EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 9, 2005
AMONG
FOREST OIL CORPORATION,
SML WELLHEAD CORPORATION,
MARINER ENERGY, INC.
AND
MEI SUB, INC.
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TABLE OF CONTENTS
Article I
DEFINITIONS
ARTICLE II
THE MERGER
Section 2.1 Distribution and Merger................................................................ 11
Section 2.2 Effect on Capital Stock................................................................ 12
Section 2.3 Cancellation of Stock.................................................................. 12
Section 2.4 Stockholders Meeting................................................................... 12
Section 2.5 Closing................................................................................ 13
Section 2.6 Effective Time......................................................................... 13
Section 2.7 Closing of Transfer Books.............................................................. 13
Section 2.8 Exchange of Certificates............................................................... 13
Section 2.9 Certain Stock Options.................................................................. 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FOREST
Section 3.1 Organization; Qualification............................................................ 17
Section 3.2 Corporate Authority; No Violation...................................................... 17
Section 3.3 Information Supplied................................................................... 18
Section 3.4 Brokers or Finders..................................................................... 18
Section 3.5 Forest Rights Plan..................................................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FOREST AND SPINCO
Section 4.1 Organization, Qualification............................................................ 19
Section 4.2 Capital Stock and Other Matters........................................................ 19
Section 4.3 Corporate Authority; No Violation...................................................... 20
Section 4.4 Spinco Financial Statements; Liabilities............................................... 21
Section 4.5 Absence of Certain Changes or Events................................................... 21
Section 4.6 Investigations; Litigation............................................................. 21
Section 4.7 Licenses; Compliance with Laws......................................................... 22
Section 4.8 Proxy Statement/Prospectus; Registration Statements.................................... 22
Section 4.9 Information Supplied................................................................... 23
Section 4.10 Environmental Matters.................................................................. 23
Section 4.11 Tax Matters............................................................................ 24
Section 4.12 Benefit Plans.......................................................................... 25
Section 4.13 Labor Matters.......................................................................... 27
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Section 4.14 Intellectual Property Matters.......................................................... 27
Section 4.15 Material Contracts..................................................................... 28
Section 4.16 Brokers or Finders..................................................................... 29
Section 4.17 Certain Board Findings................................................................. 29
Section 4.18 Vote Required.......................................................................... 29
Section 4.19 Stockholder Approval................................................................... 29
Section 4.20 Certain Payments....................................................................... 29
Section 4.21 Assets................................................................................. 29
Section 4.22 Loans.................................................................................. 30
Section 4.23 Oil and Gas Reserves................................................................... 30
Section 4.24 Derivative Transactions................................................................ 31
Section 4.25 No Other Representations and Warranties................................................ 31
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 5.1 Organization, Qualification............................................................ 32
Section 5.2 Capital Stock and Other Matters........................................................ 32
Section 5.3 Corporate Authority; No Violation...................................................... 33
Section 5.4 Company Financial Statements; Liabilities.............................................. 34
Section 5.5 Absence of Certain Changes or Events................................................... 34
Section 5.6 Investigations; Litigation............................................................. 35
Section 5.7 Licenses; Compliance with Laws......................................................... 35
Section 5.8 Proxy Statement/Prospectus; Registration Statements.................................... 35
Section 5.9 Information Supplied................................................................... 36
Section 5.10 Environmental Matters.................................................................. 36
Section 5.11 Tax Matters............................................................................ 37
Section 5.12 Benefit Plans.......................................................................... 38
Section 5.13 Labor Matters.......................................................................... 40
Section 5.14 Intellectual Property Matters.......................................................... 40
Section 5.15 Material Contracts..................................................................... 41
Section 5.16 Opinion of Company Financial Advisor................................................... 41
Section 5.17 Brokers or Finders..................................................................... 41
Section 5.18 Takeover Statutes...................................................................... 41
Section 5.19 Certain Board Findings................................................................. 42
Section 5.20 Vote Required.......................................................................... 42
Section 5.21 Certain Payments....................................................................... 42
Section 5.22 Assets................................................................................. 42
Section 5.23 Loans.................................................................................. 43
Section 5.24 Oil and Gas Reserves................................................................... 43
Section 5.25 Derivative Transactions................................................................ 43
Section 5.26 No Other Representations and Warranties................................................ 43
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ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Conduct of Business by the Company Pending the Merger.................................. 44
Section 6.2 Conduct of Business by Spinco and Forest Pending the Merger............................ 49
Section 6.3 Proxy Statement/Prospectus............................................................. 53
Section 6.4 Cooperation............................................................................ 54
Section 6.5 Letter of Spinco's Accountants......................................................... 55
Section 6.6 Letter of the Company's Accountants.................................................... 55
Section 6.7 Forest/Spinco Employee Stock Options, Incentive and Benefit Plans...................... 55
Section 6.8 Employee Benefit Plans................................................................. 56
Section 6.9 Investigation.......................................................................... 59
Section 6.10 Reasonable Efforts; Further Assurances................................................. 60
Section 6.11 No Solicitation by the Company......................................................... 60
Section 6.12 Director and Officer Indemnification; Insurance........................................ 63
Section 6.13 Rule 145 Affiliates.................................................................... 64
Section 6.14 Public Announcements................................................................... 65
Section 6.15 Defense of Litigation.................................................................. 65
Section 6.16 Notification........................................................................... 65
Section 6.17 Obligations of Merger Sub.............................................................. 65
Section 6.18 Accounting Matters..................................................................... 65
Section 6.19 Reorganization Treatment............................................................... 66
Section 6.20 Performance Bond....................................................................... 66
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to the Obligations of Spinco, Forest, the Company and Merger Sub to
Effect the Merger...................................................................... 67
Section 7.2 Additional Conditions to the Obligations of Forest and Spinco.......................... 68
Section 7.3 Additional Conditions to the Obligations of the Company and Merger Sub................. 68
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVERS
Section 8.1 Termination............................................................................ 69
Section 8.2 Effect of Termination.................................................................. 71
Section 8.3 Termination Fee; Expenses.............................................................. 71
Section 8.4 Amendment.............................................................................. 72
Section 8.5 Waivers................................................................................ 73
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations, Warranties and Agreements; Indemnification................ 73
Section 9.2 Expenses............................................................................... 74
Section 9.3 Notices................................................................................ 74
Section 9.4 Certain Construction Rules............................................................. 75
Section 9.5 Severability........................................................................... 76
Section 9.6 Assignment; Binding Effect............................................................. 76
Section 9.7 No Third Party Beneficiaries........................................................... 76
Section 9.8 Limited Liability...................................................................... 76
Section 9.9 Entire Agreement....................................................................... 77
Section 9.10 Governing Law.......................................................................... 77
Section 9.11 Counterparts........................................................................... 77
Section 9.12 Specific Performance................................................................... 77
Section 9.13 Waiver of Jury Trial................................................................... 77
Schedules
Exhibit A - Distribution Agreement
Exhibit B - Initial Officers of the Company
Exhibit C - Certificate of Incorporation of the Company
Exhibit D - Bylaws of the Company
Exhibit E - Relocation and Severance Benefits
Exhibit F - Rule 145 Affiliate Agreement
Exhibit G - Form of Forest Officers' Certificate
Exhibit H - Form of Company Officers' Certificate
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 9, 2005, is among
Forest Oil Corporation, a New York corporation ("Forest"), SML Wellhead
Corporation, a
Delaware corporation and a wholly owned subsidiary of Forest
("Spinco"), Mariner Energy, Inc., a
Delaware corporation (the "Company"), and
MEI Sub, Inc., a
Delaware corporation and a wholly owned subsidiary of the
Company ("Merger Sub").
WHEREAS, prior to the Distribution Date (as such term and other
capitalized terms are defined in Article I hereof), and subject to the terms and
conditions set forth in the Distribution Agreement of even date herewith by and
between Forest and Spinco, in the form attached hereto as Exhibit A (the
"Distribution Agreement"), Forest intends to transfer or cause to be transferred
to Spinco all of the Spinco Assets, and Spinco intends to assume all of the
Spinco Liabilities, as contemplated by the Distribution Agreement (such transfer
and assumption collectively, the "Contribution");
WHEREAS, subject to the conditions set forth in the Distribution
Agreement, on the Distribution Date, Forest intends to distribute all of the
issued and outstanding shares of Spinco Common Stock on a pro rata basis to the
holders as of the Record Date (as defined in the Distribution Agreement) of the
outstanding Forest Common Stock (the "Distribution");
WHEREAS, at the Effective Time, the parties intend to effect a merger of
Merger Sub with and into Spinco, with Spinco being the surviving corporation of
the Merger;
WHEREAS, the Board of Directors of the Company (i) has determined that the
Merger is fair to, and in the best interests of, the Company and its
stockholders and has approved this Agreement and the Merger, and (ii) has
recommended the adoption of this Agreement by the stockholders of the Company,
and the Company, as the sole stockholder of Merger Sub, has adopted this
Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved this Agreement
and the transactions contemplated hereby, including the Merger;
WHEREAS, the Board of Directors of Forest (i) has approved this Agreement
and the Distribution Agreement and the transactions contemplated hereby and
thereby, including the Contribution, the Distribution and the Merger, and (ii)
has determined that the Merger is fair to, and in the best interests of, Forest
and its shareholders;
WHEREAS, the Board of Directors of Spinco (i) has determined that the
Merger is fair to, and in the best interests of, Spinco and its stockholder and
has approved this Agreement, and Forest, as the sole stockholder of Spinco, has
adopted this Agreement, and (ii) has approved the Distribution Agreement and the
transactions contemplated hereby and thereby, including the Contribution and the
Distribution; and
WHEREAS, the parties to this Agreement intend that the Contribution and
the Distribution qualify under Sections 368(a) and 355 of the Code,
respectively, and that the Merger qualify as a reorganization under Section
368(a) of the Code, and the parties intend, by executing this Agreement, to
adopt a plan of reorganization within the meaning of Section 368 of the Code;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
"2004 Spinco IDC" shall have the meaning specified in Section 6.21.
"Acquisition Proposal" shall have the meaning specified in Section
6.11(g).
"Acquisition Group" shall have the meaning specified in Section 6.11(g).
"Action" shall mean any litigation, claim, action, suit, arbitration,
inquiry, proceeding or investigation by or before any Governmental Authority.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with, such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; provided, however,
that for purposes of this Agreement, from and after the Distribution Date, no
member of either Group shall be deemed an Affiliate of any member of the other
Group.
"Agreement" shall mean this Agreement and Plan of Merger.
"Approved for Listing" shall mean, with respect to shares of Spinco Common
Stock, that such shares have been approved for listing on the NYSE or Nasdaq,
subject to official notice of issuance.
"Certificate of Merger" shall have the meaning specified in Section 2.6.
"Certificates" shall have the meaning specified in Section 2.3.
"Change of Recommendation" shall have the meaning specified in Section
6.11(d).
"Closing" shall have the meaning specified in Section 2.5.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the preamble hereof.
"Company Benefit Plans" shall have the meaning set forth in Section
5.12(a).
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"Company Common Stock" shall mean the common stock, par value $.0001 per
share, of the Company.
"Company Consent" shall mean the consent of the Company.
"Company Disclosure Schedule" shall mean the schedule prepared and
delivered by the Company to Forest and Spinco as of the date of this Agreement,
setting forth, among other things, certain information that, to the extent
provided herein, qualifies certain representations, warranties and agreements of
the Company made in this Agreement.
"Company Employee" shall have the meaning set forth in Section 5.12(a).
"Company Financial Statements" shall have the meaning specified in Section
5.4(b).
"Company Preferred Stock" shall mean the Preferred Stock, par value $.0001
per share, of the Company.
"Company Reserve Report" shall have the meaning specified in Section 5.24.
"Company Savings Plan" shall have the meaning specified in Section 6.8(d).
"Company Stock Plans" shall mean the Mariner Energy, Inc. Stock Incentive
Plan, effective as of March 11, 2005, and the Mariner Energy, Inc. Equity
Participation Plan, effective March 11, 2005.
"Company Stockholders Meeting" shall have the meaning specified in Section
2.4(a).
"Company Subsidiaries" shall mean all direct and indirect Subsidiaries of
the Company.
"Company Voting Debt" shall have the meaning specified in Section 5.2.
"Company Welfare Plans" shall have the meaning specified in Section
6.8(c).
"Confidentiality Agreement" shall mean the Confidentiality Agreement,
dated as of May 23, 2005, between Forest and the Company.
"Continuing Company Employees" shall have the meaning set forth in Section
6.8(a).
"Continuing Spinco Employees" shall have the meaning set forth in Section
6.8(a).
"Contract" shall mean any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument or other binding agreement, obligation or commitment.
"Contribution" shall have the meaning set forth in the Recitals hereto.
"Controlling Person" shall have the meaning specified in Section 9.1(b).
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"Derivative Transaction" shall mean a derivative transaction within the
coverage of Statement of Financial Accounting Standards No. 133, including any
swap transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, credit-related events or conditions or any indexes, or any other
similar transaction (including any option with respect to any of such
transactions) or combination of any of such transactions, including
collateralized mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of transactions, and
any related credit support, collateral, transportation or other similar
arrangements or agreements related to such transactions.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Disclosure Schedules" shall mean, collectively, the Forest Disclosure
Schedule, the Spinco Disclosure Schedule and the Company Disclosure Schedule.
"Distribution" shall have the meaning set forth in the Recitals hereto.
"Distribution Agreement" shall have the meaning set forth in the Recitals
hereto.
"Distribution Date" shall mean the date and time that the Distribution
shall become effective.
"Effective Time" shall have the meaning specified in Section 2.6.
"Employee Benefits Agreement" shall mean the Employee Benefits Agreement
of even date herewith between Forest and Spinco, in the form attached to the
Distribution Agreement.
"Environmental Laws" shall mean any and all federal, state or local
statute, rule, regulation or ordinance, and any judicial or administrative
interpretation thereof, including any guidance document, cleanup standard, Order
or determination issued, promulgated, approved or entered thereunder by any
Governmental Authority, relating to pollution or the protection, cleanup or
restoration of the environment, protection of species or ecosystems, or to human
health, safety or natural resources, including those established by or
promulgated under the Federal Clean Air Act, the Federal Oil Pollution Act, the
Federal Water Pollution Control Act, the Federal Resource Conservation and
Recovery Act, the Federal Comprehensive Environmental Response, Compensation,
and Liability Act, the Federal Toxic Substances Control Act, the Federal Coastal
Zone Management Act, the Federal Outer Continental Shelf Lands Act, the Federal
Endangered Species Act, the Federal Marine Mammal Protection Act, the Federal
National Environmental Policy Act, and similar state laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any Person, any other Person
or any trade or business, whether or not incorporated, that, together with such
first Person would be deemed a "single employer" within the meaning of section
4001(b) of ERISA. For all purposes under this
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Agreement, Forest shall be deemed to be an ERISA Affiliate of Spinco, regardless
of whether the Distribution has occurred.
"Estimated Basis" shall have the meaning specified in Section 6.21.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC promulgated thereunder.
"Exchange Agent" shall have the meaning specified in Section 2.8(a).
"Exchange Fund" shall have the meaning specified in Section 2.8(a).
"Forest" shall have the meaning specified in the preamble hereof.
"Forest Common Stock" shall mean the common stock, par value $.10 per
share, of Forest.
"Forest Disclosure Schedule" shall mean the schedule prepared and
delivered by Forest to the Company as of the date of this Agreement, setting
forth, among other things, certain information that, to the extent provided
herein, qualifies certain representations, warranties and agreements of Forest
made in this Agreement.
"Forest Group" shall mean Forest and the Forest Subsidiaries.
"Forest Incentive Plans" shall mean the Forcenergy Inc. 1999 Stock Plan
and the Forest 2001 Stock Incentive Plan.
"Forest Rights" shall mean the common stock purchase rights issued
pursuant to the First Amended and Restated Rights Agreement, dated as of October
17, 2003, by and between Forest and Mellon Investor Services LLC.
"Forest Savings Plan" shall have the meaning specified in Section 6.8(d).
"Forest Stock Option" shall mean an option to acquire Forest Common Stock
granted pursuant to a Forest Incentive Plan that is held by a Continuing Spinco
Employee as of the Effective Time.
"Forest Subsidiaries" shall mean all direct and indirect Subsidiaries of
Forest immediately after the Distribution Date.
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Authority" shall mean any federal, state or local court,
administrative agency, board, bureau or commission or other governmental
department, authority or instrumentality or any subdivision, agency, commission
or authority thereof.
"Group" shall mean the Forest Group or the Spinco Group, as the case may
be.
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"Hazardous Material" shall mean any substance, material or waste regulated
under Environmental Laws, and includes petroleum and any derivative thereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"HSR Agencies" shall mean the Federal Trade Commission and the Antitrust
Division of the Department of Justice.
"Indemnified Party" shall have the meaning set forth in Section 6.12(a).
"Information" shall mean all records, books, contracts, instruments,
computer data and other data and information.
"IRS" shall mean the United States Internal Revenue Service or any
successor thereto, including, but not limited to its agents, representatives and
attorneys.
"Knowledge" of any Person or person shall mean the knowledge after due
inquiry of the executive officers of such Person (including, with respect to
Forest's or Spinco's knowledge, the head of the Spinco Business unit).
"Licenses" shall mean any license, authorization, permit, certificate,
variance, exemption, Order, franchise or approval from any Governmental
Authority.
"Liens" has the meaning set forth in Section 4.21.
"Losses" shall have the meaning set forth in Section 9.1(b).
"Material Adverse Effect," with respect to any Person, shall mean any
circumstance, change or effect that is or is reasonably likely to be materially
adverse to (i) the business, operations, assets, liabilities, results of
operations or condition (financial or otherwise) of such Person and its
Subsidiaries, taken as a whole (which may include damage attributable, both
directly and indirectly, to Hurricane Xxxxxxx), except for such effects on or
changes in general economic or capital market conditions and effects and changes
that generally affect the U.S. domestic oil and gas exploration and production
business, or (ii) the ability of such Person to perform its obligations
hereunder or under the other Transaction Agreements, in each case other than any
such circumstance, change or effect that relates to or results primarily from
(x) the announcement, pendency or consummation of the transactions contemplated
by this Agreement or the other Transaction Agreements or (y) acts of war,
insurrection, sabotage or terrorism; provided, however, that damages
attributable to Hurricane Xxxxxxx disclosed in the September 9, 2005 written
damage report of the Company and in the September 9, 2005 written damage report
of Forest, respectively, shall not be taken into account in determining whether
a Material Adverse Effect exists or has occurred.
"Merger" shall have the meaning specified in Section 2.1(b).
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"Merger Consideration" shall mean the number of shares of Company Common
Stock issuable at the Effective Time in exchange for one share of Spinco Common
Stock in accordance with the provisions of Section 2.2(a).
"Merger Sub" shall have the meaning specified in the preamble hereto.
"Nasdaq" shall mean The Nasdaq Stock Market.
"NYBCL" shall mean the Business Corporation Law of the State of New York.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Offshore Gulf of Mexico" shall mean (i) the Outer Continental Shelf, as
defined at 43 U.S.C. 1331(a), located in the Gulf of Mexico, and (ii) lands
submerged in offshore waters within the jurisdiction of Alabama, Florida,
Louisiana, Mississippi or Texas.
"Option Exchange Ratio" shall have the meaning specified in Section
2.9(b).
"Order" shall mean any decree, judgment, injunction, writ, rule or other
order of any Governmental Authority.
"Out-of-Pocket Expenses" shall have the meaning specified in Section
8.3(a).
"PBGC" shall mean the U.S. Pension Benefit Guaranty Corporation.
"Permitted Liens" of any Person shall mean any (a) purchase money Liens
and Liens in connection with capital leases, in each case upon or in any
equipment acquired or held by such Person in the ordinary course of business;
provided that, the indebtedness secured by such Liens (i) was incurred solely
for the purpose of financing the acquisition of such equipment, and does not
exceed the aggregate purchase price of such equipment, (ii) is secured only by
such equipment and not by any other assets of such Person or its Subsidiaries,
(iii) is not increased in amount and (iv) is not described in the Forest
Disclosure Schedule, Spinco Disclosure Schedule or Company Disclosure Schedule;
(b) Liens for Taxes, assessments, or other governmental charges or levies not
yet due or that (provided that foreclosure, sale, or other similar proceedings
shall not have been initiated) are being contested in good faith by appropriate
proceedings; (c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of obligations
that are not yet due or that are being contested in good faith by appropriate
proceedings; (d) Liens to operators and non-operators under joint operating
agreements arising in the ordinary course of the business of such Person to
secure amounts owing, which amounts are not yet due or are being contested in
good faith by appropriate proceedings; (e) royalties, overriding royalties, net
profits interests, production payments, reversionary interests, calls on
production, preferential purchase rights and other burdens on or deductions from
the proceeds of production, that do not secure indebtedness for borrowed money;
(f) Liens arising in the ordinary course of business out of pledges or deposits
under workers' compensation laws, unemployment insurance, old age pensions or
other social security or retirement benefits, or similar legislation or to
secure public or statutory obligations of such Person; (g) operating agreements,
unitization and pooling agreements and orders, production
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handling agreements,processing agreements, transportation agreements, sales
agreements, farmout agreements, gas balancing agreements and other agreements,
in each case that are customary in the oil, gas and mineral exploration and
production business and that are entered into in the ordinary course of
business, to the extent that such Liens do not materially impair the use of the
property covered by such Lien for the purposes for which such property is held
by such Person; (h) consents to assignments, rights reserved to or vested in any
Governmental Authority or lessor, and rights of set-off and banker's liens in
each case that do not secure indebtedness; and (i) easements, rights-of-way,
restrictions, and other similar encumbrances, and minor defects in the chain of
title that are customary in the oil and gas industry, none of which interfere
with the ordinary conduct of the business of such Person or any Subsidiary of
such Person or materially detract from the value or use of the property to which
they apply.
"Person" or "person" shall mean a natural person, corporation, company,
partnership, limited partnership, limited liability company or other entity,
including a Governmental Authority.
"Privileged Information" shall have the meaning specified in the
Distribution Agreement.
"Proxy Statement/Prospectus" shall mean the proxy statement/prospectus to
be distributed to the stockholders of the Company in connection with the Merger
and the transactions contemplated by this Agreement, including any preliminary
proxy statement/prospectus or definitive proxy statement/prospectus filed with
the SEC in accordance with the terms and provisions hereof. The Proxy
Statement/Prospectus shall constitute a part of the Registration Statement on
Form S-4.
"Registration Statements" shall mean the Registration Statement on Form
S-4 to be filed by the Company with the SEC to effect the registration under the
Securities Act of the issuance of the shares of Company Common Stock into which
shares of Spinco Common Stock will be converted pursuant to the Merger, the
Registration Statement on Form S-1 to be filed by the Company with the SEC to
effect the registration under the Securities Act of the resale of the shares of
Company Common Stock by certain selling stockholders and the registration
statement on Form 10 (or, if such form is not appropriate, the appropriate form
pursuant to the Exchange Act) to be filed by Spinco with the SEC to effect the
registration under the Exchange Act of Spinco Common Stock in connection with
the Distribution.
"Representative" shall mean, with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
"Requisite Approval" shall have the meaning specified in Section 5.20.
"Retention Benefit" shall have the meaning specified in Section 6.8(g).
"Retention Period" shall have the meaning specified in Section 6.8(e).
"Rule 145 Affiliate" shall have the meaning specified in Section 6.13.
"Rule 145 Affiliate Agreement" shall have the meaning specified in Section
6.13.
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"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations of the SEC promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02 of
Regulation S-X of the Exchange Act.
"Spinco" shall have the meaning specified in the preamble hereof.
"Spinco 2004 Financial Statements" shall have the meaning set forth in
Section 4.4.
"Spinco Assets" shall have the meaning specified in the Distribution
Agreement.
"Spinco Benefit Plans" shall have the meaning specified in Section
4.12(a).
"Spinco Business" shall have the meaning specified in the Distribution
Agreement.
"Spinco Common Stock" shall mean the Common Stock, par value $.10 per
share, of Spinco.
"Spinco Disclosure Schedule" shall mean the schedule prepared and
delivered by Spinco to the Company as of the date of this Agreement, setting
forth, among other things, certain information that, to the extent provided
herein, qualifies certain representations, warranties and agreements of Forest
and Spinco made in this Agreement.
"Spinco Employee" shall have the meaning specified in Section 4.12(a).
"Spinco Financial Statements" shall have the meaning specified in Section
4.4.
"Spinco Group" shall mean Spinco and the Spinco Subsidiaries.
"Spinco Liabilities" shall have the meaning specified in the Distribution
Agreement.
"Spinco Preferred Stock" shall mean the Preferred Stock of Spinco.
"Spinco Reserve Report" shall have the meaning specified in Section 4.23.
"Spinco Subsidiaries" shall mean all direct and indirect Subsidiaries of
Spinco immediately after the Distribution Date and prior to the Effective Time.
"Spinco Voting Debt" shall have the meaning specified in Section 4.2.
"Subsidiary" shall mean, with respect to any Person, a corporation,
partnership, limited liability company or other entity in which such Person, a
Subsidiary of such Person or such Person and one or more Subsidiaries of such
Person, directly or indirectly, has either (i) a majority ownership in the
equity thereof, (ii) the power, under ordinary circumstances, to elect, or to
direct the election of, a majority of the board of directors or other governing
body of such
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entity, or (iii) the title or function of general partner or manager, or the
right to designate the Person having such title or function.
"Superior Offer" shall have the meaning specified in Section 6.11(g).
"Surviving Corporation" shall have the meaning set forth in Section
2.1(b).
"Taxes" shall mean all taxes, charges, fees, duties, levies, imposts,
rates or other assessments imposed by any federal, state, local or foreign
Taxing Authority, including, but not limited to, income, gross receipts, excise,
property, sales, use, license, capital stock, transfer, franchise, payroll,
withholding, social security, value added or other taxes (including any
interest, penalties or additions attributable thereto) and a "Tax" shall mean
any one of such Taxes.
"Tax Return" means any return, report, certificate, form or similar
statement or document (including any related or supporting information or
schedule attached thereto and any information return, amended tax return, claim
for refund or declaration of estimated Tax) required to be supplied to, or filed
with, a Taxing Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement of even date
herewith between Forest, Spinco and the Company.
"Taxing Authority" means any Governmental Authority or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including the IRS).
"Termination Date" shall mean the date, if any, on which this Agreement is
terminated pursuant to Section 8.1.
"Termination Fee" shall have the meaning specified in Section 8.3(b).
"Termination for Cause" shall have the meaning assigned to such term in
Forest's Severance Plan as in effect on the date of this Agreement.
"Third Party Provisions" shall have the meaning specified in Section 9.7.
"Transaction Agreements" shall mean this Agreement, the Distribution
Agreement, the Employee Benefits Agreement, the Transition Services Agreement
and the Tax Sharing Agreement.
"Transition Services Agreement" shall mean the Transition Services
Agreement of even date herewith between Forest and its affiliates and Spinco and
its affiliates in the form attached to the Distribution Agreement.
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"Unvested Forest Stock Option" shall mean the portion of a Forest Stock
Option representing the shares of Forest Common Stock for which such option is
not exercisable as of the Effective Time.
ARTICLE II
THE MERGER
Section 2.1 Distribution and Merger.
(a) Subject to the terms and conditions of the Distribution Agreement,
prior to or on the Distribution Date, the parties thereto shall effect the
various transactions contemplated by the Distribution Agreement.
(b) At the Effective Time: (i) Merger Sub shall be merged with and into
Spinco (the "Merger"), the separate existence of Merger Sub shall cease and
Spinco shall continue as the surviving corporation of the Merger (sometimes
referred to herein as the "Surviving Corporation"); (ii) the Amended and
Restated Certificate of Incorporation of Spinco as in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter duly amended in accordance with applicable law and
such Certificate of Incorporation; and (iii) the Amended and Restated Bylaws of
Spinco as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
(c) The Board of Directors of the Company from and after the Effective
Time shall be increased to seven (7) directors, five of whom shall be the
directors of the Company immediately prior to the Effective Time, and two of
whom shall be mutually agreed by Forest and the Company prior to the Effective
Time. The initial officers of the Company from and after the Effective Time
shall be as set forth in Exhibit B hereto. Such directors and officers of the
Company shall serve until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Company's Certificate of Incorporation and Bylaws. The Board of
Directors of the Company shall also appoint committees as appropriate, including
an audit committee, a compensation committee and a nominating committee. The
Certificate of Incorporation and Bylaws of the Company at the Effective Time
shall be substantially in the forms attached hereto as Exhibit C and Exhibit D,
respectively. The corporate and operational headquarters of the Company will be
located in Houston, Texas.
(d) The directors of Merger Sub shall, from and after the Effective Time,
be the directors of the Surviving Corporation. The officers of Merger Sub shall,
from and after the Effective Time, be the officers of the Surviving Corporation.
Such directors and officers of the Surviving Corporation shall serve until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
11
(e) The Merger shall have the effects set forth in this Article II and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Spinco and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of Spinco and Merger Sub shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
Section 2.2 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, Spinco or any
holder of any Spinco Common Stock:
(a) Each share of Spinco Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in accordance with
Section 2.2(b)) shall be automatically converted into the right to receive one
fully paid and nonassessable share of Company Common Stock; provided, however,
that in the event that, subsequent to the date hereof but prior to the Effective
Time, the outstanding shares of Spinco Common Stock shall have been changed into
a different number of shares as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction, the Merger Consideration shall be
appropriately adjusted to provide the holders of the Spinco Common Stock the
same economic effect contemplated by this Agreement prior to such event.
(b) Each share of Spinco Common Stock held by Spinco as treasury stock and
each share of Spinco Common Stock owned by the Company or Merger Sub, in each
case immediately prior to the Effective Time, shall be canceled and shall cease
to exist and no stock or other consideration shall be delivered in exchange
therefor.
(c) Each share of common stock, par value $.0001 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock, par value
$.10 per share, of the Surviving Corporation.
Section 2.3 Cancellation of Stock. Each share of Spinco Common Stock
issued and outstanding immediately prior to the Effective Time, when converted
in accordance with Section 2.2, shall no longer be outstanding and shall
automatically be canceled and shall cease to exist. Each holder of a certificate
that, immediately prior to the Effective Time, represented outstanding shares of
Spinco Common Stock (collectively, the "Certificates") shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
any such Certificate, a certificate representing the shares of Company Common
Stock to which such holder is entitled pursuant to Section 2.2 and any dividends
or other distributions to which such holder is entitled pursuant to Section
2.8(c).
Section 2.4 Stockholders Meeting.
(a) As promptly as practicable following the date hereof and the
effectiveness of the Registration Statements, the Company, subject to Section
6.11, shall call a special meeting of its stockholders (the "Company
Stockholders Meeting") to be held as promptly as practicable for
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the purpose of voting upon (i) the adoption of this Agreement and (ii) any
related matters. Subject to Section 6.11, this Agreement shall be submitted for
adoption to the stockholders of the Company at such special meeting. Without
limiting the generality of the foregoing, the Company shall cause the Company
Stockholders Meeting to be held and such vote taken within 60 days following the
effectiveness of Spinco's Registration Statement on Form S-4. The Company shall
deliver to the Company's stockholders the Proxy Statement/Prospectus in
definitive form in connection with the Company Stockholders Meeting at the time
and in the manner provided by the applicable provisions of the DGCL, the
Exchange Act and the Company's Second Amended and Restated Certificate of
Incorporation and Fourth Amended and Restated Bylaws and shall conduct the
Company Stockholders Meeting and the solicitation of proxies in connection
therewith in compliance with such statutes, charter and bylaws.
(b) Subject to Section 6.11 and its fiduciary duty under applicable law,
the Board of Directors of the Company shall recommend that the Company's
stockholders adopt this Agreement and approve the transactions contemplated
hereby, and such recommendations shall be set forth in the Proxy
Statement/Prospectus. The Company shall comply with its obligations under
Section 2.4(a) whether or not its Board of Directors withdraws, modifies or
changes its recommendation regarding this Agreement or recommends any other
offer or proposal.
Section 2.5 Closing. Unless the transactions herein contemplated shall
have been abandoned and this Agreement terminated pursuant to Section 8.1, the
closing of the Merger and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Xxxxx Xxxxx L.L.P., in Houston,
Texas at 10:00 a.m., Central time, as promptly as practicable and in no event
later than the second business day following the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII (except for those
conditions that, by the express terms thereof, are not capable of being
satisfied until the Effective Time), or at such other time and place as Spinco
and the Company shall agree in writing.
Section 2.6 Effective Time. Upon the terms and subject to the conditions
of this Agreement, as soon as practicable at or after the Closing, a certificate
of merger shall be filed with the Secretary of State of the State of
Delaware
with respect to the Merger (the "Certificate of Merger"), in such form as is
required by, and executed in accordance with, the applicable provisions of the
DGCL. The Merger shall become effective at the time of filing of the Certificate
of Merger or at such later time as the parties hereto may agree and as is
provided in the Certificate of Merger. The date and time at which the Merger
shall become so effective is herein referred to as the "Effective Time."
Section 2.7 Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of Spinco shall be closed and no transfer shall be made
of any shares of capital stock of Spinco that were outstanding immediately prior
to the Effective Time.
Section 2.8 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, the Company shall deposit
with such bank or trust company as shall be agreed upon by Spinco and the
Company (the "Exchange Agent"), for the benefit of holders of shares of Spinco
Common Stock and for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the shares
13
of Company Common Stock issuable pursuant to Section 2.2 in exchange for
outstanding shares of Spinco Common Stock as of the Effective Time (such
certificates for shares of Company Common Stock, together with any dividends or
distributions with respect thereto to which the holders thereof may be entitled
pursuant to Section 2.8(c), being hereinafter referred to as the "Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the Company Common Stock contemplated to be issued pursuant to Section 2.2 from
the shares of stock held in the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, the Company shall cause the Exchange Agent to mail or deliver to each
holder of record of a Certificate or Certificates whose shares were converted
pursuant to Section 2.2 into the right to receive shares of Company Common Stock
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Spinco and the Company may reasonably specify) and
(ii) instructions for the use of such letter of transmittal in effecting the
surrender of the Certificates in exchange for certificates representing the
shares of Company Common Stock that such holder has the right to receive
pursuant to this Article II. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Spinco and the Company, together with such letter of transmittal, duly executed,
and any other required documents, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Company Common Stock that such holder has the right to
receive pursuant to this Article II (and any dividends or distributions pursuant
to Section 2.8(c)), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Spinco Common
Stock that is not registered in the transfer records of Spinco, a certificate
representing the proper number of shares of Company Common Stock (and any
dividends or distributions pursuant to Section 2.8(c)) may be issued to a
transferee only on the condition that the Certificate formerly representing such
shares of Spinco Common Stock is presented to the Exchange Agent, properly
endorsed, and accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been paid
or that no such taxes are applicable. Until surrendered as contemplated by this
Section 2.8, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender a certificate
representing shares of Company Common Stock (and any dividends or distributions
pursuant to Section 2.8(c)). The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Company Common Stock held
by it from time to time hereunder, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect thereto for
the account of persons entitled thereto.
If any Certificate shall have been lost, stolen, mislaid or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen, mislaid or destroyed, the Company shall cause to
be delivered in exchange for such lost, stolen, mislaid or destroyed Certificate
the consideration deliverable in respect thereof as determined in accordance
with this Article II. When authorizing the delivery of such consideration in
exchange therefor, the Company may, in its sole discretion and as a condition
precedent to the delivery thereof, require the owner of such lost, stolen,
mislaid or destroyed Certificate to give the Company a bond, in form and
substance reasonably satisfactory to the Company, and in such sum as the
14
Company may reasonably direct, as indemnity against any claim that may be made
against the Company or the Exchange Agent with respect to the Certificate
alleged to have been lost, stolen, mislaid or destroyed.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Company Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Company Common Stock which such holder is entitled to receive pursuant to the
terms hereof, until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following the
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing shares of Company Common Stock issued in exchange
therefor, without interest (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Company Common Stock and
(ii) at the appropriate payment date therefor, the amount of dividends or other
distributions with a record date after the Effective Time but prior to the
surrender of such Certificate and a payment date subsequent to the surrender of
such Certificate payable with respect to such whole shares of Company Common
Stock. Spinco shall deposit in the Exchange Fund all such dividends and
distributions.
(d) No Further Ownership Rights in Spinco Common Stock. All shares of
Company Common Stock issued upon the surrender for exchange of Certificates
formerly representing shares of Spinco Common Stock (including any cash paid
pursuant to Section 2.8(c)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Spinco Common Stock. If,
after the Effective Time, Certificates are presented to the Company or the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund made
available to the Exchange Agent that remains undistributed to the holders of
Spinco Common Stock on the eighteen-month anniversary of the Effective Time
shall be delivered to the Company, upon demand, and any stockholders of Spinco
who have not theretofore complied with this Article II shall thereafter look
only to the Company for payment of their claim for Company Common Stock and any
dividends or distributions with respect to Company Common Stock to which they
are entitled pursuant to Section 2.8(c).
(f) No Liability. Neither the Company nor the Surviving Corporation shall
be liable to any holder of a Certificate or any holder of shares of Company
Common Stock for shares of Company Common Stock (or dividends or distributions
with respect thereto or with respect to Spinco Common Stock) or cash delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 2.9 Certain Stock Options.
(a) Not later than immediately before the Effective Time, Forest and the
Company shall take such actions as may be required to provide that, effective as
of the Effective Time, each Unvested Forest Stock Option shall be converted into
an option to acquire (from the
15
Company), on the same terms and conditions as were applicable under such
Unvested Forest Stock Option immediately before the Effective Time, the number
of shares of Company Common Stock determined by multiplying the number of shares
of Forest Common Stock subject to such Unvested Forest Stock Option immediately
before the Effective Time by the Option Exchange Ratio (rounded to the nearest
whole number of shares), at a price per share (rounded to the nearest whole
cent) equal to the exercise price per share of Forest Common Stock otherwise
purchasable pursuant to such Unvested Forest Stock Option divided by the Option
Exchange Ratio; provided, however, that with respect to any Unvested Forest
Stock Option, such conversion shall be effected such that (i) the aggregate
intrinsic value of the award immediately after the conversion is not greater
than the aggregate intrinsic value (as determined pursuant to GAAP) of the
Unvested Forest Stock Option immediately before the conversion, (ii) the ratio
of the exercise price per share to the market value per share is not reduced as
a result of the conversion and (iii) the substitution requirements of Q&A
4(d)(ii) of Internal Revenue Service Notice 2005-1 are otherwise met.
(b) For purposes of Section 2.9(a) above, "Option Exchange Ratio" shall
mean the quotient (rounded to the third decimal place) determined by dividing
(i) the average of the daily closing prices per share of Forest Common Stock on
the NYSE Composite Transactions Reporting System (regular way), as reported in
The Wall Street Journal, for the last five trading days immediately preceding
the Effective Time by (ii) the average of the daily closing prices per share of
Company Common Stock on the NYSE Composite Transactions Reporting System
(regular way) or on Nasdaq (regular way), as applicable and as reported in The
Wall Street Journal, for the first five trading days following the Effective
Time. The Option Exchange Ratio shall be subject to appropriate adjustment in
the event of any stock split, stock dividend or recapitalization after the date
of this Agreement applicable to shares of Forest Common Stock or Company Common
Stock. The Company shall take all actions necessary to reserve for issuance,
from and after the Effective Time, a sufficient number of shares of Company
Common Stock for delivery pursuant to the options described in Section 2.9(a).
On or as soon as practicable after the Effective Time, the Company (x) shall
cause to be filed with the SEC a registration statement on an appropriate form
under the Securities Act with respect to shares of Company Common Stock subject
to the options described in Section 2.9(a) and shall use reasonable efforts to
maintain the current status of the prospectus contained therein, as well as to
comply with any applicable state securities or "blue sky" laws, for so long as
such options remain outstanding and (y) shall cause the shares of Company Common
Stock subject to the options described in Section 2.9(a) to be listed on the
NYSE or quoted on Nasdaq.
(c) The provisions of this Section 2.9 shall not apply to any Forest Stock
Option (or portion thereof) that is subject to Section 3.1 of the Employee
Benefits Agreement.
(d) By adopting or approving this Agreement, (i) the Board of Directors of
the Company shall be deemed to have approved and authorized each and every
amendment to any of the Company Stock Plans as the officers of the Company may
deem necessary or appropriate to give effect to the preceding provisions of this
Section 2.9, and (ii) the Board of Directors of Forest shall be deemed to have
approved and authorized each and every amendment to any of the Forest Incentive
Plans and the Forest Stock Options as the officers of Forest may deem necessary
or appropriate to give effect to the preceding provisions of this Section 2.9.
16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FOREST
Except as set forth in the Forest Disclosure Schedule (with specific
reference to the particular Section of this Agreement to which the information
set forth in such disclosure schedule relates; provided, that any information
set forth in one section of the Forest Disclosure Schedule shall be deemed to
apply to each other Section thereof to which it is relevant), Forest represents
and warrants to the Company as follows:
Section 3.1 Organization; Qualification. Forest is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York.
Section 3.2 Corporate Authority; No Violation. Forest has the corporate
power and authority to enter into this Agreement and each other Transaction
Agreement and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance by Forest of this Agreement and each other
Transaction Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of Forest and no other corporate proceedings on the part of Forest
are necessary to consummate the transactions contemplated hereby and thereby.
This Agreement has been duly executed and delivered by Forest and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding agreement of Forest, enforceable against Forest in accordance
with its terms (except insofar as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). Each other Transaction Agreement has been
duly executed and delivered by Forest and, assuming the due authorization,
execution and delivery by the other parties thereto, constitutes a legal, valid
and binding agreement of Forest, enforceable against Forest in accordance with
its terms (except insofar as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies). Except for matters expressly
contemplated by this Agreement and for such matters described in clauses (b),
(c) and (d) below as would not, individually or in the aggregate, have a
Material Adverse Effect on Forest, the Spinco Business or Spinco, neither the
execution and delivery by Forest of this Agreement and each other Transaction
Agreement, nor the consummation by Forest of the transactions contemplated
hereby or thereby and the performance by Forest of this Agreement and each other
Transaction Agreement will (a) violate or conflict with any provisions of
Forest's Certificate of Incorporation or Bylaws; (b) require any consent,
approval, authorization or permit of, registration, declaration or filing with,
or notification to, any Governmental Authority or any other Person; (c) result
in any breach of or constitute a default (or an event that, with notice or lapse
of time or both, would become a default) under, or give to others any right of
termination, cancellation, amendment or acceleration of any obligation or the
loss of any benefit under, any Contract to which Forest or any of its
Subsidiaries is a party or by which Forest or any of its Subsidiaries is bound
or affected; (d) result in the creation of a lien, pledge, security interest,
claim or other encumbrance on any of the issued and outstanding shares of Spinco
Common Stock, capital stock of any Spinco Subsidiary or on any of the Spinco
Assets pursuant to any Contract to which Forest or any of its Subsidiaries
(including Spinco and its Subsidiaries) is a
17
party or by which Forest or its Subsidiaries is bound or affected; or (e)
violate or conflict with any Order, law, ordinance, rule or regulation
applicable to Forest or any of its Subsidiaries (including Spinco and its
Subsidiaries), or any of the properties, business or assets of any of the
foregoing. Section 3.2 of the Forest Disclosure Schedule identifies all material
consents, approvals and authorizations of any Governmental Authority that are
legally required to be obtained by Forest for the consummation of the
transactions contemplated by the Transaction Agreements.
Section 3.3 Information Supplied. All documents that Forest is responsible
for filing with any Governmental Authority in connection with the transactions
contemplated hereby and by each other Transaction Agreement will comply in all
material respects with the provisions of applicable law.
Section 3.4 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other similar Person is or will be entitled, by reason of
any agreement, act or statement by Forest or any of its Subsidiaries, directors,
officers or employees, to any financial advisory, broker's, finder's or similar
fee or commission, to reimbursement of expenses or to indemnification or
contribution, in each case, by Spinco or any of its Subsidiaries, in connection
with any of the transactions contemplated by this Agreement or the other
Transaction Agreements.
Section 3.5 Forest Rights Plan. Forest has taken all action necessary, if
any, to render the Forest Rights inapplicable to this Agreement, the
Distribution Agreement and the transactions contemplated hereby and thereby.
Section 3.6 No Other Representations and Warranties. Except for the
representations and warranties contained in this Article III and in Article IV
and except for any representations and warranties specifically set forth in the
other Transaction Agreements, the Company acknowledges that neither Forest nor
any other Person makes any express or implied representation or warranty with
respect to Forest and its Subsidiaries, the Spinco Assets, the Spinco Business
or otherwise or with respect to any other information provided to the Company,
whether on behalf of Forest or such other Persons. Neither Forest nor any other
Person will have or be subject to any liability or indemnification obligation to
the Company or any other Person to the extent resulting from the distribution to
the Company or the Company's use of, any information related to Forest and any
other information, document, financial information or projections or material
made available to the Company in certain "data rooms," management presentations
or in any other form in connection with the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FOREST AND SPINCO
Except as set forth in the Spinco Disclosure Schedule (with specific
reference to the particular Section of this Agreement to which the information
set forth in such disclosure schedule relates; provided, that any information
set forth in one section of the Spinco Disclosure
18
Schedule shall be deemed to apply to each other Section thereof to which it is
relevant), Forest and Spinco, jointly and severally, represent and warrant to
the Company as follows:
Section 4.1 Organization, Qualification. Spinco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Spinco has all requisite power and authority to own, lease and operate
its properties and assets and to carry on the Spinco Business as presently
conducted and as proposed to be conducted and at the Distribution Date and the
Effective Time will be duly qualified and licensed to do business and in good
standing in each jurisdiction in which the ownership or leasing of its property
or the conduct of the Spinco Business, as presently conducted and as proposed to
be conducted, requires such qualification, except for jurisdictions in which the
failure to be so qualified or to be in good standing, individually or in the
aggregate, would not have a Material Adverse Effect on the Spinco Business or
Spinco. The copies of the Spinco Certificate of Incorporation and Bylaws in
existence on the date hereof are included as part of Section 4.1 of the Spinco
Disclosure Schedule and are complete and correct and in full force and effect on
the date hereof. Spinco is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws. All of the Subsidiaries of Spinco and
their respective jurisdictions of incorporation or organization (together with a
designation of those Subsidiaries constituting Significant Subsidiaries of
Spinco) are identified in Section 4.1 of the Spinco Disclosure Schedule. Spinco
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
Section 4.2 Capital Stock and Other Matters. The authorized capital stock
of Spinco consists of 100,000 shares of Spinco Common Stock and no shares of
Spinco Preferred Stock. As of the date hereof, 100 shares of Spinco Common stock
were issued and outstanding. At the Distribution Date and immediately prior to
the Closing, (i) there will be issued and outstanding 50,637,010 shares of
Spinco Common Stock, subject to adjustment as set forth on Section 4.2 of the
Spinco Disclosure Schedule and as provided in Section 2.4 of the Distribution
Agreement; (ii) no shares of Spinco Common Stock will be held by Spinco in its
treasury; (iii) no shares of Spinco Preferred Stock will be issued and
outstanding; and (iv) no bonds, debentures, notes or other indebtedness of
Spinco or any of its Subsidiaries having the right to vote (or convertible into
securities having the right to vote) on any matters on which holders of shares
of capital stock of Spinco (including Spinco Common Stock) may vote ("Spinco
Voting Debt") will be issued or outstanding. None of such shares of Spinco
Common Stock are, nor at the Distribution Date will they be, subject to
preemptive rights. All of the issued and outstanding shares of Spinco Common
Stock are, and all of the issued and outstanding shares of Spinco Common Stock
at the Distribution Date will be, validly issued, fully paid and nonassessable.
Except as set forth in this Section 4.2, there are no outstanding, (i) shares of
capital stock of Spinco, Spinco Voting Debt or other voting securities of
Spinco, (ii) securities of Spinco or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock of Spinco, Spinco Voting Debt or other
voting securities of Spinco or Spinco Common Stock or (iii) options, warrants,
calls, rights (including preemptive rights), commitments or other Contracts
(other than certain Transaction Agreements) to which Spinco or any of its
Subsidiaries is a party or by which Spinco or any of its Subsidiaries will be
bound obligating Spinco or any of its Subsidiaries to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, or otherwise relating to, shares of capital stock of
Spinco or any Spinco Voting Debt or other voting securities
19
of Spinco or any of its Subsidiaries or obligating Spinco or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right, commitment or Contract. There are no stockholder agreements, voting
trusts or other Contracts (other than the Distribution Agreement) to which
Spinco is a party or by which it is bound relating to the voting or transfer of
any shares of capital stock of Spinco. Spinco has no direct or indirect
Subsidiaries.
Section 4.3 Corporate Authority; No Violation. Spinco has the corporate
power and authority to enter into this Agreement and each other Transaction
Agreement and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance by Spinco of this Agreement and each other
Transaction Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all requisite corporate action
on the part of Spinco, and no other corporate proceedings are necessary to
consummate the Merger and the other transactions contemplated by the Transaction
Agreements. This Agreement has been duly executed and delivered by Spinco and,
assuming the due authorization, execution and delivery by the Company and Merger
Sub, constitutes a legal, valid and binding agreement of Spinco, enforceable
against Spinco in accordance with its terms (except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Each other Transaction Agreement has been duly executed and delivered by Spinco
and, assuming the due authorization, execution and delivery by the other parties
thereto, constitutes a legal, valid and binding agreement of Spinco, enforceable
against Spinco in accordance with its terms (except insofar as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
Except for matters expressly contemplated by this Agreement and for such matters
described in clauses (b), (c) and (d) below as would not, individually or in the
aggregate, have a Material Adverse Effect on Forest, the Spinco Business or
Spinco, neither the execution and delivery by Spinco of this Agreement and each
other Transaction Agreement, nor the consummation by Spinco of the transactions
contemplated hereby or thereby and the performance by Spinco of this Agreement
and each other Transaction Agreement will (a) violate or conflict with any
provision of Spinco's Certificate of Incorporation or Bylaws; (b) require any
consent, approval, authorization or permit of, registration, declaration or
filing with, or notification to, any Governmental Authority or any other Person;
(c) result in any breach of or constitute a default (or an event that, with
notice or lapse of time or both, would become a default) under, or give to
others any right of termination, cancellation, amendment or acceleration of any
obligation or the loss of any benefit under any Contract to which Spinco or any
of its Subsidiaries is a party or by which Spinco or any of its Subsidiaries or
any of the Spinco Assets is bound or affected; (d) result in the creation of a
lien, pledge, security interest, claim or other encumbrance on any of the issued
and outstanding shares of Spinco Common Stock or capital stock of any Spinco
Subsidiaries or on any of the Spinco Assets pursuant to any Contract to which
Spinco or any of its Subsidiaries is a party or by which Spinco or any of its
Subsidiaries or any of the Spinco Assets is bound or affected; or (e) violate or
conflict with any Order, law, ordinance, rule or regulation applicable to Spinco
or any of its Subsidiaries, or any of the properties, businesses or assets of
any of the foregoing. Section 4.3 of the Spinco Disclosure Schedule identifies
all material consents, approvals and authorizations of any Governmental
Authority that are legally required to be obtained by Spinco for the
consummation of the transactions contemplated by the Transaction Agreements.
20
Section 4.4 Spinco Financial Statements; Liabilities. Forest and Spinco
have previously made available to the Company complete and correct copies of
unaudited financial statements for the Spinco Business, comprised solely of
statements of revenues and direct operating expenses, for the years ended
December 31, 2004 (the "Spinco 2004 Financial Statements"), December 31, 2003
and December 31, 2002, and unaudited interim financial statements for the Spinco
Business, comprised solely of statements of revenues and expenses, for the
three-month periods ended March 31, 2005 and June 30, 2005 (together with the
Spinco 2004 Financial Statements, the "Spinco Financial Statements"), and Forest
and Spinco will make available to the Company any and all other financial
statements for the Spinco Business required to be included by Regulation S-X of
the Exchange Act in the Registration Statements and the Proxy
Statement/Prospectus. The Spinco Financial Statements fairly present in all
material respects, on the basis set forth therein, the revenues and direct
operating expenses for the respective periods, and any other financial
statements prepared in accordance with this Section 4.4 will fairly present in
all material respects, as applicable, on the basis set forth therein, the
financial position of the Spinco Business as of the respective dates thereof,
and the results of operations and changes in financial position or other
information included therein for the respective periods or as of the respective
dates then ended, in each case except as otherwise noted therein and subject,
where appropriate, to normal year-end audit adjustments. The Spinco Financial
Statements and such other financial statements have been or will be prepared in
accordance with past practice and GAAP, and on a consistent basis, except as
otherwise noted therein. Spinco and the Spinco Business do not have any
liability or obligation (whether accrued, absolute, contingent or otherwise),
other than (i) liabilities incurred in the ordinary course of business since
June 30, 2005, (ii) liabilities that, individually or in the aggregate, would
not have a Material Adverse Effect on the Spinco Business or Spinco and (iii)
liabilities and obligations under the Transaction Agreements.
Section 4.5 Absence of Certain Changes or Events. Except as specifically
contemplated by this Agreement or the other Transaction Agreements, since June
30, 2005, the Spinco Business has been conducted only in the ordinary course and
in a manner consistent with past practice and, since such date, there has not
been, occurred or arisen any change, or any event (including any damage,
destruction or loss whether or not covered by insurance), condition or state of
facts of any character that, individually or in the aggregate, would have a
Material Adverse Effect on the Spinco Business or Spinco, whether or not arising
in the ordinary course of business.
Section 4.6 Investigations; Litigation.
(a) To Forest's or Spinco's Knowledge, no investigation or review by any
Governmental Authority with respect to Forest, Spinco or any of their respective
Subsidiaries or the Spinco Business is pending or threatened, nor has any
Governmental Authority indicated to Forest or Spinco or any of their respective
Subsidiaries an intention to conduct the same.
(b) There is no Action pending or, to Forest's or Spinco's Knowledge,
threatened against or affecting Forest, Spinco or any of their respective
Subsidiaries, properties or assets or the Spinco Business at law or in equity,
or before any Governmental Authority or arbitrator, that (i) if adversely
determined, individually or in the aggregate, would have a Material Adverse
Effect on the Spinco Business or Spinco or (ii) seeks to delay or prevent the
consummation of
21
the Merger or any other transaction contemplated by this Agreement or any other
Transaction Agreement. There is no Order of any Governmental Authority or
arbitrator outstanding against Forest, Spinco or any of their respective
Subsidiaries or with respect to their respective properties or assets or the
Spinco Business that, individually or in the aggregate, would have a Material
Adverse Effect on the Spinco Business or Spinco.
Section 4.7 Licenses; Compliance with Laws. As of the date hereof Forest
or a Subsidiary of Forest holds, and as of the Distribution Date and the
Effective Time Spinco and its Subsidiaries will hold, all Licenses that are
required for the conduct of the Spinco Business, as presently conducted, except
such Licenses for which the failure to so hold, individually or in the
aggregate, would not have a Material Adverse Effect on the Spinco Business or
Spinco. As of the date hereof Forest or a Subsidiary of Forest is, and as of the
Distribution Date and the Effective Time Spinco and its Subsidiaries will be, in
compliance with the terms of all such Licenses so held, except where the failure
so to comply, individually or in the aggregate, would not have a Material
Adverse Effect on the Spinco Business or Spinco. No suspension or cancellation
of any of the Licenses relating to the Spinco Business is pending or, to
Forest's or Spinco's Knowledge, threatened, except where the failure to have, or
the suspension or cancellation of, any of such Licenses would not have a
Material Adverse Effect on the Spinco Business or Spinco. Except with respect to
Environmental Laws, ERISA and laws relating to Taxes, Forest, Spinco and their
respective Subsidiaries are in compliance with all, and have received no notice
of any violation (as yet unremedied) of any laws, ordinances or regulations of
any Governmental Authority applicable to the Spinco Business, except for such
instances of noncompliance which, individually or in the aggregate, would not
have a Material Adverse Effect on the Spinco Business or Spinco.
Section 4.8 Proxy Statement/Prospectus; Registration Statements. None of
the information regarding Forest or its Subsidiaries or Spinco or its
Subsidiaries or the transactions contemplated by this Agreement or any other
Transaction Agreement provided by Forest or Spinco specifically for inclusion in
the Proxy Statement/Prospectus or the Registration Statements will, in the case
of the definitive Proxy Statement/Prospectus or any amendment or supplement
thereto, at the time of the mailing of the definitive Proxy Statement/Prospectus
and any amendment or supplement thereto and at the time of the Company
Stockholders Meeting, or, in the case of each Registration Statement, at the
time it becomes effective, at the time of the Company Stockholders Meeting, at
the Distribution Date and at the Effective Time contain an 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. The Registration
Statements will comply in all material respects with the provisions of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder, except that no representation is made by Forest or
Spinco with respect to information provided by the Company specifically for
inclusion in the Registration Statements. All factual information (excluding
estimates and projections) previously furnished by Forest to the Company with
regard to the Spinco Assets and the Spinco Business was (taken as a whole) true
and correct in all material respects on the date on which such information was
furnished and did not contain any untrue statement of a material fact or omit to
state a material fact relevant to the consummation of the transactions
contemplated by this Agreement or necessary to make the statements contained
therein not misleading.
22
Section 4.9 Information Supplied. All documents that Spinco or Forest is
responsible for filing with any Governmental Authority in connection with the
transactions contemplated hereby or by any other Transaction Agreement will
comply in all material respects with the provisions of applicable law.
Section 4.10 Environmental Matters. Except as would not, individually or
in the aggregate, have a Material Adverse Effect on the Spinco Business or
Spinco:
(i) As of the date hereof Forest or a Subsidiary of Forest has
obtained, and as of the Distribution Date and the Effective Time each of
Spinco and its Subsidiaries shall have obtained, all Licenses, permits and
other authorizations under Environmental Laws ("Environmental Permits")
required for the conduct and operation of the Spinco Business. Each of
Spinco, its Subsidiaries and the Spinco Business is in compliance and at
all times has been in compliance with the terms and conditions contained
in its Environmental Permits, and each of them and the Spinco Business is,
and for the past one year has been, in compliance with all applicable
Environmental Laws;
(ii) Neither Spinco nor any of its Subsidiaries is subject to any
environmental indemnification obligation regarding businesses currently
operated by Forest, Spinco or the Spinco Business or any of their
respective Subsidiaries or regarding properties currently owned or leased
by Forest, Spinco or the Spinco Business or any of their respective
Subsidiaries;
(iii) To Forest's and Spinco's Knowledge there is no condition on,
at, under or related to any property (including any release of a Hazardous
Material into the air, soil, surface water, sediment or ground water at,
under or migrating to or from such property) currently owned, leased or
used by Forest, Spinco or any of their respective Subsidiaries or created
by Spinco's or any Spinco Subsidiary's operations or the Spinco Business
that would create liability for Spinco or any of its Subsidiaries under
applicable Environmental Laws and, to Forest's and Spinco's Knowledge, the
foregoing representation is true and correct with regard to property
formerly owned, leased or used either by Forest, Spinco or any of their
respective Subsidiaries, or in connection with the Spinco Business;
(iv) There are no past or present actions, activities,
circumstances, conditions, events or incidents (including the release,
emission, discharge, presence or disposal of any Hazardous Material) that
form or are reasonably likely to form the basis of a claim against Forest,
Spinco or any of their respective Subsidiaries under Environmental Laws,
including any claims based on the alleged exposure of any Person or
property to any Hazardous Material;
(v) Spinco has made available to the Company all material site
assessments, compliance audits, and other similar studies prepared since
January 1, 2002 in the possession or custody of Forest, Spinco or any of
their respective Subsidiaries relating to (A) the environmental conditions
on, under or about the properties or assets currently owned, leased,
operated or used by Spinco, the Spinco Business, any of its Subsidiaries
or any predecessor in interest thereto and (B) any Hazardous Materials
used, managed,
23
handled, transported, treated, generated, stored, discharged, emitted, or
otherwise released by Spinco, the Spinco Business, any of its Subsidiaries
or, to Forest's and Spinco's Knowledge, any other Person, on, under, about
or from any of the properties currently owned or leased by, or otherwise
in connection with the use or operation of any of the properties owned or
leased by, or otherwise in connection with the use or operation of any of
the properties and assets of, Spinco or any of its Subsidiaries, or their
respective businesses and operations;
(vi) Since January 1, 2002, neither Spinco nor Forest in connection
with the Spinco Business nor any Spinco Subsidiary has received any
communication that has not been resolved, whether from a Governmental
Authority, citizen's group, employee or otherwise, alleging that it is
liable under, or not in compliance with, any Environmental Law; and
(vii) To Spinco's and Forest's Knowledge, there is no requirement
anticipated or formally proposed for notice, comment, adoption or
implementation under any Environmental Law or any Environmental Permit
issued pursuant thereto that is reasonably expected to result in liability
or material increases in either capital or operating costs for Spinco or
any of its Subsidiaries.
(b) Insofar as the representations set forth in subsections (a)(i),
(a)(ii), (a)(iii), (a)(iv) and (a)(vii) relate to Spinco Assets operated by a
Person other than Spinco or any of its respective Subsidiaries, such
representations are given only to the Knowledge of Forest and Spinco.
Section 4.11 Tax Matters.
(a) (i) All material Tax Returns relating to Forest, the Subsidiaries of
Forest, Spinco, the Spinco Subsidiaries and the Spinco Business required to be
filed have been duly and timely filed, (ii) all such Tax Returns are true,
correct and complete in all material respects, (iii) all Taxes shown as due and
payable on such Tax Returns, relating to Forest, any Subsidiary of Forest,
Spinco, any of the Spinco Subsidiaries or the Spinco Business required to be
paid, have been duly and timely paid, (iv) no adjustment relating to such Tax
Returns has been proposed in writing by any Governmental Authority (insofar as
it relates to the activities or income of Forest, the Subsidiaries of Forest,
Spinco, the Spinco Subsidiaries or the Spinco Business), (v) all material Taxes
relating to Forest, any of the Subsidiaries of Forest, Spinco, any of the Spinco
Subsidiaries or the Spinco Business for any taxable period (or a portion
thereof) beginning on or prior to the date of the Closing (which are not yet due
and payable) have been properly reserved for in the Spinco 2004 Financial
Statements (or, with respect to Forest and its Subsidiaries, on Forest's audited
financial statements as of and for the year ended December 31, 2004) whether or
not shown as being due on any Tax Returns and (vi) all material Taxes required
to be withheld by or with respect to Forest, the Subsidiaries of Forest, Spinco,
the Spinco Subsidiaries and the Spinco Business have been withheld and such
withheld Taxes have been either duly and timely paid to the proper Governmental
Authority or properly set aside in accounts for such purpose and will be duly
and timely paid to the proper Governmental Authority.
24
(b) No written agreement or other written document waiving or extending,
or having the effect of waiving or extending, the statute of limitations or the
period of assessment or collection of any Taxes relating to Forest or the Spinco
Business and no power of attorney with respect to any such Taxes, in each case
that is currently outstanding and in effect, has been filed or entered into with
any Governmental Authority.
(c) No (i) audits or other administrative proceedings or court proceedings
are presently pending with regard to any Taxes or Tax Return of Spinco, any
Spinco Subsidiary or with respect to the Spinco Business as to which any Taxing
Authority has asserted in writing any claim which, if adversely determined,
would have a Material Adverse Effect on Spinco or the Spinco Business, and (ii)
Governmental Authority has asserted in writing any deficiency or claim for Taxes
(including any adjustment to Taxes) with respect to income or any other material
Tax relating to the Spinco Business or for which Spinco or any Spinco Subsidiary
may be liable which has not been fully paid or finally settled.
(d) Neither Spinco nor any Spinco Subsidiary (i) is a party to or bound by
or has any obligation or liability under any written Tax separation, sharing or
similar agreement or arrangement other than the Tax Sharing Agreement, (ii) is
or has been a member of any consolidated, combined or unitary group for purposes
of filing Tax Returns or paying Taxes, (iii) has entered into a closing
agreement pursuant to Section 7121 of the Code, or any predecessor provision or
any similar provision of state or local law, (iv) is required to include in
income any amount in respect of an adjustment pursuant to Section 481 of the
Code by reason of a change in accounting method, or (v) has filed any consents
under Section 341(f) of the Code.
(e) No asset of Spinco or any Spinco Subsidiary and no asset of the Spinco
Business is subject to any Tax lien (other than liens for Taxes that are not yet
due or that are being contested in good faith by appropriate proceedings and
which have been properly reserved for in the books and records of Spinco).
(f) To Forest's and Spinco's Knowledge, neither Forest nor Spinco, nor any
of their respective Affiliates, has taken or agreed to take any action that
would prevent the Merger from constituting a transaction qualifying under
Section 368(a) of the Code. Neither Forest nor Spinco is aware of any agreement,
plan or other circumstance that would prevent the Merger from qualifying under
Section 368(a) of the Code.
(g) None of the assets of Forest, any Subsidiary of Forest, Spinco, any
Spinco Subsidiary or the Spinco Business are tax-exempt use property within the
meaning of Section 168(h) of the Code.
(h) Neither Forest, any Subsidiary of Forest, Spinco nor any Spinco
Subsidiary has consummated, has participated in or is currently participating in
any transaction which was or is a listed transaction as defined in Treasury
Regulation Section 1.6011-4(b)(2).
Section 4.12 Benefit Plans.
(a) Section 4.12(a) of the Spinco Disclosure Schedule lists each "employee
benefit plan" (as defined in Section 3(3) of ERISA), and all other employee
benefit, bonus, incentive, deferred compensation, stock option (or other
equity-based), severance, change in control,
25
welfare (including post-retirement medical and life insurance), vacation,
retention and fringe benefit plans, whether or not subject to ERISA and whether
written or oral, sponsored, maintained or contributed to or required to be
contributed to by Forest (to the extent affecting Spinco or the Spinco
Business), Spinco or any of their respective Subsidiaries, or to which Forest
(to the extent affecting Spinco or the Spinco Business), Spinco or any of their
respective Subsidiaries is a party, for the benefit of any Person who is
currently, has been or, on or prior to the Effective Time, is expected to become
an employee of Spinco or any of its Subsidiaries (a "Spinco Employee") (the
"Spinco Benefit Plans"). Except as provided in Section 2.9 or in the Employee
Benefits Agreement, neither Spinco, any of its Subsidiaries nor any ERISA
Affiliate of any of them has any commitment or formal plan, whether legally
binding or not, to create any additional employee benefit plan or modify or
change any existing Spinco Benefit Plan that would affect any Spinco Employee.
Spinco has heretofore delivered or made available to the Company true and
complete copies of each Spinco Benefit Plan and any amendments thereto (or if
the plan is not a written plan, a description thereof), any related trust or
other funding vehicle, any reports or summaries required under ERISA or the Code
for the most recent reporting period and the most recent determination letter
received from the IRS (if any) with respect to each such plan intended to
qualify under Section 401(a) of the Code.
(b) No liability under Title IV (including Sections 4069 and 4212(c) of
ERISA) or Section 302 of ERISA has been incurred by Spinco, any of its
Subsidiaries or any ERISA Affiliate of any of them that has not been satisfied
in full, and no condition exists that presents a material risk to Spinco, any of
its Subsidiaries or any ERISA Affiliate of any of them of incurring any such
liability, other than liability for premiums due the PBGC (which premiums have
been paid when due). Except for the plan established under the Forest Oil
Corporation Pension Trust Agreement, no Spinco Benefit Plan is subject to Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code.
(c) No Spinco Benefit Plan is a "multiemployer pension plan," as defined
in Section 3(37) of ERISA, and none of Spinco, any of its Subsidiaries or any
ERISA Affiliate of any of them has made or suffered a "complete withdrawal" or a
"partial withdrawal," as such terms are respectively defined in Sections 4203
and 4205 of ERISA, which has not been satisfied in full.
(d) Each Spinco Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including
ERISA and the Code. All contributions required to be made with respect to any
Spinco Benefit Plan have been timely made. There are no pending or, to Spinco's
and Forest's Knowledge, threatened claims by, on behalf of or against any of the
Spinco Benefit Plans or any assets thereof, other than routine benefit claim
matters, that, if adversely determined could, individually or in the aggregate,
result in a material liability for Spinco or any of its Subsidiaries and no
matter is pending (other than routine qualification determination filings,
copies of which have been furnished to the Company or will be promptly furnished
to the Company when made) with respect to any of the Spinco Benefit Plans before
the IRS, the United States Department of Labor or the PBGC.
(e) Each Spinco Benefit Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code, each trust
maintained under any Spinco Benefit Plan
26
intended to satisfy the requirements of Section 501(c)(9) of the Code has
satisfied such requirements and, in either such case, no event has occurred or
condition is known to exist that would reasonably be expected to adversely
affect such tax-qualified status for any such Spinco Benefit Plan or any such
trust.
(f) Except for a Spinco Benefit Plan that provides retiree medical
benefits, no Spinco Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Spinco or any Subsidiary of Spinco for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary). With respect to any Spinco Benefit Plan maintained at the
Effective Time, Spinco will have the right at and after the Effective Time to
terminate or terminate participation in such Spinco Benefit Plan or to amend
such Spinco Benefit Plan to reduce future benefits without incurring or
otherwise being responsible for any material liability with respect thereto.
(g) 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 hereunder, under
any agreement contemplated herein, or under any Spinco Benefit Plan or any
Contract listed in Section 4.15 of the Spinco Disclosure Schedule 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.
Section 4.13 Labor Matters. None of Forest, Spinco or any of their
respective Subsidiaries is a party to, or bound by, any collective bargaining
agreement or other Contract with a labor union or labor organization that would
affect the Spinco Business and no collective bargaining agreement is being
negotiated by Forest, Spinco or any of their respective Subsidiaries that would
affect the Spinco Business. With respect to Spinco Employees, none of Forest,
Spinco or any of their respective Subsidiaries is the subject of any proceeding
asserting that it has committed an unfair labor practice or is seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment nor is there any strike, work stoppage or other labor dispute
involving Forest, Spinco or any of their respective Subsidiaries or the Spinco
Business pending or, to Spinco's or Forest's Knowledge, threatened, that,
individually or in the aggregate, would have a Material Adverse Effect on the
Spinco Business or Spinco. There are no labor controversies pending or, to
Spinco's or Forest's Knowledge, threatened against Forest, Spinco or any of
their respective Subsidiaries that, individually or in the aggregate, would have
a Material Adverse Effect on the Spinco Business or Spinco. There have been no
claims initiated by any labor organization to represent any Spinco Employees not
currently represented by a labor organization.
Section 4.14 Intellectual Property Matters. As of the date hereof Forest
or a Subsidiary of Forest owns or possesses, and as of the Distribution Date and
the Effective Time Spinco and its Subsidiaries will own or possess, adequate
licenses or other valid rights to use all seismic data, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and service marks,
know-how and other proprietary rights and information used or held for use in
connection with
27
the Spinco Business as currently conducted, except where the failure to own or
possess such items, individually or in the aggregate, would not have a Material
Adverse Effect on the Spinco Business or Spinco. To Forest's or Spinco's
Knowledge, there is no assertion or claim challenging the validity of any of the
foregoing that, individually or in the aggregate, would have a Material Adverse
Effect on the Spinco Business or Spinco. The conduct of the Spinco Business as
currently conducted does not and will not conflict in any way with any seismic
data license, patent, patent right, license, trademark, trademark right, trade
name, trade name right, copyright, service xxxx, trade secret, know-how or other
proprietary rights or information of any third party that, individually or in
the aggregate, would have a Material Adverse Effect on the Spinco Business or
Spinco.
Section 4.15 Material Contracts.
(a) Section 4.15 of the Spinco Disclosure Schedule sets forth all
Contracts, other than benefit plans maintained by Forest, Spinco Benefit Plans
and oil and gas leases and assignments entered into in the ordinary course of
business, to which Forest or any of its Subsidiaries is a party relating to the
Spinco Business or to which Spinco or any Spinco Subsidiary is a party (i)
relating to indebtedness for borrowed money, (ii) that is a "material contract"
(as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (iii)
that obligates Forest or Spinco or any of their respective Subsidiaries to make
any payments or issue or pay anything of value to any director, officer,
employee or consultant, (iv) that limit or purport to limit the ability of
Forest or Spinco or any of their respective Subsidiaries to compete in the U.S.
domestic oil and gas exploration, production and marketing business with any
Person in any geographic area or during any period of time, (v) that includes
any material indemnification, contribution or guarantee obligations (other than
such obligations entered into in the ordinary course of business in offshore oil
and gas operations), (vi) that relate to capital expenditures involving total
payments of more than $1 million, (vii) requiring annual or remaining payments
in excess of $1 million after the date hereof, (viii) that is a seismic license
agreement or rig or drilling contract, (ix) that is a fixed price commodity
sales agreement with a remaining term of more than 60 days, (x) that is a
material Contract relating to any of the properties specified in Section 4.15 of
the Spinco Disclosure Schedule or (xi) that obligates Forest or Spinco or any of
their Subsidiaries to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person. Neither Forest
nor Spinco, nor any of their respective Subsidiaries, has received notice that
any party to any such Contract is in default, and each such Contract (x) is
freely assignable to Spinco without penalty or other adverse consequences and
(y) upon consummation of the transactions contemplated by this Agreement and the
other Transaction Agreements shall continue in full force and effect without
penalty or other adverse consequence (other than the termination or expiration
thereof in accordance with its terms, for reasons other than the consummation of
the transactions contemplated by this Agreement and the other Transaction
Agreements).
(b) Neither Forest, Spinco nor any of their respective Subsidiaries is in
default in any respect under any Contract to which it is a party or by which it
or any of its properties or assets is bound, which default, individually or in
the aggregate, would have a Material Adverse Effect on the Spinco Business or
Spinco, and there has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default.
28
Section 4.16 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other similar Person is or will be entitled, by reason of
any agreement, act or statement by Forest, Spinco or any of their respective
Subsidiaries, directors, officers or employees, to any financial advisory,
broker's, finder's or similar fee or commission, to reimbursement of expenses or
to indemnification or contribution in connection with any of the transactions
contemplated by this Agreement or any other Transaction Agreement.
Section 4.17 Certain Board Findings. The Board of Directors of each of
Forest and Spinco, by unanimous written consent or at a meeting duly called and
held, has approved this Agreement and each other Transaction Agreement.
Section 4.18 Vote Required. The only vote of stockholders of Forest or
Spinco required under any of the NYBCL, DGCL, NYSE rules, Forest's Certificate
of Incorporation or Bylaws or Spinco's Certificate of Incorporation or Bylaws to
approve the transactions contemplated by this Agreement and each other
Transaction Agreement is the affirmative vote of the sole holder of the
outstanding shares of Spinco Common Stock prior to the Distribution Date. Such
affirmative vote has been obtained on or prior to the date hereof.
Section 4.19 Stockholder Approval. As of the date hereof, the sole
stockholder of Spinco is Forest. On the date of this Agreement Forest shall
deliver to Spinco a written consent of Spinco's sole stockholder in compliance
with Section 228 of the DGCL with respect to all aspects of this Agreement and
the other Transaction Agreements and the transactions contemplated hereby and
thereby which require the consent of Spinco's stockholders under the DGCL, NYSE
rules, Spinco's Certificate of Incorporation or Spinco's Bylaws. The approval of
Forest's shareholders is not required to effect the transactions contemplated by
the Distribution Agreement, this Agreement or any other Transaction Agreement.
Upon delivery of such written consent, the approval of Spinco's stockholders
after the Distribution Date will not be required to effect the transactions
contemplated by this Agreement, including the Merger, unless this Agreement is
amended in accordance with Section 251(d) of the DGCL after the Distribution
Date and such approval is required, solely as a result of such amendment, under
the DGCL, NYSE rules, Spinco's Certificate of Incorporation or Spinco's Bylaws
or by the IRS.
Section 4.20 Certain Payments. Except as contemplated by the Transaction
Agreements, no Spinco Benefit Plan or employment arrangement, no similar plan or
arrangement sponsored or maintained by Forest in which any Spinco Employee is a
participant and no contractual arrangement between Spinco and any third party
exists that could result in the payment to any current, former or future
director, officer, stockholder or employee of Spinco or any of its Subsidiaries,
or of any entity the assets or capital stock of which have been acquired by
Spinco or a Spinco Subsidiary, of any money or other property or rights or
accelerate or provide any other rights or benefits to any such individual as a
result of the consummation of the transactions contemplated by the Transaction
Agreements (including the Distribution), whether or not (a) such payment,
acceleration or provision would constitute a "parachute payment" (within the
meaning of Section 280G of the Code), or (b) some other subsequent action or
event would be required to cause such payment, acceleration or provision to be
triggered.
Section 4.21 Assets. As of the date hereof, Forest, a Subsidiary of
Forest, Spinco or a Spinco Subsidiary has, and as of the Effective Time, Spinco
or a Spinco Subsidiary will have,
29
good and marketable title to all oil and gas properties forming the basis for
the reserves reflected in the Spinco Reserve Report as attributable to interests
owned by Spinco or any Spinco Subsidiary and, as of the date hereof, Forest, a
Subsidiary of Forest, Spinco or a Spinco Subsidiary has, and as of the Effective
Time, Spinco or a Spinco Subsidiary will have, good and valid title to or valid
leasehold interests or other contractual rights in, all other Spinco Assets,
with respect to both the oil and gas properties and all other Spinco Assets,
free and clear of all mortgages, deeds of trust, liens, security interests,
pledges, leases, conditional sale contracts, claims, charges, liabilities,
obligations, privileges, easements, rights of way, limitations, reservations,
restrictions, options, rights of first refusal and other encumbrances of every
kind ("Liens") except for Permitted Liens and Liens associated with obligations
reflected in the Spinco Reserve Report. The oil and gas leases and other
agreements that provide Forest and its Subsidiaries, and that as of the
Effective Time will provide Spinco and its Subsidiaries, with operating rights
in the oil and gas properties reflected in the Spinco Reserve Report are legal,
valid and binding and in full force and effect, the rentals, royalties and other
payments due thereunder have been properly paid and, to Forest's and Spinco's
Knowledge, there is no existing default (or event that, with notice or lapse of
time or both, would become a default) under any of such oil and gas leases or
other agreements, except as would not, individually or in the aggregate, have a
Material Adverse Effect on the Spinco Business or Spinco. Each of Spinco and
Forest and their respective Subsidiaries (as the case may be) has maintained all
the Spinco Assets owned on the date hereof in working order and operating
condition, subject only to ordinary wear and tear. The Spinco Assets constitute
all the assets, properties and rights related to or required for the conduct of
the Spinco Business as currently conducted, except for the services to be
provided pursuant to the Transition Services Agreement. The Spinco Assets
include all properties reflected in the Spinco Reserve Report.
Section 4.22 Loans. There are no outstanding loans made to any Person by
Forest, Spinco or any of their respective Subsidiaries that are or will be
Spinco Assets.
Section 4.23 Oil and Gas Reserves. Forest has furnished to the Company
reserve reports prepared by Forest containing estimates of the oil and gas
reserves, as of December 31, 2004 and June 30, 2005 (collectively, the "Spinco
Reserve Report"), that will be owned by Spinco and the Spinco Subsidiaries upon
completion of the Contribution. The factual, non-interpretive data on which the
Spinco Reserve Report was based for purposes of estimating the oil and gas
reserves set forth therein was accurate in all material respects, and to the
Knowledge of Forest no errors in such information existed at the time such
information was provided. The Spinco Reserve Report conforms to the guidelines
with respect thereto of the SEC. Except for changes (including changes in
hydrocarbon commodity prices) generally affecting the oil and gas industry and
normal depletion by production, there has been no change in respect of the
matters addressed in the Spinco Reserve Report that would reasonably be expected
to have a Material Adverse Effect on the Spinco Business or Spinco. Since
January 1, 2003 all xxxxx included in the Spinco Assets have been drilled and
(if completed) completed, operated and produced in compliance in all respects
with applicable oil and gas leases and applicable laws, except where any such
failure or violation would not have a Material Adverse Effect on Spinco, the
Spinco Assets or the Spinco Business. To the Knowledge of Forest and Spinco,
there are no xxxxx included in the Spinco Assets that Forest, Spinco or any of
their respective Subsidiaries are (i) currently obligated by applicable law or
Contract to plug and abandon, or (ii) obligated by applicable law or Contract to
plug and abandon with the lapse of
30
time or notice or both because the well is not currently capable of producing in
commercial quantities. No Person has any call on, option to purchase or similar
rights with respect to the production of hydrocarbons attributable to the Spinco
Assets, except any such call, option or similar right at market prices. Except
for gas imbalances between Forest, Spinco or any of their respective
Subsidiaries and any third party working interest owners, marketers or pipelines
relative to the Spinco Assets that have accrued since June 30, 2005, neither
Forest, Spinco nor any of their respective Subsidiaries is obligated by any gas
prepayment arrangement or by any "take-or-pay" requirement, advance payment or
other similar arrangement to deliver any gas at a future time without then or
thereafter receiving payment therefor. With respect to any oil and gas interests
comprising Spinco Assets that are not operated by Forest, Spinco or any of their
respective Subsidiaries, Forest and Spinco make the representations and
warranties set forth in this Section 4.23 only to Forest's and Spinco's
Knowledge.
Section 4.24 Derivative Transactions. Neither Forest nor Spinco nor any of
their respective Subsidiaries has entered into any Derivative Transaction
pursuant to which Spinco, any Spinco Subsidiary or the Spinco Business has or
will have a continuing financial liability or obligation. All Derivative
Transactions entered into by Forest, Spinco or any of their respective
Subsidiaries that are currently open and pursuant to which Spinco, any Spinco
Subsidiary or the Spinco Business has or will have a continuing financial
liability or obligation were entered into in material compliance with applicable
rules, regulations and policies of all regulatory authorities.
Section 4.25 No Other Representations and Warranties. Except for the
representations and warranties contained in Article III and in this Article IV
and except for any representations and warranties specifically set forth in the
other Transaction Agreements, the Company acknowledges that neither Forest nor
Spinco nor any other Person makes any express or implied representation or
warranty with respect to Spinco or its Subsidiaries, the Spinco Business or
otherwise or with respect to any other information provided to the Company,
whether on behalf of Forest, Spinco or such other Persons, including as to (i)
merchantability or fitness for any particular use or purpose, (ii) the use of
the Spinco Assets and the assets of the Spinco Business and the operation of the
Spinco Business after the Closing in any manner or (iii) the success or
profitability of the ownership, use or operation of the Spinco Business after
the Closing. Neither Forest, Spinco nor any other Person will have or be subject
to any liability or indemnification obligation to the Company or any other
Person to the extent resulting from the distribution to the Company, or the
Company's use of, any information related to the Spinco Business and any other
information, document or material made available to the Company in certain "data
rooms," management presentations or in any other form in connection with the
transactions contemplated by this Agreement and the other Transaction
Agreements.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule (with specific
reference to the particular Section of this Agreement to which the information
set forth in such disclosure schedule relates; provided, that any information
set forth in one section of the Company
31
Disclosure Schedule shall be deemed to apply to each other Section thereof to
which it is relevant), the Company represents and warrants to Forest and Spinco
as follows:
Section 5.1 Organization, Qualification. Each of the Company and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of
Delaware, has all requisite power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently conducted and is duly qualified and licensed to do business and is in
good standing in each jurisdiction in which the ownership or leasing of its
property or the conduct of its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or to be in good standing,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. The copies of the Company's Second Amended and Restated Certificate
of Incorporation and Fourth Amended and Restated Bylaws in existence on the date
hereof included as part of Section 5.1 of the Company Disclosure Schedule are
complete and correct and in full force and effect on the date hereof. The
Company is not in violation of any of the provisions of its Second Amended and
Restated Certificate of Incorporation or Fourth Amended and Restated Bylaws. All
of the Company Subsidiaries and their respective jurisdictions of incorporation
or organization (together with a designation of those Subsidiaries constituting
Significant Subsidiaries of the Company) are identified in Section 5.1 of the
Company Disclosure Schedule. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities and has conducted its operations only as contemplated
by this Agreement.
Section 5.2 Capital Stock and Other Matters. The authorized capital stock
of the Company consists of 70,000,000 shares of Company Common Stock and
20,000,000 shares of Company Preferred Stock. At the close of business on
September 9, 2005, (i) 35,615,400 shares of Company Common Stock were issued and
outstanding, including 2,267,270 shares of restricted stock issued to employees
pursuant to the Company's Equity Participation Plan, and 2,000,000 shares of
Company Common Stock were reserved for issuance as restricted stock or upon the
exercise of stock options granted or that may be granted under the Company's
Stock Incentive Plan, and none of such shares have been issued as restricted
stock and 807,960 of such shares are subject to stock options that have been
granted to employees and directors; (ii) no shares of Company Common Stock were
held by the Company in its treasury or by its Subsidiaries; (iii) no shares of
Company Preferred Stock were issued and outstanding; and (iv) no bonds,
debentures, notes or other indebtedness of the Company or any of its
Subsidiaries having the right to vote (or convertible into securities having the
right to vote) on any matters on which holders of shares of capital stock of the
Company may vote ("Company Voting Debt") were issued or outstanding. All of the
issued and outstanding shares of Company Common Stock are validly issued, fully
paid and nonassessable and are not subject to preemptive rights. Except as set
forth in this Section 5.2, there are no outstanding (i) shares of Company Common
Stock, Company Voting Debt or other voting securities of the Company, (ii)
securities of the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock, Company Voting Debt or other voting
securities of the Company or (iii) except as specified in Section 2.9, options,
warrants, calls, rights (including preemptive rights), commitments or other
Contracts (other than certain Transaction Agreements) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound obligating the Company or any of its Subsidiaries to
issue, deliver, sell, purchase, redeem or acquire, or
32
cause to be issued, delivered, sold, purchased, redeemed or acquired, or
otherwise relating to, shares of capital stock of the Company or any of its
Subsidiaries or any Company Voting Debt or other voting securities of the
Company or any of its Subsidiaries or obligating the Company or any Company
Subsidiary to grant, extend or enter into any such option, warrant, call, right,
commitment or Contract. There are no stockholder agreements, voting trusts or
other Contracts to which the Company is a party or by which it is bound relating
to the voting or transfer of any shares of capital stock of the Company. The
authorized capital stock of Merger Sub consists of 1,000 shares of common stock,
par value $.0001 per share, all of which are owned by the Company. Each
outstanding share of capital stock of Merger Sub is duly authorized, validly
issued, fully paid and nonassessable and each such share owned by the Company is
free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on the voting rights of the
Company or such Company Subsidiary, charges and other encumbrances of any nature
whatsoever.
Section 5.3 Corporate Authority; No Violation. The Company has the
corporate power and authority to enter into this Agreement and, subject to
obtaining the Requisite Approval, to carry out its obligations hereunder. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of the Company, subject to
obtaining the Requisite Approval, and no other corporate proceedings are
necessary to consummate the Merger. Merger Sub has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution, delivery and performance by Merger Sub of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of Merger Sub.
This Agreement has been duly executed and delivered by Merger Sub and, assuming
the due authorization, execution and delivery by Forest and Spinco, constitutes
a legal, valid and binding agreement of Merger Sub, enforceable against Merger
Sub in accordance with its terms (except insofar as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles governing
the availability of equitable remedies). This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by Forest and Spinco, constitutes a legal, valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms
(except insofar as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). Merger Sub is not a party to any Contract
except this Agreement, and has no obligations or liabilities except under this
Agreement and costs incidental to its incorporation in the State of
Delaware.
Except for matters expressly contemplated by this Agreement and except for such
matters described in clauses (b), (c) and (d) below as would not, individually
or in the aggregate, have a Material Adverse Effect on the Company, neither the
execution and delivery by the Company and Merger Sub of this Agreement, nor the
consummation by the Company and Merger Sub of the transactions contemplated
hereby and the performance by the Company and Merger Sub of this Agreement will
(a) violate or conflict with any provision of the Company's Second Amended and
Restated Certificate of Incorporation or Fourth Amended and Restated Bylaws or
any provision of Merger Sub's Certificate of Incorporation or Bylaws; (b)
require any consent, approval, authorization or permit of, registration,
declaration or filing with, or notification to, any Governmental Authority or
any other Person; (c) result in any breach of or
33
constitute a default (or an event that, with notice or lapse of time or both,
would become a default) under, or give to others any right of termination,
cancellation, amendment or acceleration of any obligation or the loss of any
benefit under any Contract to which the Company or any of its Subsidiaries is a
party, or by which the Company or any of its Subsidiaries or any of their
respective assets or properties is bound or affected; (d) result in the creation
of a lien, pledge, security interest, claim or other encumbrance on any of the
issued and outstanding shares of Company Common Stock or on any of the assets of
the Company or its Subsidiaries pursuant to any Contract to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of the assets of the Company or its Subsidiaries is bound or
affected; or (e) violate or conflict with any Order, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries, or any of the
properties, businesses or assets of any of the foregoing. Section 5.3 of the
Company Disclosure Schedule identifies all material consents, approvals and
authorizations of any Governmental Authority that are legally required to be
obtained by the Company for the consummation of the transactions contemplated by
this Agreement.
Section 5.4 Company Financial Statements; Liabilities. The Company has
previously made available to Forest complete and correct copies of audited
consolidated financial statements for the Company as of and for the years ended
December 31, 2004, 2003 and 2002, and unaudited consolidated interim financial
statements for the Company as of and for the three-month periods ended March 31,
2005 and June 30, 2005 (including any related notes and schedules thereto, the
"Company Financial Statements"). The Company Financial Statements fairly present
in all material respects the financial position of the Company and its
consolidated Subsidiaries as of the respective dates thereof and the results of
operations and changes in financial position or other information included
therein for the respective periods or as of the respective dates then ended, in
each case except as otherwise noted therein and subject, where appropriate, to
normal year-end audit adjustments, in each case in accordance with past practice
and GAAP, consistently applied, during the periods involved (except as otherwise
stated therein). Except as set forth in the Company Financial Statements, the
Company and its Subsidiaries do not have any liability or obligation (whether
accrued, absolute, contingent or otherwise) of a nature or character required to
be reflected in the consolidated balance sheet of the Company or in the
footnotes thereto, in each case prepared in conformity with GAAP, other than (i)
liabilities incurred in the ordinary course of business since June 30, 2005,
(ii) liabilities that individually or in the aggregate, would not have a
Material Adverse Effect on the Company and (iii) liabilities and obligations
under the Transaction Agreements.
Section 5.5 Absence of Certain Changes or Events. Except as specifically
contemplated by this Agreement, since June 30, 2005, each of the Company and its
Subsidiaries has conducted its business only in the ordinary course and in a
manner consistent with past practice, and, since such date, there has not been,
occurred or arisen any change, or any event (including any damage, destruction
or loss whether or not covered by insurance), condition or state of facts of any
character that, individually or in the aggregate, would have a Material Adverse
Effect on the Company, whether or not arising in the ordinary course of
business.
34
Section 5.6 Investigations; Litigation.
(a) To the Company's Knowledge, no investigation or review by any
Governmental Authority with respect to the Company or any of its Subsidiaries is
pending or threatened, nor has any Governmental Authority indicated to the
Company or any of its Subsidiaries an intention to conduct the same.
(b) There is no Action pending or, to the Company's Knowledge, threatened
against or affecting the Company or any of its Subsidiaries at law or in equity,
or before any Governmental Authority or arbitrator, that, (i) if adversely
determined, individually or in the aggregate, would have a Material Adverse
Effect on the Company or (ii) seeks to delay or prevent the consummation of the
Merger or any other transaction contemplated by this Agreement. There is no
Order of any Governmental Authority or arbitrator outstanding against the
Company or any Company Subsidiary or with respect to any of their properties or
assets that, individually or in the aggregate, would have a Material Adverse
Effect on the Company.
Section 5.7 Licenses; Compliance with Laws. The Company and its
Subsidiaries hold all Licenses that are required for the conduct of the
businesses of the Company and its Subsidiaries, taken as a whole, as presently
conducted, except such Licenses for which the failure to so hold, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
The Company and its Subsidiaries are in compliance with the terms of all such
Licenses so held, except where the failure so to comply, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. No
suspension or cancellation of any of the Company's Licenses is pending or, to
the Company's Knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Company's Licenses would not have a
Material Adverse Effect on the Company. Except with respect to Environmental
Laws, ERISA and laws relating to Taxes, the Company and its Subsidiaries are in
compliance with all, and have received no notice of any violation (as yet
unremedied) of any, laws, ordinances or regulations of any Governmental
Authority applicable to any of them or their respective operations, except for
such instances of noncompliance which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
Section 5.8 Proxy Statement/Prospectus; Registration Statements. None of
the information regarding the Company or its Subsidiaries or the transactions
contemplated by this Agreement provided by the Company specifically for
inclusion in the Proxy Statement/Prospectus or the Registration Statements will,
in the case of the definitive Proxy Statement/Prospectus or any amendment or
supplement thereto, at the time of the mailing of the definitive Proxy
Statement/Prospectus and any amendment or supplement thereto and at the time of
the Company Stockholders Meeting, or, in the case of each Registration
Statement, at the time it becomes effective, at the time of the Company
Stockholders Meeting, at the Distribution Date and at the Effective Time,
contain an 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. The Registration Statements (other than the Registration Statement
on Form 10) will comply in all material respects with the provisions of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder, except that no representation is made by the Company
with respect to information provided by Forest and Spinco specifically for
inclusion in the
35
Registration Statements. All factual information (excluding estimates and
projections) previously furnished by the Company to Forest relating to the
Company or its business was (taken as a whole, including disclosures set forth
in the Company's Registration Statement on Form S-1 filed with the SEC, as
amended) true and correct in all material respects on the date on which such
information was furnished and did not contain any untrue statement of a material
fact or omit to state a material fact relevant to the consummation of the
transactions contemplated by this Agreement or necessary to make the statements
contained therein not misleading.
Section 5.9 Information Supplied. All documents that the Company is
responsible for filing with any Governmental Authority in connection with the
transactions contemplated hereby or by any other Transaction Agreement will
comply in all material respects with the provisions of applicable law.
Section 5.10 Environmental Matters. Except as would not, individually or
in the aggregate, have a Material Adverse Effect on the Company:
(i) Each of the Company and its Subsidiaries has obtained all
Environmental Permits required for the conduct and operation of its
business and is in compliance and at all times has been in compliance with
the terms and conditions contained in its Environmental Permits, and is,
and for the past one year has been, in compliance with all applicable
Environmental Laws;
(ii) Neither the Company nor any of its Subsidiaries is subject to
any environmental indemnification obligation regarding businesses
currently operated by the Company or any of its Subsidiaries or regarding
properties currently owned or leased by the Company or any of its
Subsidiaries;
(iii) To the Company's Knowledge there is no condition on, at, under
or related to any property (including any release of a Hazardous Material
into the air, soil, surface water, sediment or ground water at, under or
migrating to or from such property) currently owned, leased or used by the
Company or any of its Subsidiaries or created by the Company's or any of
the Company Subsidiary's operations that would create liability for the
Company or any of its Subsidiaries under applicable Environmental Laws
and, to the Company's Knowledge, the foregoing representation is true and
correct with regard to property formerly owned, leased or used by the
Company or any of its Subsidiaries;
(iv) There are no past or present actions, activities,
circumstances, conditions, events or incidents (including the release,
emission, discharge, presence or disposal of any Hazardous Material) that
form or are reasonably likely to form the basis of a claim against the
Company or any of its Subsidiaries under Environmental Laws, including any
claims based on the alleged exposure of any Person or property to any
Hazardous Material;
(v) The Company has made available to Spinco and Forest all material
site assessments, compliance audits, and other similar studies prepared
since January 1, 2002 in the Company's possession or custody relating to
(A) the environmental conditions on, under or about the properties or
assets currently owned, leased, operated or used by the
36
Company, any of its Subsidiaries or any predecessor in interest thereto
and (B) any Hazardous Materials used, managed, handled, transported,
treated, generated, stored, discharged, emitted, or otherwise released by
the Company, any of its Subsidiaries or, to the Company's Knowledge, any
other Person, on, under, about or from any of the properties currently
owned or leased by, or otherwise in connection with the use or operation
of any of the properties owned or leased by, or otherwise in connection
with the use or operation of any of the properties and assets of, the
Company or any of its Subsidiaries, or their respective businesses and
operations;
(vi) Since January 1, 2002, neither the Company nor any of its
Subsidiaries has received any communication that has not been resolved,
whether from a Governmental Authority, citizen's group, employee or
otherwise, alleging that it is liable under, or not in compliance with,
any Environmental Law; and
(vii) To the Company's Knowledge, there is no requirement
anticipated or formally proposed for notice, comment, adoption or
implementation under any Environmental Law or Environmental Permit issued
pursuant thereto that is reasonably expected to result in liability or
material increases in either capital or operating costs for the Company or
any of its Subsidiaries.
(b) Insofar as the representations set forth in subsections (a)(i),
(a)(ii), (a)(iii), (a)(iv) and (a)(vii) relate to assets of the Company operated
by a Person other than the Company or any of its Subsidiaries, such
representations are given only to the Knowledge of the Company.
Section 5.11 Tax Matters.
(a) (i) All material Tax Returns relating to the Company and the Company
Subsidiaries required to be filed have been duly and timely filed, (ii) all such
Tax Returns are true, correct and complete in all material respects, (iii) all
Taxes shown as due and payable on such Tax Returns, relating to the Company or
any Company Subsidiary required to be paid, have been duly and timely paid, (iv)
no adjustment relating to such Tax Returns has been proposed in writing by any
Governmental Authority, (v) all material Taxes relating to the Company and the
Company Subsidiaries for any taxable period (or a portion thereof) beginning on
or prior to the date of the Closing (which are not yet due and payable) have
been properly reserved for in the books and records of the Company whether or
not shown as being due on any Tax Return, and (vi) the Company and the Company
Subsidiaries have duly and timely withheld all material Taxes required to be
withheld and such withheld Taxes have been either duly and timely paid to the
proper Governmental Authority or properly set aside in accounts for such purpose
and will be duly and timely paid to the proper Governmental Authority.
(b) No written agreement or other written document waiving or extending,
or having the effect of waiving or extending, the statute of limitations or the
period of assessment or collection of any Taxes relating to the Company or any
Company Subsidiary and no power of attorney with respect to any such Taxes, in
each case that is currently outstanding and in effect, has been filed or entered
into with any Governmental Authority.
37
(c) (i) No audits or other administrative proceedings or court proceedings
are presently pending with regard to any Taxes or Tax Return of the Company or
any Company Subsidiary as to which any Taxing Authority has asserted in writing
any claim which, if adversely determined, would have a Material Adverse Effect
on the Company, and (ii) no Governmental Authority has asserted in writing any
deficiency or claim for Taxes (including any adjustment to Taxes) with respect
to which the Company or any Company Subsidiary may be liable with respect to
income or any other material Tax which has not been fully paid or finally
settled.
(d) Neither the Company nor any Company Subsidiary (i) is a party to or
bound by or has any obligation or liability under any written Tax separation,
sharing or similar agreement or arrangement, (ii) is or has been a member of any
consolidated, combined or unitary group for purposes of filing Tax Returns or
paying Taxes, (iii) has entered into a closing agreement pursuant to Section
7121 of the Code, or any predecessor provision or any similar provision of state
or local law, (iv) is required to include in income any amount in respect of an
adjustment pursuant to Section 481 of the Code by reason of a change in
accounting method, or (v) has filed any consents under Section 341(f) of the
Code.
(e) None of the assets of the Company or any of its Subsidiaries are
subject to any Tax lien (other than liens for Taxes that are not yet due or that
are being contested in good faith by appropriate proceedings and which have been
properly reserved for in the books and records of the Company).
(f) To the Company's Knowledge, neither the Company nor any of its
Affiliates has taken or agreed to take any action that would prevent the Merger
from constituting a transaction qualifying under Section 368(a) of the Code. The
Company is not aware of any agreement, plan or other circumstance that would
prevent the Merger from qualifying under Section 368(a) of the Code.
(g) None of the assets of the Company or any of the Company Subsidiaries
are tax-exempt use property within the meaning of Section 168(h) of the Code.
(h) Neither the Company nor any Company Subsidiary has consummated, has
participated in or is currently participating in any transaction which was or is
a listed transaction as defined in Treasury Regulation Section 1.6011-4(b)(2).
Section 5.12 Benefit Plans.
(a) Section 5.12(a) of the Company Disclosure Schedule lists each
"employee benefit plan" (as defined in Section 3(3) of ERISA), and all other
employee benefit, bonus, incentive, deferred compensation, stock option (or
other equity-based), severance, change in control, welfare (including
post-retirement medical and life insurance), vacation, retention and fringe
benefit plans, whether or not subject to ERISA and whether written or oral,
sponsored, maintained or contributed to or required to be contributed to by the
Company or any of its Subsidiaries, or to which the Company or any of its
Subsidiaries is a party for the benefit of any Person who is currently, has been
or, prior to the Effective Time, is expected to become an employee of the
Company or any of its Subsidiaries (a "Company Employee") (the "Company
38
Benefit Plans"). Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate of any of them has any commitment or formal plan, whether legally
binding or not, to create any additional employee benefit plan or modify or
change any existing Company Benefit Plan that would affect any Company Employee.
The Company has heretofore delivered or made available to Forest and Spinco true
and complete copies of each Company Benefit Plan and any amendments thereto (or
if the plan is not a written plan, a description thereof), any related trust or
other funding vehicle, any reports or summaries required under ERISA or the Code
for the most recent reporting period and the most recent determination letter
received from the IRS (if any) with respect to each such plan intended to
qualify under Section 401(a) of the Code.
(b) No liability under Title IV (including Sections 4069 and 4212(c) of
ERISA) or Section 302 of ERISA has been incurred by the Company, any of its
Subsidiaries or any ERISA Affiliate of any of them that has not been satisfied
in full, and no condition exists that presents a material risk to the Company,
any of its Subsidiaries or any ERISA Affiliate of any of them of incurring any
such liability, other than liability for premiums due the PBGC (which premiums
have been paid when due). No Company Benefit Plan is subject to Title IV of
ERISA, Section 302 of ERISA or Section 412 of the Code.
(c) No Company Benefit Plan is a "multiemployer pension plan," as defined
in Section 3(37) of ERISA and none of the Company, any of its Subsidiaries or
any ERISA Affiliate of any of them has made or suffered a "complete withdrawal"
or a "partial withdrawal," as such terms are respectively defined in Sections
4203 and 4205 of ERISA, which has not been satisfied in full.
(d) Each Company Benefit Plan has been operated and administered in all
material respects in accordance with its terms and applicable law, including,
but not limited to, ERISA and the Code. All contributions required to be made
with respect to any Company Benefit Plan have been timely made. There are no
pending or, to the Company's Knowledge, threatened claims by, on behalf of or
against any of the Company Benefit Plans or any assets thereof, other than
routine benefit claim matters, that, if adversely determined could, individually
or in the aggregate, result in a material liability for the Company or any of
its Subsidiaries and no matter is pending (other than routine qualification
determination filings, copies of which have been furnished to Forest and Spinco
or will be promptly furnished to Forest and Spinco when made) with respect to
any of the Company Benefit Plans before the IRS, the United States Department of
Labor or the PBGC.
(e) Each Company Benefit Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code, each trust
maintained under any Company Benefit Plan intended to satisfy the requirements
of Section 501(c)(9) of the Code has satisfied such requirements and, in either
such case, no event has occurred or condition is known to exist that would
reasonably be expected to adversely affect such tax-qualified status for any
such Company Benefit Plan or any such trust.
(f) No Company Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Company or any Company Subsidiary for periods extending beyond
their retirement or other termination of
39
service, other than (i) coverage mandated by applicable law, (ii) death benefits
under any "pension plan," or (iii) benefits the full cost of which is borne by
the current or former employee (or his beneficiary). The Company has the right,
and will have the right after the Effective Time to terminate any Company
Benefit Plan or to amend any such Company Benefit Plan to reduce future benefits
(including any Company Benefit Plan that provides post-retirement medical and
life insurance benefits) without incurring or otherwise being responsible for
any material liability with respect thereto.
(g) 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 hereunder, under
any agreement contemplated herein, or under any Company Benefit Plan or any
Contract listed in Section 5.15 of the Company Disclosure Schedule 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.
Section 5.13 Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement or
other Contract with a labor union or labor organization and no collective
bargaining agreement is being negotiated by the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries is the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or is seeking to compel it to bargain with
any labor organization as to wages or conditions of employment nor is there any
strike, work stoppage or other labor dispute involving the Company or any of its
Subsidiaries pending or, to the Company's Knowledge, threatened, that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. There are no labor controversies pending or, to the Company's
Knowledge, threatened against the Company or any of its Subsidiaries that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. There have been no claims initiated by any labor organization to
represent any Company Employees not currently represented by a labor
organization.
Section 5.14 Intellectual Property Matters. The Company and its
Subsidiaries own or possess adequate licenses or other valid rights to use all
seismic data, patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and service marks, know-how and other proprietary rights and
information used or held for use in connection with the business of the Company
and its Subsidiaries as currently conducted, except where the failure to own or
possess such items, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. To the Company's Knowledge, there is no assertion
or claim challenging the validity of any of the foregoing that, individually or
in the aggregate, would have a Material Adverse Effect on the Company. The
conduct of the business of the Company and its Subsidiaries as currently
conducted does not and will not conflict in any way with any seismic data
license, patent, patent right, license, trademark, trademark right, trade name,
trade name right, copyright, service xxxx, trade secret, know-how or other
proprietary rights or information of any third party that, individually or in
the aggregate, would have a Material Adverse Effect on the Company.
40
Section 5.15 Material Contracts.
(a) Section 5.15 of the Company Disclosure Schedule sets forth all
Contracts, other than Company Benefit Plans and oil and gas leases and
assignments entered into in the ordinary course of business, to which the
Company or any of its Subsidiaries is a party (i) relating to indebtedness for
borrowed money, (ii) that is a "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC), (iii) that obligates the Company
or any of its Subsidiaries to make any payments or issue or pay anything of
value to any director, officer, key employee or consultant, (iv) that limit or
purport to limit the ability of the Company or any of its Subsidiaries to
compete in the U.S. domestic oil and gas exploration, production and marketing
business with any Person in any geographic area or during any period of time,
(v) that includes any material indemnification, contribution or guarantee
obligations (other than such obligations entered into in the ordinary course of
business in offshore oil and gas operations), (vi) that relate to capital
expenditures involving total payments of more than $1 million, (vii) requiring
annual or remaining payments in excess of $1 million after the date hereof,
(viii) that is a seismic license agreement or rig or drilling contract material
to the Company, (ix) that is a fixed price commodity sales agreement with a
remaining term of more than 60 days, (x) that is a material Contract relating to
any of the properties specified in Section 5.15 of the Company Disclosure
Schedule or (xi) that obligate the Company or any of its Subsidiaries to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person. Neither the Company nor any of its Subsidiaries
has received notice that any party to any such Contract is in default, and each
such Contract, upon consummation of the transactions contemplated by this
Agreement and the other Transaction Agreements, shall continue in full force and
effect without penalty or other adverse consequence (other than the termination
or expiration thereof in accordance with its terms, for reasons other than the
consummation of the transactions contemplated by this Agreement and the other
Transaction Agreements).
(b) Neither the Company nor any of its Subsidiaries is in default in any
respect under any Contract to which it is a party or by which it or any of its
properties or assets is bound, which default, individually or in the aggregate,
would have a Material Adverse Effect on the Company, and there has not occurred
any event that, with the lapse of time or the giving of notice or both, would
constitute such a default.
Section 5.16 Opinion of Company Financial Advisor. The Company has
received the written opinion of Xxxxxx Brothers Inc., to the effect that, as of
the date of such opinion, the Exchange Ratio (as defined in such opinion) is
fair, from a financial point of view, to the Company. The Company has previously
delivered a complete copy of such opinion to Forest.
Section 5.17 Brokers or Finders. No agent, broker, investment banker,
financial advisor or other similar Person is or will be entitled, by reason of
any agreement, act or statement by the Company, or any of its Subsidiaries,
directors, officers or employees, to any financial advisory, broker's, finder's
or similar fee or commission, to reimbursement of expenses or to indemnification
or contribution in connection with any of the transactions contemplated by this
Agreement or any other Transaction Agreement.
Section 5.18 Takeover Statutes. The Board of Directors of the Company has
unanimously approved the terms of this Agreement and the consummation of the
Merger and the
41
other transactions contemplated by this Agreement, and such approval represents
all the action necessary to render inapplicable to this Agreement, the Merger
and the other transactions contemplated by this Agreement the restrictions on
"business combinations" set forth in Section 203 of the DGCL to the extent such
restrictions would otherwise be applicable to this Agreement, the Merger or the
other transactions contemplated by this Agreement.
Section 5.19 Certain Board Findings. The Board of Directors of the
Company, at a meeting duly called and held, (i) has determined that the Merger
is fair to, and in the best interests of, the Company and its stockholders and
(ii) has resolved, subject to Section 6.11, to recommend the adoption of this
Agreement by the stockholders of the Company.
Section 5.20 Vote Required. The only vote of the stockholders of the
Company required under any of the DGCL or the Company's Second Amended and
Restated Certificate of Incorporation for adoption of this Agreement and the
approval of the transactions contemplated by this Agreement is the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock entitled to vote (sometimes referred to herein as the "Requisite
Approval").
Section 5.21 Certain Payments. No Company Benefit Plan or employment
arrangement, and no contractual arrangements between the Company or any of its
Subsidiaries and any third party, exists that could result in the payment to any
current, former or future director, officer, stockholder or employee of the
Company or any of its Subsidiaries, or of any entity the assets or capital stock
of which have been acquired by the Company or a Company Subsidiary, of any money
or other property or rights or accelerate or provide any other rights or
benefits to any such individual as a result of the consummation of the
transactions contemplated by the Transaction Agreements whether or not (a) such
payment, acceleration or provision would constitute a "parachute payment"
(within the meaning of Section 280G of the Code), or (b) some other subsequent
action or event would be required to cause such payment, acceleration or
provision to be triggered.
Section 5.22 Assets. The Company has good and marketable title to all oil
and gas properties forming the basis for the reserves reflected in the Company
Reserve Report as attributable to interests owned by the Company or any Company
Subsidiary and has good and valid title to, or valid leasehold interests or
other contractual rights in, all other Company assets, with respect to both the
oil and gas properties and all other Company assets, free and clear of all Liens
except for Permitted Liens and Liens associated with obligations reflected in
the Company Reserve Report. The oil and gas leases and other agreements that
provide the Company and its Subsidiaries with operating rights in the oil and
gas properties reflected in the Company Reserve Report are legal, valid and
binding and in full force and effect, the rentals, royalties and other payments
due thereunder have been properly paid and, to the Company's Knowledge, there is
no existing default (or event that, with notice or lapse of time or both, would
become a default) under any of such oil and gas leases or other agreements,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The Company and its Subsidiaries (as the case may be)
have maintained all of their respective assets owned on the date hereof in
working order and operating condition, subject only to ordinary wear and tear.
42
Section 5.23 Loans. Section 5.23 of the Company Disclosure Schedule sets
forth each currently outstanding loan exceeding $1 million in principal amount
made by the Company or any of its Subsidiaries to any Person.
Section 5.24 Oil and Gas Reserves. The Company has furnished to Forest
reserve reports prepared by the Company containing estimates of the oil and gas
reserves, as of December 31, 2004 and June 30, 2005 (collectively, the "Company
Reserve Report"), that are owned by the Company or any of its Subsidiaries. The
factual, non-interpretive data on which the Company Reserve Report was based for
purposes of estimating the oil and gas reserves set forth therein was accurate
in all material respects, and to the Knowledge of the Company no errors in such
information existed at the time such information was provided. The Company
Reserve Report conforms to the guidelines with respect thereto of the SEC.
Except for changes (including changes in hydrocarbon commodity prices) generally
affecting the oil and gas industry and normal depletion by production, there has
been no change in respect of the matters addressed in the Company Reserve Report
that would reasonably be expected to have a Material Adverse Effect on the
Company. Since January 1, 2003 all of the Company's and its Subsidiaries' xxxxx
have been drilled and (if completed) completed, operated and produced in
compliance in all respects with applicable oil and gas leases and applicable
laws, except where any such failure or violation would not have a Material
Adverse Effect on the Company. To the Company's Knowledge, there are no xxxxx of
the Company or any of its Subsidiaries that the Company or any of its
Subsidiaries are (i) currently obligated by applicable law or Contract to plug
and abandon, or (ii) obligated by applicable 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. No Person has any call on, option
to purchase or similar rights with respect to the production of hydrocarbons
attributable to any of the Company's or its Subsidiaries' assets, except any
such call, option or similar right at market prices. Except for gas imbalances
between the Company or any of its Subsidiaries and any third party working
interest owners, marketers or pipelines relative to its assets that have accrued
since June 30, 2005, neither the Company nor any of its Subsidiaries is
obligated by any gas prepayment arrangement or by any "take-or-pay" requirement,
advance payment or other similar arrangement to deliver any gas at a future time
without then or thereafter receiving payment therefor. With respect to any oil
and gas interests of the Company and its Subsidiaries that are not operated by
the Company or any of its Subsidiaries, the Company makes the representations
and warranties set forth in this Section 5.24 only to its Knowledge.
Section 5.25 Derivative Transactions. Neither the Company nor any of its
Subsidiaries has entered into any Derivative Transaction pursuant to which it
has a continuing financial liability or obligation. All Derivative Transactions
entered into by the Company or any of its Subsidiaries that are currently open
were entered into in material compliance with applicable rules, regulations and
policies of all regulatory authorities.
Section 5.26 No Other Representations and Warranties. Except for the
representations and warranties contained in this Article V, Forest and Spinco
acknowledge that neither the Company nor any other Person makes any express or
implied representation or warranty with respect to the Company and its
Subsidiaries or otherwise or with respect to any other information provided to
Forest or Spinco, whether on behalf of the Company or such other Persons.
Neither the Company nor any other Person will have or be subject to any
liability or indemnification
43
obligation to Forest or Spinco or any other Person to the extent resulting from
the distribution to Forest or Spinco, or Forest or Spinco's use of, any
information related to the Company and any other information, document or
material made available to Forest or Spinco in certain "data rooms," management
presentations or in any other form in connection with the transactions
contemplated by this Agreement.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Conduct of Business by the Company Pending the Merger.
Following the date of this Agreement and prior to the earlier of the Effective
Time and the Termination Date, except as specifically contemplated or permitted
by this Agreement or the other Transaction Agreements or described in Section
6.1 of the Company Disclosure Schedule or to the extent that Forest shall
otherwise consent in writing (such consent not to be unreasonably withheld or
delayed), the Company agrees as to itself and its Subsidiaries as follows:
(a) Ordinary Course. Each of the Company and its Subsidiaries shall
conduct its operations in accordance with its ordinary course of business
consistent with past practice and use all commercially reasonable efforts to
preserve intact its present business organization, maintain its material rights
and franchises, keep available the services of its current officers and key
employees and preserve its relationships with material customers, suppliers and
others having business dealings with it in such a manner that its goodwill and
ongoing businesses are not impaired in any material respect. The Company shall
not, nor shall it permit any of its Subsidiaries to, enter into any new material
line of business. Prior to the Effective Time and except as specifically
contemplated by this Agreement or as mutually approved in writing by Spinco and
the Company, the Company shall cause Merger Sub not to conduct any business
operations, enter into any Contract (other than this Agreement), acquire any
assets or incur any liabilities.
(b) Dividends; Changes in Stock. The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall the Company or any of its
Subsidiaries propose to, (i) declare or pay any dividends on or make other
distributions in respect of any shares of its capital stock or partnership
interests (whether in cash, securities or property), except for the declaration
and payment of cash dividends or distributions paid on or with respect to a
class of capital stock all of which shares of capital stock or partnership
interests (with the exception of directors' qualifying shares and other
similarly nominal holdings required by law to be held by Persons other than the
Company or its wholly owned Subsidiaries), as the case may be, of the applicable
corporation or partnership are owned directly or indirectly by the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock; or (iii) redeem, repurchase or
otherwise acquire, or permit any Subsidiary to redeem, repurchase or otherwise
acquire, any shares of its capital stock (including any securities convertible
or exchangeable into such capital stock).
44
(c) Issuance of Securities. The Company shall not, nor shall it permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class, any
Company Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Company Voting Debt or convertible
securities, other than (i) the issuance of shares of Company Common Stock upon
the exercise of stock options that are outstanding on the date hereof pursuant
to the Company Stock Plans; (ii) the issuance of stock options with three year
vesting and restricted stock to existing employees and directors and newly-hired
employees and directors of the Company or its Subsidiaries, not to exceed
300,000 shares of Company Common Stock reserved for issuance under the Company
Stock Plans on the date hereof; and (iii) issuances by a wholly owned Subsidiary
of its capital stock to the Company.
(d) Governing Documents. The Company shall not amend or propose to amend
its Second Amended and Restated Certificate of Incorporation or Fourth Amended
and Restated Bylaws, nor shall it permit any of its Subsidiaries to amend or
propose to amend its charter or bylaws in any manner that would hinder the
consummation of the transactions contemplated by this Agreement.
(e) Acquisitions. Other than (i) purchases from vendors or suppliers in
the ordinary course of business consistent with past practice, (ii) exercises of
preferential rights, (iii) any single or series of acquisitions whether or not
related, where the fair market value of the total consideration payable in all
such acquisitions does not exceed $25.0 million in the aggregate or (iv) with
respect to the transaction described in Section 4.2 of the Spinco Disclosure
Schedule, the Company shall not, nor shall it permit any of its Subsidiaries to,
in a single transaction or a series of transactions, acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof; provided, however, that in any event, the
Company shall not, nor shall it permit any of its Subsidiaries to, make any such
acquisition, agreement or purchase if it would hinder in any material respect
the consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements.
(f) Dispositions. Subject to Section 6.11, and other than product sales
and other dispositions in connection with normal equipment maintenance or
salvage in the ordinary course of business consistent with past practice and
Permitted Liens, the Company shall not, nor shall it permit any of its
Subsidiaries to, in a single transaction or a series of related or unrelated
transactions, sell (including sale-leaseback), lease, pledge, encumber or
otherwise dispose of, or agree to sell (or engage in a sale-leaseback), lease
(whether such lease is an operating or capital lease), pledge, encumber or
otherwise directly or indirectly dispose of, any of its assets that in the
aggregate have a fair market value in excess of $10 million; provided, that the
Company shall not consummate or agree to consummate any such transaction with
respect to any securities of any of its Subsidiaries.
(g) Indebtedness; Leases. The Company shall not, nor shall it permit any
of its Subsidiaries to, incur any indebtedness for borrowed money or guarantee
or otherwise become contingently liable for any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire any debt securities of
the Company or any of its Subsidiaries or guarantee any
45
debt securities of others or enter into any material lease (whether such lease
is an operating or capital lease, but excluding compressor leases) or otherwise
incur any material obligation or liability (absolute or contingent) other than
indebtedness to the Company or a wholly owned Subsidiary of the Company, or
under the Credit Agreement dated as of March 2, 2004, among the Company and the
lenders party thereto, as amended from time to time, or any replacement thereof;
provided, however, that the aggregate outstanding indebtedness under such credit
agreement shall not exceed $170 million (exclusive of indebtedness incurred to
fund (A) costs related to the transactions contemplated by this Agreement and
(B) payments made to Company executives pursuant to non-compete, employment and
severance agreements and similar agreements and arrangements).
(h) Capital Expenditures. Except as required by law, the Company shall
continue its 2005 budgeted capital expenditure program for exploration and
development as described in the capital expenditure budget dated as of September
8, 2005 provided to Forest prior to the date hereof, and shall perform, to the
extent reasonably practicable, all scheduled capital expenditures set forth in
such capital expenditure program at an aggregate cost not exceeding 120% of the
aggregate costs set forth therein (it being understood that particular projects
set forth on such budget may be substituted with other projects, so long as the
aggregate maximum set forth above is not exceeded). In the event that the
Effective Time does not occur in 2005, the parties shall reasonably consult
regarding the Company's capital expenditure budget for 2006.
(i) Employee Arrangements. The Company and its Subsidiaries shall
not:
(i) grant any material increases in the compensation of any of
its directors, officers or employees, except in the ordinary course
of business consistent with past practice;
(ii) pay or agree to pay to any director, officer or employee,
whether past or present, any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing
benefit, severance, termination, pension or employment plans,
Contracts or arrangements as in effect on the date hereof;
(iii) except in the ordinary course of business consistent
with past practice, enter into any new, or materially amend any
existing, employment or severance or termination Contract with any
director or officer; or
(iv) except (x) in the ordinary course of business consistent
with past practice or (y) as may be required to comply with
applicable law, become obligated under any new pension plan, welfare
plan, multiemployer plan, employee benefit plan, severance plan,
benefit arrangement or similar plan or arrangement that was not in
existence on the date hereof, or amend any such plan or arrangement
in existence on the date hereof if such amendment would have the
effect of materially enhancing any benefits thereunder.
(j) Compliance with Laws; Licenses. Except as would not individually or in
the aggregate have a Material Adverse Effect on the Company, the Company shall
not, nor shall it permit any of its Subsidiaries to: (i) fail to comply with any
laws, ordinances or regulations applicable to it or to the conduct of its
business or (ii) permit to expire or terminate without
46
renewal any License that is necessary to the operation of the business of such
party, any facilities associated therewith or any other business.
(k) No Liquidation or Dissolution. The Company shall not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of the Company or any of its Subsidiaries.
(l) Accounting Methods. The Company shall not make any material change in
its methods of accounting in effect at December 31, 2004, except (i) as required
by the Financial Accounting Standards Board or changes in GAAP as agreed to by
the Company's independent auditors, (ii) in response to comments made by the SEC
with respect to any Registration Statement or (iii) as otherwise agreed to in
this Agreement. The Company and Merger Sub shall not change their respective
fiscal years.
(m) Affiliate Transactions. The Company shall not, nor shall it permit any
of its Subsidiaries to, enter into or amend any agreement or arrangement with
any of their respective Affiliates (including any Company Employees), other than
with wholly owned Subsidiaries of the Company, on terms materially less
favorable to the Company or such Subsidiary, as the case may be, than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm's-length basis.
(n) Contracts. The Company shall not, nor shall it permit any of its
Subsidiaries to, except in the ordinary course of business consistent with past
practice, modify, amend, terminate or renew any material Contract to which it or
any of its Subsidiaries is a party or waive, release or assign any material
rights or claims, in each case if such action would have a Material Adverse
Effect on the Company or impair in any material respect the Company's ability to
perform its obligations under this Agreement and the other Transaction
Agreements. The Company shall not, and shall not permit any of its Subsidiaries
to, waive any preferential rights. The Company shall not, nor shall it permit
any of its Subsidiaries to, enter into any Contract not in the ordinary course
of business involving total consideration of $2 million or more with a term
longer than one year which is not terminable by the Company or any such
Subsidiary of the Company without penalty upon no more than 30 days' prior
notice.
(o) Insurance. The Company shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies insurance in such
amounts and against such risks and losses as are customary for companies engaged
in their respective businesses; provided, however, that the Company may
self-insure with respect to operators' extra expense insurance, physical damage
to well site real and personal property insurance and business interruption
insurance.
(p) Tax Matters. The Company shall not (i) make or rescind any material
express or deemed election relating to Taxes unless such action will not
materially and adversely affect the Company or any of its Affiliates, or the
Surviving Corporation on a going-forward basis after the Effective Date,
including elections for any and all joint ventures, partnerships, limited
liability companies, working interests or other investments where the Company
has the capacity to make such binding election, (ii) settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, except where such
47
settlement or compromise will not result in a Material Adverse Effect on the
Company, (iii) amend any material Tax Returns, except where such amendment would
not adversely affect the Company or any of its Affiliates, or the Surviving
Corporation on a going-forward basis after the Effective Date or (iv) change in
any material respect any of its methods of reporting income or deductions for
federal income tax purposes from those expected to be employed in the
preparation of its federal income tax return for the taxable year ended December
31, 2004, except as may be required by applicable law or except for such changes
that are reasonably expected not to result in a Material Adverse Effect on the
Company; provided, however, that the Company may make or rescind any such
election, settle or compromise any such claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy, change any such
method of reporting or amend any such Tax Return without Forest's prior written
consent if the amount of Tax liabilities relating to such action does not exceed
$500,000.
(q) Discharge of Liabilities. Unless otherwise provided in this Agreement
or required by applicable law, the Company shall not, nor shall it permit any of
its Subsidiaries to, pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business (which includes the payment of final and unappealable
judgments) or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company as of and for the twelve months
ended December 31, 2004, or incurred in the ordinary course of business.
(r) Tax Treatment. Neither the Company nor Merger Sub shall take or cause
or permit to be taken any action (i) that would disqualify the Distribution from
constituting a tax-free distribution under Section 355 of the Code or the
Contribution from constituting a tax-free reorganization under Section 368(a) of
the Code or (ii) that would disqualify the Merger from constituting a tax-free
reorganization under Section 368(a) of the Code.
(s) Advice of Changes. Subject to the provisions of the Confidentiality
Agreement, the Company shall promptly advise Forest and Spinco orally and in
writing of any change or event having, or that, insofar as can reasonably be
foreseen, could have, either individually or together with other changes or
events, a Material Adverse Effect on the Company.
(t) No Action. Subject to the terms and conditions of this Agreement, the
Company shall not, nor will it permit any of its Subsidiaries to, intentionally
take or agree or commit to take any action that would result in any of the
conditions set forth in Article VII not being satisfied at the Effective Time.
(u) Hedging Activities. The Company shall not, nor shall it permit any of
its Subsidiaries to, enter into (i) any Derivative Transaction or (ii) any fixed
price commodity sales agreement with a term of more than 60 days.
(v) Lender Consent. The Company shall use reasonable commercial efforts to
obtain the lender consent referenced in Section 5.3 of the Company Disclosure
Schedule and to enter into the new credit facility referenced in Section 7.3(b).
48
(w) Agreements. The Company shall not, nor shall it permit any of its
Subsidiaries to, agree in writing or otherwise to take any action inconsistent
with the foregoing.
Section 6.2 Conduct of Business by Spinco and Forest Pending the Merger.
Following the date of this Agreement and prior to the earlier of the Effective
Time and the Termination Date, except as specifically contemplated or permitted
by this Agreement or the other Transaction Agreements or described in Section
6.2 of the Spinco Disclosure Schedule or to the extent that the Company shall
otherwise consent in writing (such consent not to be unreasonably withheld or
delayed), Forest and Spinco severally agree as follows:
(a) Ordinary Course. Forest (in regard to the Spinco Business only) and
each of Spinco and its Subsidiaries shall conduct its operations in accordance
with its ordinary course of business consistent with past practice and use all
commercially reasonable efforts to preserve intact its present business
organization, maintain its material rights and franchises, keep available the
services of its current officers and key employees and preserve its
relationships with material customers, suppliers and others having business
dealings with it in such a manner that its goodwill and ongoing businesses are
not impaired in any material respect. Spinco shall not, nor shall it permit any
of its Subsidiaries to, enter into any new material line of business.
(b) Dividends; Changes in Stock. Except as expressly permitted in the Tax
Sharing Agreement, Spinco shall not, nor shall it permit any of its Subsidiaries
to, nor shall it or any of its Subsidiaries propose to, (i) declare or pay any
dividends on or make other distributions in respect of any shares of its capital
stock or partnership interests (whether in cash, securities or property), except
for the declaration and payment of cash dividends or distributions paid on or
with respect to a class of capital stock or partnership interests all of which
shares of capital stock or partnership interests (with the exception of
directors' qualifying shares and other similarly nominal holdings required by
law to be held by Persons other than Spinco or its wholly owned Subsidiaries),
as the case may be, of the applicable corporation or partnership are owned
directly or indirectly by Spinco; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of its
capital stock, except as contemplated by the Distribution Agreement or (iii)
redeem, repurchase or otherwise acquire, or permit any Subsidiary to redeem,
repurchase or otherwise acquire, any shares of its capital stock (including any
securities convertible or exchangeable into such capital stock). Forest shall
not, nor shall it permit any of its Subsidiaries to, nor shall it or any of its
Subsidiaries propose to, declare or pay any dividends on or make other
distributions in respect of any shares of its capital stock or partnership
interests (whether in cash, securities or property), to the extent such dividend
or distribution would impact Spinco or the Spinco Business, or would prevent
Forest from consummating the Contribution or the Distribution. None of Forest,
Spinco or any of their respective Subsidiaries shall form or propose to form a
new Subsidiary of Spinco.
(c) Issuance of Securities. Spinco shall not, nor shall it permit any of
its Subsidiaries to, issue, deliver or sell, or authorize or propose to issue,
deliver or sell, any shares of Spinco's capital stock or capital stock of any
Spinco Subsidiary of any class, any Spinco Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, Spinco Voting Debt or convertible securities, other than (i) pursuant to
this Agreement and pursuant to the other Transaction Agreements; and (ii)
issuances by a wholly owned Subsidiary
49
of Spinco of its capital stock to Spinco. Without limiting the foregoing, Forest
shall not issue, deliver or sell, or authorize or propose to issue, deliver or
sell, any additional options or other equity-based awards that could be
converted into any option to acquire Spinco Common Stock, pursuant to the
Employee Benefits Agreement or otherwise.
(d) Governing Documents. Spinco shall not amend or propose to amend
Spinco's Certificate of Incorporation or Bylaws, nor shall it permit any of its
Subsidiaries to amend or propose to amend its charter or bylaws except as
explicitly provided herein or in the Distribution Agreement, in each case with a
Company Consent.
(e) Acquisitions. Other than (i) purchases from vendors or suppliers in
the ordinary course of business consistent with past practice, (ii) exercises of
preferential rights, or (iii) any single or series of acquisitions, whether or
not related, where the fair market value of the total consideration payable in
all such acquisitions does not exceed $25 million in the aggregate, Forest (in
regard to the Spinco Business only) shall not, and Spinco shall not, nor shall
they permit any of their respective Subsidiaries to, in a single transaction or
a series of transactions, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof; provided, however, that in any event, Forest shall not, and
Spinco shall not, nor shall they permit any of their respective Subsidiaries to,
make any such acquisition, agreement or purchase if it would hinder in any
material respect the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements.
(f) Dispositions. Other than product sales and other dispositions in
connection with normal equipment maintenance or salvage in the ordinary course
of business consistent with past practice and Permitted Liens, Forest (in regard
to the Spinco Business only) shall not, and Spinco shall not, nor shall they
permit any of their respective Subsidiaries to, in a single transaction or a
series of related or unrelated transactions, sell (including sale-leaseback),
lease, pledge, encumber or otherwise dispose of, or agree to sell (or engage in
a sale-leaseback), lease (whether such lease is an operating or capital lease),
pledge, encumber or otherwise directly or indirectly dispose of, any of its
assets that in the aggregate have a fair market value in excess of $10 million,
except as otherwise provided in this Agreement and the other Transaction
Agreements; provided, that Forest shall not consummate or agree to consummate
any such transaction with respect to any securities of Spinco or any of its
Subsidiaries.
(g) Indebtedness; Leases. Forest (in regard to the Spinco Business only)
shall not, and Spinco shall not, nor shall they permit any of their respective
Subsidiaries to, incur any indebtedness for borrowed money or guarantee or
otherwise become contingently liable for any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt securities of
Spinco or any of its Subsidiaries or guarantee any debt securities of others or
enter into any material lease (whether such lease is an operating or capital
lease, but excluding compressor leases) or otherwise incur any material
obligation or liability (absolute or contingent) other than indebtedness of
Spinco to be incurred by Spinco and obligations or liabilities to be assumed by
Spinco in connection with the consummation of the transactions contemplated by
the Distribution Agreement.
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(h) Capital Expenditures. Except as required by law, Forest and Spinco
shall continue the capital expenditure program for exploration and development
with respect to the Spinco Assets as described in the capital expenditure budget
dated as of September 8, 2005 provided to the Company prior to the date hereof,
and shall perform, to the extent reasonably practicable, such capital
expenditures at an aggregate cost not exceeding 120% of the aggregate costs set
forth therein (it being understood that particular projects set forth in such
budget may be substituted with other projects, so long as the aggregate maximum
set forth above is not exceeded). In the event that the Effective Time does not
occur in 2005, the parties shall reasonably consult regarding the Spinco
Business' capital expenditure budget for 2006.
(i) Employee Arrangements. Forest (in regard to the Spinco Employees only)
shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco
Employees only) or Spinco permit any of their respective Subsidiaries to:
(i) grant any material increases in the compensation of any of its
directors, officers or employees, except in the ordinary course of
business consistent with past practice;
(ii) pay or agree to pay to any director, officer or employee,
whether past or present, any pension, retirement allowance or other
employee benefit not required or contemplated by any of the existing
benefit, severance, termination, pension or employment plans, Contracts or
arrangements as in effect on the date hereof;
(iii) hire any new director, officer or, except in the ordinary
course of business consistent with past practice, employee, or enter into
any new, or materially amend any existing, employment or severance or
termination Contract with any director, officer or employee; or
(iv) except as may be required to comply with applicable law, become
obligated under any new pension plan, welfare plan, multiemployer plan,
employee benefit plan, severance plan, benefit arrangement or similar plan
or arrangement that was not in existence on the date hereof, or amend any
such plan or arrangement in existence on the date hereof solely with
respect to Spinco Employees if such amendment would have the effect of
enhancing any benefits thereunder.
(j) Compliance with Laws; Licenses. Except as would not individually or in
the aggregate have a Material Adverse Effect on Spinco or the Spinco Assets,
Forest (in regard to the Spinco Business only) shall not, and Spinco shall not,
nor shall they permit any of their respective Subsidiaries to, (i) fail to
comply with any laws, ordinances or regulations applicable to it or to the
conduct of its business or (ii) permit to expire or terminate without renewal
any License that is necessary to the operation of the business of Spinco or its
Subsidiaries, any facilities associated therewith, the Spinco Business, or any
other business.
(k) No Liquidation or Dissolution. Neither Forest nor Spinco shall
authorize, recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation or dissolution of Spinco or any of its
Subsidiaries.
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(l) Accounting Methods. Neither Forest (in regard to the Spinco Business
only) nor Spinco shall make any material change in Forest's methods of
accounting in effect at December 31, 2004, except (i) as required by the
Financial Accounting Standards Board or changes in GAAP as agreed to by Forest's
or Spinco's independent auditors, (ii) in response to comments made by the SEC
with respect to any Registration Statement or (iii) as otherwise agreed to in
this Agreement. Spinco shall not change its fiscal year.
(m) Affiliate Transactions. Forest (in regard to the Spinco Business only)
shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco
Business only) or Spinco permit any of their respective Subsidiaries to, enter
into or amend any agreement or arrangement with any of their respective
Affiliates (including any Spinco Employees), other than with wholly owned
Subsidiaries of Spinco, on terms materially less favorable to Spinco or such
Subsidiary, as the case may be, than could be reasonably expected to have been
obtained with an unaffiliated third party on an arm's-length basis.
(n) Contracts. Neither Forest nor Spinco shall, nor shall they permit any
of their respective Subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate or renew any material
Contract to which Spinco or any of its Subsidiaries is a party or which
otherwise is or will be, a Spinco Asset, or waive, release or assign any
material rights or claims which is or will be a Spinco Asset, in each case if
such action would have a Material Adverse Effect on Spinco or the Spinco
Business, or impair in any material respect Forest's or Spinco's ability to
perform their respective obligations under this Agreement and the other
Transaction Agreements. Forest, Spinco or their respective Subsidiaries shall
reasonably consult with the Company before entering into any new Contract
material to Spinco or the Spinco Business. Neither Forest nor Spinco shall, nor
shall they permit any of their respective Subsidiaries to, waive any
preferential rights that constitute Spinco Assets. Neither Forest nor Spinco
shall, nor shall they permit any of their respective Subsidiaries to, enter into
any Contract to which Spinco or any of its Subsidiaries will be a party or which
otherwise will be a Spinco Asset, which Contract is not in the ordinary course
of business, involves total consideration of $2 million or more, has a term
longer than one year and which is not terminable by Spinco or any such
Subsidiary of Spinco without penalty upon no more than 30 days' prior notice.
(o) Insurance. Forest and Spinco shall, and shall cause their respective
Subsidiaries to, maintain with financially responsible insurance companies
insurance for the Spinco Business and the Spinco Assets in such amounts and
against such risks and losses as are customary for companies engaged in their
respective businesses.
(p) Tax Matters. Forest and Spinco shall not (i) make or rescind any
material express or deemed election relating to Taxes of Spinco or the Spinco
Business unless such action will not materially and adversely affect Spinco or
the Surviving Corporation on a going-forward basis after the Effective Date,
including elections for any and all joint ventures, partnerships, limited
liability companies, working interests or other investments where Forest or
Spinco has the capacity to make such binding election, (ii) settle or compromise
any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes of Spinco or the Spinco
Business, except where such settlement or compromise will not result in a
Material Adverse Effect on Spinco or the Spinco Business, (iii) amend any
material Tax Returns of
52
Spinco or relating to the Spinco Business or (iv) change in any material respect
any method of reporting income or deductions of Spinco or the Spinco Business
for federal income tax purposes from those expected to be employed in the
preparation of its federal income tax return for the taxable year ended December
31, 2004, except as may be required by applicable law or except for such changes
that are reasonably expected not to result in a Material Adverse Effect on
Spinco or the Spinco Business, provided, however, that Spinco may make or
rescind any such election, settle or compromise any such claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy, change
any such method of reporting or amend any such Tax Return without the Company's
prior written consent if the amount of Tax liabilities relating to such action
does not exceed $500,000.
(q) Discharge of Liabilities. Unless otherwise provided in this Agreement
or required by applicable law, Forest (in regard to the Spinco Business only)
shall not, and Spinco shall not, nor shall Forest (in regard to the Spinco
Business only) or Spinco permit any of their respective Subsidiaries to, pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business (which
includes the payment of final and unappealable judgments).
(r) Tax Treatment. Neither Forest nor Spinco shall take or cause or permit
to be taken any action (i) that would disqualify the Distribution from
constituting a tax-free distribution under Section 355 of the Code or the
Contribution from constituting a tax-free reorganization under Section 368(a) of
the Code or (ii) that would disqualify the Merger from constituting a tax-free
reorganization under Section 368(a) of the Code.
(s) Advice of Changes. Subject to the provisions of the Confidentiality
Agreement, Forest and Spinco shall promptly advise the Company orally and in
writing of any change or event having, or that, insofar as can reasonably be
foreseen, could have, either individually or together with other changes or
events, a Material Adverse Effect on the Spinco Business or Spinco.
(t) No Action. Neither Forest nor Spinco shall, nor will they permit any
of their respective Subsidiaries to, intentionally take or agree or commit to
take any action that would result in any of the conditions set forth in Article
VII not being satisfied at the Effective Time.
(u) Hedging Activities. Forest (in regard to the Spinco Business only)
shall not, and Spinco shall not, nor shall they permit any of their respective
Subsidiaries to, enter into (i) any Derivative Transaction or (ii) any fixed
price commodity sales agreement with a term of more than 60 days.
(v) Agreements. Neither Forest nor Spinco shall, nor shall they permit any
of their respective Subsidiaries to, agree in writing or otherwise to take any
action inconsistent with the foregoing.
Section 6.3 Proxy Statement/Prospectus.
(a) As promptly as practicable following the date hereof, the Company
shall prepare and file with the SEC the Proxy Statement/Prospectus and the
Registration Statement on
53
Form S-4 (the Proxy Statement/Prospectus will be included as a prospectus in the
Registration Statement on Form S-4) with respect to the transactions
contemplated by this Agreement. As promptly as practicable following the date
hereof, the Company shall prepare and file with the SEC an amendment to its
Registration Statement on Form S-1 to reflect the transactions contemplated by
this Agreement. The Company shall use its reasonable best efforts to have such
Proxy Statement/Prospectus cleared by the SEC under the Exchange Act and the
Registration Statements declared effective by the SEC under the Securities Act
and the Exchange Act, as the case may be, as promptly as practicable after such
filings. The status or timing of the adjustment condition described in Section
4.2 of the Spinco Disclosure Schedule shall not serve as a basis for delaying
the Company's efforts to seek effectiveness of the Registration Statements and
mail to its stockholders the Proxy Statement/Prospectus.
(b) As promptly as practicable after the Registration Statements shall
have become effective, the Company shall mail the Proxy Statement/Prospectus to
its stockholders.
(c) No amendment or supplement to the Proxy Statement/Prospectus or any
Registration Statement will be made by the Company without the approval of
Forest and Spinco (such approval not to be unreasonably withheld or delayed).
The Company will advise Forest and Spinco, promptly after it receives notice
thereof, of the time when any Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the Company Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy Statement/Prospectus or any
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
(d) If, at any time prior to the Effective Time, any event or circumstance
should occur that results in the Proxy Statement/Prospectus or the Registration
Statements containing an untrue statement of a material fact or omitting to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, or that otherwise should be described in an amendment or
supplement to the Proxy Statement/Prospectus or the Registration Statements,
Forest, Spinco and the Company shall promptly notify each other of the
occurrence of such event and then promptly prepare, file and clear with the SEC
and mail to the Company's stockholders each such amendment or supplement.
Section 6.4 Cooperation. Forest, Spinco and the Company shall together, or
pursuant to the allocation of responsibility set forth below or otherwise to be
agreed upon between them, take action as follows:
(a) The Company shall take all such action as may reasonably be required
under state securities or "blue sky" laws in connection with the issuance of
shares of Company Common Stock pursuant to the Merger;
(b) Forest, Spinco and the Company shall cooperate with one another to the
extent reasonably necessary or commercially appropriate in promptly making any
filings with, and seeking any consents or approvals from, Governmental
Authorities necessary for the consummation of the transactions contemplated by
this Agreement;
54
(c) As promptly as practicable, the Company shall make application to the
NYSE or Nasdaq for the listing or quotation of the shares of Company Common
Stock to be issued pursuant to the transactions contemplated by this Agreement
and the Distribution Agreement and use all commercially reasonable efforts to
cause such shares to be Approved for Listing;
(d) Forest, Spinco and the Company shall, as promptly as practicable, make
any required filings and any other required or requested submissions under the
HSR Act, promptly respond to any requests for additional information from either
the Federal Trade Commission or the Department of Justice; and cooperate in the
preparation of, and coordinate, such filings, submissions and responses
(including the exchange of drafts between each party's outside counsel) so as to
reduce the length of any review periods; and
(e) Forest, Spinco and the Company shall promptly provide outside counsel
for the other parties for their confidential review copies of all filings
proposed to be made by such party with any Governmental Authority in connection
with this Agreement and the other Transaction Agreements and the transactions
contemplated hereby and thereby.
Section 6.5 Letter of Spinco's Accountants. In connection with the
information regarding Spinco or its Subsidiaries or the transactions
contemplated by this Agreement provided by Spinco specifically for inclusion in,
or incorporation by reference into, the Proxy Statement/Prospectus and the
Registration Statements, Spinco shall use all commercially reasonable efforts to
cause to be delivered to the Company a letter of KPMG, LLP, dated the date on
which the Registration Statement on Form S-4 shall become effective and as of
the Effective Time and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement on Form S-4.
Section 6.6 Letter of the Company's Accountants. In connection with the
information regarding the Company or its Subsidiaries or the transactions
contemplated by this Agreement provided by the Company specifically for
inclusion in, or incorporation by reference into, the Proxy Statement/Prospectus
and the Registration Statements, the Company shall use all commercially
reasonable efforts to cause to be delivered to Spinco a letter of Deloitte &
Touche LLP, dated the date on which the Registration Statements shall become
effective and as of the Effective Time and addressed to Forest and Spinco, in
form and substance reasonably satisfactory to Forest and Spinco and customary in
scope and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement on
Form S-4.
Section 6.7 Forest/Spinco Employee Stock Options, Incentive and Benefit
Plans. Spinco and the Company shall take all such steps as may be required to
cause any dispositions of Company Common Stock (including derivative securities
with respect to Company Common Stock) and any acquisitions of Spinco Common
Stock, as the case may be, resulting from the transactions contemplated by this
Agreement by each officer or director of the Company or Spinco who is subject to
the reporting requirements of Section 16(a) of the Exchange Act to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
55
accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
Section 6.8 Employee Benefit Plans.
(a) Subject to the remaining provisions of this Section 6.8, Spinco and
the Company shall take all acts necessary to cause Spinco Employees who remain
employed by Spinco, the Company or their Subsidiaries from and after the
Effective Time ("Continuing Spinco Employees") to participate in the Company
Benefit Plans maintained by the Company as of the Effective Time on a basis no
less favorable than that applicable to similarly situated Company Employees who
remain employed by the Company or its Affiliates as of the Effective Time (the
"Continuing Company Employees"). Notwithstanding the foregoing, if the Effective
Time occurs in 2006, then Spinco and the Company shall cause each Continuing
Spinco Employee to receive vacation benefits for the period beginning on the
Effective Time and ending on December 31, 2006, that are equal to (i) such
employee's accrued and unused vacation under Forest's vacation policy as of the
Effective Time plus (ii) if the Company's vacation policy is more generous than
Forest's vacation policy with respect to such Continuing Spinco Employee based
on his years of service recognized by Forest as of the Effective Time for
purposes of such policy, any additional vacation entitlement earned by such
employee under the terms of the Company's vacation policy. In the event the
employment of a Spinco Employee is terminated by Forest with the Company's
consent prior to the Effective Time (other than pursuant to a Termination for
Cause), (i) such employee shall not receive a Retention Benefit, (ii) Forest
shall provide such employee with the severance benefits described on Exhibit E,
Part B (provided such employee executes a release of claims in favor of Forest,
Spinco, the Company and their respective Affiliates (which release shall be in a
form agreed to by Forest, Spinco and the Company)), and (iii) as soon as
practicable after the Effective Time, the Company shall reimburse Forest for
such severance benefits actually paid by Forest to such employee; provided that
the Company shall not be responsible for any reimbursement of severance amounts
paid to any such Spinco Employee who is subsequently re-hired by Forest or any
Forest Subsidiary during the six-month period following the Effective Time (in
which case Forest shall refund any reimbursement so made by the Company).
(b) Neither Spinco nor the Company shall establish or maintain effective
as of the Effective Time (i) any plan providing supplemental executive
retirement benefits that is not an individual account plan, (ii) any plan
providing retiree medical benefits or (iii) any defined benefit pension plan.
(c) Spinco and the Company shall cause each Continuing Spinco Employee to
be given full credit for all service with Forest, Spinco and their Affiliates
before the Effective Time for all purposes under each Company Benefit Plan
(except to the extent necessary to avoid the duplication of benefits). Such
service credit for each such purpose shall be in an amount equal to the service
credit recognized under the corresponding Spinco Benefit Plan as of the
Effective Time for such purpose. For purposes of determining the terms and
conditions of a Continuing Spinco Employee's participation in any Company
Benefit Plan that is an employee welfare benefit plan (the "Company Welfare
Plans"), the Company shall, and shall cause its Affiliates to, (i) waive all
limitations as to pre-existing condition exclusions and waiting periods with
respect to the Continuing Spinco Employee or his or her dependents under the
Company Welfare Plans,
56
other than to the extent limitations or waiting periods that are already in
effect with respect to the Continuing Spinco Employee or his or her dependents
have not been satisfied as of the Effective Time under the corresponding welfare
benefit plans maintained for the Continuing Spinco Employee immediately before
the Effective Time, and (ii) provide each Continuing Spinco Employee with credit
for any co-payments and deductibles paid in the year of the Closing before the
Effective Time in satisfying any deductible or out-of-pocket requirements under
the Company Welfare Plans (on a pro-rata basis in the event of a difference in
plan years).
(d) As soon as practicable following the Effective Time, Forest shall
cause to be transferred from the trustee of Forest's Retirement Savings Plan
(the "Forest Savings Plan") to the trustee of the Company's Employee Capital
Accumulation Plan (the "Company Savings Plan") an amount in cash equal to the
aggregate account balances of the Continuing Spinco Employees under the Forest
Savings Plan determined as of the transfer date; provided, however, that to the
extent any Continuing Spinco Employee owes any amount to the Forest Savings Plan
pursuant to the terms of a loan from such plan to such Continuing Spinco
Employee, an in-kind transfer of such loan shall be made in addition to the
transfer of cash for the remaining account balance. All account investments
(other than any such loan amounts), including investments in shares of Forest
Common Stock and/or Company Common Stock, shall be converted to cash prior to
the account transfer to the Company Savings Plan. From and after the date of
such transfer, Spinco and the Company shall cause the Company Savings Plan to
assume the obligations of the Forest Savings Plan with respect to benefits
accrued by the Continuing Spinco Employees under the Forest Savings Plan, and
the Forest Savings Plan shall cease to be responsible therefor. Spinco, the
Company and Forest shall cooperate in making all appropriate arrangements and
filings, if any, in connection with the transfer described above. Further,
Spinco, the Company and Forest shall cooperate and take such actions as are
necessary to permit the continuation of loan repayments by Continuing Spinco
Employees to the Forest Savings Plan by payroll deductions during the period
beginning on the Effective Time and ending on the date of the transfer described
in this paragraph. Forest represents, covenants and agrees with respect to the
Forest Savings Plan, and the Company represents, covenants and agrees with
respect to the Company Savings Plan, that, as of the date of the transfer
described in this paragraph, such plan will satisfy the requirements of Code
Sections 401(a), (k), and (m) and will have received, or a pending application
has been timely filed for, a favorable determination letter from the IRS
regarding such qualified status and covering amendments required to have been
adopted prior to the expiration of the GUST remedial amendment period.
(e) If, during the period beginning on the Effective Time and ending on
the later of June 30, 2006 or the date which is six months after the Effective
Time (the "Retention Period"), the Company or a Subsidiary of the Company
desires to relocate the principal place of employment of a Continuing Spinco
Employee (other than a scheduled rotational employee) by 50 miles or more from
the location of his principal place of employment immediately prior to the
Effective Time, then Spinco and the Company shall cause any such employee who
accepts such relocation to receive the relocation benefits described on Exhibit
E, Part A. If, during the Retention Period, (i) a Continuing Spinco Employee
voluntarily terminates his employment with the Company and its Subsidiaries
within 30 days after the date of a reduction in his base salary or base wages
from that in effect immediately prior to the Effective Time, (ii) a Continuing
Spinco Employee voluntarily terminates his employment with the Company and its
Subsidiaries after the date upon which he is notified that the principal place
of his employment is changing to a
57
location that is 50 miles or more from the location of his principal place of
employment immediately prior to the Effective Time (provided, however, that if
the Company or a Subsidiary of the Company permits the employee to continue to
work at his original location, then such termination of employment may not occur
prior to a date determined by the Company, which date shall be no later than the
last day of the Retention Period), or (iii) the employment of a Continuing
Spinco Employee is involuntarily terminated by the Company or a Subsidiary of
the Company other than pursuant to a Termination for Cause, then, in any such
case, Spinco and the Company shall cause such employee to receive the severance
benefits described on Exhibit E, Part B, provided (A) such employee executes a
release of claims in favor of Forest, Spinco, the Company and their respective
Affiliates (which release shall be in a form agreed to by Forest, Spinco and the
Company), (B) such employee is not subsequently re-hired by Forest or any Forest
Subsidiary during the Retention Period (in which case Forest shall refund any
severance so paid by the Company), and (C) the amount of such severance benefit
paid to such employee shall be reduced by the portion, if any, of such
employee's Retention Benefit that was paid to such employee in accordance with
Section 6.8(g). Exhibit E, Part B sets forth the maximum aggregate severance
amount payable by the Company to the Continuing Spinco Employees pursuant to
this Section 6.8. Notwithstanding any other provision of this Agreement, except
as specifically provided in the preceding provisions of this Section 6.8(e),
neither Spinco nor the Company shall be responsible for the payment of, or
reimbursement of Forest for, severance paid to any Spinco Employee who
voluntarily resigns employment from Spinco or the Company if such Spinco
Employee was not required to relocate in order to maintain such employment. No
Continuing Spinco Employee shall be eligible for severance pursuant to the
Company's severance plan at any time while the provisions of this Section 6.8(e)
apply to such Continuing Spinco Employee.
(f) The Company shall implement in all material respects (without any
enhancement) the agreements with its officers described in Section 6.8(f) of the
Company Disclosure Schedule. The Company shall obtain the written agreement of
the officers described in Section 6.8(f) of the Company Disclosure Schedule on
or before the Effective Time.
(g) In lieu of the payment of any annual bonuses for 2005 to the
Continuing Spinco Employees under the annual incentive and bonus plans
maintained by Forest, the Company and Spinco shall provide the Continuing Spinco
Employees with the retention benefits described in this Section 6.8(g). Each
Continuing Spinco Employee's aggregate potential retention benefit ("Retention
Benefit") shall be in an amount equal to 250% of such employee's target annual
bonus for 2005 under the annual incentive or bonus plan maintained by Forest and
applicable to such employee (with such target annual bonus determined as of the
Effective Time based upon such Continuing Spinco Employee's annual base salary
in effect as of such time). Retention Benefits shall be paid by Spinco (prior to
the Effective Time) or the Company (after the Effective Time) in four
installments, the first of which will equal 25% of the employee's target annual
bonus for 2005, and the remaining three of which will each equal 75% of the
employee's target annual bonus for 2005; provided, however, that (i) any payment
of an installment of a Retention Benefit prior to the Effective Time shall be
made to each individual who is a Spinco Employee on the date of the payment of
such installment and such payment shall be based on such Spinco Employee's
annual base salary in effect on such payment date and (ii) if such Spinco
Employee's annual base salary changes between the date of any such payment and
the Effective Time, the first installment of a Retention Benefit paid to such
employee on or after the
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Effective Time shall be adjusted so that, immediately after the payment of such
installment, the employee will have received the correct amount of his or her
Retention Benefit through the date of payment of such installment determined
based on his or her annual base salary in effect as of the Effective Time. The
first such installment shall be paid on October 14, 2005, the second such
installment shall be paid on February 15, 2006, the third such installment shall
be paid on May 1, 2006, and the fourth such installment shall be paid on June
30, 2006. Retention Benefits shall be subject to applicable withholding of
taxes. Notwithstanding the foregoing, except as hereinafter provided, in order
for a Continuing Spinco Employee to be eligible to receive an installment
payment of his or her Retention Benefit, such Continuing Spinco Employee must
remain in the employ of the Company, Spinco or any of their Subsidiaries with at
least a satisfactory performance rating until the date of the payment of such
installment. If the employment of a Continuing Spinco Employee is involuntarily
terminated after the Effective Time by the Company or a Subsidiary of the
Company (other than pursuant to a Termination for Cause), then, in addition to
any severance benefit to which such employee may be entitled pursuant to Section
6.8(e), the Company shall pay or cause to be paid to such employee, within 10
days after the date of such termination of employment, an amount equal to the
next unpaid installment, if any, of such employee's Retention Benefit that would
have been paid to such employee if his or her employment had not terminated;
provided, that in no event shall any such involuntarily terminated Continuing
Spinco Employee receive less (in the aggregate) than 100% of such employee's
target annual bonus for 2005 pursuant to this Section 6.8(g), unless the
employment of such Continuing Spinco Employee was terminated pursuant to a
Termination for Cause. If a Continuing Spinco Employee voluntarily terminates
his or her employment after the Effective Time or if the employment of a
Continuing Spinco Employee is involuntarily terminated after the Effective Time
by the Company or a Subsidiary of the Company pursuant to a Termination for
Cause, then no further installments of such employee's Retention Benefit shall
be paid to such employee. Notwithstanding any other provision of this Agreement,
neither Spinco nor the Company shall be responsible for the payment of, or
reimbursement of Forest for, Retention Benefits in excess of the aggregate
amount set forth on Exhibit E, Part C.
(h) The Company hereby acknowledges that it consents to, and shall cause
any action required on its behalf to implement, the transactions and agreements
contemplated by the Employee Benefits Agreement.
Section 6.9 Investigation. Upon reasonable notice, each of Forest, Spinco,
the Company and Merger Sub shall afford to each other and to its respective
officers, employees, accountants, counsel and other authorized representatives,
reasonable access during normal business hours, throughout the period prior to
the earlier of the Effective Time or the Termination Date, to its and its
Subsidiaries' plants, properties, Contracts, commitments, books, records and any
report, schedule or other document filed or received by it pursuant to the
requirements of the federal or state securities laws, and shall use all
commercially reasonable efforts to cause its respective representatives to
furnish promptly to the other such additional financial and operating data and
other information, including environmental information, as to its and its
Subsidiaries' respective businesses and properties as the other or its duly
authorized representatives, as the case may be, may reasonably request. The
parties hereby agree that the provisions of the Confidentiality Agreement shall
apply to all information and material furnished by any party or its
representatives thereunder and hereunder. No investigation made at any time
59
by or on behalf of any of the Company, Merger Sub, Forest or Spinco shall affect
the representations and warranties of the parties hereto.
Section 6.10 Reasonable Efforts; Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of Forest,
Spinco, the Company and Merger Sub shall use all commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the other
Transaction Agreements, including providing information and using all
commercially reasonable efforts to obtain all necessary exemptions, rulings,
consents, authorizations, approvals and waivers to effect all necessary
registrations and filings and to lift any injunction or other legal bar to the
Merger and the other transactions contemplated hereby and thereby as promptly as
practicable, and to take all other actions necessary to consummate the
transactions contemplated hereby and thereby in a manner consistent with
applicable law. Without limiting the generality of the foregoing, Forest,
Spinco, the Company and Merger Sub agree to cooperate and to use their
respective commercially reasonable efforts to obtain any government clearances
required to consummate the Merger (including through any required compliance
with the HSR Act and any applicable foreign government reporting requirements)
and to respond to any government requests for information. The parties hereto
will consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other federal, state or foreign
antitrust or fair trade law.
(b) Subject to Section 6.10(a), in case at any time any further action is
reasonably necessary to carry out the purposes of this Agreement, Forest, Spinco
and the Company shall take all such commercially reasonable necessary action.
Section 6.11 No Solicitation by the Company.
(a) The Company agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it shall
use all reasonable efforts to cause its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to (and shall not authorize any
of them to), directly or indirectly: (i) solicit, initiate, encourage,
facilitate or induce any inquiry with respect to, or the making, submission or
announcement of, any Acquisition Proposal with respect to itself, (ii)
participate in any discussions or negotiations regarding, or furnish to any
person or entity any nonpublic information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition Proposal
with respect to itself, (iii) engage in discussions with any person or entity
with respect to any Acquisition Proposal with respect to itself, except as to
the existence of these provisions, (iv) approve, endorse or recommend any
Acquisition Proposal with respect to itself (except to the extent specifically
permitted pursuant to Section 6.11 and Section 8.1(g)), or (v) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal or transaction
contemplated thereby with respect to itself (except as permitted pursuant
60
to Section 6.11 and Section 8.1(g)). The Company and its Subsidiaries shall, and
the Company shall use all reasonable efforts to cause its and its Subsidiaries'
officers, directors, employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to, immediately cease any and all existing activities, discussions
or negotiations with any third parties conducted heretofore with respect to any
Acquisition Proposal with respect to itself. The Company shall ensure that its
officers, directors and key employees and its investment bankers, attorneys and
other representatives are aware of the provisions of this Section.
(b) (i) As promptly as practicable after receipt of any Acquisition
Proposal or any request for nonpublic information or inquiry which it reasonably
believes could lead to an Acquisition Proposal, the Company shall provide Forest
and Spinco with oral and written notice of the material terms and conditions of
such Acquisition Proposal, request or inquiry, and the identity of the person,
entity or Acquisition Group making any such Acquisition Proposal, request or
inquiry and a copy of all written materials provided in connection with such
Acquisition Proposal, request or inquiry. Upon receipt of the Acquisition
Proposal, request or inquiry, the Company shall provide Forest and Spinco as
promptly as practicable oral and written notice setting forth all such
information as is reasonably necessary to keep Forest and Spinco informed in all
material respects of the status and details (including material amendments or
proposed material amendments) of any such Acquisition Proposal, request or
inquiry and shall promptly provide to Forest and Spinco (A) a copy of all
written materials subsequently provided by the person making the Acquisition
Proposal in connection with such Acquisition Proposal, request or inquiry and
(B) a copy of all material written materials subsequently provided to the person
making the Acquisition Proposal in connection with such Acquisition Proposal,
request or inquiry to the extent not previously provided to Forest and Spinco.
(ii) The Company shall provide Forest and Spinco with forty eight
(48) hours prior notice (or such lesser prior notice as is provided to the
members of its Board of Directors) of any meeting of its Board of Directors at
which its Board of Directors is reasonably expected to consider any Acquisition
Proposal.
(c) Notwithstanding anything to the contrary contained in Section 6.11 and
under circumstances in which the Company has complied with all of its
obligations under Section 6.11(a) and (b), in the event that, prior to the
approval of the Merger and this Agreement by the stockholders of the Company as
provided herein, the Company receives an unsolicited, bona fide written
Acquisition Proposal with respect to itself from a third party that its Board of
Directors has in good faith concluded (following the receipt of the advice of
its outside legal counsel and its financial advisor) is, or is reasonably likely
to result in, a Superior Offer, it may then take the following actions: (i)
furnish nonpublic information to the third party making such Acquisition
Proposal, provided that (A) (1) concurrently with furnishing any such nonpublic
information to such party, its gives Forest and Spinco written notice of its
intention to furnish nonpublic information and (2) it receives from the third
party an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such third party on its behalf, the terms of which are at least as
restrictive as the terms contained in the Confidentiality Agreement (and
containing additional provisions that expressly permit the Company to comply
with the provisions of this Section 6.11) and (B) contemporaneously with
furnishing any material nonpublic information to such third
61
party, it furnishes such material nonpublic information to Forest and Spinco (to
the extent such nonpublic information has not been previously so furnished); and
(ii) engage in negotiations with the third party with respect to the Acquisition
Proposal, provided that concurrently with entering into negotiations with such
third party, it gives Forest and Spinco written notice of its intention to enter
into negotiations with such third party.
(d) In response to the receipt of a Superior Offer, the Board of Directors
of the Company may withhold, withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify, its recommendation in favor of the Merger, and, in
the case of a Superior Offer that is a tender or exchange offer made directly to
its stockholders, may recommend that its stockholders accept the tender or
exchange offer (any of the foregoing actions, whether by a Board of Directors or
a committee thereof, a "Change of Recommendation"), if all of the following
conditions in clauses (i) through (iv) are met: (i) a Superior Offer with
respect to it has been made and has not been withdrawn; (ii) approval of the
Merger and this Agreement by the stockholders of the Company as provided herein
has not occurred; (iii) it shall have (A) provided to Forest and Spinco written
notice which shall state expressly (1) that it has received a Superior Offer,
(2) the material terms and conditions of the Superior Offer (including the most
current version of any definitive agreement proposed to be entered into in
connection therewith) and the identity of the person, entity or Acquisition
Group making the Superior Offer, and (3) that it intends to effect a Change of
Recommendation and the manner in which it intends to do so, (B) provided to
Forest and Spinco a copy of all material written materials delivered to the
person, entity or Acquisition Group making the Superior Offer in connection with
such Superior Offer that were not previously provided to Forest and Spinco, and
(C) made available to Forest and Spinco all materials and information made
available to the person, entity or Acquisition Group making the Superior Offer
in connection with such Superior Offer; and (iv) it shall not have breached in
any material respect any of the provisions set forth in Section 6.11.
(e) Notwithstanding anything to the contrary contained in this Agreement,
and subject to Section 2.4, the obligation of the Company to call, give notice
of, convene and hold its stockholders' meeting as contemplated in Section 2.4
shall not be limited or otherwise affected by the commencement, disclosure,
announcement or submission to it of any Acquisition Proposal with respect to it
unless this Agreement is terminated. Notwithstanding anything to the contrary
contained in this Agreement, prior to the termination of this Agreement, the
Company shall not (i) submit to the vote of its stockholders any Acquisition
Proposal other than the Merger, or (ii) enter into any agreement, agreement in
principle or letter of intent (other than the confidentiality agreement
referenced in Section 6.11) with respect to or accept any Acquisition Proposal
other than the Merger (or resolve to or publicly propose to do any of the
foregoing).
(f) Nothing contained in this Agreement shall prohibit the Company or its
Board of Directors from taking and disclosing to its stockholders a position
with respect to a tender or exchange offer by a third party pursuant to Rules
14d 9 and 14e 2(a) promulgated under the Exchange Act to the extent required by
applicable law; provided that the content of any such disclosure thereunder
shall be governed by the terms of this Agreement; and provided further that the
Board of Directors or the Company shall not recommend that the stockholders of
the Company tender their Company Common Stock in connection with any such tender
or exchange offer unless the Board of Directors of the Company determines in
good faith (after receiving the advice of its outside legal counsel and its
financial adviser) that such Acquisition Proposal is a
62
Superior Offer. Without limiting the foregoing sentence, the Company shall not
make a Change of Recommendation to recommend that its stockholders accept a
tender or exchange offer unless specifically permitted pursuant to the terms of
Section 6.11.
(g) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Acquisition Proposal" shall mean any inquiry, offer or
proposal relating to any transaction or series of related transactions
involving: (A) any purchase from the Company or acquisition by any person,
entity or "Acquisition Group" (as "Group" is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a fifteen
percent (15%) interest in the total outstanding voting securities of the Company
or any tender offer or exchange offer that if consummated would result in any
person, entity or Acquisition Group beneficially owning fifteen percent (15%) or
more of the total outstanding voting securities of the Company or any merger,
consolidation, business combination or similar transaction involving the
Company, (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than fifteen percent (15%) of the assets of
the Company and its Subsidiaries, taken as a whole, or (C) any liquidation or
dissolution of the Company or any of its Subsidiaries; and (ii) "Superior Offer"
shall mean an unsolicited, bona fide written proposal made by a third party to
acquire, directly or indirectly, pursuant to a tender offer, exchange offer,
merger, consolidation or other business combination, all or substantially all of
the assets of the Company or substantially all of the total outstanding voting
securities of the Company on terms that the Board of Directors of the Company
has in good faith concluded (following the receipt of advice of its outside
legal counsel and its financial adviser), taking into account, among other
things, all legal, financial, regulatory and other aspects of the offer and the
person, entity or Acquisition Group making the offer, to be more favorable, from
a financial point of view, to the Company's stockholders (in their capacities as
stockholders) than the terms of the Merger and is reasonably capable of being
consummated.
Section 6.12 Director and Officer Indemnification; Insurance.
(a) From and after the Effective Time, Spinco shall indemnify, defend and
hold harmless to the fullest extent permitted under applicable law each person
who is, or has been at any time prior to the Effective Time, an officer or
director of the Company and each Subsidiary of the Company and each person who
served at the request of the Company or any Company Subsidiary as a director,
officer, trustee, partner, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, pension or other employee benefit plan or
enterprise (individually, an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, claims, damages, liabilities, costs
and expenses (including attorneys' fees), judgments, fines, penalties and
amounts paid in settlement with approval of the indemnifying party (which
approval shall not be unreasonably delayed or withheld) in connection with any
Action arising out of or pertaining to acts or omissions, or alleged acts or
omissions, by them in their capacities as such, whether commenced, asserted or
claimed before or after the Effective Time. In the event of any such Action: (i)
Spinco shall pay, as incurred, the reasonable fees and expenses of counsel
selected by the Indemnified Party, which counsel shall be reasonably acceptable
to Spinco, in advance of the final disposition of any such Action to the fullest
extent permitted by applicable law and, if required, upon receipt of any
undertaking required by applicable law, and (ii) Spinco will cooperate in the
defense of any such Action; provided, however, Spinco shall not
63
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed), and provided further, that
Spinco shall not be obligated pursuant to this Section 6.12(a) to pay the fees
and disbursements of more than one counsel for all Indemnified Parties in a
single Action, unless, in the good faith judgment of any of the Indemnified
Parties, there is or may be a conflict of interests between two or more of such
Indemnified Parties, in which case there may be separate counsel for each
similarly situated group (which counsel shall be reasonably acceptable to
Spinco). In the event of any Action, any Indemnified Party wishing to claim
indemnification will promptly notify Spinco thereof (provided, that failure to
so notify Spinco will not affect the obligations of Spinco except to the extent
that Spinco shall have been materially prejudiced as a result of such failure).
Notwithstanding the foregoing, nothing contained in this Section 6.12 shall be
deemed to grant any right to any Indemnified Party which is not permitted to be
granted to an officer or director of Spinco under
Delaware law, assuming for
such purposes that Spinco's Certificate of Incorporation and Bylaws provide for
the maximum indemnification permitted by law.
(b) Without limiting the rights that any indemnified person may have under
applicable law, the parties agree that all rights of indemnification existing as
of the date hereof as provided in the respective charter and bylaws of the
Company and Spinco shall survive the Merger and shall continue in full force and
effect in accordance with their terms.
(c) For a period of six years following the Effective Time, Spinco shall
cause to be maintained directors' and officers' liability insurance policies
covering the Indemnified Parties who are or at any time prior to the Effective
Time were covered by the Company's existing directors' and officers' liability
insurance policies on terms substantially no less advantageous to the
Indemnified Parties than such insurance with respect to claims arising from
facts or events that occurred up to and including the Effective Time to the
extent available; provided, however, that Spinco may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions that are no less advantageous to the covered persons; provided
further, that Spinco shall not be required to pay an annual premium for such
insurance in excess of 500% of the last annual premium paid by the Company prior
to the date hereof and, if such insurance is not available within such limit,
Spinco shall be required to obtain only such insurance as is available within
such limit.
(d) This Section 6.12 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives, and shall be binding on Spinco and the Company and their
respective successors and assigns. In the event Spinco or the Company or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all its
properties and assets to any Person, then, and in each case, proper provision
shall be made so that the successors and assigns of Spinco or the Company, as
the case may be, honor the indemnification obligations set forth in this Section
6.12.
Section 6.13 Rule 145 Affiliates. Spinco shall, at least 10 days prior to
the Effective Time, cause to be delivered to the Company a list, reviewed by its
counsel, identifying all persons who, in its reasonable judgment, are at such
time, or will be at the Effective Time, "affiliates" of Spinco for purposes of
Rule 145 promulgated by the SEC under the Securities Act
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(each, a "Rule 145 Affiliate"). Spinco shall furnish such information and
documents as the Company may reasonably request for the purpose of reviewing
such list. Spinco shall use all commercially reasonable efforts to cause each
person who is identified as a Rule 145 Affiliate in the list furnished pursuant
to this Section 6.13 to execute a written agreement (each, a "Rule 145 Affiliate
Agreement"), substantially in the form of Exhibit F to this Agreement, at or
prior to the Effective Time.
Section 6.14 Public Announcements. Except with respect to a Change in
Recommendation, Forest and the Company shall consult with each other and shall
mutually agree upon any press release or public announcement relating to the
transactions contemplated by this Agreement and neither of them shall issue any
such press release or make any such public announcement prior to such
consultation and agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange, in which case the party proposing to issue such press release or make
such public announcement shall use all commercially reasonable efforts to
consult in good faith with the other party before issuing any such press release
or making any such public announcement.
Section 6.15 Defense of Litigation. Each of Forest, Spinco, the Company
and Merger Sub shall use all commercially reasonable efforts to defend against
all Actions in which such party is named as a defendant that challenge or
otherwise seek to enjoin, restrain or prohibit the transactions contemplated by
this Agreement or seek damages with respect to such transactions. None of
Forest, Spinco, the Company or Merger Sub shall settle any such Action or fail
to perfect on a timely basis any right to appeal any judgment rendered or order
entered against such party therein without having previously consulted with the
other parties. Each of Forest, Spinco and the Company shall use all commercially
reasonable efforts to cause each of its Affiliates, directors and officers to
use all commercially reasonable efforts to defend any such Action in which such
Affiliate, director or officer is named as a defendant and which seeks any such
relief to comply with this Section 6.15 to the same extent as if such Person was
a party.
Section 6.16 Notification.
(a) From time to time prior to the Effective Time, each of Forest, Spinco
and the Company shall supplement or amend its respective Disclosure Schedule
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such Disclosure Schedule or that is necessary to complete or
correct (i) any information in such Disclosure Schedule that is or has been
rendered untrue, inaccurate, incomplete or misleading, (ii) any representation
or warranty of such party in this Agreement that contains a qualification as to
materiality or Material Adverse Effect that has been rendered untrue or
inaccurate, in any respect, thereby or (iii) any representation or warranty of
such party in this Agreement that is not so qualified and that has been rendered
untrue or inaccurate, in any material respect, thereby. Delivery of such
supplements shall be for informational purposes only and shall not expand or
limit the rights or affect the obligations of any party hereunder. Such
supplements shall not constitute a part of the Forest Disclosure Schedule, the
Spinco Disclosure Schedule or the Company Disclosure Schedule, as the case may
be, for purposes of this Agreement.
65
(b) Each of Forest, Spinco, the Company and Merger Sub shall give prompt
notice to the other of the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which has caused or is reasonably likely to cause
(i) any covenant or agreement of such party contained in this Agreement not to
be performed or complied with, in any material respect or (ii) any condition
contained in Article VII to become incapable of being fulfilled at or prior to
the Effective Time; provided, however, that the delivery of any notice pursuant
to this Section 6.16(b) shall not cure such breach or noncompliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
(c) Each of the parties hereto shall keep the others informed on a timely
basis as to the status of the transactions contemplated by the Transaction
Agreements and the obtaining of all necessary and appropriate exemptions,
rulings, consents, authorizations and waivers related thereto.
Section 6.17 Obligations of Merger Sub. The Company shall take all action
necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set
forth in this Agreement.
Section 6.18 Accounting Matters. The parties will use their commercially
reasonable efforts to ensure that, following the Effective Time, the Company
will establish a fiscal year ending on December 31.
Section 6.19 Reorganization Treatment.
(a) Forest (with respect to Spinco) and the Company (on its behalf and on
behalf of Merger Sub) shall execute and deliver to each of Weil, Gotshal &
Xxxxxx LLP, special tax counsel to Forest and Spinco, and Xxxxx Xxxxx L.L.P.,
counsel to the Company, certificates substantially in the forms attached hereto
as Exhibits G and H at such time or times as reasonably requested by each such
law firm in connection with its delivery of the opinion referred to in Section
7.2(c) or Section 7.3(c), as the case may be. Prior to the Effective Time,
neither Forest, Spinco, the Company or Merger Sub shall take or cause to be
taken any action which would cause to be untrue any of the representations in
such certificates.
(b) Forest, Spinco, the Company and Merger Sub intend that the Merger will
qualify as a reorganization within the meaning of Section 368(a) of the Code and
the parties will take the position for all Tax purposes that the Merger so
qualifies unless a contrary position is required by a final determination within
the meaning of Section 1313 of the Code. Forest, Spinco, the Company and Merger
Sub shall each use their respective commercially reasonable efforts to cause the
Merger to qualify as a reorganization within the meaning of Section 368(a) of
the Code, and shall not take actions, cause actions to be taken or fail to take
actions that are reasonably likely to prevent such result.
Section 6.20 Performance Bond. The Company shall obtain and maintain the
performance bond as described on Section 6.20 of the Company Disclosure
Schedule.
Section 6.21 Estimated Basis. Forest has provided the Company with an
estimate of the tax basis of the Spinco Assets as of June 30, 2005 (the
"Estimated Basis.") The Estimated Basis included capitalized intangible drilling
costs incurred with respect to the Spinco Business
66
in Forest's tax year ended December 31, 2004 (the "2004 Spinco IDC"). In respect
of this Section 6.21, and for the sake of clarity, Forest agrees that it will
capitalize the 2004 Spinco IDC in its Tax Return filing for the year ended
December 31, 2004 pursuant to Section 59(e) of the Code and in a manner
consistent with the computation of the estimated basis. Forest intends to deduct
all 2005 IDC with respect to all of its U.S. assets, including the Spinco Assets
in 2005.
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to the Obligations of Spinco, Forest, the Company
and Merger Sub to Effect the Merger. The respective obligations of Spinco,
Forest, the Company and Merger Sub to consummate the Merger shall be subject to
the fulfillment (or waiver by Forest and the Company) at or prior to the
Effective Time of the following conditions:
(a) Prior to the Effective Time, the Distribution shall have been
consummated in accordance with the Distribution Agreement and the conditions to
the consummation of the Distribution set forth in Section 9.1 of the
Distribution Agreement shall have been satisfied or shall have been waived with
a Company Consent;
(b) All material consents, approvals and authorizations of any
Governmental Authority legally required for the consummation of the transactions
contemplated by this Agreement and the other Transaction Agreements shall have
been obtained and be in effect at the Effective Time;
(c) Any applicable waiting period (including any extended waiting period
arising as a result of a request for additional information by either HSR
Agency) under the HSR Act shall have expired or been terminated;
(d) The Registration Statements shall have become effective in accordance
with the Securities Act and the Exchange Act and shall not be the subject of any
stop order or proceedings seeking a stop order; all necessary permits and
authorizations under state securities or "blue sky" laws, the Securities Act and
the Exchange Act relating to the issuance and trading of shares of Company
Common Stock to be issued in connection with the Merger shall have been obtained
and shall be in effect; and such shares of Company Common Stock and such other
shares required to be reserved for issuance in connection with the Merger shall
have been Approved for Listing;
(e) The Requisite Approval shall have been obtained;
(f) No court of competent jurisdiction or other Governmental Authority
shall have issued an Order that is still in effect restraining, enjoining or
prohibiting the Distribution or the Merger;
(g) No Action by any Governmental Authority with respect to the Merger
shall be pending that seeks to restrain, enjoin, prohibit or delay consummation
of the transactions
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contemplated by this Agreement or to impose any material restrictions or
requirements thereon or on Spinco or the Company with respect thereto;
(h) The Company Common Stock shall have been approved for listing on the
NYSE or Nasdaq, subject only to official notice of issuance; and
(i) No action shall have been taken, and no statute, rule, regulation or
executive order shall have been enacted, entered, promulgated or enforced, by
any Governmental Authority with respect to the Merger that, individually or in
the aggregate, would (i) restrain, prohibit or delay the consummation of the
Merger or (ii) impose material restrictions or requirements thereon or on Spinco
or the Company with respect thereto.
Section 7.2 Additional Conditions to the Obligations of Forest and Spinco.
The obligation of Forest and Spinco to consummate the Merger shall be subject to
the fulfillment (or waiver by Forest) at or prior to the Effective Time of the
following additional conditions:
(a) The Company shall have performed in all material respects its
covenants and agreements contained in this Agreement required to be performed at
or prior to the Effective Time and the representations and warranties of the
Company contained in this Agreement (which for purposes of this Section 7.2(a)
shall be read as though none of them contained any materiality or material
adverse effect qualifications) shall be true and correct in all respects as of
the date of this Agreement and as of the Effective Time as if made at and as of
the Effective Time (except to the extent such representations and warranties
address matters as of a particular date), except in each case (i) where the
failure to be true and correct, individually or in the aggregate, would not have
a Material Adverse Effect on Spinco or the Company or (ii) to the extent
specifically contemplated or permitted by this Agreement;
(b) The Company shall have delivered to Forest a certificate, dated as of
the Effective Time, of a senior officer of the Company certifying the
satisfaction by the Company of the conditions set forth in subsection (a) of
this Section 7.2;
(c) Forest and Spinco shall have received an opinion of Weil, Gotshal &
Xxxxxx LLP to the effect that the Merger will constitute a reorganization under
Section 368(a) of the Code. In rendering such opinion, Weil, Gotshal & Xxxxxx
LLP may require and rely upon representations contained in certificates of
officers of Forest (with respect to Spinco) and the Company (on its behalf and
on behalf of Merger Sub) substantially in the forms attached hereto in Exhibits
G and H;
(d) Forest shall have received the bondholder consents referenced in
Section 3.2 of the Forest Disclosure Schedule; and
(e) Forest shall have received the consents of its lenders under its
credit facility referenced in Section 3.2 of the Forest Disclosure Schedule.
Section 7.3 Additional Conditions to the Obligations of the Company and
Merger Sub. The obligation of the Company and Merger Sub to consummate the
Merger shall be subject to the fulfillment (or waiver by the Company) at or
prior to the Effective Time of the following additional conditions:
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(a) Spinco and Forest shall have performed in all material respects their
respective covenants and agreements contained in this Agreement required to be
performed at or prior to the Effective Time and the representations and
warranties of Spinco and Forest contained in this Agreement (which for purposes
of this Section 7.3(a) shall be read as though none of them contained any
materiality or material adverse effect qualifications) shall be true and correct
in all respects as of the date of this Agreement and as of the Effective Time as
if made at and as of the Effective Time (except to the extent such
representations and warranties address matters as of a particular date), except
in each case (i) where the failure to be true and correct, individually or in
the aggregate, would not have a Material Adverse Effect on the Spinco Business,
Spinco or the Company or (ii) to the extent specifically contemplated or
permitted by this Agreement;
(b) The Company shall have received the consent of the lenders under its
credit facility referenced in Section 5.3 of the Company Disclosure Schedule,
and Spinco and/or the Company shall have entered into a new or amended credit
facility with available borrowing capacity sufficient to operate the Spinco
Business and the Company's business after the Closing consistent with past
practice;
(c) Spinco shall have delivered to the Company a certificate, dated as of
the Effective Time, of a senior officer of Forest certifying the satisfaction of
the conditions set forth in subsection (a) of this Section 7.3;
(d) The Company shall have received an opinion from Xxxxx Xxxxx L.L.P. to
the effect that the Merger will constitute a reorganization under Section 368(a)
of the Code. In rendering such opinion, Xxxxx Xxxxx L.L.P. may require and rely
upon representations contained in certificates of officers of Forest (with
respect to Spinco) and the Company (on its behalf and on behalf of Merger Sub)
substantially in the forms attached hereto in Exhibits H and I; and
(e) The Company shall be reasonably satisfied that the Contribution and
Distribution have taken place in accordance with the terms set forth in the
Distribution Agreement.
Section 7.4 Frustration of Conditions. None of Forest, Spinco or the
Company may rely on the failure of any condition set forth in this Article VII
to be satisfied if such failure was caused by such party's failure to act in
good faith or to use its commercially reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement and the other
Transaction Agreements.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVERS
Section 8.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned prior to the Effective Time
(notwithstanding the Requisite Approval) as follows:
(a) by the mutual written consent of each party hereto, which consent
shall be effected by action of the Board of Directors of each such party;
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(b) by any party hereto if the Effective Time shall not have occurred on
or before March 31, 2006 provided that the right to terminate this Agreement
pursuant to this clause (b) shall not be available to any party whose failure to
perform any of its obligations under this Agreement required to be performed by
it at or prior to such date has been a cause of, or contributed to, the failure
of the Merger to have become effective on or before such date;
(c) by any party hereto if (i) any court of competent jurisdiction or any
other Governmental Authority shall have issued an Order restraining, enjoining
or otherwise prohibiting the Merger and such Order shall have become final and
nonappealable, provided that, if the party seeking to terminate this Agreement
pursuant to this Section 8.1(c)(i) is a party to the applicable proceeding, such
party shall have used all commercially reasonable efforts to remove such Order;
or (ii) the Requisite Approval is not obtained; provided, that the right to
terminate this Agreement pursuant to this Section 8.1(c)(ii) shall not be
available to the Company where the failure to obtain the Requisite Approval
shall have been caused by the action or failure to act by the Company and such
action or failure to act constitutes a breach by the Company of Section 6.11 in
any respect or a material breach by the Company of any of the other covenants or
agreements contained in this Agreement;
(d) by the Company if (i) either Forest or Spinco shall have failed to
perform in any material respect any of its respective covenants and agreements
contained in this Agreement required to be performed at or prior to the
Effective Time, or (ii) the respective representations and warranties of Forest
or Spinco contained in this Agreement are or shall become untrue (without giving
effect to any materiality qualification or standard contained in any such
representations and warranties) in any respect at any time prior to the
Effective Time (except to the extent such representations and warranties address
matters as of a particular date), except where the failure to be true and
correct, individually or in the aggregate, would not have a Material Adverse
Effect on the Spinco Business, Spinco or the Company; provided that the right of
the Company to terminate this Agreement pursuant to this subsection (d) shall
not be available unless such failure or untruth is incapable of cure or Forest
and Spinco shall have been unable to cure such failure or such untruth for 30
calendar days after the Company shall have given Forest and Spinco notice of
such failure or such untruth;
(e) by Forest if (i) the Company shall have failed to perform in any
material respect any of its covenants and agreements contained in this Agreement
required to be performed at or prior to the Effective Time, or (ii) the
representations and warranties of the Company contained in this Agreement are or
shall become untrue (without giving effect to any materiality qualification or
standard contained in any such representations and warranties) in any respect at
any time prior to the Effective Time (except to the extent such representations
and warranties address matters as of a particular date), except where the
failure to be true and correct, individually or in the aggregate, would not have
a Material Adverse Effect on the Company, the Spinco Business or Spinco;
provided that the right of Forest to terminate this Agreement pursuant to this
subsection (e) shall not be available unless such failure or untruth is
incapable of cure or the Company shall have been unable to cure such failure or
such untruth for 30 calendar days after Forest shall have given the Company
notice of such failure or such untruth;
(f) by Forest in the event that (i) the Board of Directors of the Company
shall have failed to reaffirm publicly its approval, as soon as reasonably
practicable, and in no event later
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than three business days, after Forest's request for such reaffirmation, of the
Merger and the transactions contemplated by this Agreement, or shall have
resolved not to reaffirm the Merger, (ii) the Board of Directors of the Company
shall have failed to include in the Proxy Statement/Prospectus its
recommendation, without modification or qualification, that the Company
stockholders approve and adopt this Agreement and approve the Merger, (iii) the
Board of Directors of the Company shall have withheld, withdrawn, amended or
modified, or proposed publicly to withdraw, amend or modify, in a manner adverse
to Forest and Spinco, the recommendation of such Board of Directors to the
Company stockholders that they approve and adopt this Agreement and approve the
Merger, (iv) the Board of Directors of the Company shall have a Change of
Recommendation or (v) the Board of Directors of the Company, within ten business
days after commencement of any tender or exchange offer for any shares of
Company Common Stock, shall have failed to recommend against acceptance of such
tender or exchange offer by its stockholders or takes no position with respect
to the acceptance of such tender or exchange offer by its stockholders; or
(g) by the Company if the Board of Directors of the Company has made a
Change of Recommendation in order to approve and permit the Company to accept a
Superior Offer; provided, however, that (i) the Company is not then in breach of
Section 6.11 or material breach of any other covenant or other agreement
contained in this Agreement and has not breached any of its representations and
warranties contained in this Agreement in any material respect, (ii) Forest does
not make, within three (3) business days after receipt of the Company's written
notice pursuant to Section 6.11(d), an offer that the Board of Directors of the
Company shall have concluded in good faith (following consultation with its
financial advisor and outside legal counsel) is at least as favorable, from a
financial point of view, to the Company stockholders as such Superior Offer,
(iii) the Board of Directors of the Company authorizes the Company, subject to
complying with the terms of Section 6.11 and this clause (g), to enter into a
binding written agreement concerning a transaction that constitutes a Superior
Offer and the Company notifies Forest and Spinco in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, and (iv) the Company shall have tendered to Forest
payment in full of the amount specified in Section 8.3 concurrently with
delivery of notice of termination pursuant to this Section 8.1(g).
Section 8.2 Effect of Termination. In the event of termination of this
Agreement pursuant to Section 8.1, this Agreement shall terminate (except to the
extent set forth in the last sentence of Section 9.1(a) and in Section 9.2),
without any liability on the part of any party or its directors, officers or
stockholders except as set forth in Section 8.3; provided, that nothing in this
Agreement shall relieve any party of liability for breach of this Agreement or
prejudice the ability of the non-breaching party to seek damages from any other
party for any breach of this Agreement, including attorneys' fees and the right
to pursue any remedy at law or in equity.
Section 8.3 Termination Fee; Expenses.
(a) Expenses Payable upon Breach. If this Agreement is terminated pursuant
to one (but not both) of Section 8.1(d) or Section 8.1(e), then the breaching
party shall promptly (but not later than five (5) business days after receipt of
notice of the amount due from the other party) pay to the terminating party an
amount equal to all documented out-of-pocket expenses and fees incurred by such
terminating party (including fees and expenses payable to all legal,
71
accounting, financial, public relations and other professional advisors arising
out of, in connection with or related to the transactions contemplated by this
Agreement and the Transaction Documents) not to exceed $5 million in the
aggregate ("Out-of-Pocket Expenses").
(b) Termination Fee Payable in Certain Circumstances.
(i) If (x) this Agreement is terminated by Forest or the Company
pursuant to Section 8.1(c)(ii) (as it relates to failure to obtain the
Requisite Approval), (y) Forest or the Company terminates this Agreement
pursuant to Section 8.1(b), or (z) Forest terminates this Agreement
pursuant to Section 8.1(e)(i); and
as to any of clauses (x), (y) or (z) above, prior to the termination of this
Agreement, there has been publicly announced an Acquisition Proposal (other than
the Merger) and within twelve months of such termination the Company shall
either (1) consummate an Acquisition Proposal (whether or not such Acquisition
Proposal is the same Acquisition Proposal that had been publicly announced prior
to termination of this Agreement) or (2) enter into an agreement with respect to
an Acquisition Proposal or recommend approval of an Acquisition Proposal
(whether or not such Acquisition Proposal is the same Acquisition Proposal that
had been publicly announced prior to termination of this Agreement), which
Acquisition Proposal is subsequently consummated (whether or not such
consummation occurs within such twelve-month period); or
(ii) If Forest shall terminate this Agreement pursuant to Section
8.1(f); or
(iii) If the Company shall terminate this Agreement pursuant to
Section 8.1(g);
then the Company shall pay to Forest an amount equal to $25 million (the
"Termination Fee"), plus Out of Pocket Expenses. The Company hereby waives its
right to set off or counterclaim against such amount. If the Termination Fee
shall be payable pursuant to subsection (b)(i) of this Section 8.3, the
Termination Fee shall be paid in same day funds at or prior to the date of
consummation of such Acquisition Proposal. If the Termination Fee shall be
payable pursuant to subsection (b)(ii) of this Section 8.3, the Termination Fee
shall be paid in same day funds no later than one business day after the date of
termination of this Agreement. If the Termination Fee shall be payable pursuant
to subsection (b)(iii) of this Section 8.3, the Termination Fee shall be paid in
same day funds concurrently with the delivery of the notice of termination of
this Agreement pursuant to Section 8.1(g).
(c) The parties hereto acknowledge that the agreements contained in
paragraph (b) of this Section 8.3 are an integral part of the transactions
contemplated by this Agreement, and that without these agreements, they would
not enter into this Agreement. Accordingly, if the Company fails to pay promptly
any fee payable by it pursuant to this Section 8.3, then the Company shall pay
to Forest all of Forest's costs and expenses (including attorneys' fees) in
connection with collecting such fee, together with interest on the amount of the
fee at the rate of 5% from the date such payment was due under this Agreement
until the date of payment.
Section 8.4 Amendment. This Agreement may be amended by Forest, Spinco,
the Company and Merger Sub at any time before or after adoption of this
Agreement by the stockholders of the Company; provided, however, that after such
adoption, no amendment shall be made that by law requires further approval by
such stockholders without such further
72
approval. This Agreement may not be amended except by an instrument in writing
signed by Forest, Spinco, the Company and Merger Sub.
Section 8.5 Waivers. At any time prior to the Effective Time, Forest,
Spinco and the Company may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or acts of the other party; (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant to this Agreement; and
(iii) waive compliance with any of the agreements or conditions of the other
party contained herein; provided, however, that no failure or delay by Forest,
Spinco or the Company in exercising any right hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right hereunder.
Any agreement on the part of Forest, Spinco or the Company to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Survival of Representations, Warranties and Agreements;
Indemnification.
(a) The covenants and agreements in this Agreement or in any certificate
or instrument delivered pursuant to this Agreement shall survive the Effective
Time in accordance with their respective terms. None of the representations or
warranties in this Agreement or in any certificate or instrument delivered
pursuant to this Agreement (except for the certificates substantially in the
forms attached hereto in Exhibits G and H) shall survive the Effective Time.
Subject to Section 9.14, the Confidentiality Agreement shall survive the
execution and delivery of this Agreement and any termination of this Agreement,
and the provisions of the Confidentiality Agreement shall apply to all
information and material furnished by any party or its representatives
thereunder or hereunder.
(b) Following the Effective Time, Forest will indemnify, defend and hold
harmless Spinco, the Company and each Person, if any, who controls, within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(any such person being hereinafter referred to as a "Controlling Person"),
Spinco or the Company from and against, and pay or reimburse each of the
foregoing for, all losses, claims, damages, liabilities, actions, costs and
expenses, joint or several, including reasonable attorneys' fees (collectively,
"Losses"), arising out of or resulting from, directly or indirectly, or in
connection with any untrue statement or alleged untrue statement of a material
fact contained in or incorporated by reference into either of the Registration
Statements or in the Proxy Statement/Prospectus (or any amendment or supplement
thereto) or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that Forest shall not be responsible for information provided by the
Company as to itself and its Subsidiaries specifically for inclusion in, or
incorporation by reference into, any such Proxy Statement/Prospectus or
Registration Statement.
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(c) Following the Effective Time, Spinco will indemnify, defend and hold
harmless Forest and each Controlling Person of Forest from and against, and pay
or reimburse each of the foregoing for, all Losses arising out of or resulting
from, directly or indirectly, or in connection with any untrue statement or
alleged untrue statement of a material fact contained in or incorporated by
reference into either of the Registration Statements or in the Proxy
Statement/Prospectus (or any amendment or supplement thereto) or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, but only with respect to information
provided by the Company as to itself and its Subsidiaries specifically for
inclusion in, or incorporation by reference into, any such Proxy
Statement/Prospectus or Registration Statement.
Section 9.2 Expenses. Except as otherwise provided in the Distribution
Agreement or in Section 8.3, whether or not the Merger or the other transactions
contemplated by this Agreement are consummated, all costs and expenses incurred
by Forest or Spinco in connection with this Agreement and the transactions
contemplated hereby shall be paid by Spinco (provided that Spinco shall not be
obligated to pay more than $7 million, exclusive of the expenses described in
the exception below), and all costs and expenses incurred by the Company in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Company, except that the Company and Spinco each shall pay one-half
of all expenses relating to printing, filing and mailing the Registration
Statements and the Proxy Statement/Prospectus and all SEC and other regulatory
filing fees incurred in connection with the Registration Statements and the
Proxy Statement/Prospectus.
Section 9.3 Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given
upon (a) a transmitter's confirmation of a receipt of a facsimile transmission
(but only if followed by confirmed delivery of a standard overnight courier the
following business day or if delivered by hand the following business day), (b)
confirmed delivery of a standard overnight courier or when delivered by hand or
(c) the expiration of five business days after the date mailed by certified or
registered mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice):
If to Spinco (prior to the Effective Time) or Forest, to:
SML Wellhead Corporation or Forest Oil Corporation
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
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with a copy to (which shall not constitute effective notice) to:
Xxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
If to Spinco (following the Effective Time), to:
SML Wellhead Corporation
c/o Mariner Energy, Inc.
0000 XxxxXxxx Xxxxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
with a copy (which shall not constitute effective notice) to:
Xxxxx Xxxxx L.L.P.
Xxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
If to the Company, to:
Mariner Energy, Inc.
0000 XxxxXxxx Xxxxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
with a copy (which shall not constitute effective notice) to:
Xxxxx Xxxxx L.L.P.
Xxx Xxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
Section 9.4 Certain Construction Rules. The article and section headings
and the table of contents contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. As used in this Agreement, unless otherwise provided to the contrary,
(a) all references to days or months shall be deemed
75
references to calendar days or months and (b) any reference to a "Section,"
"Article," "Exhibit" or "Schedule" shall be deemed to refer to a section or
article of this Agreement or an exhibit or schedule to this Agreement. The words
"hereof," "herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Unless otherwise specifically provided for herein, the
term "or" shall not be deemed to be exclusive. Any matter disclosed in any
particular Section or Subsection of the Spinco Disclosure Schedule, the Forest
Disclosure Schedule or the Company Disclosure Schedule shall be deemed to have
been disclosed in any other Section or Subsection of Articles III, IV, V or VI
of this Agreement, as applicable, with respect to which such matter is relevant
so long as the applicability of such matter to such Section or Subsection is
reasonably apparent. For avoidance of doubt, "consistent with past practice"
when used with respect to Spinco, any of its Subsidiaries, any Spinco Asset or
the Spinco Business shall mean the past practice of Forest.
Section 9.5 Severability. If any provision of this Agreement or the
application of any such provision to any Person or circumstance, shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of Spinco, Forest, the Company and Merger Sub
that this Agreement shall be deemed amended by modifying such provision to the
extent necessary to render it valid, legal and enforceable while preserving its
intent or, if such modification is not possible, by substituting therefor
another provision that is legal and enforceable and that achieves the same
objective.
Section 9.6 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, benefits or obligations hereunder may be assigned by Spinco, Forest,
the Company or Merger Sub (whether by operation of law or otherwise) without the
prior written consent of all of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by Spinco, Forest, the Company and Merger Sub and their respective
successors and permitted assigns.
Section 9.7 No Third Party Beneficiaries. Except as provided in Sections
2.2, 2.8, 2.9 and 6.12 (collectively, the "Third Party Provisions"), nothing in
this Agreement, express or implied, is intended to or shall confer upon any
Person (other than Forest, Spinco and the Company and their respective
successors and permitted assigns) any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, and no
Person (other than as so specified) shall be deemed a third party beneficiary
under or by reason of this Agreement. The Third Party Provisions may be enforced
by the beneficiaries thereof after the Effective Time. Subject to Section 6.12,
Spinco shall reimburse all expenses, including reasonable attorneys' fees, that
are incurred by any Person who prevails in any litigation or other proceeding
required to enforce the obligations of the Surviving Corporation and Spinco
under the Third Party Provisions.
Section 9.8 Limited Liability. Notwithstanding any other provision of this
Agreement, no stockholder, director, officer, Affiliate, agent or representative
of Spinco, Forest, the Company or Merger Sub, in its capacity as such, shall
have any liability in respect of or relating to the covenants, obligations,
representations or warranties of such party under this Agreement or
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in respect of any certificate delivered with respect hereto or thereto and, to
the fullest extent legally permissible, each of Spinco, Forest, the Company and
Merger Sub, for itself and its stockholders, directors, officers and Affiliates,
waives and agrees not to seek to assert or enforce any such liability that any
such Person otherwise might have pursuant to applicable law.
Section 9.9 Entire Agreement. This Agreement (together with the other
Transaction Agreements, the Confidentiality Agreement, the exhibits and the
Disclosure Schedules and the other documents delivered pursuant hereto)
constitutes the entire agreement of all the parties hereto and supersedes all
prior and contemporaneous agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof.
All exhibits attached to this Agreement and the Disclosure Schedules are
expressly made a part of, and incorporated by reference into, this Agreement.
Each section of the Company Disclosure Schedule, the Forest Disclosure Schedule
and the Spinco Disclosure Schedule qualifies the corresponding numbered
representation and warranty or covenant to the extent specified therein, and any
other representation, warranty or covenant to which such matter is relevant so
long as the applicability of such matter to any such representation, warranty or
covenant is reasonably apparent.
Section 9.10 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Delaware without giving
effect to the conflicts of law principles thereof. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO,
AND HEREBY CONSENTS AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE
OF DELAWARE AND OF THE FEDERAL COURTS SITTING IN THE STATE OF DELAWARE, (ii) TO
THE EXTENT SUCH PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE
STATE OF DELAWARE, HEREBY APPOINTS THE CORPORATION TRUST COMPANY, AS SUCH
PARTY'S AGENT IN THE STATE OF DELAWARE FOR ACCEPTANCE OF LEGAL PROCESS AND (iii)
AGREES THAT SERVICE MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE
THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN
THE STATE OF DELAWARE.
Section 9.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement binding on Spinco, Forest, the Company
and Merger Sub, notwithstanding that not all parties are signatories to the
original or the same counterpart.
Section 9.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 9.13 Waiver of Jury Trial. Each of the parties hereto irrevocably
and unconditionally waives all right to trial by jury in any Action or
counterclaim (whether based in contract, tort or otherwise) arising out of or
relating to this Agreement or the actions of the parties hereto in the
negotiation, administration, performance and enforcement thereof.
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Section 9.14 Confidentiality. Subject to Section 7.2 and Section 7.5 of
the Distribution Agreement, for a period of eighteen months following the
Effective Time, each of Forest and the Company shall hold, and shall cause its
Affiliates and Representatives to hold, in strict confidence all Information
concerning the other party and its Affiliates obtained by it prior to the
Effective Date or furnished to it by such other party and its Affiliates
pursuant to this Agreement or the other Transaction Agreements (including, with
respect to Forest and its Affiliates and Representatives, Information of Forest,
its Affiliates and Representatives to the extent related to Spinco, the Spinco
Assets or the Spinco Business) and shall not release or disclose such
Information to any other Person, except its Affiliates and Representatives, who
shall be advised of the provisions of this Section 9.14, and shall not use such
Information except as required pursuant to the terms of the Transaction
Agreements, and each party shall be responsible for a breach by any of its
Affiliates or Representatives; provided, however, that any member of the Forest
Group or the Company and its Affiliates may disclose such Information to the
extent that (a) disclosure is compelled by judicial or administrative process
or, based on advice of such Person's counsel, by other requirements of law, or
(b) such party can show that such Information was (i) in the public domain
through no fault of such Person or (ii) lawfully acquired by such Person from
another source after the time that it was furnished to such Person by the other
party or its Affiliates, and not acquired from such source subject to any
confidentiality obligation on the part of such source known to the acquiror.
Notwithstanding the foregoing, each of Forest and the Company shall be deemed to
have satisfied its obligations under this Section 9.14 with respect to any
Information (other than Privileged Information) if it exercises the same care
with regard to such Information as it takes to preserve confidentiality for its
own similar Information.
78
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FOREST OIL CORPORATION
By: /s/ H. Xxxxx Xxxxx
--------------------------------------------
Name: H. Xxxxx Xxxxx
Title: President and Chief Executive Officer
SML WELLHEAD CORPORATION
By: /s/ Xxxxx Xxxxxx
--------------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President and Secretary
MARINER ENERGY, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer and President
MEI SUB, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer and President
79
