EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
AMONG
OCEAN ENERGY, INC.,
OEI ACQUISITION CORP.,
AND
TEXOIL, INC.
DATED AS OF JANUARY 18, 2001
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.......................................................2
SECTION 1.01. CERTAIN DEFINED TERMS......................................2
ARTICLE II. THE OFFER.......................................................12
SECTION 2.01. THE OFFER.................................................12
SECTION 2.02. COMPANY ACTIONS...........................................14
SECTION 2.03. DIRECTORS.................................................15
ARTICLE III. THE MERGER.....................................................17
SECTION 3.01. THE MERGER................................................17
SECTION 3.02. EFFECTIVE TIME; CLOSING...................................17
SECTION 3.03. EFFECT OF THE MERGER......................................17
SECTION 3.04. ARTICLES OF INCORPORATION; BYLAWS.........................17
SECTION 3.05. DIRECTORS AND OFFICERS....................................18
SECTION 3.06. EFFECT ON CAPITAL STOCK...................................18
SECTION 3.07. EXCHANGE OF COMPANY CERTIFICATES..........................19
SECTION 3.08. STOCK OPTIONS AND WARRANTS................................21
SECTION 3.09. SUBSEQUENT ACTIONS........................................22
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................23
SECTION 4.01. ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY..23
SECTION 4.02. CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES.....23
SECTION 4.03. COMPANY SUBSIDIARIES......................................24
SECTION 4.04. CORPORATE BOOKS AND RECORDS...............................25
SECTION 4.05. NO CONFLICT...............................................25
SECTION 4.06. GOVERNMENTAL CONSENTS AND APPROVALS.......................26
SECTION 4.07. SEC REPORTS, FINANCIAL INFORMATION, BOOKS AND RECORDS.....26
SECTION 4.08. NO UNDISCLOSED LIABILITIES................................27
SECTION 4.09. ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS.........27
SECTION 4.10. LITIGATION................................................27
SECTION 4.11. COMPLIANCE WITH LAWS......................................28
SECTION 4.12. MATERIAL CONTRACTS........................................28
SECTION 4.13. TITLE TO PROPERTY.........................................29
SECTION 4.14. INTELLECTUAL PROPERTY.....................................31
SECTION 4.15. EMPLOYEE BENEFIT MATTERS..................................31
SECTION 4.16. ENVIRONMENTAL MATTERS.....................................35
SECTION 4.17. HEDGING...................................................36
SECTION 4.18. TAXES.....................................................36
SECTION 4.19. INSURANCE.................................................38
SECTION 4.20. BROKERS...................................................38
SECTION 4.21. PRODUCTION AND PIPELINE IMBALANCES........................39
SECTION 4.22. OIL AND GAS OPERATIONS....................................39
SECTION 4.23. XXXXX AND EQUIPMENT.......................................39
SECTION 4.24. PROXY STATEMENT...........................................40
SECTION 4.25. GAS IMBALANCES; PREFERENTIAL RIGHTS.......................40
SECTION 4.26. REQUIRED STOCKHOLDER VOTE OR CONSENT......................41
SECTION 4.27. FAIRNESS OPINION..........................................41
SECTION 4.28. TAKEOVER RESTRICTIONS.....................................41
SECTION 4.29. INDEMNIFICATION OBLIGATIONS...............................41
SECTION 4.30. BANKRUPTCY................................................42
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ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...........42
SECTION 5.01. ORGANIZATION AND AUTHORITY OF PARENT AND PURCHASER........42
SECTION 5.02. NO CONFLICT...............................................42
SECTION 5.03. GOVERNMENTAL CONSENTS AND APPROVALS.......................43
SECTION 5.04. OFFER DOCUMENTS; PROXY STATEMENT..........................43
SECTION 5.05. BROKERS...................................................43
SECTION 5.06. FINANCING ARRANGEMENTS....................................44
ARTICLE VI. ADDITIONAL AGREEMENTS...........................................44
SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING..................44
SECTION 6.02. ACCESS TO INFORMATION.....................................47
SECTION 6.03. CONFIDENTIALITY...........................................47
SECTION 6.04. STOCKHOLDER ACTION........................................47
SECTION 6.05. PREPARATION OF THE PROXY STATEMENT........................48
SECTION 6.06. REGULATORY AND OTHER AUTHORIZATIONS; NOTICES AND CONSENTS.48
SECTION 6.07. NOTICE OF CERTAIN MATTERS.................................49
SECTION 6.08. NO SOLICITATION OF TRANSACTION............................49
SECTION 6.09. EXPENSES..................................................50
SECTION 6.10. DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE....50
SECTION 6.11. COOPERATION AND FILINGS...................................51
SECTION 6.12. PUBLICITY.................................................51
SECTION 6.13. ADDITIONAL ACTIONS........................................52
SECTION 6.14. CONSENTS..................................................52
SECTION 6.15. STOCKHOLDER LITIGATION....................................52
SECTION 6.16. AMENDMENT TO BYLAWS.......................................52
ARTICLE VII. CONDITIONS TO CLOSING..........................................52
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY...............52
ARTICLE VIII. TERMINATION AND WAIVER........................................53
SECTION 8.01. TERMINATION...............................................53
SECTION 8.02. EFFECT OF TERMINATION.....................................54
ARTICLE IX. GENERAL PROVISIONS..............................................55
SECTION 9.01. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.....55
SECTION 9.02. NOTICES...................................................55
SECTION 9.03. ENTIRE AGREEMENT..........................................57
SECTION 9.04. HEADINGS..................................................57
SECTION 9.05. SEPARABILITY..............................................57
SECTION 9.06. ASSIGNMENT................................................57
SECTION 9.07. AMENDMENT.................................................57
SECTION 9.08. GOVERNING LAW; FORUM......................................57
SECTION 9.09. COUNTERPARTS..............................................57
SECTION 9.10. SPECIFIC PERFORMANCE......................................58
SECTION 9.11. WAIVER OF JURY TRIAL......................................58
SECTION 9.12. ATTORNEY'S FEES...........................................58
SECTION 9.13. EXTENSIONS, WAIVERS, ETC..................................58
Annex I Conditions to the Offer
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 18, 2001, among Ocean
Energy, Inc., a Texas corporation ("PARENT"), OEI Acquisition Corp., a Nevada
corporation and a direct, wholly owned subsidiary of Parent ("PURCHASER"),
and Texoil, Inc., a Nevada corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Purchaser and the Company
have approved, and deem it advisable and in the best interests of their
respective companies and stockholders to consummate, the acquisition of the
Company by Parent and Purchaser upon the terms and subject to the conditions set
forth herein;
WHEREAS, pursuant to this Agreement, Purchaser has agreed to commence a
tender offer (the "OFFER") to purchase (i) all of the outstanding shares (the
"COMMON SHARES") of the Company's common stock, par value $0.01 per share
("COMPANY COMMON STOCK"), at a price per Common Share of $8.25 (such price or
such higher price as may be paid for Common Shares in the Offer, the "OFFER
PRICE") net to the seller in cash and (ii) all of the outstanding shares (the
"PREFERRED SHARES") of the Company's Series A Convertible Preferred Stock, par
value $0.01 per share ("COMPANY PREFERRED STOCK"), at a price per Preferred
Share of $18.04 (such price or such higher price as may be paid for Preferred
Shares in the Offer, the "PREFERRED OFFER PRICE") net to the seller in cash;
WHEREAS, the Board of Directors of the Company has (i) approved the Offer
and (ii) approved and adopted this Agreement, declared its advisability and is
recommending that the Company's stockholders accept the Offer, tender their
Shares to Purchaser and approve the Merger (hereinafter defined) and adopt this
Agreement;
WHEREAS, the respective Boards of Directors of Purchaser and the Company,
and Parent as sole stockholder of Purchaser, have approved and adopted the
merger of Purchaser with and into the Company, as set forth below (the
"MERGER"), in accordance with the Nevada Revised Statutes (the "NRS") upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has approved the terms of
and transactions contemplated by the (i) Tender Agreement (the "TENDER
AGREEMENT") to be executed and delivered by Parent, Purchaser and the
stockholders of the Company named therein and (ii) Tender and Voting Agreement
(the "TENDER AND VOTING AGREEMENT") to be executed and delivered by Parent,
Purchaser and the stockholders of the Company named therein;
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger, and
WHEREAS, there are no prior agreements, arrangements or understandings
with respect to the subject matter hereof or the Tender Agreement or the Tender
and Voting Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ACQUISITION PROPOSAL" means any offer or proposal for, or any indication
of interest in, a merger or other business combination directly or indirectly
involving the Company or any Company Subsidiary or the acquisition of a
substantial equity interest in, or a substantial portion of the assets of, any
such party, other than the transactions contemplated by this Agreement.
"ACTION" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"AFFILIATE" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"AGREEMENT" or "THIS AGREEMENT" means this Agreement, dated as of January
18, 2001, among the Company, Parent and Purchaser (including the Exhibits hereto
and the Disclosure Letter) and all amendments hereto made in accordance with the
provisions of SECTION 9.07.
"ALLOCATED VALUE SCHEDULE" means Schedule A attached to the Disclosure
Letter.
"ARTICLES OF MERGER" has the meaning specified in SECTION 3.02(B).
"AUDIT" means any audit, assessment of Taxes, other examination by any Tax
Authority, proceeding or appeal of such proceeding relating to Taxes.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting, severance or
other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health, disability or accident benefits
(including without limitation any "voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code providing for the same or other
benefits) or for deferred compensation, profit-sharing bonuses, stock options,
restricted stock, phantom stock, stock appreciation rights, stock purchases or
other forms of incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(ii) is (or was within the six-year period ending on the Closing Date) entered
into, maintained, contributed to or required to be contributed to, as the case
may be, by
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the Company or any ERISA Affiliate, and (iii) covers any current or former
employee, director, or consultant of the Company or any ERISA Affiliate (with
respect to their relationship with such entities).
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in The City of New
York.
"CLASS B COMPANY COMMON STOCK" has the meaning specified in SECTION 4.02.
"CLOSING" has the meaning specified in SECTION 3.02(A).
"CLOSING DATE" has the meaning specified in SECTION 3.02(A).
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the Regulations promulgated thereunder.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"COMMON SHARES" has the meaning specified in the recitals to this
Agreement.
"COMPANY" has the meaning specified in the recitals to this Agreement.
"COMPANY CERTIFICATES" has the meaning specified in SECTION 3.07(B).
"COMPANY COMMON STOCK" has the meaning specified in the recitals to this
Agreement.
"COMPANY OPTION" has the meaning specified in SECTION 3.08(A).
"COMPANY OPTION PAYMENTS" has the meaning specified in SECTION 3.08(A).
"COMPANY OPTION PLANS" has the meaning specified in SECTION 3.08(A).
"COMPANY PREFERRED STOCK" has the meaning specified in the recitals to
this Agreement.
"COMPANY SEC REPORTS" has the meaning specified in SECTION 4.07(A).
"COMPANY STOCKHOLDERS' APPROVAL" has the meaning specified in SECTION
4.26.
"COMPANY STOCKHOLDERS' MEETING" has the meaning specified in SECTION 6.04.
"COMPANY SUBSIDIARY" means any and all corporations, partnerships, joint
ventures, associations, limited liability companies and other entities
controlled by the Company, directly or indirectly through one or more
intermediaries.
"COMPANY WARRANT" has the meaning specified in SECTION 3.08(B).
"COMPANY WARRANT PAYMENTS" has the meaning specified in SECTION 3.08(B).
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"CONFIDENTIALITY AGREEMENTS" has the meaning specified in SECTION 6.03.
"CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly, or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"COURT" shall mean any court, tribunal, or other judicial or arbitral
panel of the United States, any foreign country, or any domestic or foreign
state, and any political subdivision or agency thereof.
"XXXX XXXXXXXX" means Xxxx Xxxxxxxx Xxxxxxx, a division of Xxxx Xxxxxxxx
Incorporated.
"DEBT RELIEF ACTIONS" has the meaning specified in SECTION 4.30.
"DEFENSIBLE TITLE" has the meanings specified in SECTION 4.13(B).
"DISCLOSURE LETTER" means the disclosure letter delivered by the Company
to Parent simultaneously with the execution of this Agreement.
"D&O INSURANCE" has the meaning specified in SECTION 6.10(B).
"DISSENTING SHARES" has the meaning specified in SECTION 3.06(E).
"EASEMENTS" means all easements, rights-of-way, licenses, permits,
servitudes, surface leases, and similar assets, rights and interests in any way
appertaining, belonging, affixed, incidental or applicable to, or used in
connection with, the ownership of the Leases, the Xxxxx, Fee Mineral Interests
or Other Real Property or the Operations of the Company or any Company
Subsidiary, including, without limitation, those described in SECTION 4.13(C) of
the Disclosure Letter.
"EFFECTIVE TIME" has the meaning specified in SECTION 3.02(B).
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"ENCUMBRANCE" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"ENVIRONMENTAL LAWS" means any Law in effect on the date of this Agreement
relating to pollution or protection of the environment, health, safety or
natural resources, including, but
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not limited to, Laws pertaining to the use, handling, transportation, storage,
disposal, release or discharge of Hazardous Materials.
"EQUIPMENT" means all equipment, fixtures, physical facilities, tank
batteries, surface and subsurface machinery, inventory, spare parts, supplies,
tools, and other tangible personal property owned or leased by the Company or
any Company Subsidiary and other personal property of any kind on or associated
with the Operations of the Company or any Company Subsidiary on the date hereof,
including, without limitation, casing, tubing, tubular goods, rods, pumping
units and engines, Christmas trees, derricks, platforms, separators,
compressors, gun barrels, gathering lines, pipelines, flow lines, tanks,
wellheads, production units, platforms, related plants, valves, meters, heaters,
dehydrators, and communications systems and equipment, which are located on or
connected with the Leases, the Easements or the Operations of the Company or any
Company Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the Regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with the Company as
such terms are defined in Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXPENSE FEE" has the meaning specified in SECTION 8.02(B).
"EXPENSES" has the meaning specified in SECTION 6.09(B).
"EXPIRATION DATE" has the meaning specified in SECTION 2.01(B).
"FEE MINERAL INTERESTS" means all of the record and beneficial right,
title and interest of the Company and any Company Subsidiary in and to the oil,
gas and other minerals in and under the land described in Section 4.13(d) of the
Disclosure Letter.
"FINANCIAL STATEMENTS" has the meaning specified in SECTION 4.07(B).
"GOVERNMENTAL AUTHORITY" means any United States federal, state, local or
any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal, or judicial or arbitral body.
"GOVERNMENTAL ORDER" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"HAZARDOUS MATERIALS" means (i) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls, and (ii) other chemicals, materials or
substances defined or regulated as toxic or hazardous or as pollutants,
contaminants or waste under any applicable Environmental Law.
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"HYDROCARBONS" means crude oil, natural gas, casinghead gas, condensate,
sulphur, natural gas liquids, plant products and other liquid or gaseous
hydrocarbons produced in association therewith, including, without limitation,
coalbed methane and gas and CO2, and all other minerals of every kind and
character which may be covered by or included in the Property, except Fee
Mineral Interests, with respect to which "HYDROCARBONS" means all of the
foregoing subject to the terms of any Lease existing at the Effective Time.
"INDEBTEDNESS" means, with respect to any Person, (a) all indebtedness of
such Person, whether or not contingent, for borrowed money, (b) all obligations
of such Person for the deferred purchase price of property or services (other
than trade payables), (c) all obligations of such Person evidenced by notes,
bonds, debentures, repurchase and reverse repurchase agreements or other similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement, in the event of default, are limited to repossession or sale of such
property), (e) all obligations of such Person as lessee under leases that have
been or should be, in accordance with U.S. GAAP, recorded as capital leases, (f)
all obligations, contingent or otherwise, of such Person under acceptance,
letter of credit or similar facilities, and (g) all Indebtedness of others
referred to in clauses (a) through (f) above guaranteed by such Person.
"INDEMNIFICATION OBLIGATIONS" has the meaning set forth in SECTION 4.29.
"INDEMNIFIED PARTIES" has the meaning set forth in SECTION 6.10(A).
"INDEPENDENT DIRECTORS" has the meaning set forth in SECTION 2.03(A).
"INTELLECTUAL PROPERTY" has the meaning specified in SECTION 4.14.
"INTERIM FINANCIAL STATEMENTS" has the meaning specified in SECTION
4.07(B).
"IRS" means the Internal Revenue Service of the United States.
"KNOWLEDGE" means an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (a) such individual is actually aware of such
fact or other matter; (b) such individual should be aware of such fact or
matter; or (c) a prudent individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
comprehensive investigation concerning the existence of such fact or other
matter. A Person other than an individual will be deemed to have "Knowledge" of
a particular fact or other matter if any individual who is currently serving as
an officer of such Person or a subsidiary of such Person (or in each case any
similar capacity), has, or at any time had, Knowledge of such fact or other
matter.
"LAWS" shall mean all laws, statutes, ordinances, rulings and Regulations
of the United States, any foreign country, or any domestic or foreign state, and
any political subdivision or agency thereof, including all decisions of Courts
having the effect of law in each such jurisdiction.
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"LEASES" means the fee mineral interests other than Fee Mineral Interests
as that term is defined herein, oil, gas and mineral leasehold interests and
other leasehold interests, subleases, mineral servitudes, licenses, concessions,
working interests, farm-out or farm-in rights, royalty, overriding royalty or
other non-working or carried interests, operating rights or other rights and
interests described or referred to in SECTION 4.13(B) of the Disclosure Letter
(other than Permitted Encumbrances), including, without limitation, all right,
title, and interest of the Company and any Company Subsidiary in all pooled or
unitized areas in which the Leases are included, to the extent that such rights
and interests arise from and are associated with the Leases or Xxxxx, and all
right, title and interest owned by the Company and any Company Subsidiary in,
under or derived from all or any presently existing unitization, pooling,
operating, communitization or other agreements, whether voluntary or
involuntary, or formed under orders, regulations, rules or declaration or other
official acts of any governmental or regulatory authority.
"LIABILITIES" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured, or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order, and those arising under any contract or
agreement.
"LOSS" means any and all Liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' fees and expenses) actually suffered or incurred by a
Person.
"MATERIAL ADVERSE EFFECT" means any event, circumstance, condition,
development or occurrence causing, resulting in or having (or with the passage
of time likely to cause, result in or have) a material adverse effect on the
financial condition, business, assets, properties or results of operations of
the Company and the Company Subsidiaries taken as a whole; provided, that such
term shall not include (i) changes in the market price and trading volume of the
Company's securities or (ii) effects that are not applicable primarily to the
Company resulting from market conditions generally in the oil and gas industry
(including without limitation changes in commodities prices).
"MATERIAL CONTRACTS" has the meaning specified in SECTION 4.12(A).
"MATERIAL TITLE FAILURE" means Title Failures having a value in excess of
Six Million dollars ($6,000,000.00).
"MERGER" has the meaning specified in the recitals to this Agreement.
"MINIMUM CONDITION" has the meaning specified in ANNEX I attached hereto.
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan," as defined in
Sections 3(37) or 4001(a)(3) of ERISA, which (i) is (or was within the six-year
period ending on the Closing Date) entered into, maintained, administered,
contributed to or required to be contributed to, as the case may be, by the
Company or any ERISA Affiliate and (ii) covers or covered any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
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"NET REVENUE INTEREST" means an overall share of Hydrocarbons throughout
the duration of the estate produced (including the proceeds attributable
thereto) from or attributable to the Fee Mineral Interests, Leases and Xxxxx,
after deducting all lessors' royalties, overriding royalties, production
payments, and other interests or burdens on Hydrocarbons produced therefrom.
"NRS" has the meaning specified in the recitals to this Agreement.
"OFFER" has the meaning specified in the recitals to this Agreement.
"OFFER DOCUMENTS" has the meaning specified in SECTION 2.01(A).
"OFFER PRICE" has the meaning specified in the recitals to this Agreement.
"OTHER REAL PROPERTY" means the real property described and identified in
SECTION 4.13(E) of the Disclosure Letter.
"OPERATIONS" means all Hydrocarbon exploration, development, production,
treatment and marketing and all operations related thereto, including, without
limitation, (a) the acquisition, purchase, sale, development, operation,
maintenance or remediation and abandonment of oil, gas and mineral leases, lands
and related interests, (b) the drilling, reworking, production, purchase, sale,
gathering, transportation, storage, processing, treating, manufacture and
disposal of, or for, Hydrocarbon, and associated by-products and wastes, and (c)
the acquisition, construction, installation, maintenance or remediation and
operation of related plants, platforms, pipelines, gathering lines, compressors,
facilities, storage facilities and equipment.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PARENT" has the meaning specified in the recitals to this Agreement.
"PARENT MATERIAL ADVERSE EFFECT" means any event, circumstance, condition,
development or occurrence causing, resulting in or having (or with the passage
of time likely to cause, result in or have) a material adverse effect on the
financial condition, business, assets, properties, or results of operations of
Parent and Parent's subsidiaries taken as a whole; provided, that such term
shall not include effects that are not applicable primarily to Parent resulting
from market conditions generally in the oil and gas industry (including without
limitation changes in commodities prices).
"PAYING AGENT" has the meaning specified in SECTION 3.07(A).
"PENSION PLAN" shall mean any "employee pension benefit plan" as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) which (i) is (or was
within the six-year period ending on the Closing Date) entered into, maintained,
administered, contributed to or required to be contributed to, as the case may
be, by the Company or any ERISA Affiliate and (ii) which covers or covered any
current or former employee, director, or consultant of the Company or any ERISA
Affiliate (with respect to their relationship with such entities).
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"PERMITTED ENCUMBRANCES" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments and governmental charges or
levies not yet due and payable; (b) Encumbrances imposed by Law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's liens and other
similar liens arising in the ordinary course of business; (c) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that do not, individually or in the aggregate, materially
adversely affect the value or use of property subject thereto for its current
and anticipated purposes; (e) lessor's royalties, overriding royalties,
nonparticipating royalties, net profits interests, carried interests, production
payments, reversionary interests, and other burdens, if the net cumulative
effect of such burdens does not operate to reduce the Net Revenue Interest of
the Company or the Company Subsidiary, as applicable, in any Property to an
amount less than the Net Revenue Interest for such Property set forth on SECTION
4.13(B) of the Disclosure Letter; (f) easements, rights-of-way, servitudes,
permits, licenses, surface leases, and other rights in respect of surface
operations, pipelines, grazing, logging, canals, ditches, reservoirs or the
like; conditions covenants or other restrictions, and easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways, and other
easements and rights-of-way on, over, or in respect of any Property which will
not materially interfere with the value, operation or use of any of the affected
Properties; (g) farmout and farmin agreements, participation agreements, joint
operating agreements, division orders, pooling agreements, unitization orders or
agreements, if the net cumulative effect thereof (A) do not operate to reduce
the Net Revenue Interest of the Company or the Company Subsidiary, as
applicable, in any Property to an amount less than the Net Revenue Interest for
such Property set forth on SECTION 4.13(B) of the Disclosure Letter, or (B) do
not obligate the Company or the Company Subsidiary to bear costs and expenses
relating to the maintenance, development, and operation of any Properties in an
amount greater than the Working Interest of the Company or Company Subsidiary,
as applicable, for such Property as set forth on SECTION 4.13(B) of the
Disclosure Letter (unless the actual Net Revenue Interest for such Property is
greater than the Net Revenue Interest set forth on SECTION 4.13(B) of the
Disclosure Letter in the same proportion as any increase in such Working
Interest); (h) Hydrocarbon sales agreements entered into in the ordinary course
of business and, with respect to those Hydrocarbon sales agreements that were
entered into prior to the date of the Reserve Report, that do not adversely
affect the assumptions made in the Reserve Report; (i) rights reserved to or
vested in any Governmental Authority to control or regulate any Property in any
manner, and (j) any defect, irregularity, deficiencies in title, or other matter
that a reasonable and prudent operator, experienced and knowledgeable in the
domestic oil and gas business, would not consider a material impairment of the
Company's or the Company Subsidiary's title in such Property.
"PERSON" means any individual, partnership, corporation, limited liability
company, trust, incorporated or unincorporated organization or other legal
entity of any kind.
"PREFERRED OFFER PRICE" has the meaning specified in the recitals to this
Agreement.
"PREFERRED SHARE" has the meaning specified in the recitals to this
Agreement.
9
"PREFERRED STOCK PURCHASE AGREEMENT" means the Preferred Stock Purchase
Agreement dated October 12, 1999 by and among the Company, Quantum Energy
Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital Investment
Company PLC, V&C Energy Limited Partnership, Xxxxxx X. Xxxxx, Xxxx X. Xxxxx,
Xxxxxx X. Xxxxxx and Xxxxx X. Xxxxx, as amended to the date hereof.
"PROPERTY" or "PROPERTIES" mean the Leases, Xxxxx, Easements, Equipment,
Other Real Property and Fee Mineral Interests.
"PROXY STATEMENT" has the meaning specified in SECTION 6.05.
"PURCHASER" has the meaning specified in the recitals to this Agreement.
"REFERENCE BALANCE SHEET" means the consolidated balance sheet of the
Company, dated as of September 30, 2000, included in the Financial Statements.
"REGULATION" shall mean any rule or regulation of any governmental
authority having the effect of law.
"REPRESENTATIVES" has the meaning specified in SECTION 6.02.
"RESERVE REPORT" means the oil and gas reserve report for the Company
prepared by the Company and reviewed by X.X. Xxx Xxxxxx & Co. as of January
1, 2000.
"SCHEDULE TO" has the meaning specified in SECTION 2.01(A).
"SCHEDULE 14D-9" has the meaning specified in SECTION 2.02(A).
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHARES" refers collectively to the shares of Company Common Stock and
shares of Company Preferred Stock.
"SUPERIOR PROPOSAL" has the meaning specified in SECTION 8.01(F).
"SURVIVING CORPORATION" has the meaning specified in SECTION 3.01.
"TAX" or "TAXES" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or
10
gains taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"TAX AUTHORITY" means the IRS and any other domestic or foreign
Governmental Authority responsible for the administration of Taxes.
"TENDER AGREEMENT" has the meaning specified in the recitals to this
Agreement.
"TENDER AND VOTING AGREEMENT" has the meaning specified in the recitals to
this Agreement.
"TENDER OFFER CONDITIONS" has the meaning specified in SECTION 2.01(A).
"TERMINATION DATE" has the meaning specified in SECTION 8.01(B).
"TERMINATION FEE" has the meaning specified in SECTION 8.02(B).
"THIRD PARTY PROVISIONS" has the meaning specified in SECTION 9.06.
"TITLE FAILURE" means the occurrence or existence of any of the following
conditions: (a) the Company does not have Defensible Title to a Lease or Well;
(b) any royalties, rentals, xxxx clause payments, shut-in gas payments and other
payments due with respect to a Lease have not been properly and timely paid by
or on behalf of the Company, except for payments held in suspense for title or
other reasons which are customary in the industry and which will not result in
grounds for cancellation of the Company's rights in such Lease; (c) the Company
is in default under the material terms of any Leases, farm-out agreements or
other contracts or agreements respecting a Lease or Well which could (A) prevent
the Company from receiving the proceeds of production attributable to its
interest therein, or (B) result in cancellation of the Company's interest
therein; or (d) the Company is not receiving on a current basis the proceeds of
production attributable to its Net Revenue Interest, or if so, is required to
post a bond or provide indemnity to receive such payments. The value of any
Title Failure shall be determined as follows:
(1) If the Title Failure results from the failure to have Defensible
Title, the value of the Title Failure shall equal the difference between the
Allocated Value for the affected Lease or Well and the Adjusted Allocated Value.
For purposes hereof, the Adjusted Allocated Value for a Lease or Well means the
product obtained by multiplying (x) the Allocated Value for such Lease or Well,
times (y) one (1) minus the Adjustment Ratio. For purposes hereof, the
Adjustment Ratio with respect to a Lease or Well means the ratio of: (i) the
actual Net Revenue Interest and/or Working Interest, as applicable, to which the
Company has Defensible Title, to (ii) the Net Revenue Interest and/or Working
Interest, as applicable, set forth for such Lease or Well in the Allocated Value
Schedule.
(2) If the Title Failure results from a lien, encumbrance or other charge
that is uncontested and liquidated in amount, then the value of the Title
Failure shall equal the lesser of the Allocated Value for the affected Lease or
Well and the sum necessary to be paid to the obligee to remove the Title
Failure.
11
(3) If the Title Failure results from other than those described in (1) or
(2) above, the value of the Title Failure shall equal an amount determined in
good faith by Parent and Company, taking into account the Allocated Value of the
affected Lease or Well, the legal effect of the Title Failure and the probable
economic effect of the Title Failure over the life of such Lease or Well.
For purposes of the foregoing, the Allocated Value shall be the 10% discounted
present value specified in the Allocated Value Schedule for the relevant Lease
or Well.
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as defined
in Section 3(1) of ERISA, which (i) is (or was within the six-year period ending
on the Closing Date) entered into, maintained, administered, contributed to or
required to be contributed to, as the case may be, by the Company or any ERISA
Affiliate and (ii) which covers or covered any current or former employee,
director, or consultant of the Company or any ERISA Affiliate (with respect to
their relationship with such entities).
"XXXXX" means those oil, condensate or natural gas xxxxx or xxxxx
producing any combination thereof (whether producing, not producing, abandoned
or temporarily abandoned), water source xxxxx, and water and other types of
injection or disposal xxxxx and systems located on the Leases, including,
without limitation, the xxxxx described and identified in SECTION 4.13(B) of the
Disclosure Letter.
"WINDROCK" means Windrock Capital, Ltd.
"WORKING INTERESTS" means that share of all of the costs, expenses,
burdens and obligations of any type or nature attributable to the Company's or
the Company Subsidiaries throughout the duration of the estates, as applicable,
interest in any Lease or Well.
ARTICLE II.
THE OFFER
SECTION 2.01 THE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with ARTICLE VIII hereof and none of the events set forth in ANNEX I
hereto shall have occurred or be existing (and shall not have been waived by
Purchaser), as promptly as practicable but in no event later than the fifth
Business Day following the public announcement by Parent and the Company of the
execution of this Agreement, Purchaser shall commence (within the meaning of
Rule 14d-2 under the Exchange Act) the Offer to purchase all outstanding Common
Shares at the Offer Price and all outstanding Preferred Shares at the Preferred
Offer Price. Any Shares acquired pursuant to the Offer will include, by way of
amplification and not limitation, all rights associated with such Shares,
including but not limited to all cash and non-cash dividends, distributions,
rights, other Shares or other securities issued, paid or distributed or
issuable, payable or distributable in respect thereof on or after the date of
this Agreement (including,
12
without limitation, with respect to the Preferred Shares, rights to dividends
pursuant to Section 4.17 of the Preferred Stock Purchase Agreement). As promptly
as practicable on the date of commencement of the Offer, Purchaser shall file
with the SEC a Tender Offer Statement on Schedule TO (together with all
amendments and supplements thereto, the "SCHEDULE TO") with respect to the
Offer. The Schedule TO shall contain or incorporate by reference an offer to
purchase and forms of the related letters of transmittal and other ancillary
offer documents (collectively, together with all supplements and amendments
thereto, being referred to as the "OFFER DOCUMENTS") and otherwise shall comply
in all material respects with the Exchange Act. Purchaser shall disseminate to
holders of Shares the Offer Documents to the extent required by law. The
obligation of Purchaser to accept for payment and pay for any Shares tendered
pursuant thereto will be subject only to the satisfaction of the conditions set
forth in ANNEX I hereto (the "TENDER OFFER CONDITIONS"). The Offer Price and the
Preferred Offer Price shall be net to the seller in cash, without interest,
subject to reduction only for any applicable withholding taxes or stock transfer
taxes payable by the seller. The Company agrees that no Shares held by the
Company or any of its subsidiaries will be tendered in the Offer.
(b) Purchaser specifically reserves the right to waive any condition of
the Offer, to increase the Offer Price and the Preferred Offer Price and to make
any other changes in the terms and conditions of the Offer; provided that
without the prior written consent of the Company, Purchaser shall not decrease
the Offer Price or the Preferred Offer Price or change the form of consideration
payable in the Offer, decrease the number of Shares sought to be purchased in
the Offer, impose additional conditions to the Offer or amend any other term of
the Offer in any manner materially adverse to the holders of Shares or reduce
the time period during which the Offer shall remain open. Subject to the terms
of the Offer and this Agreement and the satisfaction or waiver of all the Tender
Offer Conditions as of any Expiration Date, Purchaser will accept for payment
and pay for all Shares validly tendered and not withdrawn pursuant to the Offer
as soon as practicable after such Expiration Date of the Offer. Notwithstanding
the foregoing, Purchaser shall be entitled to extend the Offer, without the
consent of the Company if at the initial expiration of the Offer, which will be
12:00 midnight eastern standard time on the twentieth Business Day following
commencement of the Offer (such date and time, as extended in accordance with
the term hereof, the "EXPIRATION DATE"), or any extension thereof, any condition
to the Offer is not satisfied or waived, and Purchaser agrees to extend the
Offer from time to time until the Termination Date if at the then scheduled
Expiration Date all of the Tender Offer Conditions have not been satisfied or
waived as permitted by this Agreement; provided, however, that Purchaser shall
not be required to extend the Offer as provided in this sentence unless, in
Parent's reasonable judgment, (i) each such condition is reasonably capable of
being satisfied; (ii) the Company is in material compliance with all of its
covenants in this Agreement; and (iii) the failure of such condition to be
satisfied shall not result from a breach by the Company of any of its covenants
and agreements contained in this Agreement. Any extension of the Offer pursuant
to this SECTION 2.01 shall not, without the written consent of the Company,
exceed the number of days that Purchaser reasonably believes will be necessary
so that the Tender Offer Conditions will be satisfied. In addition, Purchaser
may, without the consent of the Company, extend any then scheduled Expiration
Date of the Offer for any period required by applicable rules, regulations,
interpretations or positions of the SEC or the staff thereof applicable to the
Offer or for any period required by applicable law. If the Minimum Condition (as
defined in ANNEX I hereto) has been satisfied and all other conditions to the
Offer have been satisfied or waived but fewer than 90% of the Shares have been
validly tendered and not
13
withdrawn as of any Expiration Date, Purchaser shall accept and purchase all of
the Shares tendered in the initial offer period and may provide for a subsequent
offering period (as contemplated by Rule 14d-11 under the Exchange Act) as long
as providing for the subsequent offering period does not require the extension
of the initial offer period under applicable rules and regulations of the SEC,
which subsequent offering period shall not exceed 20 Business Days. In addition,
the Offer Price and the Preferred Offer Price may be increased and the Offer may
be extended to the extent required by law in connection with such increase in
each case without the consent of the Company. On or prior to the dates that
Purchaser becomes obligated to accept for payment and pay for Shares pursuant to
the Offer, Parent shall provide or cause to be provided to Purchaser the funds
necessary to pay for all Shares that Purchaser becomes so obligated to accept
for payment and pay for pursuant to the Offer.
(c) Parent and Purchaser represent that the Offer Documents will comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the Company's stockholders, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Purchaser with respect to information
supplied by the Company for inclusion in the Offer Documents. The Company and
its counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents and any amendments thereto prior to the filing thereof with the
SEC. Each of Parent and Purchaser, on the one hand, and the Company, on the
other hand, agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that it shall have become false or
misleading in any material respect and Purchaser further agrees to take all
steps necessary to cause the Offer Documents as so corrected to be filed with
the SEC and to be disseminated to stockholders of the Company, in each case, as
and to the extent required by applicable federal securities laws. Parent and
Purchaser will provide the Company and its counsel with a copy of any written
comments or telephonic notification of any oral comments Parent or Purchaser
receives from the SEC or its staff with respect to the Offer Documents promptly
after receipt thereof and will provide the Company and its counsel with a copy
of any written responses and telephonic notification of any oral responses of
Parent, Purchaser or their counsel.
SECTION 2.02 COMPANY ACTIONS.
(a) The Company shall file with the SEC and mail to the holders of Shares,
on the date of the filing by Parent and Purchaser of the Offer Documents, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "SCHEDULE 14D-9") reflecting the
recommendation of the Board of Directors of the Company that holders of Shares
tender their Shares pursuant to the Offer, and shall disseminate the Schedule
14D-9 as required by Rule 14d-9 promulgated under the Exchange Act. The Schedule
14D-9 will set forth, and the Company hereby represents, that the Board of
Directors of the Company, at a meeting duly called and held, has unanimously, by
vote of the directors attending such meeting, (i) determined by vote of its
directors present at the meeting at which this Agreement was approved that the
transactions contemplated hereby, including each of the Offer, the Merger, the
Tender Agreement and the Tender and Voting Agreement, are fair to and in the
best interests of the Company and its stockholders,
14
(ii) approved the Offer and approved and adopted this Agreement and declared its
advisability in accordance with the NRS, and (iii) recommended acceptance of the
Offer and approval of this Agreement by the Company's stockholders (if such
approval is required by applicable law). The Company further represents that,
prior to the execution hereof, Xxxx Xxxxxxxx has delivered to the Board of
Directors of the Company its written opinion that the consideration to be
received for the Shares pursuant to the Offer and the Merger is fair to the
Company's stockholders from a financial point of view. The Company further
represents and warrants that it has been authorized by Xxxx Xxxxxxxx to permit,
subject to prior review and consent by Xxxx Xxxxxxxx (such consent not to be
unreasonably withheld), the inclusion of the fairness opinion (or a reference
thereto) in the Offer Documents and in the Schedule 14D-9. The Company hereby
consents to the inclusion in the Offer Documents of the recommendations of the
Board of Directors of the Company described in this SECTION 2.02(A).
(b) The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Purchaser for inclusion in the Schedule 14D-9. Parent and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC. Each
of the Company, on the one hand, and Parent and Purchaser, on the other hand,
agree promptly to correct any information provided by either of them for use in
the Schedule 14D-9 to the extent that it shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and to be disseminated to the stockholders of the Company, in each case, as and
to the extent required by applicable federal securities law. The Company will
provide Parent, Purchaser and their counsel with a copy of any written comments
or telephonic notification of any oral comments the Company may receive from the
SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt
thereof and will provide Parent, Purchaser and their counsel with a copy of any
written responses and telephonic notification of any oral responses of the
Company or its counsel.
(c) In connection with the Offer, the Company will promptly furnish
Purchaser with mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listing or computer list containing the
names and addresses of the record holders of the Shares as of the most recent
practicable date and shall furnish Purchaser with such additional information
(including updated lists of holders of Shares and their addresses, mailing
labels and lists of security positions and non-objecting beneficial owner lists)
and such other assistance as Purchaser or its agents may reasonably request in
communicating the Offer to the Company's record and beneficial stockholders.
SECTION 2.03 DIRECTORS.
(a) Subject to compliance with applicable law, promptly upon the payment
by Purchaser for the Shares pursuant to the Offer and from time to time
thereafter (provided,
15
however, that Purchaser shall not be entitled to designate any members to the
Board of Directors of the Company without owning a majority of the Common Shares
and a majority of the Preferred Shares), Purchaser shall be entitled to
designate (i) such number of Class A directors, rounded up to the next whole
number, on the Board of Directors of the Company as is equal to the product of
the total number of Class A directors on the Board of Directors of the Company
(determined after giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Parent or its Affiliates (calculated on an as converted
basis) bears to the total number of Shares then outstanding (calculated on an as
converted basis), and (ii) such number of Class B directors, rounded up to the
next whole number, on the Board of Directors of the Company as is equal to the
product of the total number of Class B directors on the Board of Directors of
the Company (determined after giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of
Preferred Shares beneficially owned by Parent or its Affiliates bears to the
total number of Preferred Shares then outstanding, and the Company shall, upon
request of Purchaser, promptly take all actions necessary to cause Purchaser's
designees to be so elected, including, if necessary, seeking the resignations of
one or more existing directors, increasing the number of authorized directors or
amending its bylaws; provided, however, that prior to the Effective Time, the
Board of Directors of the Company shall have at least two members who are
directors of the Company on the date hereof and are not employees of the Company
(such members, the "INDEPENDENT DIRECTORS"), provided, however, that if no
Independent Directors remain, the other directors shall designate one person to
fill one of the vacancies who shall be neither an employee of the Company nor an
Affiliate of Parent and such person shall be deemed to be an Independent
Director for purposes of this Agreement. Upon written request of Purchaser, the
Company shall cause the designees of Purchaser to constitute the same percentage
of representation as is on the Board of Directors of the Company after giving
effect to this SECTION 2.03 on (i) each committee of the Board of Directors of
the Company; (ii) the Board of Directors of each Company Subsidiary; and (iii)
each committee of each such board. The provisions of this SECTION 2.03 shall not
limit any rights that Purchaser, Parent or any of their Affiliates may have as a
holder or beneficial owner of Shares as a matter of law with respect to the
election of directors or otherwise.
(b) The Company's obligations to appoint Purchaser's designees to the
Board of Directors of the Company shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under this SECTION 2.03 and shall include in the Schedule 14D-9
mailed to stockholders promptly after the commencement of the Offer (or an
amendment thereof or an information statement pursuant to Rule 14f-1 if
Purchaser has not theretofore designated directors or timely provided the
requisite information) such information with respect to the Company and its
officers and directors as is required under such Section and Rule in order to
fulfill its obligations under this SECTION 2.03. Parent and Purchaser will
supply any information with respect to itself and its officers, directors and
Affiliates required by such Section and Rule to the Company.
(c) Following the election or appointment of Parent's designees pursuant
to this SECTION 2.03 and prior to the Effective Time, any amendment or
termination of this Agreement by the Company, any extension of time for
performance of any of the obligations of Parent or Purchaser hereunder, any
waiver of any condition or any of the Company's rights hereunder or
16
other action by the Company hereunder adversely affecting the rights of the
stockholders of the Company other than Purchaser and its Affiliates, will
require the concurrence of the Independent Directors.
ARTICLE III
THE MERGER
SECTION 3.01 THE MERGER. Upon the terms and subject to the satisfaction or
waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the NRS, at the Effective Time, Purchaser shall
be merged with and into the Company. As a result of the Merger, the separate
corporate existence of Purchaser shall cease and the Company shall continue as
the surviving corporation (sometimes referred to herein as the "SURVIVING
CORPORATION").
SECTION 3.02 EFFECTIVE TIME; CLOSING.
(a) The closing of the Merger (the "CLOSING") shall take place at 10:00
a.m. on the second Business Day after satisfaction or waiver of the conditions
set forth in ARTICLE VII, at the offices of Akin, Gump, Strauss, Xxxxx & Xxxx,
L.L.P., 0000 Xxxxxxxx Xxxxx, Xxxxx Tower, 000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx
00000, unless another date, time or place is agreed to in writing between Parent
and the Company. The date on which the Closing occurs is referred to in this
Agreement as the "CLOSING DATE."
(b) On the Closing Date or as promptly as practicable thereafter, the
parties hereto shall cause the Merger to be consummated by filing Articles of
Merger, in accordance with Section 92A.200 of the NRS, with the Nevada Secretary
of State in such form as required by, and executed in accordance with the
relevant provisions of the NRS (the "ARTICLES OF MERGER") (the time of such
filing (or such later time as is specified in such Articles of Merger as agreed
between Parent and the Company) being the "EFFECTIVE TIME").
SECTION 3.03 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the NRS (except
as provided herein). Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of each of the Company and Purchaser shall become the debts,
liabilities, obligations, restrictions, disabilities and duties of the Surviving
Corporation.
SECTION 3.04 ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time, the
Articles of Incorporation and Bylaws of the Surviving Corporation shall be
amended to be identical to the Articles of Incorporation and Bylaws,
respectively, of Purchaser as in effect immediately prior to the Effective Time
(except that the name of the Surviving Corporation shall be "OEI Resources,
Inc."), in each case until duly amended in accordance with applicable law.
17
SECTION 3.05 DIRECTORS AND OFFICERS.
(a) The directors of Purchaser immediately prior to the Effective Time
shall be the directors of the Surviving Corporation at the Effective Time, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation until his or her respective successor is duly elected
or appointed and qualified.
(b) The officers of Purchaser immediately prior to the Effective Time
shall be the officers of the Surviving Corporation at the Effective Time, each
to hold office in accordance with the Articles of Incorporation and Bylaws of
the Surviving Corporation until his or her respective successor is duly elected
or appointed and qualified.
SECTION 3.06 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any Shares or
any shares of capital stock of Purchaser:
(a) CAPITAL STOCK OF PURCHASER. Each issued and outstanding share of
capital stock of Purchaser shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each Share that
is owned by the Company or by any wholly-owned Subsidiary of the Company and
each Share that is owned by Parent, Purchaser or any other wholly-owned
Subsidiary of Parent shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to SECTION 3.06(E), each
issued and outstanding share of Company Common Stock (other than such shares to
be canceled in accordance with SECTION 3.06(B)) shall be cancelled and
terminated and shall represent solely the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price. As of the Effective
Time, all such Shares shall no longer be outstanding and shall be automatically
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Offer Price, without interest.
(d) CONVERSION OF COMPANY PREFERRED STOCK. Subject to SECTION 3.06(E),
each issued and outstanding share of Company Preferred Stock (other than such
shares to be canceled in accordance with SECTION 3.06(B)) shall be cancelled and
terminated and shall represent solely the right to receive from the Surviving
Corporation in cash, without interest, an amount equal to the Preferred Offer
Price. As of the Effective Time, all such Shares shall no longer be outstanding
and shall be automatically canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Shares shall cease to have
any rights with respect thereto, except the right to receive the Preferred Offer
Price, without interest.
(e) SHARES OF DISSENTING STOCKHOLDERS.
(i) Notwithstanding any provision of this Agreement to the
contrary, Shares that are outstanding immediately prior to the
Effective Time and which are
18
held by holders of Shares who shall have not voted in favor of
the Merger or consented thereto in writing and who shall have
demanded properly in writing payment of the fair market value
of such Shares in accordance with Section 92A.420 of the NRS
(collectively, the "DISSENTING SHARES") shall be cancelled and
terminated and shall represent solely the right to receive
payment from the Surviving Corporation of the fair market
value of such Shares held by them in accordance with the
provisions of the NRS, except that all Dissenting Shares held
by holders of Shares who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights for an
appraisal of such shares under the NRS shall thereupon be
deemed to have been cancelled and terminated, as of the
Effective Time, and shall represent solely the right to
receive the Offer Price as provided in SECTION 3.06(C) or the
Preferred Offer Price as provided in 3.06(D), as applicable,
upon surrender in the manner provided in SECTION 3.07, of the
certificate or certificates that formerly evidenced such
Shares.
(ii) The Company shall give to Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of
such demands, and any other instruments served pursuant to the
NRS and received by the Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to
demands for payment of fair market value under the NRS. The
Company shall not, except with the prior written consent of
Parent, make any payment with respect to any such demands, or
offer to settle, or settle, any such demands. Any amount
payable to any holder of Shares exercising dissenters' rights
shall be paid solely by the Surviving Corporation out of its
own funds.
SECTION 3.07 EXCHANGE OF COMPANY CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall designate a
bank or trust company to act as agent for the holders of the Shares in
connection with the Merger (the "PAYING AGENT") to receive in trust the funds to
which holders of the Shares shall become entitled pursuant to SECTIONS 3.06(C)
and 3.06(D). From time to time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Paying Agent cash in amounts and
at times necessary for the prompt payment of the Offer Price as provided in
SECTION 3.06(C) and the Preferred Offer Price as provided in SECTION 3.06(D)
upon surrender of certificates representing Shares as provided herein. All
interest earned on such funds shall be paid to Parent.
(b) EXCHANGE PROCEDURE. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "COMPANY CERTIFICATES"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Company Certificates shall pass, only upon delivery of the Company
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for the Offer
Price as provided in SECTION 3.06(C) or the Preferred Offer Price as provided in
SECTION 3.06(D), as the case may be. Upon surrender of a Company Certificate for
19
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Company Certificate shall be entitled to receive in exchange
therefor the amount of cash into which the Shares theretofore represented by
such Company Certificate shall have been converted pursuant to SECTIONS 3.06(C)
or 3.06(D), as the case may be, and the Company Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares that is
not registered in the transfer records of the Company, payment may be made to a
Person other than the Person in whose name the Company Certificate so
surrendered is registered, if such Company Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the Person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of such Company Certificate
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
SECTION 3.07, each Company Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
amount of cash, without interest, into which the Shares theretofore represented
by such Company Certificate shall have been converted pursuant to SECTIONS
3.06(C) or 3.06(D), as the case may be. No interest will be paid or will accrue
on the cash payable upon the surrender of any Company Certificate.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES; TRANSFER BOOKS. All cash paid
upon the surrender of Company Certificates in accordance with the terms of this
ARTICLE III shall be deemed to have been paid in full satisfaction of all rights
pertaining to the Shares theretofore represented by such Company Certificates.
At the Effective Time, the stock transfer books of the Company shall be closed,
and there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Certificates are presented to the Surviving Corporation or the Paying Agent for
any reason, they shall be canceled and exchanged as provided in this ARTICLE
III.
(d) TERMINATION OF FUND; NO LIABILITY. At any time following six months
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Company Certificates, and thereafter
such holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Offer Price or the Preferred Offer Price, as
applicable, payable upon due surrender of their Company Certificates, without
any interest thereon. Notwithstanding the foregoing, none of Parent, Purchaser,
the Company or the Paying Agent shall be liable to any Person in respect of any
cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Company Certificates shall not have
been surrendered immediately prior to such date on which any payment pursuant to
this ARTICLE III would otherwise escheat to or become the property of any
Governmental Authority, the cash payment in respect of such Company Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any Person
previously entitled thereto.
20
(e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Company
Certificates evidencing Shares shall have been lost, stolen or destroyed, the
Paying Agent shall pay to such holder the Offer Price required pursuant to
SECTION 3.06(C) or the Preferred Offer Price required pursuant to SECTION
3.06(D), as applicable, in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit, which shall include indemnities
which are acceptable to Parent, of that fact by the holder thereof with such
assurances as the Paying Agent, in its discretion and as a condition precedent
to the payment of the Offer Price or the Preferred Offer Price, as applicable,
may reasonably require of the holder of such lost, stolen or destroyed Company
Certificates.
(f) WITHHOLDING TAXES. Parent and Purchaser shall be entitled to deduct
and withhold, or cause the Paying Agent to deduct and withhold, from the
consideration otherwise payable to a holder of Shares pursuant to the Offer or
the Merger any stock transfer taxes and such amounts as are required under the
Code, or any applicable provisions of state, local or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the Shares
in respect of which such deduction and withholding were made.
SECTION 3.08 STOCK OPTIONS AND WARRANTS.
(a) OPTIONS.
(i) Each outstanding and unexercised option to purchase shares of
Company Common Stock ("COMPANY OPTION") pursuant to each stock
option and incentive plan of or sponsored by the Company (the
"COMPANY OPTION PLANS"), that is fully vested and exercisable as of
the consummation of the Offer shall be converted into an obligation
of the Company to pay, and a right of the holder thereof to receive
in full satisfaction of such Option, cash in an amount in respect
thereof equal to the product of (A) the excess, if any, of the Offer
Price over the exercise price thereof and (B) the number of shares
of Company Common Stock subject to such Company Option (such payment
to be net of withholding taxes) (the "COMPANY OPTION PAYMENTS"). The
Company shall take all actions necessary to cause the Company's
employees and directors to consent, to the extent required, to the
transactions contemplated by this SECTION 3.08(A) no later than
immediately prior to the time Purchaser accepts Shares for payment
pursuant to the Offer. Except as may be otherwise agreed to by
Parent or Purchaser and the Company, as of the Effective Time, (A)
the Company Option Plans shall terminate, (B) the provisions in any
other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the
Company or any of the Company Subsidiaries shall be deleted and (C)
no holder of Company Options or any participant in the Company
Option Plans or any other plans, programs or arrangements shall have
any rights thereunder to acquire any equity securities of the
Company, the Surviving Corporation or any subsidiary thereof. All
Company Options outstanding as of the date of this Agreement, the
price at which they are exercisable and the vesting schedule
therefore are listed on SECTION 3.08(A) of the Disclosure Letter.
The Company and Parent agree that the
21
Company Option Payments are the sole payments that will be made with
respect to or in relation to the Company Options.
(ii) With respect to each Company Option granted pursuant to the terms of
a Company Option Plan that is not vested and exercisable as of the
consummation of the Offer, the Company or the Surviving Corporation,
as applicable, shall make the payment of the amount determined
pursuant to SECTION 3.08(A)(I) above at the time each such unvested
Company Option would otherwise have become vested and exercisable
subject to the satisfaction of the terms and conditions set forth in
the applicable option award agreement and the Company Option Plan
pursuant to which such Company Option was granted, or at such
earlier date as may be determined by Parent in its sole and absolute
discretion.
(b) WARRANTS. At the Effective Time, each warrant to purchase shares of
Company Common Stock, that is then outstanding and exercisable (each a "COMPANY
WARRANT"), shall be cancelled and converted into the right to receive cash in an
amount equal to the product of (A) the excess, if any, of the Offer Price over
the exercise price of such Company Warrant and (B) the number of Shares
previously subject to such Company Warrant immediately prior to its cancellation
(such payment to be net of withholding taxes) (the "COMPANY WARRANT PAYMENTS").
The Company shall take all actions necessary to cause the holders of the Company
Warrants to consent, to the extent required, to the transactions contemplated by
this SECTION 3.08(B) no later than immediately prior to the time Purchaser
accepts Shares for payment pursuant to the Offer. All Company Warrants
outstanding as of the date of this Agreement, the date or dates when they become
exercisable if not exercisable on the date of this Agreement and the price at
which they are exercisable are listed on SECTION 3.08(B) of the Disclosure
Letter. The Company and Parent agree that the Company Warrant Payments are the
sole payments that will be made with respect to or in relation to the Company
Warrants.
SECTION 3.09 SUBSEQUENT ACTIONS. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Purchaser, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
22
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that:
SECTION 4.01 ORGANIZATION, AUTHORITY AND QUALIFICATION OF THE COMPANY. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all necessary power and authority
to own, operate or lease the properties and assets now owned, operated or leased
by it and to carry on its business as it is currently conducted and as it is now
proposed to be conducted. The Company has all necessary power and authority to
enter into this Agreement, to carry out its obligations hereunder and to
consummate the transactions contemplated hereby. The Company is duly licensed or
qualified as a foreign corporation to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the operation
of its business makes such licensing or qualification necessary, except for such
failures to be so licensed or qualified and in good standing that would not have
a Material Adverse Effect. Complete and correct copies of the Articles of
Incorporation and Bylaws of the Company, each as in effect on the date hereof,
have been made available by the Company to Parent. The Company is not in default
in any respect in the performance, observation or fulfillment of any provision
of its Articles of Incorporation or Bylaws. The execution and delivery of this
Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or the consummation of the transactions
contemplated hereby (other than, with respect to the Merger, obtaining approval
of the Company's stockholders and the filing and recordation of appropriate
merger documents as required by the NRS). The Company hereby represents that the
Board of Directors of the Company, at a meeting duly called and held, has
unanimously, by vote of the directors attending such meeting, (i) determined by
vote of its directors present at the meeting at which this Agreement was
approved that the transactions contemplated hereby, including each of the Offer,
the Merger, the Tender Agreement and the Tender and Voting Agreement are fair to
and in the best interests of the Company and its stockholders, (ii) approved the
Offer and approved and adopted this Agreement and declared its advisability in
accordance with the NRS, and (iii) recommended acceptance of the Offer and
approval of this Agreement by the Company's stockholders (if such approval is
required by applicable law). This Agreement has been duly executed and delivered
by the Company, and (assuming due authorization, execution and delivery by
Parent and Purchaser) this Agreement constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
SECTION 4.02 CAPITAL STOCK OF THE COMPANY; OWNERSHIP OF THE SHARES. The
authorized capital stock of the Company consists of 25,000,000 shares of Company
Common Stock, 10,000,000 shares of Class B common stock, par value $.01 per
share ("CLASS B COMPANY COMMON STOCK") and 10,000,000 shares of preferred stock,
par value $.01 per share, of which 5,000,000 shares have been designated and
issued as Company Preferred Stock. As of the date of this Agreement, (i)
6,724,939 shares of Company Common Stock, (ii) no shares of Company Class B
Common Stock, and (iii) 2,991,465 shares of Company Preferred Stock are issued
and outstanding, all of which (a) are duly authorized, validly issued, fully
paid and nonassessable and
23
(b) were issued in compliance with all applicable state and federal securities
laws. No shares of the Company's capital stock are held in the treasury of the
Company. None of the issued and outstanding shares of the Company's capital
stock were issued in violation of any preemptive rights. Except as set forth in
SECTION 4.02 of the Disclosure Letter and except for the dividends to be issued
on the Company Preferred Stock that are payable in shares of Company Preferred
Stock pursuant to the Company's Articles of Incorporation and Section 4.17 of
the Preferred Stock Purchase Agreement, there are no (i) options, warrants,
convertible securities, subscriptions or other rights, agreements, arrangements
or commitments of any character relating to the capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or any
other interest in, the Company, (ii) outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of the Company's
capital stock or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any other Person or (iii)
outstanding contractual obligations to register any shares of the Company's
capital stock or instruments convertible or exchangeable into shares of the
Company's capital stock. SECTION 4.02 of the Disclosure Letter sets forth all
voting trusts, stockholder agreements, proxies or other agreements in effect
with respect to the voting or transfer of any shares of the Company's capital
stock binding upon the Company or to which the Company is a party, except those
contemplated or required by this Agreement, and to the Knowledge of the Company
no such other voting trusts, stockholder agreements, proxies or other agreements
with respect to the voting or transfer of any shares of the Company's capital
stock are in effect.
SECTION 4.03 COMPANY SUBSIDIARIES.
(a) SECTION 4.03 of the Disclosure Letter sets forth a list of all Company
Subsidiaries, listing for each Company Subsidiary its name, type of entity, the
jurisdiction and date of its incorporation or organization, its authorized
capital stock, partnership capital or equivalent, the number and type of its
issued and outstanding shares of capital stock, partnership interests or similar
ownership interests and the current ownership of such shares, partnership
interests or similar ownership interests.
(b) Other than the Company Subsidiaries, there are no other corporations,
partnerships, joint ventures, associations or other entities in which the
Company owns, of record or beneficially, any direct or indirect equity or other
interest, or any right (contingent or otherwise) to acquire the same. Other than
Company Subsidiaries, there are no partnerships or joint venture agreements or
other business entities in which the Company or any Company Subsidiary owns any
equity interest.
(c) Each Company Subsidiary that is a corporation: (i) is a corporation
duly organized and validly existing under the laws of its jurisdiction of
incorporation, (ii) has all necessary power and authority to own, operate or
lease the properties and assets owned, operated or leased by such Company
Subsidiary and to carry on its business as it is currently conducted and as it
is now proposed to be conducted by such Company Subsidiary and (iii) is duly
licensed or qualified as a foreign corporation to do business and is in good
standing in each jurisdiction in which the properties owned or leased by it or
the operation of its business makes such licensing or qualification necessary,
except for such failures to be so licensed or qualified and in good standing
that would not have a Material Adverse Effect. Each Company Subsidiary that is
not a
24
corporation: (i) is duly organized and validly existing under the laws of its
jurisdiction of organization, (ii) has all necessary power and authority to own,
operate or lease the properties and assets owned, operated or leased by such
Company Subsidiary and to carry on its business as it is currently conducted and
as it is now proposed to be conducted by such Company Subsidiary and (iii) is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary, except for such
failures to be so licensed or qualified and in good standing that would not have
a Material Adverse Effect. No Company Subsidiary is in default in any respect in
the performance, observation or fulfillment of any provision of its Articles of
Incorporation or Bylaws (or similar organizational documents).
(d) Except as set forth in SECTION 4.03 of the Disclosure Letter, all the
outstanding shares of capital stock of each Company Subsidiary are validly
issued, fully paid and nonassessable and are owned by the Company, whether
directly or indirectly, free and clear of all Encumbrances, except Permitted
Encumbrances.
(e) There are no (i) options, warrants, convertible securities,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the capital stock of any Company Subsidiary or obligating
the Company or any Company Subsidiary to issue or sell any shares of capital
stock of, or any other interest in, any Company Subsidiary nor (ii) outstanding
contractual obligations of any Company Subsidiary to repurchase, redeem or
otherwise acquire Common Stock or any shares of outstanding capital stock of the
Company or any Company Subsidiary or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any other Person.
(f) There are no voting trusts, stockholder agreements, proxies or other
agreements or understandings in effect with respect to the voting or transfer of
any shares of capital stock of, or any other interests in, any Company
Subsidiary.
(g) True and complete copies of the charter and by-laws (or similar
organizational documents), in each case as in effect on the date hereof, of each
Company Subsidiary have been made available by the Company to Parent.
SECTION 4.04 CORPORATE BOOKS AND RECORDS. The minute books of the Company
and the Company Subsidiaries that are corporations contain accurate records of
all meetings and accurately reflect all other actions taken by the shareholders,
Boards of Directors and all committees of the Boards of Directors of the Company
and the Company Subsidiaries. Complete and accurate copies of all such minute
books of the Company and each Company Subsidiary have been made available by the
Company to Parent.
SECTION 4.05 NO CONFLICT. Except as disclosed in SECTION 4.05 of the
Disclosure Letter, assuming that all consents, approvals, authorizations and
other actions described in SECTION 4.06 have been obtained and all filings,
approvals and notifications listed in SECTION 4.06 of the Disclosure Letter have
been made or obtained, the execution, delivery and performance of this Agreement
by the Company do not and will not (a) violate or conflict with or result in a
breach of any provision of the Articles of Incorporation or Bylaws or similar
organizational documents of the Company or any Company Subsidiary, (b) violate
or conflict with any Law or
25
Governmental Order applicable to the Company or any Company Subsidiary or any of
their respective assets and properties, or (c) conflict with, result in any
violation or breach of or constitute a default (or an event which, with the
giving of notice or lapse of time, or both, would become a default) under,
require any notice or consent under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in any loss
of any benefit, the triggering of any payment by, or the increase in any other
obligation of, the Company or any Company Subsidiary or the creation of any
Encumbrance on any assets or properties of the Company or any Company Subsidiary
pursuant to any Material Contract (as defined in SECTION 4.12) or any other
material license, permit, franchise or other instrument or arrangement to which
the Company or any Company Subsidiary is a party or by which any of them, the
Company Common Stock or any of such assets or properties is bound or affected,
except for such conflicts, violations, breaches, defaults or other occurrences
which would not (i) have a Material Adverse Effect, (ii) impair, in any material
respect, the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or materially delay the consummation of any of the
transactions contemplated hereby.
SECTION 4.06 GOVERNMENTAL CONSENTS AND APPROVALS. Except as disclosed in
SECTION 4.06 of the Disclosure Letter, the execution, delivery and performance
of this Agreement by the Company and compliance by the Company with any of the
provisions hereof do not and will not require any consent, waiver, approval,
authorization or other order of, action by, filing with or notification to, any
Governmental Authority, except (a) the requirements of the Securities Act, the
Exchange Act, state securities or blue sky laws, (b) the filing and recordation
of appropriate merger documents as required by the NRS, (c) any other consent,
approval, authorization, filing or notice the failure of which to make or obtain
would not (i) have a Material Adverse Effect, (ii) impair, in any material
respect, the ability of the Company to perform its obligations under this
Agreement, or (iii) prevent or materially delay the consummation of any of the
transactions contemplated hereby and (d) any consent, approval, authorization,
filing or notice required as a result of the identity of Parent.
SECTION 4.07 SEC REPORTS, FINANCIAL INFORMATION, BOOKS AND RECORDS.
(a) The Company has filed with the SEC and has heretofore made available
to Parent true and complete copies of, each form, registration statement,
report, schedule, proxy or information statement and other information statement
and other document (including Exhibits and amendments thereto), including
without limitation its Annual Reports to Stockholders incorporated by reference
in certain of such reports, required to be filed by it or its predecessors with
the SEC since December 31, 1996 under the Securities Act or the Exchange Act
(collectively, the "COMPANY SEC REPORTS"). As of the respective dates such
Company SEC Reports were filed or, if any such Company SEC Reports were amended,
as of the date such amendment was filed, each of the Company SEC Reports,
including without limitation any financial statements or schedules included
therein, (a) complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the
applicable rules and regulations promulgated thereunder, and (b) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
26
(b) Each of the audited consolidated balance sheets of the Company for
each of the three fiscal years ended as of December 31, 1997, December 31, 1998
and December 31, 1999, and the related audited consolidated statements of
operations and cash flows of the Company, together with all related notes and
schedules thereto, accompanied by the reports thereon of the Company's
accountants (collectively referred to herein as the "FINANCIAL STATEMENTS")
included in the Company SEC Reports and (ii) the unaudited consolidated balance
sheet of the Company as of September 30, 2000, and the related consolidated
statement of operations, together with all related notes and schedules thereto
(collectively referred to herein as the "INTERIM FINANCIAL STATEMENTS") included
in the Company SEC Reports (i) were prepared from, and are in accordance with,
the books of account and other financial records of the Company, (ii) present
fairly the consolidated financial position of the Company and the Company
Subsidiaries as of the dates thereof and the consolidated results of operations
and cash flows of the Company and the Company Subsidiaries for the periods
covered thereby, subject, in the case of unaudited financial statements, to
normal year-end adjustments, (iii) have been prepared in accordance with U.S.
GAAP applied on a basis consistent with the past practices of the Company and
(iv) comply in all material respect with applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto.
(c) The books of account and other financial records of the Company and
the Company Subsidiaries (i) are complete and correct, and do not contain or
reflect any material inaccuracies or discrepancies and (ii) have been maintained
in accordance with good business and accounting practices and in accordance with
U.S. GAAP.
SECTION 4.08 NO UNDISCLOSED LIABILITIES. There are no Liabilities of the
Company or any Company Subsidiary other than Liabilities (a) reflected or
reserved against on the Reference Balance Sheet or reflected in the notes
thereto or (b) incurred since the date of the Reference Balance Sheet in the
ordinary course of the business, consistent with past practice, of the Company
and the Company Subsidiaries, which in the aggregate do not exceed
$2,000,000.00. The Company and the Company Subsidiaries have no Knowledge of any
basis for the assertion of any other claims or liabilities of any material
nature or in any material amount.
SECTION 4.09 ABSENCE OF CERTAIN CHANGES, EVENTS AND CONDITIONS. Since the
date of the Reference Balance Sheet, the business of the Company and the Company
Subsidiaries has been conducted in all material respects in the ordinary course,
consistent with past practice, and, since such date, there has not been (a)
individually or in the aggregate, any Material Adverse Effect, (b) any material
change by the Company or any Company Subsidiary in its accounting methods,
principles or practices, (c) any declaration, setting aside or payment of any
dividend or distribution in respect of the Company Common Stock or any
redemption, purchase or other acquisition of any of its securities, (d) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the ordinary course of business
consistent with past practice or (e) the occurrence of the other events set
forth in SECTION 6.01(B).
SECTION 4.10 LITIGATION. Except as disclosed in SECTION 4.10 of the
Disclosure Letter, there is no material Action pending or, to the Knowledge of
the Company, threatened against or directly affecting the Company, any Company
Subsidiary or any Property of the
27
Company or any Company Subsidiary or any of the directors or officers of the
Company or any Company Subsidiary in their capacity as such, before any
Governmental Authority. There are no outstanding Governmental Orders against the
Company or any Company Subsidiary or any Property of the Company or any Company
Subsidiary that would reasonably be expected to (a) have a Material Adverse
Effect, (b) impair, in any material respect, the ability of the Company to
perform its obligations under this Agreement, or (c) prevent or materially delay
the consummation of the transactions contemplated hereby. Neither the Company
nor any Company Subsidiary is aware of any facts or circumstances which would
give rise to any Action or right to initiate any Action. Neither the Company nor
any Company Subsidiary is subject to any outstanding Governmental Order.
SECTION 4.11 COMPLIANCE WITH LAWS. Each of the Company and the Company
Subsidiaries holds all material approvals, licenses, permits, registrations and
similar type authorizations necessary for the lawful conduct of their respective
businesses, as now conducted, and such businesses are not being, and neither the
Company nor any Company Subsidiary has received any notice from any Governmental
Authority or Person that any such business has been or is being conducted in
violation of any law, ordinance or regulation, including without limitation any
law, ordinance or regulation relating to occupational health and safety, and
have conducted and continues to conduct their businesses in compliance in all
material respects with all Laws and Governmental Orders applicable to the
Company or any Company Subsidiary.
SECTION 4.12 MATERIAL CONTRACTS.
(a) As of the date hereof, SECTION 4.12(A) of the Disclosure Letter lists
each contract, lease, indenture, agreement, arrangement or understanding to
which the Company or any of the Company Subsidiaries is subject that is of a
type that would be required to be included as an Exhibit to a Registration
Statement on Form S-1 pursuant to the rules and regulations of the SEC if such
registration statement was filed by the Company (collectively, the "MATERIAL
CONTRACTS").
(b) Each of the Material Contracts listed on SECTION 4.12(A) of the
Disclosure Letter (i) are in full force and effect and are the valid and legally
binding obligations of the parties thereto and are enforceable in accordance
with their respective terms; (ii) neither the Company nor any such Company
Subsidiary nor, to the Knowledge of the Company, any other party to such
Material Contract is in violation, breach or default of any material provision
thereof, including with respect to payments or otherwise; (iii) no party to any
Material Contract has given notice of any action to terminate, cancel, rescind
or procure a judicial reformation thereof; and (iv) no Material Contract
contains any provision that prevents the Company or any Company Subsidiary from
owning, managing and operating the Leases of the Company or any Company
Subsidiary in accordance with historical practices.
(c) As of the date of this Agreement, (i) there are no material
outstanding calls for payment that are due or that the Company or any Company
Subsidiary are committed to make that have not been made; (ii) there are no
material operations with respect to which the Company or any Company Subsidiary
have become a non-consenting party; and (iii) there are no commitments for the
material expenditure of funds for drilling or other capital projects other than
projects with respect to which the operator is not required under the applicable
operating agreement to seek consent.
28
SECTION 4.13 TITLE TO PROPERTY.
(a) Except as would not have a Material Adverse Effect or except as to
those matters set forth in SECTION 4.13(A) of the Disclosure Letter, the Company
or a Company Subsidiary, as the case may be, has Defensible Title to the
Property, free and clear of Encumbrances, other than Permitted Encumbrances.
(b) SECTION 4.13(B) of the Disclosure Letter sets forth a brief
description of all Leases and Xxxxx. With respect to any Lease or Well,
"DEFENSIBLE Title" shall mean:
(i) such record and beneficial right, title and interest in and to
such Lease or Well that:
(A) entitles the Company or the Company Subsidiary, as
applicable, to receive a Net Revenue Interest in such
Lease or Well that is equal to or greater than the Net
Revenue Interest set forth in SECTION 4.13(B) of the
Disclosure Letter therefor, without reduction, suspension
or diminution throughout the duration of the estate
constituting such Property, except (x) as shown in
SECTION 4.13(B) of the Disclosure Letter or as provided
in any Lease or other agreement filed as public record as
of the date hereof, (y) as permitted or required by
SECTION 6.01, changes or adjustments that result from the
establishment of units, the entry into of pooling or
unitization agreements after the date hereof, changes in
existing units (or the participating areas therein) made
after the date hereof voluntarily or by order of the
appropriate regulatory agency having jurisdiction, or (z)
that result from or are incidental to Operations
conducted as permitted or required by SECTION 6.01;
(B) obligates or subjects the Company or the Company
Subsidiary, as applicable, to bear a Working Interest in
such Well or Lease that is no greater than the Working
Interest set forth in SECTION 4.13(B) of the Disclosure
Letter therefor, without increase throughout the duration
of the estate constituting such Property, except (w) as
shown in SECTION 4.13(B) of the Disclosure Letter or as
provided in any Lease or other agreement filed as public
record as of the date hereof, (x) for any changes or
adjustments that are caused by contribution requirements
provided for under provisions similar to those contained
in an operating agreement, (y) as permitted or required
by SECTION 6.01, changes or adjustments that result from
the establishment of units, the entry into of pooling or
unitization agreements after the date hereof, changes in
existing units (or the participating areas therein) made
after the date hereof voluntarily or by order of the
appropriate regulatory agency having jurisdiction, after
the date hereof or (z) that result from or are
29
incidental to Operations conducted as permitted or
required by SECTION 6.01; and
(ii) (A) the Leases are valid and enforceable and grant the rights
purported to be granted thereby and all rights necessary
thereunder for the current Operations of the Company or the
Company Subsidiary, as applicable, (B) neither the Company nor
the Company Subsidiary that is party to each such Lease, nor,
to the Knowledge of the Company, any other party to any such
Lease, is in breach or default thereunder in any material
respect, no notice of default to termination thereunder has
been given or received by the Company or any Company
Subsidiaries, and no event has occurred which would, with the
giving of notice or passage of time or both, constitute a
breach or default thereunder or permit termination,
modification or acceleration thereunder that could reasonably
be expected to result in a Material Adverse Effect, and (C) (i)
there are no express contractual obligations to engage in
continuous development operations in order to maintain any
producing Property in force and effect; (ii) there are no
provisions applicable to the Properties that increase the
royalty percentage of the lessor thereunder; and (iii) none of
the Properties are limited by terms fixed by a certain number
of years (other than primary terms under Leases).
(c) SECTION 4.13(C) of the Disclosure Letter contains a description of the
Easements. With respect to Easements and related Equipment, Defensible Title
shall mean record or beneficial right, title and interest in the applicable
Easement sufficient to enable the Company or any Company Subsidiary to conduct
its Operations as currently conducted with respect thereto, without material
interference by any other Person, and, to the Knowledge of the Company or the
Company Subsidiary, as applicable, all material Easements are valid and
enforceable and grant the rights purported to be granted thereby and all rights
necessary for the current Operations of such business without material
interference by any other Person.
(d) SECTION 4.13(D) of the Disclosure Letter sets forth a brief
description of each parcel of real property comprising the Fee Mineral
Interests. With respect to Fee Mineral Interests, Defensible Title means all the
record and beneficial right, title and interest in and to each such parcel of
land, respectively, that was conveyed or granted to the Company or any Company
Subsidiary, or their respective predecessors-in-title, in the instrument of
conveyance referred to and described by volume or book and page in SECTION
4.13(D) of the Disclosure Letter, as each instrument of conveyance is recorded
in the county or parish where the land is located.
(e) SECTION 4.13(E) of the Disclosure Letter sets forth a brief
description of each parcel of Other Real Property. With respect to Other Real
Property, Defensible Title shall mean the right of quiet enjoyment of all such
real property, whether leased or fee, for the term of any applicable agreement
relating thereto, and all such interests in Other Real Property are valid and
enforceable and grant the rights purported to be granted thereby and all rights
necessary thereunder for the current Operations of such business without
material interference.
30
(f) In evaluating the significance of any fact, circumstance or condition
for purposes of determining Defensible Title, due consideration shall be given
to the length of time that the particular Property has been producing
Hydrocarbons and whether such fact, circumstance or condition is of the type
expected to be encountered in the area involved and is usual and customarily
acceptable to reasonable and prudent operators, interest owners, and/or
purchasers engaged in the business of the ownership, development and operation
of oil and gas properties with knowledge of such facts and appreciation of their
legal significance.
SECTION 4.14 INTELLECTUAL PROPERTY. The Company and the Company
Subsidiaries own the entire right, title and interest, free and clear of any
Encumbrance, in and to, or are licensed to use, or otherwise have the right to
use, all patents and patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service xxxx rights, trade dress, logos,
domain names, corporate names and goodwill associated therewith; and copyrights,
technology, trade secrets know-how, processes, confidential business
information, seismic rights and other proprietary intellectual property rights
and computer software ("INTELLECTUAL PROPERTY") currently used in the conduct of
the business of the Company and the Company Subsidiaries, except where the
failure to so own, be licensed or otherwise have the right to use such
Intellectual Property would not, individually or in the aggregate, have a
Material Adverse Effect. No Person has notified either the Company or any
Company Subsidiary that their use of the Intellectual Property infringes on the
rights of any Person, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of the
Company and the Company Subsidiaries that could have a Material Adverse Effect,
and, to the Company's Knowledge, no Person is infringing on any right of the
Company or any Company Subsidiary with respect to and no action is pending or
threatened which challenges and neither the Company nor the Company's
Subsidiaries are aware of any fact which, individually or in the aggregate,
could reasonably be argued to detrimentally affect the validity, enforceability,
use or ownership of any such Intellectual Property. No claims are pending or, to
the Company's Knowledge, threatened that any activity of the Company or any
Company Subsidiary now conducted or presently contemplated to be conducted,
infringes, violates or otherwise adversely affects the intellectual property or
other proprietary rights of any Person. The consummation of the transactions
contemplated by this Agreement will not have a Material Adverse Effect on any
right to or the use of the any Intellectual Property.
SECTION 4.15 Employee Benefit Matters.
(a) PENSION PLANS.
(i) No "accumulated funding deficiency" (for which an excise tax
is due or would be due in the absence of a waiver) as defined
in Section 412 of the Code or as defined in Section 302(a)(2)
of ERISA, whichever may apply, has been incurred with respect
to any Pension Plan with respect to any plan year, whether or
not waived. Neither the Company nor any ERISA Affiliate has
failed to pay when due any "required installment," within the
meaning of Section 412(m) of the Code and Section 302(e) of
ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Company nor any ERISA Affiliate is subject to any
lien imposed under Section 412(n) of the Code or Section
302(f) or 4068 of ERISA,
31
whichever may apply, with respect to any Pension Plan. All
"benefit liabilities" within the meaning of Section
4001(a)(16) of ERISA, are fully funded as of the Closing Date
with respect to each Pension Plan as determined on a
termination basis using the assumed interest rate set forth
in each Pension Plan or otherwise required by ERISA or the
Code. Neither the Company nor any ERISA Affiliate is required
to provide security to a Pension Plan under Section
401(a)(29) of the Code.
(ii) No Pension Plan is "top heavy" within the meaning of Section
416 of the Code.
(iii) Each Pension Plan and each related trust agreement, annuity
contract or other funding instrument which is intended to be
qualified and tax exempt under the provisions of Code
Sections 401(a) and 501(a) or 408, as applicable, is so
qualified and, except for Pension Plans which are qualified
under Code Section 408, each such plan has been so determined
by the Internal Revenue Service pursuant to a favorable
determination letter considering the Tax Reform Act of 1986,
as amended, or application for such determination has been
made within the applicable remedial amendment period and is
currently pending.
(iv) Each Pension Plan, related trust agreement, annuity contract
or other funding instrument is in material compliance with
its terms and, both as to form and in operation, with the
requirements prescribed by any and all Laws which are
applicable to such Pension Plan, including without limitation
ERISA and the Code.
(v) The Company or an ERISA Affiliate has paid all premiums (and
interest charges and penalties for late payment, if
applicable) due to the PBGC with respect to each Pension Plan
which is covered by Title IV of ERISA for each plan year
thereof for which such premiums are required. Neither the
Company nor any ERISA Affiliate has engaged in, or is a
successor or affiliate of an entity that has engaged in, a
transaction which is described in Section 4069 or Section
4212(c) of ERISA. There has been no unreported "reportable
event" (as defined in Section 4043(b) of ERISA and the PBGC
regulations under such Section) requiring notice to the PBGC
with respect to any Pension Plan. No filing has been made by
the Company or any ERISA Affiliate with the PBGC, and no
proceeding has been commenced by the PBGC, to terminate any
Pension Plan. No condition exists and no event has occurred
that could constitute grounds for the termination of any
Pension Plan by the PBGC, or which could reasonably be
expected to result in liability of the Company or any ERISA
Affiliate to the PBGC with respect to any Pension Plan, other
than liabilities for premium payments. Neither the Company
nor any ERISA Affiliate has, at any time, (1) ceased
operations at a facility so as to become subject to the
provisions of Section 4062(e) of ERISA, (2) withdrawn as a
substantial employer so as to become subject to the
32
provisions of Section 4063 of ERISA, (3) ceased making
contributions on or before the Closing Date to any Pension Plan
subject to Section 4064(a) of ERISA to which the Company or any
ERISA Affiliate made contributions during the six years prior
to the Closing Date, or (4) otherwise incurred any liability to
the PBGC, including the creation of a lien against any property
of the Company or any ERISA Affiliate pursuant to Section 4068
of ERISA.
(b) MULTIEMPLOYER PLANS. There are no Multiemployer Plans, and neither the
Company nor any ERISA Affiliate has ever maintained, contributed to, or
participated or agreed to participate in any Multiemployer Plan. Neither the
Company nor any ERISA Affiliate has ever withdrawn, partially or completely, or
instituted steps to withdraw, whether partially or completely, from any
Multiemployer Plan, nor has any event occurred which could enable a
Multiemployer Plan to give notice of and demand payment of any withdrawal
liability with respect to the Company or any ERISA Affiliate.
(c) WELFARE PLANS.
(i) Each Welfare Plan is in material compliance with its terms
and, both as to form and operation, with the requirements
prescribed by any and all Laws which are applicable to such
Welfare Plan, including without limitation ERISA and the
Code.
(ii) An estimate of the liabilities of the Company and any ERISA
Affiliates for providing retiree life and medical benefits
coverage to active and retired employees of the Company and
any ERISA Affiliates has been made and is reflected on the
appropriate balance sheet and books and records according to
Statement of Financial Accounting Standards No. 106. The
Company or any ERISA Affiliate has the right to modify or
terminate each Welfare Plan that provides coverage or
benefits for either or both retired and active employees
and/or their beneficiaries.
(iii) Each Welfare Plan which is a "group health plan," as defined
in Section 607(1) of ERISA, has been operated in material
compliance with provisions of Part 6 and 7 of Title I,
Subtitle B of ERISA and Sections 4980B, 9801-9803, 9811,
9812, and 9831-9833 of the Code at all times.
(iv) No Welfare Plans are self-insured "multiple employer welfare
arrangements" as such term is defined in Section 3(40) of
ERISA.
(d) BENEFIT ARRANGEMENTS. Each Benefit Arrangement is in material
compliance with its terms and with the requirements prescribed by any and all
Laws which are applicable to such Benefit Arrangement, including without
limitation the Code.
(e) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Neither the Company nor
any ERISA Affiliate has any liability with respect to any transaction which
relates to any Pension Plan or any Welfare Plan and which is in violation of
Sections 404 or 406 of ERISA or constitutes a "prohibited transaction," as
defined in Section 4975(c)(1) of the Code, and for
33
which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or
(d) of the Code. To the Knowledge of the Company, neither it nor any ERISA
Affiliate has participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Welfare Plan or Pension Plan or has any
unpaid civil penalty under Section 502(1) of ERISA.
(f) LITIGATION. There is no material action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation, proceeding, arbitral
action, governmental audit or investigation (including, without limitation, any
such audit or investigation by the Internal Revenue Service, Department of
Labor, or PBGC) relating to or seeking benefits under any Employee Plan that is
pending or, to the Knowledge of the Company, threatened or anticipated against
the Company or any ERISA Affiliate other than routine claims for benefits. To
the best of the Company's Knowledge, no Employee has any material claim against
the Company (whether under federal or state law, any employment agreement, or
otherwise) on account of or for (i) overtime pay, other than overtime pay for
the current payroll period; (ii) wages or salary for any period other than the
current payroll period; (iii) vacation, time off, sick time or pay in lieu of
any of the foregoing, other than that earned in respect of the current fiscal
year of the Company; or (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work. To the best of
the Company's Knowledge, no Employee has any material claim, or basis for any
material action or proceeding against the Company, arising under any statute,
ordinance or regulation relating to discrimination in employment or employment
practices, occupational safety and health standards or workers' compensation.
(g) UNPAID CONTRIBUTIONS. Neither the Company nor any ERISA Affiliate has
any liability for unpaid contributions with respect to any Employee Plan. The
Company and all ERISA Affiliates have made all required contributions and paid
all accrued liabilities under each Employee Plan for all periods through and
including the Closing Date. For purposes of the preceding sentence, accrued
liability shall include a pro rata contribution to each Employee Plan for that
portion of a plan year or other applicable period which precedes the Closing
Date, and accrued liabilities for any portion of a plan year or other applicable
period shall be determined by multiplying the liability for the entire such year
or period by a fraction, the numerator of which is the number of days preceding
the Closing Date in such year or period, and the denominator of which is the
number of days in such year or period, as the case may be. No event has occurred
or circumstance exists that could result in a material increase in the premium
or other benefit cost of any Employee Plan.
(h) AMENDMENT AND TERMINATION. Each Employee Plan may be amended or
terminated at any time by the Company or an ERISA Affiliate.
(i) CHANGE OF CONTROL PAYMENTS AND COMPENSATION DEDUCTION LIMITATIONS. The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not result in any payment (whether of separation pay or
otherwise), cancellation of indebtedness, or other obligation becoming due from
the Company or any ERISA Affiliate to any current or former employee, director,
or consultant, or result in the vesting, acceleration of payment or increase in
the amount of any benefit payable to or in respect of any such current or former
employee, director, or consultant of the Company or any ERISA Affiliate. There
is no contract, agreement, plan or arrangement covering any current or former
employee, director, or consultant of the Company or any ERISA Affiliate that,
individually or collectively, could give rise to the
34
payment of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1), 162(m), and/or 280G of the Code or would require the payment
of an excise tax imposed by Section 4999 of the Code or of any "gross up" of any
such excise tax.
(j) COPIES OF DOCUMENTATION. The Company has made available to Parent (i)
copies of all employment agreements with officers of the Company or any Company
Subsidiary; (ii) copies of all severance agreements, programs and policies of
the Company or any Company Subsidiary with or relating to its employees; and
(iii) copies of all plans, programs, agreements and other arrangements of the
Company or any Company Subsidiary with or relating to its employees which
contain change of control provisions.
(k) LABOR. As of the date of this Agreement, there is no labor dispute,
strike or work stoppage against the Company or any Company Subsidiary, pending
or threatened in writing, which may interfere with the respective business
activities of the Company or any Company Subsidiary. As of the date of this
Agreement, to the Knowledge of the Company, neither the Company nor any Company
Subsidiary, nor their representatives or employees, has committed any unfair
labor practices in connection with the operation of the respective businesses of
the Company or any Company Subsidiary, and there is no charge or complaint
against the Company by the National Labor Relations Board or any comparable
state agency pending or threatened. Neither the Company nor any Company
Subsidiary (i) is a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strikes, grievances, claims or unfair labor
practices, or other collective bargaining disputes; (ii) has committed any
unfair labor practice; or (iii) has any Knowledge of any organizational effort
currently being made or threatened by or on behalf of any labor union with
respect to employees of the Company or any Company Subsidiary.
SECTION 4.16 ENVIRONMENTAL MATTERS. Except as disclosed in SECTION 4.16 of
the Disclosure Letter:
(a) the Company and the Company Subsidiaries currently are and have been
in compliance in all material respects with all applicable Environmental Laws;
(b) there are no existing, pending or, to the Company's Knowledge,
threatened actions, suits, investigations, allegations, inquiries, proceedings
or clean-up obligations relating to any Environmental Laws with respect to the
Properties or any other properties adversely affected by the Properties or
activities thereon;
(c) there are no conditions or circumstances at the Properties creating a
cleanup obligation relating to any Environmental Laws or any other action, suit,
investigation, inquiry, or proceeding arising from such conditions or
circumstances;
(d) all material notices, permits, licenses, registrations, approvals or
authorizations required to be obtained or filed in connection with the operation
of the Properties by the Company or the Company Subsidiaries, including, without
limitation, treatment, storage, disposal or release of hazardous substances or
solid waste into the environment, have been duly obtained or filed; their are no
pending or, to the Knowledge of the Company or the Company Subsidiaries,
threatened or existing actions, proceedings, or investigations seeking to
modify,
35
revoke, or deny renewal of any permits, licenses, registrations, approvals, or
other authorizations; and the Company and the Company Subsidiaries do not have
Knowledge of any fact or condition that could give rise to any action,
proceeding, or investigation to modify, revoke, or deny renewal of any such
permits, licenses, registrations, approvals, or other authorizations and all
notices or similar authorizations required for transfer of such permits,
licenses, registrations, approvals or authorizations have been duly obtained or
filed or will have been obtained or filed at or prior to the Closing Date;
(e) to the Knowledge of the Company and the Company Subsidiaries, all
off-site locations where the Company and the Company Subsidiaries has
transported, released, discharged, stored, disposed or arranged for the disposal
of pollutants, contaminants, hazardous wastes or toxic substances are licensed
and responsible disposal sites as required by Environmental Laws; or
(f) to the Knowledge of the Company and the Company Subsidiaries, all
underground storage tanks, and the operating status, capacity, and contents of
such tanks located on any property owned, leased or operated by the Company and
the Company Subsidiaries are identified in SECTION 4.16 of the Disclosure
Letter.
SECTION 4.17 HEDGING.
(a) The Company and the Company Subsidiaries do not have any outstanding
obligations for the delivery of Hydrocarbons attributable to any of the
Properties of the Company or any Company Subsidiary in the future on account of
prepayment, advance payment, take-or-pay or similar obligations without then or
thereafter being entitled to receive full value therefor.
(b) SECTION 4.17(B) of the Disclosure Letter sets forth, as of the date of
this Agreement, all futures, hedge, swap, collar, put, call, floor, cap, option
or other contracts that are intended to benefit from, relate to or reduce or
eliminate the risk of fluctuations in the price of commodities, including
Hydrocarbons or securities, to which the Company or any Company Subsidiary is
bound and the current position of the parties thereto.
SECTION 4.18. TAXES. Except as set forth in SECTION 4.18 of the Disclosure
Letter, and except for matters that would not have a Material Adverse Effect:
(a) Each of the Company and the Company Subsidiaries has timely filed all
Tax reports and returns that it was required to file. All such reports and
returns were correct and complete in all material respects.
(b) All Taxes owed by any of the Company and Company Subsidiaries (whether
or not shown on any report or return) have been timely paid.
(c) None of the Company and the Company Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax report or Tax
return.
36
(d) No claim has been made by an authority in a jurisdiction where any of
the Company and the Company Subsidiaries does not file reports and returns that
it is or may be subject to taxation by that jurisdiction.
(e) There are no Encumbrances on any of the assets of any of the Company
and the Company Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(f) Each of the Company and the Company Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other third
party.
(g) There is no dispute or claim concerning any Tax Liability of any of
the Company or the Company Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which the Company or the directors and
officers (and employees responsible for Tax matters) of the Company and the
Company Subsidiaries has Knowledge based upon personal contact with any agent of
such authority.
(h) SECTION 4.18 of the Disclosure Letter lists all federal, state, local,
and foreign income Tax returns filed with respect to any of the Company and the
Company Subsidiaries for taxable periods ended on or after December 31, 1999,
indicates those returns that have been audited, and indicates those returns that
currently are subject of audit.
(i) The Company has delivered to Parent correct and complete copies of all
federal income tax returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and the Company Subsidiaries
since December 31, 1999.
(j) None of the Company and the Company Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(k) None of the Company and the Company Subsidiaries has filed a consent
under Code Sec. 341(f) concerning collapsible corporations.
(l) None of the Company and the Company Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible in whole or in part under Code Sec. 280G or Code Section 162(m).
(m) None of the Company and the Company Subsidiaries has been a United
States real property holding corporation within the meaning of Code Sec.
897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).
(n) Each of the Company and the Company Subsidiaries has disclosed on its
federal income Tax returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code Sec.
6661.
37
(o) Except as set forth in SECTION 4.18 of the Disclosure Letter, none of
the Company and the Company Subsidiaries is a party to any Tax allocation or
sharing agreement or policy.
(p) None of the Company and the Company Subsidiaries has any liability
under Treas. Reg. 1.1502-6 or any similar provision of any other tax law or by
agreement for unpaid taxes because it is or once was a member of an affiliated,
consolidated, or unitary group of corporations.
(q) SECTION 4.18 of the Disclosure Letter sets forth the following
information with respect to each of the Company and the Company Subsidiaries
(or, in the case of clause (B) below, with respect to each of the Company
Subsidiaries) as of the most recent practicable date: (A) the basis of the
Company or the Company Subsidiaries in its assets; (B) the basis of the
stockholder(s) of the Company Subsidiary in its stock (or the amount of any
Excess Loss Account); (C) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Company and the Company Subsidiaries;
and (D) the amount of any deferred gain or loss allocable to the Company and the
Company Subsidiaries arising out of any deferred intercompany transaction.
SECTION 4.19 INSURANCE. The Company has all insurance policies that it
believes are required in connection with the operation of the business of the
Company and the Company Subsidiaries. SECTION 4.19 of the Disclosure Letter
lists each of the insurance polices relating to the Company or any Company
Subsidiary which are currently in effect and describes any self-insurance
arrangement affecting the Company or any Company Subsidiary. The Company has
made available to Parent true and correct summaries of each of the insurance
policies relating to the Company or the Company Subsidiaries that are currently
in effect. With respect to each such insurance policy, none of the Company, any
Company Subsidiary or, to the Knowledge of the Company, any other party to the
policy is in breach or default thereunder (including with respect to the payment
of premiums or the giving of notice) and the Company does not know of any
occurrence of any event which, with notice or the lapse of time or both, would
constitute such a breach or default or permit termination, modification or
acceleration under the policy, except for such breaches or defaults as would not
result in a Material Adverse Effect. Except as set forth on SECTION 4.19 of the
Disclosure Letter, to the Knowledge of the Company, there are no claims pending
with respect to any of such policies which are likely to exceed the amount of
coverage provided by the applicable policy. The Company has not received (A) any
written notice of cancellation of any such policy or refusal of coverage
thereunder, (B) any written notice that any issuer of such policy has filed for
protection under applicable bankruptcy or other insolvency laws or is otherwise
in the process of liquidating or has been liquidated, of (C) any other written
indication that such policies are no longer in full force or effect or that the
issuer of any such policy is no longer willing or able to perform its
obligations thereunder. All premiums and other payments relating to the
insurance have been paid for coverage through the date of this Agreement.
SECTION 4.20 BROKERS. Except for Windrock and Xxxx Xxxxxxxx, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement, based upon arrangements made by or on behalf of the Company or the
Company Subsidiaries. True and correct copies of
38
all agreements and engagement letters currently in effect with each of Windrock
and Xxxx Xxxxxxxx have been provided to Parent.
SECTION 4.21 PRODUCTION AND PIPELINE IMBALANCES. SECTION 4.21 of the
Disclosure Letter sets forth all Company and Company Subsidiary pipeline, plant
and production imbalances and penalties as of September 30, 2000 with respect to
the Properties.
SECTION 4.22 OIL AND GAS OPERATIONS. Except as set forth in SECTION 4.22
of the Disclosure Letter, as of the date of this Agreement, with respect to
authorizations for expenditure executed on or after September 30, 2000, (a)
there are no material outstanding calls for payments that are due or that the
Company or its Subsidiaries are committed to make that have not been made; (b)
there are no material operations with respect to which the Company or the
Company Subsidiaries have become a nonconsenting party; and (c) there are no
commitments for the material expenditure of funds for drilling or other capital
projects, other than projects with respect to which the operator is not required
under the applicable operating agreement to seek consent.
SECTION 4.23 XXXXX AND EQUIPMENT. Except as otherwise set forth in SECTION
4.23 of the Disclosure Letter:
(a) None of the Xxxxx have overproduced, except where such overproduction
individually, or in the aggregate with all other such overproduction, would not
have a Material Adverse Effect;
(b) To the Knowledge of the Company, there have been no material changes
proposed in the production allowables for any Xxxxx;
(c) All Xxxxx have been drilled and (if completed) completed, operated,
and produced in accordance with good oil and gas field practices and in
compliance in all respects with applicable oil and gas leases and applicable
Laws, rules, and regulations, except where any failure or violation would not
have a Material Adverse Effect;
(d) There are no Xxxxx that:
(i) Company or any of the Company Subsidiaries is currently
obligated by law or contract to plug and abandon or will be
obligated by Law or contract to plug and abandon with the
lapse of time or notice or both because the Well is not
currently capable of producing in commercial quantities,
except for such Xxxxx that will not individually, or in the
aggregate with all other such Xxxxx, result in Company and
the Company Subsidiaries incurring plugging and abandonment
costs (net of salvage value) in an amount in excess of
$2,000,000.00 in addition to any plugging and abandonment
costs that have been provided for in the Financial
Statements;
(ii) are subject to exceptions to a requirement to plug and
abandon issued by a Governmental Authority having
jurisdiction over the Xxxxx;
39
(iii) have been plugged and abandoned but have not been plugged or
reclaimed in accordance with all applicable requirements of
each Governmental Authority having jurisdiction over such
Xxxxx; or
(iv) have not been plugged and abandoned and are located on lands
which have been sold to a third party but for which the
Company has been identified as the operator for such Xxxxx
with the regulatory agency having jurisdiction over such
Xxxxx;
(e) Proceeds from the sale of Hydrocarbons produced from the Properties
are being received by the Company and the Company Subsidiaries, as applicable,
in a timely manner and are not being held by third parties in suspense for any
reason (except for amounts individually or in the aggregate, not in excess of
$350,000.00 and held in suspense in the ordinary course of business); (f) To the
Knowledge of the Company and the Company Subsidiaries, all equipment and
machinery currently in use and material of the operation of the Property as
conduced prior to the date hereof are in reasonable working condition, ordinary
wear and tear excepted; and (g) With respect to Xxxxx that are not operated by
the Company or any of the Company Subsidiaries, the Company makes the foregoing
representations and warranties set forth in PARAGRAPHS (A) through (D) of this
SECTION 4.23 only to its and the Company Subsidiaries' Knowledge.
SECTION 4.24 PROXY STATEMENT. None of the information to be supplied by
the Company for inclusion in (a) the Proxy Statement to be filed by the Company
with the SEC, and any amendments or supplements thereto, or (b) the Schedule TO
to be filed by Parent with the SEC in connection with the Merger, and any
amendments or supplements thereto, will, at the respective times such documents
are filed, and, in the case of the Proxy Statement, at the time the Proxy
Statement or any amendment or supplement thereto is first mailed to stockholders
of the Company, at the time such stockholders vote on approval and adoption of
this Agreement and at the Effective Time contain any untrue statement of a
material fact or omit to state any material fact required to be made therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Company does not make any representation or warranty with respect
to statements made or incorporated by reference in any of the foregoing
documents based upon information that has been supplied by Parent or Purchaser
or their accountants, counsel or other authorized representatives for use in any
of the foregoing documents.
SECTION 4.25 GAS IMBALANCES; PREFERENTIAL RIGHTS. SECTION 4.25 to the
Disclosure Letter sets forth (a) an accurate description of all material
obligations (if any) of the Company to any third party under any contracts to
which the Company or by which its assets are bound and which includes "take or
pay" or similar provisions obligating the Company to deliver production from an
oil and gas property of the Company for which it has already received payment
(or obligating the Company to return any such payment) together with an accurate
and detailed listing of the amount of all such delivery obligations and (b) a
list of all instruments and agreements whereby any third party may claim a
preferential right or call to purchase a material
40
portion of the production of the Company at a price other than the market price
prevailing from time to time where such properties are located, other than under
existing contracts for sale of production.
SECTION 4.26 REQUIRED STOCKHOLDER VOTE OR CONSENT. The only vote of the
holders of any class or series of the Company's capital stock that will be
necessary or required under this Agreement, the NRS or under applicable Law to
consummate the Merger and the other transactions contemplated by this Agreement
are the approval and adoption of this Agreement by the holders of a majority of
the votes entitled to be cast by holders of (a) the Company Common Stock and the
Company Preferred Stock, voting together as a single class, with each Preferred
Share entitling the holder thereof to the number of votes equal to the full
number of Common Shares into which such Preferred Share is convertible on the
record date for such vote, (b) the Company Common Stock, voting as a single
class, and (c) the Company Preferred Stock, voting as a single class
(collectively, the "COMPANY STOCKHOLDERS' APPROVAL").
SECTION 4.27 FAIRNESS OPINION. The Board of Directors of the Company has
received the written opinion of Xxxx Xxxxxxxx to the effect that, as of the date
of such opinion, the consideration to be received in the Offer and the Merger by
the holders of Company Common Stock and Company Preferred Stock is fair from a
financial point of view to such holders. True and complete copies of such
opinions have been given to Parent.
SECTION 4.28 TAKEOVER RESTRICTIONS.
(a) The Company and the Board of Directors of the Company have each taken
all action required to be taken by it in order to exempt the Offer (including
the purchase of Shares pursuant to the Offer), the Merger, this Agreement, the
Tender Agreement, the Tender and Voting Agreement and the transactions
contemplated hereby and thereby from, the requirements of any "moratorium,"
"control share," "fair price," "affiliate transaction," "business combination,"
or other antitakeover laws and regulations of any state, including, without
limitation, the State of Nevada.
(b) No provision of the Articles of Incorporation or Bylaws of the Company
or comparable organizational documents of any of the Company Subsidiaries would,
directly or indirectly, restrict or impair the ability of Purchaser or its
Affiliates to vote, or otherwise to exercise the rights of a stockholder with
respect to, securities of the Company or any Company Subsidiary that may be
acquired or controlled by Purchaser or its Affiliates pursuant to this
Agreement, the Tender Agreement or the Tender and Voting Agreement or permit any
stockholder to acquire securities of the Company on a basis not available to
Purchaser in the event that Purchaser were to acquire securities of the Company.
(c) There are no agreements, arrangements or commitments, including any
rights plan or rights agreement or similar arrangement, pursuant to which there
are outstanding or which obligates the Company to issue any rights to purchase
any series or class of the Company's securities.
SECTION 4.29 INDEMNIFICATION OBLIGATIONS. Except as contained in the
Leases and as set forth on SECTION 4.29 to the Disclosure Letter, there are no
Indemnification
41
Obligations (as defined below) that the Company or any Company Subsidiary has to
any Person. "INDEMNIFICATION OBLIGATIONS" shall mean any obligations of the
Company to hold harmless or to indemnify any Person from any cost, expense,
liability, penalty, damage, deficiency, claim or loss arising from, resulting
from, based in any way on, relating to or attributable to a breach by the
Company of any portion of an agreement between the Company and such Person,
including but not limited to any breach of a representation, warranty, or
covenant under any such agreement.
SECTION 4.30 BANKRUPTCY. Neither the (i) Company, (ii) any predecessor of the
Company, nor (iii) any Company Subsidiary has (A) voluntarily sought, consented
to or acquiesced in the benefits of, or become party to or made the subject of
the Bankruptcy Code of the United States or any other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally (collectively, "DEBT RELIEF
ACTIONS") except as disclosed in SECTION 4.30 of the Disclosure Letter or (B)
any outstanding obligations to creditors in connection with a Debt Relief Action
or the resolution of a Debt Relief Action.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER
Parent and Purchaser hereby jointly and severally represent and warrant to
the Company as follows:
SECTION 5.01.ORGANIZATION AND AUTHORITY OF PARENT AND PURCHASER. Each of
Parent and Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation, and has
all necessary power and authority to carry on its business as it is currently
conducted. Parent and Purchaser have all necessary corporate power and authority
to enter into this Agreement, to carry out their obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Parent and Purchaser, the performance by each of
Parent and Purchaser of its obligations hereunder and the consummation by each
of Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by all requisite corporate action on the part of each of Parent and
Purchaser and no other corporate proceedings on the part of Parent or Purchaser
are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby (other than, with respect to the Merger, the
filing and recordation of appropriate merger documents as required by the NRS).
This Agreement has been duly executed and delivered by each of Parent and
Purchaser, and (assuming due authorization, execution and delivery by the
Company) this Agreement constitutes a legal, valid and binding obligation of
each of Parent and Purchaser enforceable against each in accordance with its
terms.
SECTION 0.00.XX CONFLICT. Assuming the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in SECTION 5.05, except as may result from any facts or
circumstances relating solely to the Company, the execution, delivery and
performance of this Agreement by each of Parent and Purchaser do not and will
not (i) violate, conflict with or result in the breach of any provision of the
Articles of Incorporation or Bylaws of either Parent or Purchaser, (ii) conflict
with or violate any Law or
43
Governmental Order applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or (iii) conflict with, result in any breach of
or constitute a default (or an event which, with the giving of notice or lapse
of time, or both, would become a default) under, require any consent under, or
give to others any rights of termination, amendment or cancellation of, or
result in the creation of any Encumbrance on any of the assets or properties of
Parent or Purchaser pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other
instrument or obligation to which Parent or Purchaser, respectively, is a party
or by which any of such assets or properties are bound or affected, except for,
in the case of clauses (i) and (iii), conflicts, violations, breaches or
defaults which would not prevent or materially delay the consummation of the
Offer and the Merger.
SECTION 5.03.GOVERNMENTAL CONSENTS AND APPROVALS. Except for (a)
applicable requirements, if any, of the Exchange Act, (b) the filing and
recordation of appropriate merger documents as required by the NRS, (c) filings
as may be required by any applicable "blue sky" laws, (d) any required
notifications or filings with any national securities exchange on which Parent's
securities are listed and (e) as would not prevent or materially delay the
consummation of the Offer and the Merger, neither Parent nor Purchaser is
required to submit any notice, report or other filing with any Governmental
Authority, in connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby. No
waiver, consent, approval or authorization of any Governmental Authority, is
required to be obtained or made by either Parent or Purchaser in connection with
its execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby, except (i) where the failure to obtain
such waivers, consents, approvals or authorizations would not prevent or
materially delay the performance by Parent or Purchaser of their respective
obligations under this Agreement or (ii) in connection with any submission
required above.
SECTION 5.04.OFFER DOCUMENTS; PROXY STATEMENT. None of the information to
be supplied by Parent for inclusion in (a) the Proxy Statement to be filed by
the Company with the SEC, and any amendments or supplements thereto, or (b) the
Schedule 14D-9 to be filed by the Company with the SEC in connection with the
Offer, and any amendments or supplements thereto, will, at the respective times
such documents are filed, and, in the case of the Proxy Statement, at the time
the Proxy Statement or any amendment or supplement thereto is first mailed to
stockholders of the Company, at the time such stockholders vote on approval of
the Merger and adoption of this Agreement and at the Effective Time contain any
untrue statement of a material fact or omit to state any material fact required
to be made therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to statements made or incorporated by
reference in any of the foregoing documents based upon information that has been
supplied by the Company or their accountants, counsel or other authorized
representatives for use in any of the foregoing documents. SECTION
5.05.BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger or
the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
44
SECTION 5.06. FINANCING ARRANGEMENTS. Parent has or will have funds
available to it sufficient to consummate the Offer and the Merger in accordance
with the terms of this Agreement.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING.
(a) The Company covenants and agrees that, between the date of this
Agreement and the time of the Closing, except as set forth in SECTION 6.01(A) of
the Disclosure Letter or as contemplated by any other provision of this
Agreement, unless Parent shall otherwise consent in writing:
(i) the businesses of the Company and the Company Subsidiaries
shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past
practice; and
(ii) the Company and the Company Subsidiaries shall use reasonable
efforts to preserve substantially intact their business
organization, to keep available the services of the current
employees of the Company and the Company Subsidiaries and to
preserve the current relationships of the Company and the
Company Subsidiaries with customers, contractholders and other
Persons with whom the Company or any Company Subsidiary has
significant business relations.
(b) By way of amplification and not limitation, except as contemplated by
this Agreement, or as reflected in SECTION 6.01(A) of the Disclosure Letter,
neither the Company nor any Company Subsidiary shall, between the date of this
Agreement and the Closing, directly or indirectly do, or propose to do, any of
the following, without the prior written consent of Parent:
(i) amend, propose to amend, or otherwise change its Articles of
Incorporation or Bylaws or similar organizational documents;
(ii) issue, sell, pledge, dispose of, grant, encumber, amend the
terms of, or authorize the issuance, sale, pledge,
disposition, grant or encumbrance of (A) any shares of capital
stock of the Company or any Company Subsidiary of any class,
or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital
stock, or any other ownership interest (including, without
limitation, any phantom interest) of the Company or any
Company Subsidiary, except the sale of capital stock of the
Company in connection with the exercise of outstanding options
or warrants or (B) any assets or Properties of the Company or
any Company Subsidiary, except the sales of Hydrocarbons in
the ordinary course of business and in a manner consistent
with past practice;
44
(iii) declare, set aside, make or pay any dividend or other
distribution payable in cash, stock, property or otherwise,
with respect to any of its capital stock, except for shares of
Company Preferred Stock to be issued and cash to be paid as
dividends on the Preferred Shares in accordance with the
Company's Articles of Incorporation and Section 4.17 of the
Preferred Stock Purchase Agreement;
(iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital
stock;
(v) (A) acquire or sell, lease, license, surrender, relinquish or
otherwise dispose of (including, without limitation, by
merger, consolidation or acquisition or disposition of stock
or assets) any interest in any corporation, partnership, other
business organization or any division thereof or any assets,
other than sales of Hydrocarbons in the ordinary course of
business, consistent with past practice, and any other
acquisitions for consideration which is not, in the aggregate,
in excess of $250,000.00; (B) incur any Indebtedness for
borrowed money, incur any trade debt, or issue any debt
securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any
Person (other than the Company or a wholly owned Company
Subsidiary), except for Indebtedness incurred in the ordinary
course of business, consistent with past practice, in amounts
not in excess of $250,000.00 in the aggregate; (C) make any
loans or advances to any Person other than the Company or a
wholly owned Company Subsidiary; (D) authorize or commit to
any capital expenditure in excess of $250,000.00 in the
aggregate per month, other than pursuant to any commitment as
of the date hereof disclosed in SECTION 4.12(A) of the
Disclosure Letter; or (E) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed,
would not be permitted under this SUBSECTION (V);
(vi) enter a new line of business or commence business operations
in any country outside the United States;
(vii) increase the compensation payable or to become payable to its
officers or employees, except in the ordinary course of
business and consistent with past practice, or grant any
severance or termination pay to, or modify or enter into any
employment or severance agreement with, any director, officer,
employee or former employee of the Company or any Company
Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or
employee;
45
(viii)change any method of accounting or accounting practice by the
Company or any Company Subsidiary, except for any such change
required by U.S. GAAP;
(ix) pay, discharge or satisfy any material claim, liability or
obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or
reserved against in the Reference Balance Sheet or
subsequently incurred in the ordinary course of business and
consistent with past practice or in accordance with the
provisions of this SECTION 6.01, provided however, that in no
event shall payments under this SECTION 6.01(B)(IX) exceed
individually, or in the aggregate, $250,000.00 without the
express written consent of Parent.
(x) settle any material Audit, make or change any material Tax
election or file any material amended Tax return;
(xi) take any action that would give rise to a claim under the WARN
Act or any similar state law or regulation because of a "plant
closing" or "mass layoff" (each as defined in the WARN Act);
(xii) enter into any futures, hedge, swap, collar, put, call, floor,
cap, option or other contracts that are intended to benefit
from or reduce or eliminate the risk of fluctuations in the
price of commodities, including Hydrocarbons, or securities;
(xiii) enter into any fixed price commodity sales agreements with a
duration of more than three months;
(xiv) take, or agree or commit to take, any action that would make
any representation and warranty of the Company or any Company
Subsidiary hereunder inaccurate in any respect at, or as of
any time prior to, the Closing, or omit, or agree or commit to
omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any
respect at any time;
(xv) (A) engage in any transaction (either acting alone or in
conjunction with any Plan or trust created thereunder) in
connection with which the Company or any Company Subsidiary
could be subjected (directly or indirectly) to either a civil
penalty assessed pursuant to subsections (c), (i) or (1) of
Section 502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code, (B) terminate any Plan in a manner,
or take any other action with respect to any Plan, that could
result in the liability of the Company or any Company
Subsidiary to any Person, (C) take any action that could
adversely affect the qualification of any Plan or its
compliance with the applicable requirements of ERISA, (D) fail
to make full payment
46
when due of all amounts which, under the provisions of any
Plan, any agreement relating thereto or applicable law, the
Company or any Company Subsidiary are required to pay as
contributions thereto or (E) fail to file, on a timely basis,
all reports and forms required by federal regulations with
respect to any Plan; or
(xvi) other than the consummation of the Merger, take any action
that would cause adjustment to the conversion price of the
Preferred Shares.
SECTION 6.02 ACCESS TO INFORMATION. Except as required pursuant to any
confidentiality agreement or similar agreement or arrangement to which the
Company or any Company Subsidiary is a party or pursuant to applicable Law, from
the date hereof until the Closing, upon reasonable notice, the Company shall,
and shall cause each of the Company Subsidiaries and each of the Company's and
the Company Subsidiaries' officers, directors, employees, agents,
representatives, accountants and counsel to: (a) afford the officers, employees
and authorized agents, accountants, counsel and representatives of Parent
(collectively, "REPRESENTATIVES") full access, during normal business hours, to
the offices, premises, properties, oil and gas fields, other facilities, books
and records of the Company and each Company Subsidiary and to those officers,
directors, employees, agents, accountants and counsel of the Company and of each
Company Subsidiary who have any knowledge relating to the Company, any Company
Subsidiary or the business, (b) furnish to the Representatives such additional
financial and operating data and other information regarding the assets,
properties and goodwill of the Company and the Company Subsidiaries as Parent
may from time to time reasonably request; (c) provide Parent reasonable
assistance in searches of government records related to the assets of the
Company and the Company Subsidiaries; and (d) furnish copies, and allow for the
audit, of all such books and records, documents, and all financial, operating,
and other data and other information as Parent may request. No investigation
will affect any of the representations or warranties made herein or the
conditions to the obligations of the parties hereto to consummate the
transaction contemplated hereby.
SECTION 6.03 CONFIDENTIALITY. Each party shall hold in confidence all
nonpublic information until such time as such information is otherwise publicly
available and, if this Agreement is terminated, each party will deliver to the
other all documents, work papers and other materials (including copies) obtained
by such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after the
execution hereof. Notwithstanding the foregoing, the Confidentiality Agreement
dated October 30, 2000 between the Company and Parent and the Confidentiality
Agreement dated December 18, 2000 between the Company and Parent (collectively,
the "CONFIDENTIALITY AGREEMENTS") shall survive the execution and delivery of
this Agreement.
SECTION 6.04 STOCKHOLDER ACTION.
(a) Following consummation of the Offer, if required by applicable law in
order to consummate the Merger, the Company shall, in accordance with applicable
law, give notice of, convene and hold a special meeting of its stockholders (the
"COMPANY STOCKHOLDERS' MEETING") for the purpose of securing the Company
Stockholders' Approval. The date of any Company Stockholders' Meeting shall be
set by the Board of Directors of the Company after consultation
47
with, and on a date approved by, Parent, whose approval shall not be
unreasonably withheld. The Board of Directors of the Company shall (i)
distribute to its stockholders the Proxy Statement in accordance with applicable
federal and state law and with its Articles of Incorporation and Bylaws, which
Proxy Statement shall contain (A) the recommendation of the Board of Directors
of the Company that its stockholders approve the Merger and adopt this Agreement
and the transactions contemplated hereby if proxies are solicited by the Company
with respect to such vote and (B) the opinion of Xxxx Xxxxxxxx referred to in
SECTION 2.02(A), (ii) cause the Company to use all reasonable efforts to solicit
from its stockholders proxies in favor of the approval of the Merger and
adoption of this Agreement and the transactions contemplated hereby and to
secure the Company Stockholders' Approval, unless, in accordance with applicable
law and the regulations of the Nasdaq Small-Cap Market, such solicitation is not
required to achieve approval of the Merger, (iii) take all other action in their
judgment necessary and appropriate to secure the Company Stockholders' Approval,
and (iv) cooperate and consult with Parent with respect to each of the foregoing
matters, all subject to the right of the Board of Directors of the Company to
modify or withdraw its recommendation in the exercise of its fiduciary duties to
the Company and its stockholders.
(b) Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Purchaser or any of Parent's other subsidiaries in
favor of the approval of the Merger and of this Agreement.
SECTION 6.05. PREPARATION OF THE PROXY STATEMENT. Following the
consummation of the Offer and if required by applicable law in order to
consummate the Merger, the Company shall promptly (i) prepare a preliminary
version of a proxy statement pursuant to Regulation 14A under the Exchange Act
or, if applicable law and regulations do not so require, an information
statement pursuant to Regulation 14C under the Exchange Act (the "PROXY
STATEMENT"), (ii) file with the SEC the Proxy Statement and use all reasonable
efforts to respond to the comments of the SEC in connection therewith and to
furnish all information required to prepare the definitive Proxy Statement, and
(iii) as promptly as practicable after responding to all such comments to the
satisfaction of the SEC, cause the definitive Proxy Statement to be mailed to
its respective stockholders, and if necessary, after the definitive Proxy
Statement shall have been mailed, promptly circulate amended, supplemented or
supplemental proxy materials and, if required in connection therewith, resolicit
proxies. The Company shall advise Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the SEC, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
Company Stockholders' Meeting there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its stockholders such an amendment or supplement.
The Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
SECTION 6.06 REGULATORY AND OTHER AUTHORIZATIONS; NOTICES AND CONSENTS.
Upon the terms and subject to the conditions hereof, each of the parties hereto
shall (i) use its reasonable best efforts to take, or cause to be taken, all
appropriate action and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate
48
and make effective the Offer, the Merger and the other transactions contemplated
by this Agreement and (ii) use its reasonable best efforts to (A) take all
reasonable actions necessary to cause the Tender Offer Conditions to be
satisfied, and (B) obtain any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Parent or the
Company or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the Offer, the
Merger and the other transactions contemplated by this Agreement and (iii) make
all necessary filings, and thereafter make any other required submissions with
respect to this Agreement, the Offer, the Merger and the other transactions
contemplated by this Agreement required under applicable Law. The parties hereto
shall cooperate with each other in connection with the making of all such
filings.
SECTION 6.07 NOTICE OF CERTAIN MATTERS. Parent shall give prompt notice to
the Company, and the Company shall give prompt notice to Parent, of (a) the
occurrence, or nonoccurrence, of any event the occurrence or nonoccurrence of
which would be likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied, and
(b) any failure of Parent or the Company, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. Each of the Company and Parent shall promptly notify each other of
any notice or other communication from any Person alleging that the consent of
such Person (or other Person) is or may be required in connection with the
transactions contemplated by this Agreement or any notice or other communication
from any Governmental Authority in connection with the transactions contemplated
by this Agreement.
SECTION 6.08 NO SOLICITATION OF TRANSACTION. From the date of this
Agreement until the termination hereof, the Company and the Company Subsidiaries
will not, and will not authorize their respective officers, directors, employees
or other agents to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal or (ii) engage in negotiations
with, or disclose any nonpublic information relating to the Company or the
Company Subsidiaries, respectively, or afford access to their respective
properties, books or records to any Person that may be considering making, or
has made, an Acquisition Proposal. Nothing contained in this SECTION 6.08 shall
prohibit the Company and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated by the SEC under the Exchange Act, or (ii) furnishing
information, including without limitation nonpublic information to, or entering
into negotiations with any Person that has indicated its willingness to make an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A)
such unsolicited bona fide Acquisition Proposal is made by a third party that
the Board of Directors of the Company determines in good faith has the good
faith intent to proceed with negotiations or consider, and financial and other
capability to consummate, such Acquisition Proposal (taking into account among
other things the legal, financial, regulatory and other aspects of such
Acquisition Proposal and the Person making such Acquisition Proposal), (B) the
Board of Directors of the Company, after consultation with outside legal counsel
to the Company, determines in good faith that such action is required for the
Board of Directors of the Company to comply with its fiduciary duties to
stockholders imposed by applicable law, (C) contemporaneously with furnishing
such information to, or entering into discussions or negotiations with, such
Person, the Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or
49
negotiations with, such Person and (D) the Company uses all reasonable efforts
to keep Parent informed in all material respects of the status and terms of any
such negotiations or discussions (including without limitation the identity of
the Person with whom such negotiations or discussions are being held) and
provides Parent copies of such written proposals and any amendments or revisions
thereto or correspondence related thereto. The Company, the Company
Subsidiaries, and their respective officers, directors, employees or other
agents shall immediately cease any existing discussions or negotiations, if any,
with any Persons conducted heretofore with respect to any Acquisition Proposal.
SECTION 6.09 EXPENSES.
(a) Except as provided in SECTION 8.02, all Expenses (as defined below)
incurred by the parties hereto shall be borne solely and entirely by the party
that has incurred such Expenses; provided, however, that if this Agreement is
terminated for any reason, then the allocable share of Parent and the Company
for all Expenses (including any fees and expenses of accountants, experts, and
consultants, but excluding the fees and expenses of legal counsel and investment
bankers) related to preparing, printing, filing and mailing the Offer Documents,
the Proxy Statement and all SEC and other regulatory filing fees incurred in
connection with the Offer Documents and the Proxy Statement shall be allocated
one-half each.
(b) "EXPENSES" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including, without limitation, all reasonable fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its Affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the preparation, printing, filing
and mailing of the Offer Documents and the Proxy Statement, the solicitation of
stockholder approvals, requisite filings and all other matters related to the
consummation of the transactions contemplated hereby.
SECTION 6.10 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) For six years after the Effective Time, Parent and the Surviving
Corporation shall indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer or director of the Company or any Company Subsidiary
(each, an "INDEMNIFIED PARTY") against all losses, claims, damages, liabilities,
fees and expenses (including reasonable fees and disbursements of counsel and
judgments, fines losses, claims, liabilities and amounts paid in settlement
(provided that any such settlement is effected with the prior written consent of
Parent or the Surviving Corporation, which consent will not be unreasonably
withheld)) arising in whole or in part out of actions or omissions in their
capacity as such occurring at or prior to the Effective Time to the fullest
extent permitted under Nevada law and the Surviving Corporation's Articles of
Incorporation and Bylaws and the Company's written indemnification agreements in
effect at the date hereof and listed on SECTION 6.10 of the Disclosure Letter,
including provisions therein relating to the advancement of expenses incurred in
the defense of any action or suit; provided, that in the event any claim or
claims are asserted or made within such six year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and
50
all such claims, provided that in no event shall the liability of Parent and the
Surviving Corporation in the aggregate under this SECTION 6.10(A) exceed
$115,000,000.00.
(b) Parent shall cause the Surviving Corporation to maintain the Company's
existing officers' and directors' liability insurance policy ("D&O Insurance")
for a period of not less than six years after the Effective Time, but only to
the extent related to actions or omissions prior to the Effective Time;
provided, that the Surviving Corporation may substitute therefor policies of
substantially similar coverage and amounts containing terms no less advantageous
to such former directors or officers; provided further, that the annual premiums
to be paid with respect to the maintenance of such D&O Insurance during such six
year period shall not exceed two hundred percent (200%) of the premium paid by
the Company for such D&O Insurance during the year ended December 31, 2000, it
being agreed and understood that if such policies cannot be obtained at such
cost, Parent shall cause the Surviving Corporation to obtain as much of such
policies as can be obtained at a cost equal to such amount.
(c) The Articles of Incorporation and Bylaws of the Surviving Corporation
and each subsidiary thereof shall contain provisions no less favorable with
respect to indemnification than are currently set forth in the Bylaws of the
Company and any Company Subsidiary, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder of individuals
who, at or prior to the Effective Time, were Indemnified Parties, unless such
modification shall be required by Law. Notwithstanding the foregoing, the
Surviving Corporation shall not be obligated to maintain the provisions of the
Company's and Company Subsidiaries' Bylaws and Articles of Incorporation that
provide for indemnification of directors and officers in their capacities as
stockholders.
SECTION 6.11 COOPERATION AND FILINGS.
(a) Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of the parties hereto shall confer on a regular and
frequent basis with one or more representatives of the other parties to report
operational matters of materiality and the general status of ongoing operations.
(b) Each party hereto shall make all filings required to be made by such
party in connection herewith or desirable to achieve the purposes contemplated
hereby, shall cooperate as needed with respect to any such filing by any other
party hereto, and shall promptly provide the other party or its counsel with
copies of all filings made by such party with any Governmental Authority in
connection with this Agreement and the transactions contemplated hereby SECTION
SECTION 6.12 PUBLICITY. Neither the Company, Parent nor any of their
respective Affiliates shall issue or cause the publication of any press release
or other announcement with respect to the Offer, the Merger, this Agreement or
the other transactions contemplated hereby without a prior consultation of the
other party, except as may be required by Law or by any listing agreement with a
national securities exchange and will use reasonable efforts to provide copies
of such release or other announcement to the other party hereto, and give due
consideration to such comments as the other party may have, prior to such
release.
51
SECTION 6.13 ADDITIONAL ACTIONS. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws, or to remove any
injunctions or other impediments or delays, to consummate and make effective the
Offer, the Merger and the other transactions contemplated by this Agreement,
subject, however, to the appropriate vote of stockholders of the Company
required to so vote.
SECTION 6.14 CONSENTS. Each of Parent and the Company shall use all
reasonable efforts to obtain all consents necessary or advisable in connection
with its obligations hereunder.
SECTION 6.15 STOCKHOLDER LITIGATION. Each of Parent and the Company shall
give the other the reasonable opportunity to participate in the defense of any
litigation against Parent or the Company, as applicable, and its directors
relating to the transactions contemplated by this Agreement.
SECTION 6.16 AMENDMENT TO BYLAWS. Within four Business Days of the date of
this Agreement, the Company shall by action of the Company's Board of Directors
cause the Company's Bylaws to be amended such that the Company elects not to be
governed by the provisions of Sections 78.378 through 78.3793, inclusive, of the
NRS.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company, Parent and Purchaser to consummate the Merger are subject to the
satisfaction or waiver, in whole or in part, (where permissible by applicable
law), at or prior to the Closing, of each of the following conditions:
(a) no Governmental Authority or court of competent jurisdiction located
or having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any Law or Governmental Order which is then in
effect making the consummation of the Merger illegal or otherwise prohibiting
the consummation of the Merger;
(b) if required by applicable law in order to consummate the Merger, the
Company Stockholders' Approval shall have been obtained;
(c) Parent, Purchaser or their Affiliates shall have purchased Shares
pursuant to the Offer; and
(d) all approvals of Governmental Authorities necessary to consummate the
Merger and other transactions contemplated hereby shall have been received and
shall be in effect at the Effective Time.
52
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01 TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the stockholders of the Company:
(a) by the mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall not have
occurred on or before May 31, 2001 (the "TERMINATION DATE"); provided that the
party seeking to terminate this Agreement pursuant to this SECTION 8.01(b) shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger on or before the Terminated Date;
(c) by the Company if there has been a material breach by Parent or
Purchaser of any representation, warranty, covenant or agreement set forth in
this Agreement which breach (if susceptible to cure) has not been cured in all
material respects within five Business Days following receipt by Parent or
Purchaser of notice of such breach;
(d) by either Parent or the Company if any court of competent jurisdiction
or other Governmental Authority shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the acceptance for payment of, or payment for, Common Shares or
Preferred Shares pursuant to the Offer or the Merger and such order, decree or
ruling or other action shall have become final and nonappealable, provided that
the party seeking to terminate this Agreement shall have used its reasonable
best efforts to remove or lift such order, decree or ruling;
(e) by Parent, if (i) the Board of Directors of the Company (A) withdraws,
modifies or changes (including by amendment of the Schedule 14D-9) its
recommendation of the Offer, this Agreement or the Merger in a manner adverse to
Parent or shall have resolved to do any of the foregoing, (B) shall have
recommended to the stockholders of the Company any Acquisition Proposal or
resolved to do so or (C) shall have failed to reaffirm publicly and
unconditionally its recommendation to the Company's stockholders that they
tender their Shares in the Offer, which public reaffirmation must be made within
five days after Parent's written request to do so; or (ii) the Minimum Condition
(as defined in ANNEX I) shall not have been satisfied by the Expiration Date and
(A) a third party shall have made or caused to be made an Acquisition Proposal
or (B) any "group" (as defined in Section 13(d)(3) of the Exchange Act) or
Person (including the Company or any of its Affiliates), other than Parent or
any of its Affiliates, shall have become the beneficial owner of more than 50%
of the Common Shares or 50% of the Preferred Shares; provided, however, the
current ownership of Shares by the Company's stockholders who are party to
either the Tender Agreement or the Tender and Voting Agreement shall not be
deemed to trigger this clause (B);
(f) by the Company, if, prior to the acceptance of and payment for the
Shares pursuant to the Offer, the Company's Board of Directors shall have
determined to recommend a Superior Proposal and the Company makes the payment of
the Termination Fee as required
53
pursuant to SECTION 8.02 of this Agreement and of the Expense Fee for which the
Company is responsible under Section 8.02 of this Agreement. For purposes of
this Agreement, "SUPERIOR PROPOSAL" means an unsolicited bona fide proposal made
by a third party relating to an Acquisition Proposal on terms that the Board of
Directors of the Company determines it cannot reject in favor of the Offer and
the Merger, based on applicable fiduciary duties and after consultation with the
Company's outside counsel (taking into account among other things the legal,
financial, regulatory and other aspects of the Acquisition Proposal, the Person
making such Acquisition Proposal, the likelihood of consummation and the time
required to complete such transaction); PROVIDED, HOWEVER, that the Company
shall not be permitted to terminate this Agreement pursuant to this SECTION
8.01(F) unless it has complied with Section 6.08 and used all reasonable efforts
to provide Parent with two Business Days prior written notice of its intent to
so terminate this Agreement together with a detailed summary of the terms and
conditions of such Acquisition Proposal; PROVIDED FURTHER, that prior to any
such termination, the Company shall, and shall cause its respective financial
and legal advisors to, negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein, and it is
acknowledged by Parent that such negotiations with Parent shall be conducted in
a manner consistent with the fiduciary duties of the Company's Board of
Directors.
(g) by the Company if (i) Purchaser fails to commence the Offer in
violation of SECTION 2.01 hereof, provided, however, that the Company may not
terminate this Agreement pursuant to this SECTION 8.01(G) if the Company has
materially breached this Agreement, or (ii) Purchaser fails to purchase validly
tendered Shares in violation of the terms of this Agreement;
(h) by Parent or the Company if the Offer is terminated or withdrawn or
shall have expired pursuant to its terms without any Shares being purchased
thereunder; provided, however, that neither Parent nor the Company may terminate
this Agreement pursuant to this SECTION 8.01(H) if such party (or in the case of
Parent, Purchaser) shall have materially breached this Agreement;
(i) by Parent if the Company shall have breached any of its
representations or warranties which breach would give rise to the failure of the
condition set forth in clause (e) of ANNEX I hereto to be satisfied or if, prior
to consummation of the Offer, the Company shall have failed to perform its
covenants or other agreements contained in this Agreement which failure to
perform would give rise to the failure of the condition set forth in clause (e)
of ANNEX I hereto to be satisfied, which breach or failure to perform is
incapable of being cured or has not been cured by the date that is five Business
Days following written notice thereof to the Company from Parent.
SECTION 8.02. EFFECT OF TERMINATION.
(a) In the event of termination of the Agreement pursuant to this ARTICLE
VIII, all obligations of the parties shall terminate, except the obligations of
the parties pursuant to this SECTION 8.02 and except for the provisions of
SECTIONS 6.03, 6.09, 6.12, 9.01, 9.02, 9.03, 9.04, 9.05, 9.07, 9.08, 9.11, 9.12
AND 9.13, PROVIDED that nothing herein shall relieve any party from liability
for any breaches hereof.
54
(b) In the event that this Agreement is terminated pursuant to SECTION
8.01(E)(I) (other than SECTION 8.01(E)(I)(A) if no Acquisition Proposal shall
have been publicly announced or disclosed) or SECTION 8.01(F), then the Company
shall promptly (and in any event within one Business Day after such termination
or, in the case of any such termination by the Company, prior to such
termination) pay Parent an amount equal to (i) a termination fee of
$5,200,000.00 (the "TERMINATION FEE"), provided, however, that in no event shall
more than one Termination Fee be payable by the Company plus (ii) Parent's
aggregate Expenses up to $500,000.00 (the "EXPENSE FEE").
(c) In the event that this Agreement is terminated pursuant to (i) SECTION
8.01(E)(I)(A) (if no Acquisition Proposal shall have been publicly announced or
disclosed) and within 12 months of the date of termination of this Agreement a
transaction constituting an Acquisition Proposal is consummated, the Company
shall, prior to or simultaneously with the consummation of such transaction, pay
Parent the Termination Fee and the Expense Fee OR (ii) SECTION 8.01(E)(II)
hereof and within 12 months of the date of termination of this Agreement either
(A) a transaction constituting an Acquisition Proposal is consummated or (B) any
"group" (as defined in Section 13(d)(3) of the Exchange Act) or Person
(including the Company or any of its Affiliates), other than Parent or any of
its Affiliates, shall have become the beneficial owner of more than 50% of the
Common Shares or 50% of the Preferred Shares, the Company shall, prior to or
simultaneously with the consummation of such transaction or the acquisition of
such Common Shares or Preferred Shares, pay Parent the Termination Fee and the
Expense Fee; provided, however, the current ownership of Shares by the Company's
stockholders who are party to either the Tender Agreement or the Tender and
Voting Agreement shall not be deemed to trigger this clause (B); and provided
further that the acquisition of additional Preferred Shares by any of the
current holders of Preferred Shares by virtue of a transfer or purchase of such
Preferred Shares from another current holder of Preferred Shares shall not be
deemed to trigger this clause (B).
(d) In no event shall the Company be obligated to pay more than one
Termination Fee and Expense Fee pursuant to this SECTION 8.02.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The representations and warranties of the parties contained in this
Agreement shall not survive the Effective Time.
(b) The covenants and agreements of the parties to be performed after the
Effective Time contained in this Agreement shall survive the Effective Time.
SECTION 9.02. NOTICES. All notices or communications hereunder shall be in
writing (including facsimile or similar writing) addressed as follows:
To the Company:
55
Texoil, Inc.
000 Xxxxxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, President
with a copy to:
Jenkens & Xxxxxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
To Parent or Purchaser:
Ocean Energy, Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
Chairman of the Board, President
and Chief Executive Officer
with a copy to:
Ocean Energy, Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
Executive Vice President,
General Counsel and Secretary
with a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy: 214-969-4343
Attention: Xxxxxxx X. Xxxxxxx, P.C.
Any such notice or communication shall be deemed given (i) when made, if made by
hand delivery, and upon confirmation of receipt, if made by facsimile, (ii) one
Business Day after being deposited with a next day courier, postage prepaid, or
(iii) three Business Days after being
56
sent certified or registered mail, return receipt requested, postage prepaid, in
each case addressed as above (or to such other address as such party may
designate in writing from time to time).
SECTION 9.03 ENTIRE AGREEMENT. This Agreement and the confidentiality
obligations under the Confidentiality Agreements represent the entire agreement
of the parties with respect to the subject matter hereof and shall supersede any
and all previous contracts, arrangements or understandings between the parties
hereto with respect to the subject matter hereof.
SECTION 9.04 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.05 SEPARABILITY. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
SECTION 9.06 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by operation of law or
otherwise without the prior written consent of the parties hereto, which consent
may be granted or withheld in the sole discretion of the parties. Subject to the
preceding sentence, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of ARTICLE III and SECTION 6.10 (collectively, the "THIRD PARTY
PROVISIONS"), nothing in this Agreement, express or implied, is intended to
confer on any Person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement. The Third Party Provisions may be enforced by the
beneficiaries thereof.
SECTION 9.07 AMENDMENT. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by each of, or on behalf of each
of, the parties or (b) by a waiver in accordance with SECTION 9.13.
SECTION 9.08 GOVERNING LAW; FORUM. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in that state and without regard to
any applicable conflicts of law. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any Texas state or
federal court located in Houston, Texas. In connection with the foregoing, each
of the parties to this Agreement irrevocably (a) consents to submit itself to
the personal jurisdiction of the state and federal courts of competent
jurisdiction located in Houston, Texas, (b) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court, and (c) hereby consents to service of process pursuant to
the notice provisions set forth in SECTION 9.02.
SECTION 9.09 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties
57
hereto in separate counterparts, each of which when executed and delivered shall
be deemed to be an original, but all of which taken together shall constitute
one and the same agreement.
SECTION 9.10 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 9.11 WAIVER OF JURY TRIAL. Each of the parties hereto irrevocably
and unconditionally waives all right to trial by jury in any action, proceeding
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.
SECTION 9.12 ATTORNEY'S FEES. If any action at law or equity, including an
action for declaratory relief, is brought to enforce or interpret any provision
of this Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees and expenses from the other party, which fees and expenses shall
be in addition to any other relief which may be awarded.
SECTION 9.13 EXTENSIONS, WAIVERS, ETC. At any time prior to the Effective
Time, either party may:
(a) extend the time for the performance of any of the obligations or act
of the other party;
(b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; or
(c) waive compliance with any of the agreements or conditions of the other
party contained herein.
Notwithstanding the foregoing, no failure or delay by Parent 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 a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
[SIGNATURE PAGES FOLLOW]
58
IN WITNESS WHEREOF, the Company, Parent and Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
TEXOIL, INC.
By: /s/ XXXXX X. XXXXXXXXX
Xxxxx X. Xxxxxxxxx
Chairman of the Board, President
and Chief Executive Officer
OCEAN ENERGY, INC.
By: /s/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx
Chairman of the Board, President
and Chief Executive Officer
OEI ACQUISITION CORP.
By: /s/ XXXXX X. XXXXXXX
Xxxxx X. Xxxxxxx
Chairman of the Board, President
and Chief Executive Officer
ANNEX I
CONDITIONS TO THE OFFER
The capitalized terms used in this ANNEX I shall have the meanings set
forth in the Agreement and Plan of Merger to which this Annex is attached,
except that the term "MERGER AGREEMENT" shall be deemed to refer to such
Agreement and Plan of Merger.
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange
Act, pay for any tendered Shares and, subject to the terms of the Merger
Agreement, may terminate or amend the Offer, if (i) there shall not be validly
tendered and not properly withdrawn prior to the Expiration Date for the Offer
(A) at least a majority of the total number of outstanding Common Shares on a
fully diluted basis on the date of purchase (excluding for this purpose Common
Shares issuable but not yet issued as of such date upon conversion of
outstanding Preferred Shares) and (B) at least a majority of the total number of
outstanding Preferred Shares on a fully diluted basis on the date of purchase
(clauses (A) and (B), collectively the "MINIMUM CONDITION"), (ii) any applicable
approvals or consents listed on SECTION 4.06 of the Disclosure Letter have not
been obtained (or waiting periods relating to any filings identified therein
have not expired or been terminated), or (iii) at any time on or after the date
of the Merger Agreement and prior to the time of payment for any Shares any of
the following conditions shall exist or be determined by Purchaser to have
occurred:
(a) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, ruling, judgment, order or injunction enacted,
enforced, promulgated, proposed, amended, issued or deemed applicable to the
Offer by any Governmental Authority that could reasonably be expected to
directly or indirectly: (1) make the acceptance for payment of, or payment for
or purchase of all or a substantial number of the Shares pursuant to the Offer,
illegal, or otherwise restrict or prohibit the making of the Offer or the
consummation of the Offer or the Merger, (2) result in a significant delay in or
restrict the ability of Purchaser to accept for payment, pay for or purchase all
or a substantial number of the Shares pursuant to the Offer or to effect the
Merger, (3) render Purchaser unable to accept for payment or pay for or purchase
all or a substantial number of the Shares pursuant to the Offer, (4) prohibit or
materially limit the ownership or operation by Parent or Purchaser of all or a
portion of the business or assets of the Company and the Company Subsidiaries or
compel Parent or Purchaser to dispose of or hold separately all or a portion of
the business or assets of Parent or any of its subsidiaries or Purchaser or the
Company and the Company subsidiaries, or seek to impose a limitation on the
ability of Parent, any of its subsidiaries or Purchaser to conduct its business
or own such assets, (5) impose a limitation on the ability of Parent or
Purchaser effectively to acquire, hold or exercise full rights of ownership of
the Shares, including the right to vote any Shares acquired or owned by
Purchaser or Parent on an equal basis with all other Shares on all matters
properly presented to the Company's stockholders, (6) require divestiture by
Parent or Purchaser of Shares, (7) impose any limitations on the ability of
Parent or Purchaser effectively to control the business or operations of the
Company and the Company subsidiaries or (8) which would otherwise reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or Parent Material Adverse Effect; or
I-1
(b)(i) there shall be instituted or pending any action, proceeding or
counterclaim seeking any of the consequences referred to in clauses (1) through
(8) of paragraph (a) above, or (ii) there shall have been threatened any action,
proceeding or counterclaim seeking any of the consequences referred to in
clauses (1) through (8) of paragraph (a) above that, in the good faith judgment
of Parent, has a reasonable probability of success; or
(c)(i) it shall have been publicly disclosed or Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph (c) as set forth in Rule 13d-3 promulgated under the Exchange Act) of
50% or more of the outstanding Common Shares or more than 50% of the outstanding
Preferred Shares has been acquired by any Person other than Parent and Purchaser
and except for any Person having such beneficial ownership as of the date of the
Merger Agreement, (ii) the Board of Directors of the Company (A) withdraws,
modifies or changes (including by amendment of the Schedule 14D-9) its
recommendation of the Offer, this Agreement or the Merger in a manner adverse to
Parent, (B) shall have recommended to the stockholders of the Company any
Acquisition Proposal, or (C) shall have failed to reaffirm publicly and
unconditionally its recommendation to the Company's stockholders that they
tender their Shares in the Offer, which public reaffirmation must be made within
five days after Parent's written request to do so, (iii) a third party shall
have entered into a definitive agreement or a written agreement in principle
with the Company with respect to an Acquisition Proposal, or (iv) the Board of
Directors of the Company or any committee thereof shall have resolved to do any
of the foregoing; or
(d) the Merger Agreement shall have been terminated in accordance with its
terms, or the Company and Purchaser and Parent shall have reached an agreement
that the Offer or the Merger Agreement be terminated; or
(e)(i) any of the representations and warranties of the Company set forth
in SECTIONS 4.02 and 4.03 of the Merger Agreement shall not be true and correct
as if such representations and warranties were made at the time of such
determination (except as to any such representation or warranty that speaks as
of a specific date, which must be untrue or incorrect as of such date); (ii) the
representations and warranties of the Company set forth in SECTION 4.16 of the
Merger Agreement shall not be true and correct as if such representations and
warranties were made at the time of such determination and the cost of
correcting the breach of such representations and warranties shall be in excess
of $6,000,000.00 in the aggregate; (iii) any of the other representations and
warranties of the Company set forth in the Merger Agreement, when read without
any exception or qualification as to materiality or reference to Material
Adverse Effect, shall not be true and correct as if such representations and
warranties were made at the time of such determination (except as to any such
representation and warranty which speaks as of a specific date, which must be
untrue or incorrect as of such date) except where the failure to be so true and
correct would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect or (iv) the Company shall have breached or failed
to observe or perform in any material respect any of its material covenants
under the Merger Agreement, which breach has not been cured in all material
respects within five Business Days following receipt by the Company of written
notice of such breach; or
(f) any approvals or consents (other than the filing of a certificate of
merger or approval by the stockholders of the Company of the Merger if required
by the NRS) required to
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be filed, or obtained by the Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement, the Offer and the
consummation of the transactions contemplated by this Agreement shall not have
been filed or obtained except where the failure to obtain such approval or
consent would not reasonably be expected to have a Material Adverse Effect; or
(g) there shall have occurred, and continued to exist, (1) any general
suspension of, or limitation on prices for, trading in securities on the Nasdaq
Small-Cap Market, (2) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, or a material limitation
(whether or not mandatory) by any Governmental Authority on the extension of
credit by banks or other lending institutions, or (3) in the case of any of the
foregoing clauses existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof; or
(h) since the date of this Agreement there shall have occurred any event,
change, effect or development that, individually or when considered together
with any other event, change, effect or development, has had or would have a
Material Adverse Effect; or
(i) There shall exist any Material Title Failure.
The foregoing conditions (including those set forth in clauses (i), (ii)
and (iii) of the initial paragraph) are for the benefit of Parent and Purchaser
and may be asserted by Parent or Purchaser regardless of the circumstances
giving rise to any such conditions and other than clauses (i) and (ii) may be
waived by Parent or Purchaser, in whole or in part, at any time and from time to
time in their reasonable discretion, in each case, subject to the terms of the
Merger Agreement. The conditions in clauses (i) and (ii) of the initial
paragraph may not be waived without the written consent of the Company. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
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