror Benefit Plan or
any of such programs, agreements, policies or other arrangements, whether
or not some other subsequent action or event would be required to cause
such creation or acceleration to be triggered.
(k) Neither the Acquiror nor any of its Subsidiaries is a party to
or is bound by any severance or change in control agreement, program or
policy (involving $10,000 or more of future payments) with respect to any
employee, officer or director.
(l) No Current Acquiror Benefit Plan (other than a Acquiror Benefit
Plan maintained outside the United States that is either fully insured or
fully funded through a retirement plan) provides retiree medical or retiree
life insurance benefits to any Person and
AGREEMENT AND PLAN OF MERGER
-28-
neither the Acquiror nor any of its Subsidiaries is contractually or
otherwise obligated (whether or not in writing) to provide any Person with
life insurance or medical benefits upon retirement or termination of
employment, other than as required by the provisions of Sections 601
through 608 of ERISA and Section 4980B of the Code.
(m) Neither the Acquiror nor any of its Subsidiaries contributes,
has an obligation to contribute, has within six years prior to the date of
this Agreement contributed or had an obligation to contribute, or had any
other liability, to a multiemployer plan within the meaning of Section
3(37) of ERISA.
(n) The Acquiror has not contributed, transferred or otherwise
provided any cash, securities or other property to any grantee, trust,
escrow or other arrangement that has the effect of providing or setting
aside assets for benefits payable pursuant to any termination, severance or
other change in control agreement.
(o) Except as could not reasonably be expected to have a Material
Adverse Effect on the Acquiror, (i) no collective bargaining agreement is
being negotiated by the Acquiror or any of its Subsidiaries, (ii) there is
no pending or, to the Knowledge of the Acquiror, threatened labor dispute,
strike or work stoppage against the Acquiror or any of its Subsidiaries,
(iii) to the Knowledge of the Acquiror, neither the Acquiror or any of its
Subsidiaries nor any representative or employee of the Acquiror or any of
its Subsidiaries has in the United States committed any Material unfair
labor practices in connection with the operation of the business of the
Acquiror and its Subsidiaries, and (iv) there is no pending or, to the
Knowledge of the Acquiror, threatened charge or complaint against the
Acquiror or any of its Subsidiaries by or before the National Labor
Relations Board or any comparable agency of any state of the United States.
SECTION 5.14 Taxes.
-----
(a) Except for such matters as could not reasonably be expected to
have a Material Adverse Effect on the Acquiror, all Tax Returns that are
required to be filed by or with respect to the Acquiror or any of its
Subsidiaries on or before the Effective Time have been or will be timely
filed, all Taxes that are due on or before the Effective Time have been or
will be timely paid in full, all withholding Tax requirements imposed on or
with respect to the Acquiror or any of its Subsidiaries have been or will
be satisfied in full in all respects and no penalty, interest or other
charge is or will become due with respect to the late filing of any such
Tax Return or late payment of any such Tax.
(b) Except as set forth in Section 5.14(b) of the Acquiror's
Disclosure Letter, each of such Tax Returns has been audited by the
applicable Governmental Authority or the applicable statute of limitations
has expired for the period covered by such Tax Return.
(c) Except as set forth in Section 5.14(c) of the Acquiror's
Disclosure Letter, there is not in force any extension of time with respect
to the due date for the filing of any
AGREEMENT AND PLAN OF MERGER
-29-
such Tax Return or any waiver or agreement for any extension of time for
the assessment or payment of any Tax due with respect to the period covered
by any such Tax Return.
(d) There is no claim against the Acquiror or any of its
Subsidiaries for any Taxes, and no assessment, deficiency or adjustment has
been asserted or proposed with respect to any such Tax Return, that, in
either case, could reasonably be expected to have a Material Adverse Effect
on the Acquiror.
(e) Except as set forth in Section 5.14(e) of the Acquiror's
Disclosure Letter, none of the Acquiror and its Subsidiaries has, during
the last ten years, been a member of an affiliated group filing a
consolidated federal income Tax Return, other than the affiliated group of
which the Acquiror is the common parent corporation.
SECTION 5.15 Environmental Matters.
---------------------
(a) Except for matters disclosed in the Acquiror's SEC Reports
or in Section 5.15 of the Acquiror's Disclosure Letter and except for
matters that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Acquiror, (a) the
properties, operations and activities of the Acquiror and its Subsidiaries
are in compliance with all applicable Environmental Laws; (b) the Acquiror
and its Subsidiaries and the properties and operations of the Acquiror and
its Subsidiaries are not subject to any existing, pending or, to the
Knowledge of the Acquiror, threatened action, suit, investigation, inquiry
or proceeding by or before any Court or Governmental Authority under any
Environmental Law; (c) all Authorizations if any, required to be obtained
or filed by the Acquiror or any of its Subsidiaries under any Environmental
Law in connection with the business of the Acquiror and its Subsidiaries
have been obtained or filed and are valid and currently in full force and
effect; (d) there has been no release of any hazardous substance, pollutant
or contaminant into the environment by the Acquiror or its Subsidiaries or
in connection with their properties or operations; and (e) there has been
no exposure of any Person or property to any hazardous substance, pollutant
or contaminant in connection with the properties, operations and activities
of the Acquiror and its Subsidiaries.
(b) The Acquiror and its Subsidiaries have made available to
the Company all internal and external environmental audits and studies and
all correspondence on environmental matters (in each case relevant to the
Acquiror or any of its Subsidiaries) in the possession of the Acquiror or
its Subsidiaries for such matters as could reasonably be expected to have a
Material Adverse Effect on the Acquiror.
SECTION 5.16 Insurance. The Acquiror and its Subsidiaries own and are
---------
beneficiaries under all such insurance policies underwritten by reputable
insurers that, as to risks insured, coverages and related limits and
deductibles, are customary for a company of the size and nature of the Acquiror
and which is similarly situated. All premiums due with respect to all such
insurance policies that are Material have been paid and, to the Knowledge of the
Acquiror, all such policies are in full force and effect.
AGREEMENT AND PLAN OF MERGER
-30-
SECTION 5.17 Certain Business Practices. As of the date of this
--------------------------
Agreement, neither the Acquiror or any of its Subsidiaries nor any director,
officer, employee or agent of the Acquiror or any of its Subsidiaries has (a)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any unlawful payment
to any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (c) consummated any transaction, made
any payment, entered into any agreement or arrangement or taken any other action
in violation of Section 1128B(b) of the Social Security Act, as amended, or (d)
made any other unlawful payment, except for any such matters that could not
reasonably be expected to have a Material Adverse Effect on the Acquiror.
SECTION 5.18 Newco. Newco is a wholly owned subsidiary of Aviva
-----
Holding Inc., a Delaware corporation (the "Special Purpose Subsidiary"); the
Special Purpose Subsidiary is a wholly owned subsidiary of Aviva America, Inc.,
a Delaware corporation ("Aviva America"); Aviva America is a wholly owned
subsidiary of the Acquiror.
SECTION 5.19 Brokers. Except as set forth in Section 5.19 of the
-------
Acquiror's Disclosure Letter, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Acquiror.
ARTICLE VI
COVENANTS
SECTION 6.01 Affirmative Covenants.
---------------------
(a) The Company hereby covenants and agrees that, prior to
the Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the Acquiror, it will and will
cause each of its Subsidiaries to:
(i) operate its business in the usual and ordinary
course consistent with past practices;
(ii) use all reasonable efforts to preserve
substantially intact its business organization, maintain its
rights and franchises, retain the services of its respective
key employees and maintain its relationships with its
respective customers and suppliers;
(iii) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and
tear excepted, and maintain supplies and inventories in
quantities consistent with its customary business practice;
and
(iv) use all reasonable efforts to keep in full force
and effect insurance and bonds comparable in amount and scope
of coverage to that currently maintained;
AGREEMENT AND PLAN OF MERGER
-31-
except for any matters that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the
Company.
(b) The Acquiror hereby covenants and agrees that, prior to
the Effective Time, unless otherwise expressly contemplated by this
Agreement or consented to in writing by the Company, it will and will
cause each of its Subsidiaries to:
(i) operate its business in the usual and ordinary
course consistent with past practices;
(ii) use all reasonable efforts to preserve
substantially intact its business organization, maintain its
rights and franchises, retain the services of its respective
key employees and maintain its relationships with its
respective customers and suppliers;
(iii) maintain and keep its properties and assets in as
good repair and condition as at present, ordinary wear and
tear excepted, and maintain supplies and inventories in
quantities consistent with its customary business practice;
and
(iv) use all reasonable efforts to keep in full force
and effect insurance and bonds comparable in amount and scope
of coverage to that currently maintained;
except for any matters that, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the
Acquiror.
SECTION 6.02 Negative Covenants.
------------------
(a) The Company covenants and agrees that, except as
expressly set forth in the Company's Disclosure Letter, as expressly
contemplated by this Agreement or as otherwise consented to in writing
by the Acquiror, from the date of this Agreement until the Effective
Time, it will not do, and will not permit any of its Subsidiaries to
do, any of the following:
(i) (A) increase the compensation payable to or to
become payable to any director or executive officer, (B) grant
any severance or termination pay; (C) amend or take any other
actions to increase the amount or accelerate the payment or
vesting of any benefit under any Benefit Plan (including the
acceleration of vesting, waiving of performance criteria or
the adjustment of awards or any other actions permitted upon a
change in control of such party or permitted upon a filing
under Section 13(d) or 14(d) of the Exchange Act with respect
to such party) or (D) contribute, transfer or otherwise
provide any cash, securities or other property to any grantee,
trust, escrow or other arrangement that has the effect of
providing or setting aside assets for benefits payable
pursuant to any termination, severance or other change in
control agreement; except (i) pursuant to any contract,
agreement or other legal obligation of the Company or any of
its Subsidiaries existing at the date of this Agreement, (ii)
increases in salary payable or to become payable upon
promotion to an office having
AGREEMENT AND PLAN OF MERGER
-32-
greater operational responsibilities, (iii), in the case of
severance or termination payments, pursuant to the severance
policy of the Company or its Subsidiaries existing at the date
of this Agreement and (iv), in the case of Benefit Plans,
amendments required by ERISA or other applicable Law.
(ii) (A) enter into any employment or severance
agreement with any director or executive officer, either
individually or as part of a class of similarly situated
persons, or (B) establish, adopt or enter into any new Benefit
Plan; except employment and severance agreements and Benefit
Plans for the benefit of any newly employed or promoted
officers or employees, in which case the terms of such
agreements and Benefit Plans shall be reasonably consistent
with those existing at the date of this Agreement, and except
Benefit Plans relating to health and life insurance benefits
established or adopted in the ordinary course of business
consistent with past practice;
(iii) declare or pay any extraordinary dividend on,
or make any other distribution in respect of outstanding
shares of capital stock, except for dividends by a wholly
owned Subsidiary of the Company to the Company or another
wholly owned Subsidiary of the Company;
(iv) (A) redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the
Company or any of its Subsidiaries, other than (1) any such
acquisition by the Company or any of its wholly owned
Subsidiaries directly from any wholly owned Subsidiary of the
Company, (2) any repurchase, forfeiture or retirement of
shares of Company Common Stock or Company Stock Options
occurring pursuant to the terms (as in effect on the date of
this Agreement) of any existing Benefit Plan of the Company or
any of its Subsidiaries, or (3) any periodic purchase of
Company Common Stock for allocation to employee's accounts
occurring pursuant to the terms (as in effect on the date of
this Agreement) of any existing employee stock purchase plan;
(B) effect any reorganization or recapitalization; or (C)
split, combine or reclassify any of the capital stock of, or
other equity interests in, the Company or any of its
Subsidiaries or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for, such Equity Securities;
(v) (A) offer, sell, issue or grant, or authorize the
offering, sale, issuance or grant, of any Equity Securities of
the Company or any of its Subsidiaries, other than issuances
of Company Common Stock (1) upon the exercise of Company Stock
Options outstanding at the date of this Agreement in
accordance with the terms thereof (as in effect on the date of
this Agreement) or (2) that constitutes a periodic issuance of
shares of Company Common Stock required by the terms (as in
effect on the date of this Agreement) of any Benefit Plans of
the Company or any of its Subsidiaries, (B) amend or otherwise
modify the terms (as in effect on the date of this Agreement)
of any outstanding options, warrants or rights the effect of
which shall be to make such terms more favorable to the
holders thereof (except as may be
AGREEMENT AND PLAN OF MERGER
-33-
required by ERISA or other applicable Law); (C) take any
action to accelerate the vesting of any outstanding Company
Stock Options or (D) grant or suffer to exist any Lien with
respect to any outstanding Equity Securities of any Subsidiary
of the Company;
(vi) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or all
or a portion of the assets of, or in any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof or otherwise to
acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice);
(vii) sell, lease, exchange or otherwise dispose of,
or grant any Lien (other than a Permitted Encumbrance) with
respect to, any of the assets of the Company or any of its
Subsidiaries that are Material to the Company, except for
dispositions of assets and inventories in the ordinary course
of business and consistent with past practice and dispositions
of assets and purchase money Liens incurred in connection with
the original acquisition of assets and secured by the assets
acquired in an amount not to exceed $100,000 in the aggregate;
(viii) adopt any amendments to its charter or bylaws
or other organizational documents that would alter the terms
of its capital stock or other equity interests or would have a
Material Adverse Effect on the Company;
(ix) (A) change any of its methods of accounting in
effect at December 31, 1997, except as may be required to
comply with GAAP, (B) make or rescind any election relating to
Taxes (other than any election that must be made periodically
and that is made consistent with past practice), (C) settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes (except where the cost to the Company and its
Subsidiaries of such settlements or compromises, individually
or in the aggregate, does not exceed $50,000) or (D) change
any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable
year ending December 31, 1996, except, in each case, as may be
required by Law and for matters that could not reasonably be
expected to have a Material Adverse Effect on the Company;
(x) incur any obligations for borrowed money or
purchase money indebtedness (other than purchase money
indebtedness as to which Liens may be granted as permitted by
Section 6.02(a)(vii)) that are Material to the Company,
whether or not evidenced by a note, bond, debenture or similar
instrument, except drawings under credit lines existing at the
date of this Agreement and borrowings evidenced by short term
obligations issued in the ordinary course of business
consistent with past practice.
AGREEMENT AND PLAN OF MERGER
-34-
(xi) release any third Person from its obligations
under any existing standstill agreement relating to a
Competing Transaction or otherwise under any confidentiality
agreement or similar agreement;
(xii) enter into any Material Contract with any third
Person that provides for an exclusive arrangement with that
third Person or is substantially more restrictive on the
Company or any of its Subsidiaries or substantially less
advantageous to the Company or any of its Subsidiaries than
Material Contracts existing on the date hereof; or
(xiii) agree in writing or otherwise to do any of the
foregoing;
(b) The Acquiror covenants and agrees that, except as
expressly set forth in the Acquiror's Disclosure Letter, as
contemplated by this Agreement, or as otherwise consented to in writing
by the Company, from the date of this Agreement until the Effective
Time, it will not do, and will not permit any of its Subsidiaries to
do, any of the following:
(i) (A) increase the compensation payable to or to
become payable to any director or executive officer, (B) grant
any severance or termination pay; (C) amend or take any other
actions to increase the amount or accelerate the payment or
vesting of any benefit under any Benefit Plan (including the
acceleration of vesting, waiving of performance criteria or
the adjustment of awards or any other actions permitted upon a
change in control of such party or permitted upon a filing
under Section 13(d) or 14(d) of the Exchange Act with respect
to such party) or (D) contribute, transfer or otherwise
provide any cash, securities or other property to any grantee,
trust, escrow or other arrangement that has the effect of
providing or setting aside assets for benefits payable
pursuant to any termination, severance or other change in
control agreement; except (i) pursuant to any contract,
agreement or other legal obligation of the Acquiror or any of
its Subsidiaries existing at the date of this Agreement, (ii)
increases in salary payable or to become payable upon
promotion to an office having greater operational
responsibilities, (iii), in the case of severance or
termination payments, pursuant to the severance policy of the
Acquiror or its Subsidiaries existing at the date of this
Agreement and (iv), in the case of Benefit Plans, amendments
required by ERISA or other applicable Law;
(ii) (A) enter into any employment or severance
agreement with any director or executive officer, either
individually or as part of a class of similarly situated
persons, or (B) establish, adopt or enter into any new Benefit
Plan; except employment and severance agreements and Benefit
Plans for the benefit of any newly employed or promoted
officers or employees, in which case the terms of such
agreements and Benefit Plans shall be reasonably consistent
with those existing at the date of this Agreement, and except
Benefit Plans relating to health and life insurance benefits
established or adopted in the ordinary course of business
consistent with past practice;
AGREEMENT AND PLAN OF MERGER
-35-
(iii) declare or pay any extraordinary dividend on,
or make any other distribution in respect of outstanding
shares of capital stock, except for dividends by a wholly
owned Subsidiary of the Company to the Company or another
wholly owned Subsidiary of the Company;
(iv) (A) redeem, purchase or acquire, or offer to
purchase or acquire, any outstanding Equity Securities of the
Acquiror or any of its Subsidiaries (other than (1) any such
acquisition by the Acquiror or any of its wholly owned
Subsidiaries directly from any wholly owned Subsidiary of the
Acquiror, (2) any repurchase, forfeiture or retirement of
shares of the Acquiror Common Stock or the Acquiror Stock
Options occurring pursuant to the terms (as in effect on the
date of this Agreement) of any existing Benefit Plan of the
Acquiror or any of its Subsidiaries, or (3) any periodic
purchase of the Acquiror Common Stock for allocation to
employee's accounts occurring pursuant to the terms (as in
effect on the date of this Agreement) of any existing employee
stock purchase plan; (B) effect any reorganization or
recapitalization; or (C) split, combine or reclassify any of
the Equity Securities of the Acquiror or any of its
Subsidiaries or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in
substitution for, such Equity Securities;
(v) (A) offer, sell, issue or grant, or authorize
the offering, sale, issuance or grant, of any Equity
Securities of the Acquiror or any of its Subsidiaries, other
than issuances of the Acquiror Common Stock (1) upon the
exercise of the Acquiror Stock Options outstanding at the date
of this Agreement in accordance with the terms thereof (as in
effect on the date of this Agreement) or (2) that constitutes
a periodic issuance of shares of Acquiror Common Stock
required by the terms (as in effect on the date of this
Agreement) of any Benefit Plan of the Acquiror or any of its
Subsidiaries; (B) amend or otherwise modify the terms (as in
effect on the date of this Agreement) of any outstanding
options, warrants or rights the effect of which shall be to
make such terms more favorable to the holders thereof (except
as may be required by ERISA or other applicable Law); (C) take
any action to accelerate the vesting of any outstanding
Acquiror Stock Options or (D) grant any Lien with respect to
any Equity Securities of any Subsidiary of the Acquiror;
(vi) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or all
or a portion of the assets of, or in any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise to
acquire any assets of any other Person (other than the
purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice);
(vii) sell, lease, exchange or otherwise dispose of,
or grant any Lien (other than a Permitted Encumbrance) with
respect to, any of the assets of the Acquiror or any of its
Subsidiaries that are Material to the Acquiror, except for
dispositions of assets and inventories in the ordinary course
of business and consistent with past
AGREEMENT AND PLAN OF MERGER
-36-
practice and dispositions of assets and purchase money Liens
incurred in connection with the original acquisition of assets
and secured by the assets acquired in an amount not to exceed
$100,000 in the aggregate;
(viii) adopt any amendments to its charter or bylaws
or other organizational documents that would alter the terms
of its capital stock or other equity interests or would have a
Material Adverse Effect on the Acquiror;
(ix) (A) change any of its methods of accounting in
effect at December 31, 1997, except as may be required to
comply with GAAP, (B) make or rescind any election relating to
Taxes (other than any election which must be made periodically
which is made consistent with past practice), (C) settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes (except where the cost to the Acquiror and its
Subsidiaries of such settlements or compromises, individually
or in the aggregate, does not exceed $50,000) or (D) change
any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable
year ending December 31, 1996, except, in each case, as may be
required by Law and for matters that could not reasonably be
expected to have a Material Adverse Effect on the Acquiror;
(x) incur any obligations for borrowed money or
purchase money indebtedness (other than purchase money
indebtedness as to which Liens may be granted as permitted by
Section 6.02(b)(vii)) that are Material to the Acquiror,
whether or not evidenced by a note, bond, debenture or similar
instrument, except drawings under credit lines existing at the
date of this Agreement and borrowings evidenced by short term
obligations issued in the ordinary course of business
consistent with past practice.
(xi) enter into any Material Contract with any third
Person that provides for an exclusive arrangement with that
third Person or is substantially more restrictive on the
Acquiror or any of its Subsidiaries or substantially less
advantageous to the Acquiror or any of its Subsidiaries than
Material Contracts existing on the date hereof; or
(xii) agree in writing or otherwise to do any of the
foregoing.
SECTION 6.03 No Solicitation. From the date of this
---------------
Agreement until the Effective Time or the termination of this Agreement pursuant
to Section 9.01, the Company agrees that neither the Company nor any of its
Subsidiaries nor any of the directors and officers of the Company or any of its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
the other employees, agents and representatives (including investment bankers,
attorneys and accountants) employed or retained by the Company or any of its
Subsidiaries not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate (including by way of furnishing information or assistance)
any Acquisition Proposal or any inquiries that may reasonably be expected to
lead to an Acquisition
AGREEMENT AND PLAN OF MERGER
-37-
Proposal. The Company further agrees that neither the Company nor any of its
Subsidiaries nor any of the directors and officers of the Company or any of its
Subsidiaries shall, and that it shall direct and use its best efforts to cause
the other employees, agents and representatives (including investment bankers,
attorneys and accountants) employed or retained by the Company or any of its
Subsidiaries not to, directly or indirectly, engage in any discussion with or
provide any confidential information or data to any Person that may reasonably
be expected to lead to an Acquisition Proposal or engage in any negotiations
concerning, or otherwise facilitate any effort or attempt to make or implement,
an Acquisition Proposal. Notwithstanding the foregoing, the Board of Directors
of the Company shall be permitted (A), to the extent applicable, to comply, with
regard to an Acquisition Proposal, with Rule 14e-2(a) promulgated under the
Exchange Act, (B) in response to an unsolicited bona fide written Acquisition
Proposal from any Person, recommend such Acquisition Proposal to the Company's
stockholders or withdraw or modify in any adverse manner its approval or
recommendation of this Agreement, or both, or (C) engage in any discussions or
negotiations with, or provide any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such Person, if and
only to the extent that, in any such case described in clause (B) or (C), if (i)
the Required Company Vote shall not have been theretofore obtained, (ii) the
Board of Directors of the Company shall have concluded in good faith that such
Acquisition Proposal (x) in the case of that described in clause (B) above
would, if consummated, constitute a Superior Proposal or (y), in the case
described in clause (C) above could reasonably be expected to constitute a
Superior Proposal, (iii) the Board of Directors of the Company shall have
determined in good faith on the basis of written advice of outside legal counsel
that such action is necessary for such Board of Directors to act in a manner
consistent with its fiduciary duties under applicable Law, (iv) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the Board of Directors shall have
received from such Person an executed confidentiality agreement containing
customary terms and provisions and (v) prior to providing any information or
data to any Person or entering into discussions or negotiations with any Person,
the Board of Directors of the Company shall have notified the Acquiror
immediately of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals of offers. The Company agrees that it will keep the
Acquiror informed, on a current basis, of the status of any such discussions or
negotiations. The Company agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any Acquisition Proposal. The Company
agrees that it will take the necessary steps to inform promptly the individuals
or entities referred to in the first sentence of this Section 6.03 of the
obligations undertaken in this Section 6.03.
SECTION 6.04 Access and Information.
----------------------
(a) Each of the Company and the Acquiror shall, and shall
cause its Subsidiaries to, (i) afford to the other and its officers,
directors, employees, accountants, consultants, legal counsel, agents
and other representatives (collectively, in the case of the Company,
the "Company's Representatives" and, in the case of the Acquiror, the
"Acquiror's Representatives") access, at reasonable times upon
reasonable prior notice, to the officers, employees, agents,
properties, offices and other facilities of the other and to its books
and
AGREEMENT AND PLAN OF MERGER
-38-
records and (ii) furnish promptly to the other and its Representatives
such information concerning its business, properties, contracts,
records and personnel (including financial, operating and other data
and information) as may be reasonably requested, from time to time, by
or on behalf of the other party.
(b) Each party to this Agreement (the Acquiror Companies being
considered one party for purposes of this Section 6.04(b)) shall hold
in confidence all nonpublic information received from the other party
to this Agreement until such time as such information is otherwise
publicly available. If this Agreement is terminated for any reason
pursuant to Article IX hereof, each of the Company and the Acquiror
shall, within ten days after a request therefor from the other, return
or destroy (and provide the other party within such ten-day time period
with a certificate of an executive officer certifying such destruction)
all of the information furnished to such party and its Representatives
pursuant to the provisions of Section 6.04(a) and all internal
memoranda, analyses, evaluations and other similar material containing,
reflecting or prepared from any such information, in each case other
than information available to the general public without restriction.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Meetings of Stockholders.
------------------------
(a) The Company shall, promptly after the date of this
Agreement, take all actions necessary in accordance with the GCL and
its certificate of incorporation and bylaws to convene a special
meeting of the Company's stockholders to consider approval and adoption
of this Agreement and the Merger (the "Company Stockholders' Meeting"),
and the Company shall consult with the Acquiror in connection
therewith. Subject to the provisions of Section 6.03, the Board of
Directors shall recommend this Agreement and the Merger to the
stockholders of the Company and the Company shall use all reasonable
efforts to solicit from stockholders of the Company proxies in favor of
the approval and adoption of this Agreement and to secure the vote or
consent of stockholders required by the GCL and its certificate of
incorporation and bylaws to approve and adopt this Agreement (the
"Required Company Vote").
(b) The Acquiror shall, promptly after the date of this
Agreement, take all actions necessary in accordance with the TBCA and
its certificate of incorporation and bylaws to convene a special
meeting of the Acquiror's stockholders to consider approval and
adoption of this Agreement and the Merger (the "Acquiror Stockholders'
Meeting"), and the Acquiror shall consult with the Company in
connection therewith. The Acquiror shall use all reasonable efforts to
solicit from stockholders of the Acquiror proxies in favor of the
approval and adoption of the Share Issuance and to secure the vote or
consent of the stockholders of the Acquiror required by the rules of
the LSE and the ASE to approve and adopt the Share Issuance (the
"Required Acquiror Vote").
AGREEMENT AND PLAN OF MERGER
-39-
SECTION 7.02 Registration Statement; Proxy Statements.
----------------------------------------
(a) As promptly as practicable after the execution of this
Agreement, the Acquiror and the Company shall prepare and file with the
Commission a joint proxy statement and forms of proxy to be used in
connection with the solicitation of proxies to be voted at the Acquiror
Stockholders' Meeting with respect to the Share Issuance and in
connection with the solicitation of proxies to be voted at the Company
Stockholders' Meeting with respect to this Agreement (such joint proxy
statement, together with any amendments thereof or supplements thereto
effected on or prior to the effective date of the Registration
Statement, being the "Joint Proxy Statement"). At such time as the
Acquiror and the Company deem appropriate, the Acquiror shall prepare
and file with the Commission a registration statement on Form S-4 (such
registration statement, together with any amendments thereof or
supplements thereto, being the "Registration Statement") containing the
Joint Proxy Statement for stockholders of the Acquiror and the Company
(the Joint Proxy Statement shall also constitute a prospectus for
stockholders of the Company in connection with the registration under
the Securities Act of the offering, sale and delivery of the Acquiror
Common Stock to be issued pursuant to this Agreement in the Merger to
stockholders of the Company and, together, they shall be referred to
herein as the "Joint Proxy Statement/Prospectus"). Each of the Acquiror
Companies and the Company shall furnish all information concerning it
and the holders of its capital stock as the other may reasonably
request in connection with such actions. Each of the Acquiror Companies
and the Company will use all reasonable efforts to have or cause the
Registration Statement to become effective as promptly as practicable,
and shall take any action required to be taken under any applicable
federal or state securities Laws in connection with the issuance of
shares of the Acquiror Common Stock in the Merger. As promptly as
practicable after the Registration Statement shall have become
effective, (x) the Acquiror shall mail the Joint Proxy
Statement/Prospectus to its stockholders entitled to notice of and to
vote at the Acquiror's Stockholders' Meeting and (y) the Company shall
mail the Joint Proxy Statement/Prospectus to its stockholders entitled
to notice of and to vote at the Company Stockholders' Meeting.
(b) The information supplied by the Company for inclusion in
the Registration Statement shall not, at the time the Registration
Statement is declared effective, 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 not
misleading. The information supplied by the Company for inclusion in
the Joint Proxy Statement/Prospectus shall not, at the date the Joint
Proxy Statement/Prospectus (or any supplement thereto) is first mailed
to stockholders of the Acquiror, at the date (if different) the Joint
Proxy Statement/Prospectus (or any supplement thereto) is first mailed
to stockholders of the Company, at the time of the Acquiror
Stockholders' Meeting, at the time (if different) of the Company
Stockholders' Meeting or at the Effective Time, 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 the light of the circumstances under which they
were made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to the Company or any of its
Subsidiaries, or its or their respective officers or directors, should
be discovered by the Company that should be set forth in an amendment
to the Registration
AGREEMENT AND PLAN OF MERGER
-40-
Statement or a supplement to the Joint Proxy Statement/Prospectus, the Company
shall promptly inform the Acquiror. All documents that the Company is
responsible for filing with the Commission in connection with the transactions
contemplated herein shall comply as to form in all material respects with the
applicable requirements of the Securities Act and the Regulations thereunder and
the Exchange Act and the Regulations thereunder.
(c) The information supplied by the Acquiror Companies for inclusion
in the Registration Statement shall not, at the time the Registration Statement
is declared effective, 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 not misleading. Such information supplied by the
Acquiror for inclusion in the Joint Proxy Statement/Prospectus shall not, at the
date the Joint Proxy Statement/Prospectus (or any supplement thereto) is first
mailed to stockholders of the Acquiror, at the date (if different) the Joint
Proxy Statement/Prospectus (or any supplement thereto) is first mailed to
stockholders of the Company, at the time of the Acquiror Stockholders' Meeting,
at the time (if different) of the Company Stockholders' Meeting or at the
Effective Time, 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 the light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Acquiror or any of its Affiliates, or to their
respective officers or directors, should be discovered by the Acquiror that
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, the Acquiror shall promptly
inform the Company. All documents that the Acquiror Companies are responsible
for filing with the Commission in connection with the transactions contemplated
hereby shall comply as to form in all material respects with the applicable
requirements of the Securities Act and the Regulations thereunder and the
Exchange Act and the Regulations thereunder.
(d) No amendment or supplement to the Registration Statement or the
Joint Proxy Statement/Prospectus shall be made by the Acquiror or the Company
without the approval of the other party, which shall not be unreasonably
withheld or delayed. The Acquiror and the Company each will advise the other,
promptly after it receives notice thereof, of the time when the Registration
Statement has become effective or any supplement or amendment has been filed,
the issuance of any stop order suspending the effectiveness of the Registration
Statement or the solicitation of proxies pursuant to the Joint Proxy
Statement/Prospectus, the suspension of the qualification of the Acquiror Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, any request by the staff of the Commission for amendment of the
Registration Statement or the Joint Proxy Statement/Prospectus, the receipt from
the staff of the Commission of comments thereon or any request by the staff of
the Commission for additional information with respect thereto.
AGREEMENT AND PLAN OF MERGER
-41-
SECTION 7.03 Appropriate Action; Consents; Filings.
-------------------------------------
(a) The Company and the Acquiror shall each use all reasonable efforts
(i) to take, or to cause to be taken, all actions, and to do, or to cause to be
done, all things that, in either case, are necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, (ii) to obtain from any Governmental Authorities
any Authorizations or Orders required to be obtained by the Acquiror or the
Company or any of their Subsidiaries in connection with the authorization,
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, including the Merger, (iii) to make all
necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities Act
(in the case of the Acquiror) and the Exchange Act and the Regulations
thereunder and any other applicable federal or state securities Laws, (B) the
HSR Act and (C) any other applicable Law. The Acquiror and the Company shall
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the nonfiling party and its
advisors prior to filings and, if requested, shall accept all reasonable
additions, deletions or changes suggested in connection therewith. The Company
and the Acquiror shall furnish all information required for any application or
other filing to be made pursuant to any applicable Law or any applicable
Regulations of any Governmental Authority (including all information required to
be included in the Joint Proxy Statement/Prospectus or the Registration
Statement) in connection with the transactions contemplated by this Agreement.
(b) Each of the Company and the Acquiror shall give prompt notice to
the other of (i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the Merger,
(ii) any notice or other communication from any Governmental Authority in
connection with the Merger, (iii) any actions, suits, claims, investigations or
proceedings commenced or threatened in writing against, relating to or involving
or otherwise affecting the Company, the Acquiror or their Subsidiaries that
relate to the consummation of the Merger; (iv) the occurrence of a default or
event that, with notice or lapse of time or both, will become a default under
any Material Contract of the Company or the Acquiror, respectively; and (v) any
change that is reasonably likely to have a Material Adverse Effect on the
Company or the Acquiror, respectively, or is likely to delay or impede the
ability of either the Company or the Acquiror, respectively, to consummate the
transactions contemplated by this Agreement or to fulfill their respective
obligations set forth herein.
(c) The Acquiror Companies and the Company agree to cooperate and use
all reasonable efforts vigorously to contest and resist any action, including
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any Order (whether temporary, preliminary or permanent) of any Court
or Governmental Authority that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any other transactions contemplated
by this Agreement, including the vigorous pursuit of all available avenues of
administrative and judicial appeal. Each of the Acquiror Companies and the
Company also agree to take any and all actions, including the disposition of
assets or the
AGREEMENT AND PLAN OF MERGER
-42-
withdrawal from doing business in particular jurisdictions, required by any
Court or Governmental Authority as a condition to the granting of any
Authorization or Order necessary for the consummation of the Merger or as may be
required to avoid, lift, vacate or reverse any legislative or judicial action
that would otherwise cause any condition to the Closing not to be satisfied;
provided, however, that in no event shall either party take, or be required to
take, any action that could reasonably be expected to have a Material Adverse
Effect on the Combined Companies.
(d) (i) Each of the Company and the Acquiror shall give (or
shall cause their respective Subsidiaries to give) any notices to
third Persons, and use, and cause their respective Subsidiaries to
use, all reasonable efforts to obtain any consents from third Persons
(A) necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, (B) otherwise required under any
contracts, licenses, leases or other agreements in connection with the
consummation of the transactions contemplated hereby or (C) required
to prevent a Material Adverse Effect on the Company from occurring
prior to or after the Effective Time or a Material Adverse Effect on
the Acquiror from occurring after the Effective Time.
(ii) If any party shall fail to obtain any consent from a
third Person described in subsection (d)(i) above, such party shall
use all reasonable efforts, and shall take any such actions reasonably
requested by the other parties, to limit the adverse effect upon the
Company and the Acquiror, their respective Subsidiaries, and their
respective businesses resulting, or which could reasonably be expected
to result after the Effective Time, from the failure to obtain such
consent.
SECTION 7.04 Affiliates.
----------
(a) The Company shall use all reasonable efforts to obtain from any
Person who may be deemed to have become an Affiliate of the Company after
the date of this Agreement and on or prior to the Closing Date a written
agreement substantially in the form of Annex B hereto as soon as
practicable after attaining such status.
(b) The Acquiror Companies shall not be required to maintain the
effectiveness of the Registration Statement for the purpose of resale by
stockholders of the Company who may be Affiliates of the Company pursuant
to Rule 145 under the Securities Act.
SECTION 7.05 Public Announcements. The Acquiror and the Company shall
--------------------
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement prior to such consultation.
SECTION 7.06 Stock Exchange Listings. The Acquiror shall use all
-----------------------
reasonable efforts to cause the shares of the Acquiror Common Stock to be issued
in the Merger to be approved for listing (subject to official notice of
issuance) on the LSE and to cause the Depositary Shares
AGREEMENT AND PLAN OF MERGER
-43-
representing such shares of Acquiror Common Stock to be approved for listing
(subject to official notice of issuance) on the ASE, in each case prior to the
Effective Time.
SECTION 7.07 State Takeover Statute. The Company shall take all action
----------------------
so that the execution, delivery and performance of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby will
be exempt from Section 203 of the GCL.
SECTION 7.08 Indemnification of Directors and Officers.
-----------------------------------------
(a) Until six years from the Effective Time, the certificate of
incorporation and bylaws of the Surviving Corporation as in effect
immediately after the Effective Time shall not be amended to reduce or
limit the rights of indemnity afforded to the present and former directors,
officers, employees and agents of the Company thereunder or to reduce or
limit the ability of the Company as the Surviving Corporation to indemnify
such persons or to hinder, delay or make more difficult the exercise of
such rights of indemnity or such ability to indemnify. The Surviving
Corporation will at all times exercise the powers granted to it by its
certificate of incorporation, its bylaws and applicable law to indemnify to
the fullest extent possible the present and former directors and officers
of the Company against claims made against them arising from their service
in such capacities prior to the Effective Time.
(b) If any claim or claims shall, subsequent to the Effective Time
and within six years thereafter, be made against any present or former
director, officer, employee or agent of the Company based on or arising out
of the services of such Person prior to the Effective Time in the capacity
of such Person as a director, officer, employee or agent of the Company,
the provisions of subsection (a) of this Section respecting the certificate
of incorporation and bylaws of the Surviving Corporation shall continue in
effect until the final disposition of all such claims.
(c) The Acquiror hereby agrees after the Effective Time to guarantee
the payment of the Surviving Corporation's indemnification obligations
described in subsection (a) of this Section 7.08 up to an amount determined
as of the Effective Time equal to (i) the fair market value of any assets
of the Surviving Corporation or any of its Subsidiaries distributed to the
Acquiror or any of its Subsidiaries (other than the Surviving Corporation
and its Subsidiaries), minus (ii) any liabilities of the Surviving
Corporation or any of its Subsidiaries assumed by the Acquiror or any of
its Subsidiaries (other than the Surviving Corporation and its
Subsidiaries), minus (iii) the fair market value of any assets of the
Acquiror or any of its Subsidiaries (other than the Surviving Corporation
and its Subsidiaries) contributed to the Surviving Corporation or any of
its Subsidiaries and plus (iv) any liabilities of the Acquiror or any of
its Subsidiaries (other than the Surviving Corporation and its
Subsidiaries) assumed by the Surviving Corporation or any of its
Subsidiaries.
(d) Notwithstanding subsections (a), (b) or (c) of this Section 7.10,
the Acquiror and the Surviving Corporation shall be released from the
obligations imposed by such subsections if the Acquiror shall assume the
indemnification obligations of the Surviving Corporation under its
certificate of incorporation and bylaws by operation of Law or
AGREEMENT AND PLAN OF MERGER
-44-
otherwise. Notwithstanding anything to the contrary in this Section 7.10,
neither the Acquiror nor the Surviving Corporation shall be liable for any
settlement effected without its written consent, which shall not be
unreasonably withheld.
(e) The Acquiror shall cause to be maintained in effect for the
period ending on the third anniversary of the Effective Time the current
policies of directors' and officers' liability insurance maintained by the
Company (or substitute policies providing at least the same coverage and
limits and containing terms and conditions that are not materially less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that (i) neither the
Acquiror nor the Surviving Corporation shall be required to maintain any
such policies to the extent the coverage thereunder exceeds $ 3,000,000 and
(ii) in no event shall the Acquiror or the Surviving Corporation be
required to expend more than 100 percent of the current annual premiums
paid by the Company for such insurance.
(f) The provisions of this Section 7.08 are intended to be for the
benefit of, and shall be enforceable by, each Person entitled to
indemnification hereunder and the heirs and representatives of such Person.
SECTION 7.09 Event Notices. From and after the date of this Agreement
-------------
until the Effective Time, each party hereto shall promptly notify the other
party hereto of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any condition to the
obligations of the latter party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied and (ii) any failure of the
former party to comply with any covenant or agreement to be complied with by it
pursuant to this Agreement that would be likely to result in any condition to
the obligations of the latter party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied. No delivery of
any notice pursuant to this Section 7.09 shall cure any breach of any
representation or warranty of the party giving such notice contained in this
Agreement or otherwise limit or affect the remedies available hereunder to the
party receiving such notice.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.01 Conditions to Obligations of Each Party Under This
--------------------------------------------------
Agreement. The respective obligations of each party to effect the Merger and the
---------
other transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Closing of the following conditions, any or all of which may be
waived by the parties hereto, in whole or in part, to the extent permitted by
applicable Law:
(a) Effectiveness of the Registration Statement. The Registration
-------------------------------------------
Statement shall have been declared effective by the Commission under the
Securities Act, no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the
AGREEMENT AND PLAN OF MERGER
-45-
Commission and no proceedings for that purpose shall have been initiated by
the Commission.
(b) Stockholder Approval. This Agreement shall have been approved and
--------------------
adopted by the requisite vote of the stockholders of the Company as
required by the GCL. The Share Issuance shall have been approved and
adopted by the requisite vote of the stockholders of the Acquiror as
required by the rules of the LSE and the ASE.
(c) No Order. No Court or Governmental Authority shall have enacted,
--------
issued, promulgated, enforced or entered any Law, Regulation or Order
(whether temporary, preliminary or permanent) that is in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger.
(d) Foreign Governmental Authorities. The parties hereto shall have
--------------------------------
received all Authorizations and Orders of foreign Governmental Authorities
necessary in order to consummate the Merger in accordance with applicable
Law, except for any such Authorizations and Orders the nonreceipt of which
could not reasonably be expected to have a Material Adverse Effect on the
Acquiror (including the Surviving Corporation).
(e) Listing of Depositary Shares. The Depositary Shares issued by the
----------------------------
Depositary to represent the Aviva Common Stock issued pursuant to the
Merger and deposited with the Depositary shall have been listed on the ASE,
subject to official notice of issuance.
SECTION 8.02 Additional Conditions to Obligations of the Acquiror
----------------------------------------------------
Companies. The obligations of the Acquiror Companies to effect the Merger and
---------
the other transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Closing of the following conditions, any or all of which may
be waived by the Acquiror Companies, in whole or in part, to the extent
permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement which is qualified as
to materiality shall be true and correct, and each of such representations
and warranties that is not so qualified shall be true and correct in all
material respects, as of the date of this Agreement and as of the Closing
Date as though made again on and as of the Closing Date, and the Acquiror
shall have received a certificate of the Chief Executive Officer and the
Chief Financial Officer of the Company, dated the Closing date, to such
effect.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time, and the Acquiror shall have received a
certificate of the Chief Executive Officer and the Chief Financial Officer
of the Company, dated the Closing date, to such effect.
(c) Bank Credit Agreement. The Bank Credit Agreement shall have been
---------------------
amended and the Bank shall have made available to the Acquiror a credit of
$ 15,000,000
AGREEMENT AND PLAN OF MERGER
-46-
against which the Acquiror shall have refinanced the indebtedness
theretofore outstanding under the Bank Credit Agreement and shall have paid
and discharged the OPIC Debt.
(d) Debenture Agreement. The Debenture Agreement shall have been
-------------------
executed and delivered by the parties thereto and, concurrently with the
Closing, the transactions contemplated by the Debenture Agreement shall
have been consummated and the Acquiror shall be the beneficial owner of all
the outstanding Debentures.
(e) OPIC Debt. The aggregate obligation of the Company with respect
---------
to the principal of the OPIC Debt shall not, on the Closing Date, exceed
$ 6,000,000 (net of amounts added to the escrow account maintained for the
benefit of the holders of the OPIC Debt subsequent to April 16, 1998.
(f) Other Liabilities. The aggregate amount of consolidated current
-----------------
assets of the Company and its Subsidiaries (exclusive of any amounts held
in escrow necessary to reduce the net OPIC debt to $ 6,000,000), less the
aggregate amount of consolidated liabilities, absolute and contingent,
whether or not accrued, of the Company and its Subsidiaries, including the
Partnership (exclusive of indebtedness represented by the OPIC Debt and the
Debentures), shall not be less than $100,000.
(g) Other Consents. The Company shall have received written consents
--------------
to the Merger from OPIC and Chase Bank of Texas and from any other Person
whose failure to consent to the Merger could reasonably be expected to have
a Material Adverse Effect on the Acquiror (including the Surviving
Corporation).
(h) Change in Control Agreements. The Change in Control Agreements
----------------------------
shall have been amended to reduce the severance payments thereunder to
$65,000 in the case of Xx. Xxx and $35,000 in the case of Mr. Dyes, to
limit the medical, life and disability insurance coverage requirements to
five months, five months and five months in the case of Xx. Xxx and three
months, three months and three months, in the case of Mr. Dyes, and to
delete the provisions thereof relating to stock options.
(i) Stock Options. Each holder of outstanding Company Stock Options
-------------
shall have surrendered all such Company Stock Options to the Company for
cancellation.
SECTION 8.03 Additional Conditions to Obligations of the Company. The
---------------------------------------------------
obligations of the Company to effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any or all of which may be waived by the
Company, in whole or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Acquiror contained in this Agreement which is qualified
as to materiality shall be true and correct, and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and as
of the Closing Date as though made again on and as of the Closing Date, and
the Company shall
AGREEMENT AND PLAN OF MERGER
-47-
have received a certificate of the Chief Executive Officer and the Chief
Financial Officer of the Acquiror, dated the Closing Date, to such effect.
(b) Agreements and Covenants. The Acquiror Companies shall have
------------------------
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and the Company shall have received a
certificate of the Chief Executive Officer and the Chief Financial Officer
of the Acquiror, dated the Closing Date, to such effect.
(c) Other Consents. The Company shall have received written consents
--------------
to the Merger from OPIC and Chase Bank of Texas and from any other Person
whose failure to consent to the Merger could reasonably be expected to have
a Material Adverse Effect on the Acquiror (including the Surviving
Corporation).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated at any time
-----------
prior to the Effective Time, whether before or after approval of this Agreement
by the stockholders of the Company and before or after approval of the Share
Issuance by the stockholders of the Acquiror:
(a) by mutual consent of the Acquiror and the Company;
(b) by the Acquiror, upon a Material breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in
this Agreement or if any representation or warranty of the Company shall
have become untrue in any Material respect, in either case such that the
conditions set forth in Section 8.02(a) or Section 8.02(b) would not be
satisfied (a "Terminating Company Breach"); provided that, if such
Terminating Company Breach is curable by the Company through the exercise
of reasonable efforts and for so long as the Company continues to exercise
such reasonable efforts, the Acquiror may not terminate this Agreement
under this Section 9.01(b);
(c) by the Company, upon a Material breach of any representation,
warranty, covenant or agreement on the part of the Acquiror Companies set
forth in this Agreement or if any representation or warranty of the
Acquiror Companies shall have become untrue in any Material respect, in
either case such that the conditions set forth in Section 8.03(a) or
Section 8.03(b) would not be satisfied (a "Terminating Acquiror Breach");
provided that, if such Terminating Acquiror Breach is curable by the
Acquiror Companies through the exercise of their reasonable efforts and for
so long as the Acquiror Companies continue to exercise such reasonable
efforts, the Company may not terminate this Agreement under this Section
9.01(c);
AGREEMENT AND PLAN OF MERGER
-48-
(d) by either the Acquiror or the Company, if there shall be any
final and nonappealable Order that prevents the consummation of the Merger,
unless the party relying on such Order has not complied with its
obligations under Section 7.03;
(e) by either the Acquiror or the Company, if the Merger shall not
have been consummated before September 30, 1998; provided, however, that
this Agreement may be extended by written notice of either the Acquiror or
the Company to a date not later than October 31, 1998, if the Merger shall
not have been consummated as a result of the Company or the Acquiror
Companies having failed by September 30, 1998 to receive all required
Authorizations and Orders with respect to the Merger or as a result of the
entering of an Order by a Court or Governmental Authority; and provided,
further, that, prior to October 31, 1998, no party shall be entitled to
terminate this Agreement pursuant to this Section 9.01(e) if such party is
in Material breach of any representation, warranty, covenant or agreement
on the part of such party set forth in this Agreement;
(f) by either the Acquiror or the Company, if this Agreement shall
fail to receive the Required Company Vote by the stockholders of the
Company at the Company Stockholders' Meeting;
(g) by either the Acquiror or the Company, if this Agreement shall
fail to receive the Required Acquiror Vote by the stockholders of the
Acquiror at the Acquiror Stockholders' Meeting;
(h) by the Company, at any time prior to receipt of the Required
Company Vote, upon two Business Days' prior written notice to the Acquiror,
if the Board of Directors of the Company shall approve a Superior Proposal;
provided, however, that (i) the Company shall have complied with Section
6.03, (ii) the Board of Directors of the Company shall have concluded in
good faith, after giving effect to all concessions that may be offered by
the Acquiror pursuant to clause (iv) below, on the advice of its financial
advisers and outside counsel, that such proposal is a Superior Proposal,
(iii) the Board of Directors of the Company shall have concluded in good
faith, after receipt of the written advice of outside counsel, that,
notwithstanding all concessions that may be offered by the Acquiror in
negotiations entered into pursuant to clause (iv) below, such action is
necessary for the Board of Directors of the Company to act in a manner
consistent with its fiduciary duties under applicable Law and (iv), prior
to such termination, the Company shall, and shall cause its respective
financial and legal advisers to, negotiate with the Acquiror to make such
adjustments in the terms and conditions of this Agreement as would enable
the Company to proceed with the transactions contemplated herein on such
adjusted terms; or
(i) by the Acquiror, upon two Business Days' prior written notice to
the Company, if the Board of Directors of the Company (A) shall withdraw or
modify in any manner adverse to the Acquiror the Board's approval or
recommendation of this Agreement and the Merger, (B) shall fail to reaffirm
such approval or recommendation upon the Acquiror's request, (C) shall
approve or recommend any Superior Proposal or (D) shall resolve to take any
of the actions specified in clause (A), (B) or (C); or
AGREEMENT AND PLAN OF MERGER
-49-
(j) by the Acquiror, by written notice to the Company, if (A) a third
party acquires securities representing more than 30% of the voting power of
the outstanding voting securities of the Company or (B) individuals who as
of the date of this Agreement constitute the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors of the
Company then still in office who are either directors as of the date of
this Agreement or whose election or nomination for election was previously
so approved) shall cease for any reason to constitute a majority of the
Board of Directors of the Company.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.01 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.02 Effect of Termination. Except as provided in Section 9.05
---------------------
or Section 10.01 of this Agreement, in the event of the termination of this
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
there shall be no liability on the part of the Acquiror Companies or the Company
or any of their respective officers or directors to the other and all rights and
obligations of any party hereto shall cease, except that nothing herein shall
relieve any party from liability for any misrepresentation or breach of any
covenant or agreement under this Agreement.
SECTION 9.03 Amendment. This Agreement may be amended by the parties
---------
hereto by action authorized by their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after approval of this
Agreement by the stockholders of the Company, or approval of the Share Issuance
by the stockholders of the Acquiror, no amendment may be made which would reduce
the amount or change the type of consideration into which each share of Company
Common Stock shall be converted pursuant to this Agreement upon consummation of
the Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 9.04 Waiver. At any time prior to the Effective Time, any
------
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby. For purposes of this Section
9.04, the Acquiror Companies shall be deemed to be one party.
SECTION 9.05 Fees, Expenses and Other Payments.
---------------------------------
(a) Except as provided in Section 9.05(b) of this Agreement, all
Expenses incurred by the parties hereto shall be borne solely and entirely
by the party which has incurred such Expenses; provided, however, that all
Expenses related to printing, filing and
AGREEMENT AND PLAN OF MERGER
-50-
mailing the Registration Statement and the Joint Proxy
Statement/Prospectus and all Commission and other regulatory filing
fees incurred in connection with the Registration Statement and the
Joint Proxy Statement/Prospectus shall be for the account of the
Acquiror; and provided, further, that the Acquiror may, at its option,
but subject to Section 7.04(e), pay any Expenses of the Company that
are solely and directly related to the Merger.
(b) The Company agrees that, if this Agreement is terminated
pursuant to Section 9.01(b) (breach), Section 9.01(h) (fiduciary out),
Section 9.01(i) (change of recommendation) or Section 9.01(j)
(acquisition of voting power or change of board), the Company shall
promptly (but not later than five Business Days after receipt of notice
from the Acquiror that the amount is due) pay to the Acquiror, as
liquidated damages and expense reimbursement, an amount in cash equal
to $ 50,000 (the "Termination Fee");
(c) If the Company shall fail to pay the Acquiror any fee due
hereunder, the Company shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment,
together with interest on the amount of any unpaid fee at the publicly
announced prime interest rate of CitiBank, N.A., in effect from time to
time, from the date such fee was required to be paid until payment in
full.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Effectiveness of Representations, Warranties and
------------------------------------------------
Agreements.
-----------
(a) Except as set forth in Section 10.01(b) of this Agreement,
the representations, warranties, covenants and agreements of each party
hereto shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any other party hereto,
any Person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the
execution of this Agreement.
(b) The representations and warranties in this Agreement shall
terminate at the Effective Time and the representations, warranties,
covenants and agreements of each of the parties hereto shall terminate
upon the termination of this Agreement pursuant to Section 9.01, except
that the covenants and agreements set forth in Sections 9.02 and 9.05
and in Article X hereof shall survive such termination of this
Agreement.
SECTION 10.02 Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given upon receipt, if delivered personally, mailed by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses or sent by electronic transmission to the telecopier number specified
below:
AGREEMENT AND PLAN OF MERGER
-51-
(a) If to any of the Acquiror Companies, to:
Aviva Petroleum Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxx, President and Chief Executive Officer
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx L.L.P.
First City Tower
0000 Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxx III
Telecopier No.: (000) 000-0000
(b) If to the Company, to:
Garnet Resources Corporation
0000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxxx Xxx, President and Chief Executive Officer
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx & Xxxxxxx
One Utah Center
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed delivered on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed delivered three
days after the date the same is postmarked.
AGREEMENT AND PLAN OF MERGER
-52-
SECTION 10.03 Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.04 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.05 Entire Agreement. This Agreement (together with the
----------------
Annexes, the Company's Disclosure Letter and the Acquiror's Disclosure Letter)
constitutes the entire agreement of the parties, and supersedes all prior
agreements and undertakings, both written and oral, among the parties, with
respect to the subject matter hereof.
SECTION 10.06 Assignment. This Agreement shall not be assigned by
----------
operation of Law or otherwise.
SECTION 10.07 Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, other than Section 7.11 which is intended also to
benefit the present and former directors, officers, employees and agents of the
Company therein referenced, and their heirs and representatives, is intended to
or shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 10.08 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative with, and not exclusive
of, any rights or remedies otherwise available.
SECTION 10.09 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the Laws of the State of Texas, regardless of the
Laws that might otherwise govern under applicable principles of conflicts of
law; provided, however, that any matter involving the internal corporate affairs
of the Company or Newco shall be governed by the provisions of the GCL.
SECTION 10.10 Specific Performance. The parties hereby acknowledge and
--------------------
agree that the failure of any party to this Agreement to perform its agreements
and covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Merger, will cause irreparable
injury to the other parties to this Agreement for which damages, even
AGREEMENT AND PLAN OF MERGER
-53-
if available, will not be an adequate remedy. Accordingly, each of the parties
hereto hereby consents to the granting of equitable relief (including specific
performance and injunctive relief) by any court of competent jurisdiction to
enforce any party's obligations hereunder. The parties further agree to waive
any requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this Section is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
SECTION 10.11 Counterparts. This Agreement may be executed in multiple
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
AGREEMENT AND PLAN OF MERGER
-54-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AVIVA PETROLEUM INC.
By: /s/ X. Xxxxxxx
----------------------------
Name: X. Xxxxxxx
Title: President
AVIVA MERGER INC.
By: /s/ X. Xxxxxxx
----------------------------
Name: X. Xxxxxxx
Title: President
GARNET RESOURCES CORPORATION
By: /s/ Xxxxxxx X. Xxx
----------------------------
Name: Xxxxxxx X. Xxx
Title: President
AGREEMENT AND PLAN OF MERGER
-55-
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings
set forth below unless the context shall otherwise require:
"Acquiror" shall mean Aviva Petroleum Inc., a Texas corporation, and
its successors from time to time.
"Acquiror Annual Report" shall mean the Annual Report on Form 10-K of
the Acquiror for the year ended December 31, 1997 filed with the Commission.
"Acquiror Benefit Plans" shall mean Benefit Plans with respect to the
Acquiror and its Subsidiaries.
"Acquiror Common Stock" shall mean the common stock, without par value,
of the Acquiror.
"Acquiror Companies" shall have the meaning ascribed to such term in
the first paragraph of this Agreement.
"Acquiror Representatives" shall have the meaning ascribed to such term
in Section 6.04.
"Acquiror Stock Options" shall mean stock options granted pursuant to
the Acquiror Stock Plans.
"Acquiror Stock Plans" shall mean the Aviva Petroleum Inc. 1995 Stock
Option Plan, as amended, and the Incentive Plan and Non-Statutory Stock Option
Plan.
"Acquiror Stockholders' Meeting" shall have the meaning ascribed to
such term in Section 7.01(b).
"Acquiror's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Acquiror and its Subsidiaries as of December
31, 1996 and December 31, 1997 and the related consolidated statements of
operations and cash flows for the fiscal years ended December 31, 1995, 1996 and
1997, together with the notes thereto, all as audited by KPMG Peat Marwick LLP,
independent accountants, under their report with respect thereto dated February
27, 1998 and included in the Acquiror's Annual Report on Form 10-K for the year
ended December 31, 1997 filed with the Commission.
"Acquiror's Consolidated Balance Sheet" shall mean the consolidated
balance sheet of the Acquiror as of December 31, 1997 included in the Acquiror's
Audited Consolidated Financial Statements.
"Acquiror's Consolidated Financial Statements" shall mean the
Acquiror's Audited Consolidated Financial Statements and the Acquiror's
Unaudited Consolidated Financial Statements.
AGREEMENT AND PLAN OF MERGER
ANNEX A-1
"Acquiror's Disclosure Letter" shall mean a letter of even date
herewith delivered by the Acquiror to the Company with the execution of the
Agreement, which, among other things, shall identify exceptions to the
Acquiror's representations and warranties contained in Article V by specific
section and subsection references.
"Acquiror's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Acquiror and its Subsidiaries as of
March 31, 1998 and the related consolidated statements of operations and cash
flows for the fiscal quarters ended March 31, 1997 and March 31, 1998, together
with the notes thereto, included in the Acquiror's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998 filed with the Commission.
"Acquisition Proposal" shall mean any proposal or offer with respect to
a merger, consolidation, share exchange, business combination, reorganization,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase or sale of all or any significant portion of the assets or 10% or
more of the Equity Securities of, the Company or any of its Subsidiaries that,
in any case, could be reasonably expected to interfere with the consummation of
the Merger or the other transactions contemplated by this Agreement.
"Affiliate" shall, with respect to any Person, mean any other Person
that controls, is controlled by or is under common control with the former.
"Agreement" shall mean the Agreement and Plan of Merger made and
entered into as of June 24, 1998 among the Acquiror, Newco and the Company,
including any amendments thereto and each Annex (including this Annex A) and
Schedule thereto (including the Acquiror's Disclosure Letter and the Company's
Disclosure Letter).
"ASE" shall mean the American Stock Exchange.
"Authorization" shall mean any and all permits, licenses,
authorizations, orders, certificates, registrations or other approvals granted
by any Governmental Authority.
"Benefit Plans" shall mean, with respect to a specified Person, any
employee pension benefit plan (whether or not insured), as defined in Section
3(2) of ERISA, any employee welfare benefit plan (whether or not insured) as
defined in Section 3(1) of ERISA, any plans that would be employee pension
benefit plans or employee welfare benefit plans if they were subject to ERISA,
such as foreign plans and plans for directors, any stock bonus, stock ownership,
stock option, stock purchase, stock appreciation rights, phantom stock,
severance, employment, change-in-control, deferred compensation and any bonus or
incentive compensation plan, agreement, program or policy (whether qualified or
nonqualified, written or oral) sponsored, maintained, or contributed to by the
specified Person or any of its Subsidiaries for the benefit of any of the
present or former directors, officers, employees, agents, consultants or other
similar representatives providing services to or for the specified Person or any
of its Subsidiaries in connection with such services or any such plans which
have been so sponsored, maintained or contributed to within six years prior to
the date of this Agreement; provided, however, that such term shall not include
(a) routine employment policies and procedures developed and applied in the
ordinary course of business and consistent with past
AGREEMENT AND PLAN OF MERGER
ANNEX A-2
practice, including wage, vacation, holiday and sick or other leave policies,
(b) workers compensation insurance and (c) directors and officers liability
insurance.
"Business Day" means any day other than a day on which banks in the State
of Texas are authorized or obligated to be closed;
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 2.04.
"Change in Control Agreements" shall mean those certain agreements
dated April 11, 1997 between the Company and Xxxxxxx X. Xxx and Xxxxx X. Dyes,
as amended.
"Closing" shall mean a meeting, which shall be held in accordance with
Section 3.03, of representatives of the parties to the Agreement at which, among
other things, all documents deemed necessary by the parties to the Agreement to
evidence the fulfillment or waiver of all conditions precedent to the
consummation of the transactions contemplated by the Agreement are executed and
delivered.
"Closing Date" shall mean the date of the Closing as determined
pursuant to Section 3.03.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Combined Companies" shall mean the Acquiror, the Surviving Corporation
and their Subsidiaries after giving effect to the Merger.
"Commission" shall mean the Securities and Exchange Commission.
"Common Stock Exchange Ratio" shall mean the ratio of conversion of
Company Common Stock into Acquiror Common Stock pursuant to the Merger as
provided in Section 3.01(a).
"Company" shall mean Garnet Resources Corporation, a Delaware
corporation, and its successors from time to time.
"Company Annual Report" shall mean the Annual Report on Form 10-K of
the Company for the year ended December 31, 1997 filed with the Commission.
"Company Benefit Plans" shall mean Benefit Plans with respect to the
Company and its Subsidiaries.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Option Plans" shall mean the Company's 1987 Stock Option Plan,
1990 Stock Option Plan, as amended, and 1997 Directors' Stock Option Plan.
AGREEMENT AND PLAN OF MERGER
ANNEX A-3
"Company Representatives" shall have the meaning ascribed to such term
in Section 6.04.
"Company Stock Options" shall mean stock options granted pursuant to
the Company Option Plans.
"Company Stockholders' Meeting" shall have the meaning ascribed to such
term in Section 7.01(a).
"Company's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1996 and 1997 and the related consolidated and combined statements of
operations and cash flows for the fiscal years ended December 31, 1995, 1996 and
1997, together with the notes thereto, all as audited by Xxxxxx Xxxxxxxx LLP,
independent accountants, under their report with respect thereto dated March 20,
1998 and included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 filed with the Commission.
"Company's Consolidated Balance Sheet" shall mean the consolidated
balance sheet of the Company as of December 31, 1997 included in the Company's
Audited Consolidated Financial Statements.
"Company's Consolidated Financial Statements" shall mean the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
"Company's Disclosure Letter" shall mean a letter of even date herewith
delivered by the Company to the Acquiror Companies concurrently with the
execution of the Agreement, which, among other things, shall identify exceptions
to the Company's representations and warranties contained in Article IV by
specific section and subsection references.
"Company's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
March 31, 1997 and 1998 and the related consolidated statements of operations
and cash flows for the three month periods ended March 31, 1997 and 1998,
together with the notes thereto, included in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 filed with the Commission.
"Competing Transaction" shall mean any merger, consolidation, share
exchange, business combination or similar transaction involving the Company or
any of its Subsidiaries or the acquisition in any manner, directly or
indirectly, of a Material equity interest in any voting securities of, or a
substantial portion of the assets of, the Company or any of its Significant
Subsidiaries, other than the transactions contemplated by this Agreement.
"Constituent Corporations" shall mean the Company and Newco.
"control" (including the terms "controlled," "controlled by" and "under
common control with") means (except where another definition is expressly
indicated) the possession, directly or
AGREEMENT AND PLAN OF MERGER
ANNEX A-4
indirectly or as trustee or executor, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of stock or as trustee or executor, by contract or credit arrangement
or otherwise.
"Court" shall mean any court or arbitration tribunal of the United
States, any foreign country or any domestic or foreign state, and any political
subdivision thereof, and shall include the European Court of Justice.
"Current Acquiror Benefit Plans" shall mean Benefit Plans that are
sponsored, maintained or contributed to by the Acquiror or any of its
Subsidiaries as of the date of this Agreement.
"Current Company Benefit Plans" shall mean Benefit Plans that are
sponsored, maintained or contributed to by the Company or any of its
Subsidiaries as of the date of this Agreement.
"Debenture" or "Debentures" shall mean $15,000,000 in aggregate
principal amount of the Company's outstanding 9-1/2% Convertible Subordinated
Debentures due December 21, 1998.
"Debenture Agreement" shall mean a definitive and binding agreement by
and among the Company and each of the holders of the outstanding Debentures
pursuant to which such holders agree (i) to consent to the transactions
contemplated by this Agreement and (ii) to sell to the Acquiror the Debentures
in exchange for 12,887,771 shares of Acquiror Common Stock.
"Deposit Agreement" shall mean that certain Deposit Agreement dated as
of September 15, 1994 between the Acquiror and the Depositary relating to the
issuance of Depositary Shares in exchange for shares of Acquiror Common Stock.
"Depositary" shall mean ChaseMellon Shareholder Services Group, L.L.C.,
as Depositary under the Deposit Agreement.
"Depositary Receipts" shall mean the depositary receipts issued by the
Depositary pursuant to the Deposit Agreement to evidence the Depositary Shares.
"Depositary Shares" shall mean the Depositary Shares issued by the
Depositary pursuant to the Deposit Agreement to holders of Acquiror Common Stock
in exchange for the deposit of shares of Acquiror Common Stock with the
Depositary on the basis of five shares of Acquiror Common Stock for one
Depositary Share.
"Ecopetrol" shall mean Empresa de Colombiana, the national oil company
of Colombia.
"Effective Time" shall mean the date and time of the completion of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 2.02.
"Environmental Law or Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, or orders of any Governmental Authority
pertaining to health or the environment
AGREEMENT AND PLAN OF MERGER
ANNEX A-5
currently in effect and applicable to a specified Person and its Subsidiaries,
including the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended, the Oil
Pollution Act of 1990, as amended ("OPA"), any state or local Laws implementing
the foregoing federal Laws, and all other environmental conservation or
protection Laws. For purposes of the Agreement, the terms "hazardous substance"
and "release" have the meanings specified in CERCLA; provided, however, that, to
the extent the Laws of the state or locality in which the property is located
establish a meaning for "hazardous substance" or "release" that is broader than
that specified in either CERCLA, such broader meaning shall apply, and the term
"hazardous substance" shall include all dehydration and treating wastes, waste
(or spilled) oil, and waste (or spilled) petroleum products, and (to the extent
in excess of background levels) radioactive material, even if such are
specifically exempt from classification as hazardous substances pursuant to
CERCLA or RCRA or the analogous statutes of any jurisdiction applicable to the
specified Person or its Subsidiaries or any of their respective properties or
assets.
"Equity Securities" shall mean, with respect to a specified Person, any
shares of capital stock of, or other equity interests in, or any securities that
are convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interests in,
such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall mean ChaseMellon Shareholder Services Group,
L.L.C.
"Exchange Fund" shall mean the fund of Acquiror Common Stock, cash in
lieu of fractional share interests and dividends and distributions, if any, with
respect to such shares of Acquiror Common Stock established at the Exchange
Agent pursuant to Section 3.02(a).
"Expenses" shall mean all reasonable out-of-pocket expenses (including
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its Affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Registration Statement, the Joint Proxy
Statement, the Acquiror Proxy Statement and the Company Proxy Statement, the
solicitation of stockholder approvals and all other matters related to the
consummation of the transactions contemplated hereby.
"GAAP" shall mean accounting principles generally accepted in the
United States as in effect from time to time consistently applied by a specified
Person.
AGREEMENT AND PLAN OF MERGER
ANNEX A-6
"GCL" shall mean the General Corporation Law of the State of Delaware,
as in effect on the date of this Agreement and from time to time thereafter
during the pendency hereof.
"Governmental Authority" shall mean any governmental agency or
authority (other than a Court) of the United States, any foreign country, or any
domestic or foreign state, and any political subdivision thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
"Joint Proxy Statement/Prospectus" shall have the meaning ascribed to
such term in Section 7.02(a).
"Knowledge" shall mean, with respect to either the Company or the
Acquiror, the knowledge of any executive officer of such party after reasonable
inquiry.
"Law" shall mean all laws, statutes and ordinances of the United
States, any state of the United States, any foreign country, any foreign state
and any political subdivision thereof, including all decisions of Courts having
the effect of law in each such jurisdiction.
"Lien" shall mean any mortgage, pledge, security interest, adverse
claim, encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing), any conditional sale or other title retention agreement,
any lease in the nature thereof or the filing of or agreement to give any
financing statement under the Laws of any jurisdiction.
"LSE" shall mean the London Stock Exchange Limited.
"Marketable Title" shall mean, as to the oil and gas properties of a
party, such title or contractual right that, subject to and except for the
Permitted Encumbrances: (i) entitles such party to receive not less than the
"Net Revenue Interest", set forth in Section 3.10(a) of the Company's Disclosure
Letter or the Acquiror's Disclosure Letter, as the case may be, of all oil, gas
and associated liquid and gaseous hydrocarbons produced, saved and marketed from
the presently producing formations in the presently producing xxxxx located on
such oil and gas properties; (ii) obligates such party to bear costs and
expenses relating to the maintenance, development and operation of the presently
producing xxxxx located on such oil and gas properties in an amount not greater
than the "Working Interest" set forth in Section 3.10(a) of the Company's
Disclosure Letter or the Acquiror's Disclosure Letter, as the case may be; and
(iii) is free and clear of any encumbrances, liens or other defects.
"Material" shall mean material to the (a) consolidated business,
condition (financial and other), results of operations, properties or prospects
of a specified Person and its Subsidiaries, if any, taken as a whole or (b) to
the specified Person's ability to perform its obligations under this
AGREEMENT AND PLAN OF MERGER
ANNEX A-7
Agreement or fulfill the conditions to Closing; provided, however, that, as used
in this definition the word "material" shall have the meaning accorded thereto
pursuant to Section 11 of the Securities Act.
"Material Adverse Effect" shall mean any change or effect that would be
material and adverse (a) to the consolidated business, condition (financial or
otherwise), results of operations, properties or prospects of a specified Person
and its Subsidiaries, if any, taken as a whole or (b) to the specified Person's
ability to perform its obligations under this Agreement or fulfill the
conditions to Closing; provided, however, that, as used in this definition the
word "material" shall have the meaning accorded thereto pursuant to Section 11
of the Securities Act.
"Material Contract" shall mean each contract, lease, indenture,
agreement, arrangement or understanding to which a specified Person or any of
its Subsidiaries is a party or to which any of the assets or operations of such
specified Person or any of its Subsidiaries is subject that is of a type that
would be required to be included as an exhibit to a registration statement on
Form S-1 pursuant to Paragraph (2), (4) or (10) of Item 601(b) of Regulation S-K
under the Securities Act if such a registration statement were to be filed by
such Person under the Securities Act on the date of determination.
Notwithstanding the foregoing, such term shall, in the case of the Company,
include any of the following contracts, agreements or commitments, whether oral
or written:
(1) Any collective bargaining agreement or other agreement
with any labor union;
(2) any agreement, contract or commitment with any other
Person, other than any agency or representation agreement relating to
operations of the Company or any of its Subsidiaries in any foreign
nation or state entered into in the ordinary course of business,
containing any covenant limiting the freedom of such specified Person
or any of its Subsidiaries to engage in any line of business or to
compete with any other Person;
(3) any partnership, joint venture or profit sharing agreement
with any Person;
(4) any employment or consulting agreement, contract or
commitment between the Company or any of its Subsidiaries and any
employee, officer or director thereof (i) having more than one year to
run from the date hereof, (ii) providing for an obligation to pay or
accrue compensation of $ 25,000 or more per annum or (iii) providing
for the payment or accrual of any additional compensation upon a change
in control of such Person or any of its Subsidiaries or upon any
termination of such employment or consulting relationship following a
change in control of such Person or any of its Subsidiaries;
(5) any agency or representation agreement relating to
operations of the Company or any of its Subsidiaries in any foreign
nation or state with any Person that is not terminable by the Company
or one of its Subsidiaries without penalty upon not more than one
year's notice; and
(6) any confidentiality agreement, development agreement or
license agreement relating to the products of the Company or any of its
Subsidiaries.
AGREEMENT AND PLAN OF MERGER
ANNEX A-8
"Merger" shall mean the merger of Newco with and into the Company as
provided in Article II of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Newco" shall mean Aviva Merger Inc., a Delaware corporation and a
wholly owned, indirect Subsidiary of the Acquiror.
"Oil and Gas Properties" shall mean the oil and gas properties of
subsidiaries of the Acquiror listed in Section 3.10(a) of the Acquiror's
Disclosure Letter Schedule.
"OPIC" shall mean Overseas Private Investment Corporation, an agency of
the United States Government.
"OPIC Debt" shall mean the indebtedness of Argosy Energy International,
a wholly owned Subsidiary of the Company, under that certain Finance Agreement
dated May 2, 1994 between Argosy Energy International and OPIC, as amended.
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Partnership" shall mean Argosy Energy International, L.P., a Utah
limited partnership.
"Partnership Properties" shall mean the oil and gas properties of the
Partnership listed in Section 3.10(a) of the Company's Disclosure Letter
Schedule.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean the following:
(1) liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in good
faith by appropriate proceedings; provided that, in the latter case,
the specified Person or one of its Subsidiaries shall have set aside on
its books adequate reserves with respect thereto;
(2) mechanics' and materialmen's liens not filed of record and
similar charges not delinquent or which are filed of record but are
being contested in good faith by appropriate proceedings; provided
that, in the latter case, the specified Person or one of its
Subsidiaries shall have set aside on its books adequate reserves with
respect thereto;
(3) liens in respect of judgments or awards with respect to
which the specified Person or one of its Subsidiaries shall in good
faith currently be prosecuting an appeal or other proceeding for review
and with respect to which such Person or such Subsidiary shall have
secured a stay of execution pending such appeal or such proceeding for
review;
AGREEMENT AND PLAN OF MERGER
ANNEX A-9
provided that such Person or such Subsidiary shall have set aside on
its books adequate reserves with respect thereto;
(4) easements, leases, reservations or other rights of others
in, or minor defects and irregularities in title to, property or assets
of a specified Person or any of its Subsidiaries; provided that such
easements, leases, reservations, rights, defects or irregularities do
not materially impair the use of such property or assets for the
purposes for which they are held;
(5) any lien or privilege vested in any lessor, licensor or
permittor for rent or other obligations of a specified Person or any of
its Subsidiaries thereunder so long as the payment of such rent or the
performance of such obligations is not delinquent;
(6) lessors' royalties, overriding royalties and division
orders and sales contracts covering oil, gas or associated liquid or
gaseous hydrocarbons, reversionary interests and similar burdens if the
net cumulative effect of such burdens does not operate to reduce the
net revenue interest of any of the oil and gas properties of the
Company or the Acquiror to less than the net revenue interest relating
thereto disclosed to the other party hereto set forth in the Disclosure
Letter of such party;
(7) preferential rights to purchase and required third party
consents to assignments and similar agreements with respect to oil and
gas properties of a party hereto and as to which (i) waivers or
consents have been obtained from the appropriate Persons, (ii) the
appropriate time period for asserting such rights has expired without
an exercise of such rights or (iii) with respect to consents, such
consent need not be obtained prior to an assignment or the failure to
obtain such consent will not adversely effect the value of the
producing oil and gas properties to such party;
(8) liens for taxes or assessments not yet due or not yet
delinquent;
(9) all rights to consent by, required notices to, filings
with, or other actions by governmental or tribal entities in connection
with the sale or conveyance of oil and gas leases or interests therein
if the same are customarily obtained subsequent to such sale or
conveyance;
(10) rights of reassignment;
(11) easements, rights-of-way, servitudes, permits, surface
leases and other rights in respect of surface operations, pipelines,
grazing, logging, canals, ditches, reservoirs or the like; conditions,
covenants or other restrictions; and easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other
easements and rights-of-way, on, over or in respect of any of the oil
and gas properties of a party hereto;
(12) all other liens, charges, encumbrances, contracts,
agreements, instruments, obligations, defects and irregularities
affecting the oil and gas properties of a party hereto (including liens
of operators relating to obligations not yet due or pursuant to which
such
AGREEMENT AND PLAN OF MERGER
ANNEX A-10
party is not in default) that are not such as to adversely interfere
with the operation, value or use of such properties;
(13) the terms and conditions of all leases and all
agreements, orders, instruments, documents and other matters affecting
the oil and gas properties of a party hereto (including production
sales contracts, division orders, contracts for sale, purchase,
exchange, refining, or processing of hydrocarbons, unitization and
pooling designations, declarations, orders and agreements, operating
agreements, agreements of development, area of mutual interest
agreements, gas balancing or deferred production agreements, processing
agreements, plant agreements, pipeline, gathering and transporting
agreements, injection, repressuring and recycling agreements, carbon
dioxide purchase or sale agreements, salt water or other disposal
agreements, seismic or geophysical permits or agreements) that are
customary in the oil, gas and other mineral exploration, development or
extraction business or in the business of processing of gas and gas
condensate production for the extraction of products therefrom, if the
net cumulative effect of such burdens does not operate to reduce the
net revenue interest of any of the oil and gas properties of the
Company or the Acquiror to less than the net revenue interest relating
thereto disclosed to the other party hereto set forth in the Disclosure
Letter of such party (unless, in the case of an increased Working
Interest, the Partnership's Net Revenue Interest is proportionately
increased); and
(14) rights reserved to or vested in any municipality or
governmental, tribal, statutory or public authority to control or
regulate any of the oil and gas properties of a party hereto in any
manner, and all applicable laws, rules and orders of governmental and
tribal authority.
"Person" shall mean an individual, partnership, limited liability
company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but shall not include a Court or Governmental Authority.
"Registration Statement" shall have the meaning ascribed to such term
in Section 7.02(a).
"Regulation" shall mean any rule or regulation of any Governmental
Authority having the effect of Law or of any rule or regulation of any
self-regulatory organization, such as the LSE or the ASE.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the Commission).
"Representatives" shall mean, collectively, the Company's
Representatives and the Acquiror's Representatives.
"Required Acquiror Vote" shall have the meaning ascribed to such term
in Section 7.01(b).
"Required Company Vote" shall have the meaning ascribed to such term in
Section 7.01(a).
AGREEMENT AND PLAN OF MERGER
ANNEX A-11
"SEC Reports" shall mean (1) all Annual Reports on Form 10-K, (2) all
Quarterly Reports on Form 10-Q, (3) all proxy statements relating to meetings of
stockholders (whether annual or special), (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
required to be filed during a specified period by a specified Person with the
Commission pursuant to the Securities Act or the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share Issuance" shall mean the issuance of shares of Acquiror Common
Stock to be issued in the Merger.
"Significant Subsidiary" means any Subsidiary of the Company or the
Acquiror, as the case may be, that constitutes a significant subsidiary of such
party as such term is defined in Rule 1-02 of Regulation S-X of the Commission.
A "Subsidiary" of a specified Person shall be any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity or of which the specified Person controls the
management.
"Superior Proposal" means a bona fide Acquisition Proposal that the
Board of Directors of the Company determines in its good faith judgment (after
consultation with its financial advisers and legal counsel), taking into account
all legal, financial, regulatory and other aspects of the proposal or offer and
the Person making the proposal or offer, (i) would, if consummated, result in a
transaction that is more favorable to the Company's stockholders, from a
strategic and financial point of view, than the transactions contemplated by
this Agreement and (ii) is reasonably capable of being completed; provided,
however, that, for the purposes of this definition, the term "Acquisition
Proposal" shall have the meaning ascribed to it herein except that the reference
therein to 10% shall be deemed to be a reference to 50% and the proposal or
offer therein described shall be deemed only to refer to a transaction involving
the Company or the assets of the Company (including the shares of the
Subsidiaries of the Company), taken as a whole, rather than any transaction
relating to any of the Subsidiaries of the Company alone.
"Surviving Corporation" shall mean the Company as the corporation
surviving the Merger.
"Tax Returns" shall have the meaning ascribed to such term in Section
4.14(a) of the Agreement.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies
or other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any Law; and such terms shall include any interest, fines,
penalties, assessments
AGREEMENT AND PLAN OF MERGER
ANNEX A-12
or additions to tax resulting from, attributable to or incurred in connection
with any such tax or any contest or dispute thereof.
"TBCA" shall mean the Texas Business Corporation Act, as in effect on
the date of this Agreement and from time to time thereafter during the pendency
hereof.
"Terminated Acquiror Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained, or contributed to by the Acquiror or any of its
Subsidiaries within six years prior to the date of this Agreement but which have
been terminated prior to the date of this Agreement.
"Terminated Company Benefit Plans" shall mean Benefit Plans that were
sponsored, maintained or contributed to by the Company or any of its
Subsidiaries within six years prior to the date of this Agreement but which have
been terminated prior to the date of this Agreement.
"Terminating Acquiror Breach" shall have the meaning ascribed to such
term in Section 9.10(c)of the Agreement.
"Terminating Company Breach" shall have the meaning ascribed to such
term in Section 9.01(b) of the Agreement.
"Termination Fee" shall have the meaning ascribed to such term in
Section 9.05(b).
"Title Defect" shall mean any encumbrance, encroachment, irregularity,
defect in or objection to a party's title to or contractual right in the oil and
gas properties of such party (expressly excluding Permitted Encumbrances), that
alone or in combination with other defects renders such party's title to any of
such oil and gas properties less than Marketable Title. In evaluating whether an
encumbrance, encroachment, irregularity, defect in or objection to title or
contractual right exists, due consideration shall be given to the length of time
that the leases have been producing hydrocarbon substances, whether such oil and
gas properties are in "pay status" and whether such defect is of the type
expected to be encountered in the area involved and is customarily acceptable to
prudent operators and interest owners. (As used herein, "pay status" shall mean
payment is being made by a third party for the production from such oil and gas
properties without indemnity from such party except such indemnities as are
customarily included in division orders, transfer orders, product purchase
agreements and similar instruments commonly used in connection with the payment
of proceeds from production.) Such usual and customary defects include defects
that have been cured by possession under applicable statutes of limitation,
defects in the early chain of title such as failure to recite marital status in
documents, omission of heirship or succession proceedings, lack of survey and
failure to record releases of liens, production payments or mortgages that have
expired of their own terms to the extent such defects represent matters that are
not reasonably expected to result in claims that will adversely affect such
party's title to such oil and gas properties. 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 such oil and gas properties shall not constitute a
Title Defect (i) if they have not been filed pursuant to Law, (ii) if filed,
they have not yet become due and payable or payment is being
AGREEMENT AND PLAN OF MERGER
ANNEX A-13
withheld as provided by Law or (iii) if their validity is being contested in
good faith by appropriate action.
AGREEMENT AND PLAN OF MERGER
ANNEX A-14
ANNEX B
Garnet Resources Corporation Affiliates
AFFILIATE'S AGREEMENT
[Date]
Aviva Petroleum Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Ladies and Gentlemen:
The undersigned has been advised that, as of the date hereof, the
undersigned may be deemed to be an "affiliate" of Garnet Resources Corporation,
a Delaware corporation (the "Company"), as that term is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the Regulations of the Commission under
the Securities Act.
Pursuant to the terms and subject to the conditions of that certain
Agreement and Plan of Merger by and among Aviva Petroleum Inc., a Texas
corporation (the "Acquiror"), Aviva Merger Inc., a newly formed Delaware
corporation and a wholly owned, indirect Subsidiary of the Acquiror ("Newco"),
and the Company dated as of June 24, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of Newco with and into the Company (the
"Merger"), the undersigned will be entitled to receive shares of Acquiror Common
Stock in exchange for shares of Company Common Stock owned by the undersigned at
the Effective Time of the Merger as determined pursuant to the Merger Agreement.
Capitalized terms used but not defined herein are defined in Annex A to the
Merger Agreement and are used herein with the same meanings as ascribed to them
therein.
In consideration of the agreements contained herein, the Acquiror's
reliance on this letter in connection with the consummation of the Merger and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby represents, warrants and agrees
that the undersigned will not make any sale, transfer or other disposition of
the Acquiror Common Stock received by the undersigned pursuant to the Merger in
violation of the Securities Act or the applicable Regulations thereunder. The
undersigned has been advised that the offering, sale and delivery of the shares
of Acquiror Common Stock pursuant to the Merger will have been registered with
the Commission under the Securities Act on a Registration Statement on Form S-4.
The undersigned has also been advised, however, that, since the undersigned may
be deemed to be an Affiliate of the Company at the time the Merger is submitted
for a vote of the
AGREEMENT AND PLAN OF MERGER
ANNEX A-15
stockholders of the Company, the Acquiror Common Stock received by the
undersigned pursuant to the Merger can be sold by the undersigned only (i)
pursuant to an effective registration statement under the Securities Act, (ii)
in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Securities Act or (iii) in reliance upon an exemption
from registration that is available under the Securities Act.
The undersigned also understands that instructions will be given to the
transfer agent for the Acquiror Common Stock with respect to the Acquiror Common
Stock to be received by the undersigned pursuant to the Merger and that there
will be placed on the certificates representing such shares of Acquiror Common
Stock, or any substitutions therefor, a legend stating in substance as follows:
"These shares were issued in a transaction to which Rule 145
promulgated under the Securities Act of 1933, as amended, applies.
These shares may only be transferred in accordance with the terms of
such Rule and an Affiliate's Agreement between the original holder of
such shares and Aviva Petroleum Inc., a copy of which agreement is on
file at the principal offices of Aviva Petroleum, Inc."
It is understood and agreed that the legend set forth above shall be removed
upon surrender of certificates bearing such legend by delivery of substitute
certificates without such legend if the undersigned shall have delivered to the
Acquiror an opinion of counsel, in form and substance reasonably satisfactory to
the Acquiror, to the effect that (i) the sale or disposition of the shares
represented by the surrendered certificates may be effected without registration
of the offering, sale and delivery of such shares under the Securities Act and
(ii) the shares to be so transferred may be publicly offered, sold and delivered
by the transferee thereof without compliance with the registration provisions of
the Securities Act.
By its execution hereof, the Acquiror agrees that it will, as long as
the undersigned owns any shares of Acquiror Common Stock to be received by the
undersigned pursuant to the Merger that are subject to the restrictions on sale,
transfer or other disposition herein set forth, take all reasonable efforts to
make timely filings with the Commission of all reports required to be filed by
it pursuant to the Exchange Act and will promptly furnish upon written request
of the undersigned a written statement confirming that such reports have been so
timely filed.
If you are in agreement with the foregoing, please so indicate by
signing below and returning a copy of this letter to the undersigned, at which
time this letter shall become a binding agreement between us.
Very truly yours,
By:
---------------------------------------
Name:
Title:
Date:
Address:
AGREEMENT AND PLAN OF MERGER
ANNEX A-16
ACCEPTED this ___ day
of __________, 1998
AVIVA PETROLEUM INC.
By:
------------------------------------
Name:
Title:
AGREEMENT AND PLAN OF MERGER
ANNEX A-17
