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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
NOVEMBER 22, 1997
BETWEEN
ZILKHA ENERGY COMPANY
AND
SONAT INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
The Merger
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Surrender and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.7 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
The Surviving Corporation
Section 2.1 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
Representations and Warranties of the Company
Section 3.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 Consents and Approvals; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.6 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.7 Bank Account Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.8 Conduct of the Business Since Company Unaudited Balance Sheet Date . . . . . . . . . . . . . . . . . . . 7
Section 3.9 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10 Licenses; Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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Section 3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.14 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.16 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.18 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.19 Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.20 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.21 Financial and Commodity Hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.22 Production and Pipeline Imbalances and Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.23 Preference Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.24 Brokerage Fees and Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.25 Tax Treatment and Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.26 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
Representations and Warranties of Parent
Section 4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.4 Consents and Approval; No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.5 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.7 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.8 Conduct of the Business Since Parent Unaudited Balance Sheet Date . . . . . . . . . . . . . . . . . . 17
Section 4.9 Litigation; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.10 Licenses; Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.11 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.16 Tax Treatment and Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.17 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.18 Parent Stockholders' Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.19 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.20 Amendment of Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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ARTICLE V
Covenants of the Company
Section 5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.2 Financial Reporting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI
Covenants of Parent
Section 6.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.2 Obligations of Merger Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.3 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.4 Parent Stockholders' Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.5 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.7 Corporate Name; Trademark Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.8 Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.9 Post-Merger Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.10 Shareholder Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.11 Rights Agreement Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
Covenants of Parent and the Company
Section 7.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.2 Certain Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.5 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.6 Tax-Free Reorganization and Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.7 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.8 Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.9 Registration Statement and Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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ARTICLE VIII
Conditions to the Merger
Section 8.1 Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.2 Conditions to the Obligations of Parent and Merger Subsidiary . . . . . . . . . . . . . . . . . . . . 29
Section 8.3 Conditions to the Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX
Termination
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X
Miscellaneous
Section 10.1 Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.2 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.4 Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.7 Headings; Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.8 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.9 Construction of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.10 Agreement for the Parties' Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 10.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.12 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.15 Counterparts; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 10.16 Definitions and Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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EXHIBITS AND SCHEDULES
Exhibit A Form of Registration Rights Agreement
Exhibit B-1 Form of Company Affiliate Letter
Exhibit B-2 Form of Parent Affiliate Letter
Exhibit C Representations of Company Stockholders
Exhibit D Representations of Officers of Parent
Exhibit E Representations of Officers of Company
Exhibit F Leases and Xxxxx
Exhibit G Form of Amendment to Rights Agreement
Schedule I Permitted Encumbrances
Schedule 3.4 Company Consents and Approvals; No Violation
Schedule 3.5 Company Financial Statements
Schedule 3.6 Company Undisclosed Liabilities
Schedule 3.7 Company Bank Account Information
Schedule 3.9 Company Litigation; Orders
Schedule 3.13 Company Insurance
Schedule 3.14 Material Contracts
Schedule 3.17 Company Taxes
Schedule 3.18 Company Employee Benefit Plans
Schedule 3.20 Title
Schedule 3.21 Company Financial and Commodity Hedging
Schedule 3.22 Company Production and Pipeline Imbalances and Penalties
Schedule 3.23 Company Preference Rights
Schedule 3.24 Company Brokerage Fees and Commission
Schedule 4.14 Parent Taxes
Schedule 5.1 Conduct of Business
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of
November 22, 1997 between Zilkha Energy Company, a Delaware corporation (the
"Company"), and Sonat Inc., a Delaware corporation ("Parent").
RECITALS:
WHEREAS, the Boards of Directors of the Company and Parent
have determined that the combination of the Company and Parent is in the best
interests of the stockholders of the Company and Parent, respectively;
WHEREAS, the Company and Parent intend the combination of the
Company and Parent to qualify as a tax-free reorganization under the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder; and
WHEREAS, the Company and Parent intend the combination of the
Company and Parent to be recorded as a "pooling of interests" for accounting
purposes.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. (a) Upon the terms and subject to
the conditions hereof, at the Effective Time (as hereinafter defined), a newly
formed wholly-owned subsidiary of Parent (the "Merger Subsidiary") shall be
merged (the "Merger") with and into the Company in accordance with the General
Corporation Law of the State of Delaware ("Delaware Law"), whereupon the
separate existence of the Merger Subsidiary shall cease, and the Company shall
be the surviving corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger set forth
herein, the Company and Merger Subsidiary will file a certificate of merger
(the "Certificate of Merger") with the Delaware Secretary of State and make all
other filings or recordings required by Delaware Law in connection with the
Merger. The Merger shall become effective at such time (the "Effective Time")
as the Certificate of Merger is duly filed with the Delaware Secretary of State
(or at such later time as may be agreed in writing by the parties hereto and
specified in the Certificate of Merger).
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(c) From and after the Effective Time, the
Surviving Corporation shall possess all the rights, assets, powers,
privileges, and franchises and be subject to all of the obligations,
liabilities, restrictions, and disabilities of the Company and the
Merger Subsidiary, all as provided under Delaware Law.
Section 1.2 Conversion of Shares. At the Effective Time:
(a) the shares of common stock, $1.00 par value, of the
Company ("Company Common Stock") outstanding immediately prior to the Effective
Time and the shares of 11% cumulative preferred stock, no par value, of the
Company ("Company Preferred Stock" and, together with the Company Common Stock,
"Company Stock") outstanding immediately prior to the Effective Time shall
(except as otherwise provided in Section 1.5) be converted into the right to
receive, without interest, an aggregate number of shares of common stock, $1.00
par value, of Parent ("Parent Common Stock") (the "Merger Consideration") equal
to (i) the Adjusted Purchase Price (as defined in Section 10.16) divided by
(ii) the average closing price (the "Closing Price") of the Parent Common Stock
on the 15 consecutive trading days ending on and including the third trading
day prior to the Effective Time on the New York Stock Exchange (the "NYSE"), as
reported in The Wall Street Journal; provided, however, that if the Closing
Price is greater than $51.00 (the "Ceiling Amount"), the Closing Price shall be
deemed for purposes of this Agreement to equal the Ceiling Amount (the Ceiling
Amount is subject to appropriate adjustment in the event of any change in the
Parent Common Stock during the period between the date of this Agreement and
the Effective Time, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period);
and
(b) each share of common stock of the Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, powers, and privileges as the shares so converted and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.
Section 1.3 Adjustments. The Reserve Report (as defined in
Section 10.16) was prepared by the Reserve Engineer (as defined in Section
10.16) effective as of July 1, 1997. The Parties recognize that additional
production data will become available to the Company between the date of this
Agreement and the Effective Time which may affect the estimates of Proved
Reserves (as defined in Section 10.16) shown in the Reserve Report for each
Reserve Report Field (as defined in Section 10.16). If during the period
between the date of this Agreement and 30 days prior to the Effective Time the
production rates from any Reserve Report Field reasonably indicate to Parent
that a material decline in the recoverable Proved Reserves has occurred for
such Reserve Report Field from the Proved Reserves shown in the Reserve Report,
then the Company shall request that the Reserve Engineer reestimate the Proved
Reserves for such Reserve Report Field and recalculate the estimated future net
revenues, discounted at 10%, for such Reserve Report Field. The Reserve
Engineer shall be instructed to use the same operating costs, oil and gas
prices, taxes, discounting methods, effective date (July 1, 1997), and all
other data and parameters that were used by the
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Reserve Engineer to prepare the Reserve Report and, in addition, to take into
account the new production data available to the Company. Additionally, the
Reserve Engineer shall determine the Reserve Loss Amount, if any, for such
Reserve Report Field. The Company shall cause the Reserve Engineer to provide
a written report to the Company and Parent no later than 10 days prior to the
Effective Time showing (a) the reestimated Proved Reserves and future net
revenues, discounted at 10%, each effective as of July 1, 1997, for such
Reserve Report Field, and (b) the Reserve Loss Amount, if any, for such Reserve
Report Field. If the Reserve Engineer determines that the aggregate Reserve
Loss Amounts for all Reserve Report Fields redetermined by the Reserve Engineer
under this Section 1.3 exceeds $50,000,000 (such aggregate amount is referred
to herein as the "Reserve Adjustment Amount"), then the Purchase Price shall be
reduced by the Reserve Adjustment Amount.
Section 1.4 Surrender and Payment. At the Effective Time,
the stockholders of the Company (the "Company Stockholders") will deliver to
Parent certificates (the "Certificates") representing all of the outstanding
shares of Company Stock, and Parent will deliver, in exchange therefor,
certificates representing the Merger Consideration.
Section 1.5 Fractional Shares. No fractional shares of
Parent Common Stock shall be issued in the Merger, but in lieu thereof each
holder of Company Stock otherwise entitled to a fractional share of Parent
Common Stock will be entitled to receive from Parent, in accordance with the
provisions of this Section 1.5, a cash payment equal to such fraction
multiplied by the Closing Price.
Section 1.6 Withholding Rights. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person (as defined in Section 10.16)
pursuant to this Article I such amounts as it is required to deduct and
withhold with respect to the making of such payment under any provision of
federal, state, local, or foreign tax law. To the extent that amounts are so
withheld by the Surviving Corporation or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or Parent, as
the case may be.
Section 1.7 Lost Certificates. If any Certificate shall
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen, or destroyed
and, if required by the Surviving Corporation, the posting by such Person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as
indemnity against any claim that may be made against it with respect to such
Certificate, Parent will issue in exchange for such lost, stolen, or destroyed
Certificate the Merger Consideration to be paid in respect of the shares of
Company Stock represented by such Certificates as contemplated by this Article
I.
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ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The certificate
of incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.2 Bylaws. The bylaws of the Company in effect at
the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
Section 2.3 Directors and Officers. (a) From and after
the Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, (i) the directors of the Merger
Subsidiary at the Effective Time shall be the directors of the Surviving
Corporation and (ii) the officers of the Merger Subsidiary at the Effective
Time shall be the officers of the Surviving Corporation.
(b) The Board of Directors of Parent shall take such
action as may be necessary to increase the size of Parent's Board of Directors
immediately following the Effective Time from 13 members to 14 members and
shall cause to be appointed to the Board of Directors of Parent Xxxxx X. Xxxxxx
and Xxxxxxx Xxxxxx (together, the "Zilkhas"). Xxxxx X. Xxxxxx shall be
appointed a Class III director with a term of office expiring in 1998 and
Xxxxxxx Xxxxxx shall be appointed a Class I director with a term of office
expiring in 1999. After such appointments, the Board of Directors shall cause
the Zilkhas to stand for election to the Board of Directors of Parent at
Parent's next succeeding Annual Meeting of Stockholders following the
expiration of their respective term of office. At each Annual Meeting of
Stockholders of Parent, the Board of Directors shall nominate the Zilkha whose
term of office is then expiring to stand for election to the Board of Directors
of Parent and Parent shall support the election of such Person. The Zilkhas
shall be appointed by the Board of Directors of Parent to the Strategic
Planning Committee of the Board of Directors of Parent.
(c) Notwithstanding anything to the contrary contained
herein, if the Zilkhas ever directly or indirectly beneficially own (including
ownership by any trust holding Parent Common Stock solely for the benefit of
the Zilkhas or the members of their immediate families) in the aggregate less
than 8% of the shares of outstanding Parent Common Stock, the Zilkhas shall
promptly tender their resignations as directors and the obligations of Parent
under Section 2.3(b) shall terminate.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 3.1 Organization and Qualification. Each of the
Company and Zilkha Energy Development I Company, a Delaware corporation (the
"Subsidiary"), is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation and has the requisite
corporate power to carry on its business as it is now being conducted. Each of
the Company and the Subsidiary is duly qualified to conduct business as a
foreign corporation in every state of the United States in which its ownership
or lease of property or the conduct of its business and operations makes such
qualification necessary, except for such states in which the Company's or
Subsidiary's failure to be so qualified is not reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect (as defined
in Section 10.16). The Company has heretofore delivered to Parent true and
complete copies of the certificate of incorporation and bylaws of the Company
and the Subsidiary as currently in effect.
Section 3.2 Capitalization. (a) The authorized capital
stock of the Company consists of 100,000 shares of Company Common Stock and
200,000 shares of Company Preferred Stock, of which 75,000 shares of Company
Common Stock and 200,000 shares of Company Preferred Stock are issued and
outstanding (the "Company Shares"). The Company Shares are all of the issued
and outstanding shares of capital stock of the Company and have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. There are not, as of the date hereof, any outstanding or
authorized subscriptions, options, warrants, calls, rights, commitments, or any
other agreements of any character (any of the foregoing, a "Commitment")
obligating the Company to issue any additional shares of capital stock of the
Company, or any other securities convertible into or evidencing the right to
subscribe for any shares of capital stock of the Company.
(b) The authorized capital stock of the Subsidiary
consists of 10,000 shares of common stock, par value $.01 per share
("Subsidiary Common Stock"), of which 100 shares (the "Subsidiary Shares") are
issued and outstanding. The Subsidiary Shares are all of the issued and
outstanding shares of capital stock of the Subsidiary and are owned by the
Company, free and clear of any Liens (as defined in Section 10.16), and have
been duly authorized and validly issued and are fully paid and nonassessable
and free of preemptive rights. There are not, as of the date hereof, any
Commitments obligating the Subsidiary to issue any additional shares of capital
stock of the Subsidiary, or any other securities convertible into or evidencing
the right to subscribe for any shares of capital stock of the Subsidiary.
Section 3.3 Authorization. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The Company
Stockholders and the Board of Directors of the Company have
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by unanimous written consent (a) determined that participating in the Merger is
in the best interests of the Company and its stockholders and (b) approved this
Agreement and the Merger. No other corporate proceedings on the part of the
Company or the Company Stockholders are necessary to authorize the execution
and delivery of this Agreement or the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly authorized,
executed, and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to (x) applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar laws of general application with respect to
creditors, (y) general principles of equity, and (z) the power of a court to
deny enforcement of remedies generally based upon public policy.
Section 3.4 Consents and Approvals; No Violation. Neither
the execution and delivery of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated by this Agreement,
will: (a) require any consent, approval, authorization, or permit of, or filing
with or notification to, any Governmental Authority (as defined in Section
10.16), except (i) the filing of a certificate of merger in accordance with
Delaware Law, (ii) in connection with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iii) any regulatory
approvals or routine governmental consents normally acquired after the
consummation of transactions such as transactions of the nature contemplated by
this Agreement, or (iv) where the failure to obtain such consent, approval,
authorization, or permit, or to make such filing or notification, is not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect or prevent or delay, in any material respect, the
consummation of the transactions contemplated by this Agreement; (b) result in
a default (or give rise to any right of termination, cancellation, or
acceleration) under any of the terms, conditions, or provisions of any Material
Contract (as hereinafter defined) of the Company, except (i) as set forth on
Schedule 3.4 or (ii) for such defaults (or rights of termination, cancellation,
or acceleration) as to which requisite waivers or consents have been obtained
or will be obtained prior to the Effective Time or which are not reasonably
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or prevent or delay, in any material respect, the consummation of the
transactions contemplated by this Agreement; or (c) assuming compliance with
the matters referred to in Section 3.4(a), violate any order, writ, injunction,
decree, statute, rule, or regulation applicable to the Company, the Subsidiary,
or any of their assets, except for violations which are not reasonably expected
to have, individually or in the aggregate, a Company Material Adverse Effect or
prevent or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement.
Section 3.5 Financial Statements. Attached as Schedule 3.5
are (a) the audited consolidated balance sheet, statement of income and
statement of cash flows of the Company and the Subsidiary as of and for the
year ended December 31, 1996 and (b) the unaudited consolidated balance sheet,
statement of income and statement of cash flows of the Company and the
Subsidiary as of and for the nine months ended September 30, 1997 (the "Company
Unaudited Financial Statements"). The audited consolidated balance sheet,
statement of income and statement of cash flows of the Company and the
Subsidiary as of and for the years ended December 31, 1994, 1995,
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and 1996 (the "Company Audited Financial Statements") and the Company Unaudited
Financial Statements present fairly the consolidated financial position,
results of operations, and changes in financial position of the Company and the
Subsidiary as of the respective dates or for the respective periods to which
they apply in accordance with United States generally accepted accounting
principles, consistently applied ("GAAP").
Section 3.6 Undisclosed Liabilities. Except as set forth
on Schedule 3.6 or as reflected, reserved against, or otherwise disclosed in
the Company Unaudited Financial Statements, the Company did not have, at the
date of the unaudited balance sheet included in the Company Unaudited Financial
Statements (the "Company Unaudited Balance Sheet Date"), does not have, at the
date hereof, and will not have, at the Effective Time, any liabilities or
obligations, whether accrued, contingent, absolute, determined, determinable or
otherwise, that are reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.7 Bank Account Information. Schedule 3.7
contains an accurate list of the names and addresses of every bank and other
financial institution in which Company or the Subsidiary maintains an account
(whether checking, savings or otherwise), lock box, or safe deposit box, and
the account numbers and persons having signature authority or legal access
thereto.
Section 3.8 Conduct of the Business Since Company Unaudited
Balance Sheet Date. Except as expressly contemplated by this Agreement, since
the Company Unaudited Balance Sheet Date, (a) the business and operations of
the Company and the Subsidiary have been conducted in the ordinary and usual
course in all material respects in accordance with past practices, (b) the
Company has not paid or declared any dividend on, or made any distribution with
respect to, or purchased or redeemed any of its capital stock and (c) no
Company Material Adverse Effect has occurred and is continuing.
Section 3.9 Litigation; Orders. Except as affects the oil
and gas industry generally or as set forth on Schedule 3.9, as of the date
hereof, there are no Actions (as defined in Section 10.16) pending or, to the
Company's or the Subsidiary's Knowledge (as defined in Section 10.16),
threatened against the Company or the Subsidiary that are reasonably expected
to have, individually or in the aggregate, a Company Material Adverse Effect or
that would prevent or delay, in any material respect, the consummation of the
transactions contemplated by this Agreement. Except as affects the oil and gas
industry generally or as set forth on Schedule 3.9, as of the date hereof there
are no judgments or outstanding orders, injunctions, decrees, stipulations, or
awards (whether rendered by a court or administrative agency or by arbitration)
against the Company or the Subsidiary that are reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect or that
would prevent or delay, in any material respect, the consummation of the
transactions contemplated by this Agreement.
Section 3.10 Licenses; Approvals. The Company and the
Subsidiary, as applicable, possess all material governmental licenses, permits,
franchises, and other authorizations of any Governmental Authority ("Licenses")
that are necessary to the ownership or operation of the
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Business (as defined in Section 10.16) as currently conducted, and all such
Licenses are in full force and effect, except where the failure to possess any
License or the failure to be in full force and effect is not reasonably
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. No proceeding is pending or, to the Company's or the Subsidiary's
Knowledge, is threatened seeking the revocation or limitation of any such
License that is reasonably expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
Section 3.11 Labor Matters. There are no agreements with
labor unions or associations representing employees of the Company or the
Subsidiary. No material work stoppage against the Company or the Subsidiary is
pending or, to the Company's or the Subsidiary's Knowledge, threatened.
Neither the Company nor the Subsidiary is involved in or, to the Company's or
the Subsidiary's Knowledge, is threatened with any labor dispute, arbitration,
lawsuit, or administrative proceeding relating to labor matters involving the
employees of the Company or the Subsidiary (excluding routine workers'
compensation claims) that is reasonably expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section 3.12 Compliance with Laws. The conduct of the
Business by the Company and the Subsidiary complies with all statutes, laws,
regulations, ordinances, rules, judgments, orders, or decrees applicable
thereto (other than Environmental Laws (as hereinafter defined) which are
governed solely by Section 3.15), except for violations or failures so to
comply, if any, that are not reasonably expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section 3.13 Insurance. Schedule 3.13 sets forth a list of
all insurance policies issued in favor of the Company or the Subsidiary which
relate to the Business, and all such policies are currently in force and
effect. True and complete copies of all such policies will be delivered to
Parent upon request.
Section 3.14 Material Contracts. (a) Except as set forth
on Schedule 3.14, as of the date hereof neither the Company nor the Subsidiary
is a party to or bound by any lease, agreement, or other contract or legally
binding contractual right or obligation of a type described below
(collectively, "Material Contracts"):
(i) any employment agreement;
(ii) any collective bargaining agreement with any
labor union covering the employees of the Company or the Subsidiary;
(iii) any agreement for the provision of
operational consulting services or technical consulting services that
is not terminable on 30 calendar days' notice or less;
(iv) any agreement (other than an oil and gas
lease) for capital expenditures or the acquisition or construction of
fixed assets which requires aggregate future payments in excess of
$2,500,000;
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(v) any indenture, mortgage, loan, credit,
sale-leaseback, or similar agreement under which the Company or the
Subsidiary has borrowed any money or issued any note, bond, indenture,
or other evidence of indebtedness for borrowed money, sold and leased
back assets, or guaranteed indebtedness for money borrowed by others,
(excluding hedge, swap, exchange, or similar agreements entered into
in the ordinary course of business);
(vi) any gas, crude oil, or liquids sales
agreement, gas, crude oil, or liquids purchase agreement, or gas,
crude oil, or liquids marketing agreement, under which the Company or
the Subsidiary is a seller, that (A) cannot be terminated by the
Company or the Subsidiary, as the case may be, without penalty upon
not more than 30 calendar days' notice and (B) provides for a price
less than the market value price that would be received pursuant to an
arm's-length agreement for the same term with an unaffiliated third
party purchaser;
(vii) any agreement for, or that contemplates, the
sale of any Working Interests (as defined in Section 10.16) in any
Property (as defined in Section 10.16), or the sale of any other asset
(other than sales of oil and gas production in the ordinary course of
business), which involves payment to the Company or the Subsidiary in
excess of $5,000,000;
(viii) any agreement that constitutes a lease (other
than an oil and gas lease) under which the Company or the Subsidiary
is the lessor or lessee of real or personal property, that (A) cannot
be terminated by the Company or the Subsidiary, as the case may be,
without penalty upon not more than 30 calendar day's notice and (B)
involves an annual base rental in excess of $250,000;
(ix) (A) any agreement for the future acquisition
of 3-D seismic data that requires aggregate future payments in excess
of $2,500,000 and (B) any other material 3-D seismic data license;
(x) any hydrocarbon or financial hedge, swap,
exchange, or similar agreement; and
(xi) any other agreement not referenced in
subsections (i) through (x) of this Section 3.14(a)that (A) requires
future payment by the Company or the Subsidiary in excess of
$2,500,000 and is not an oil and gas lease or an interest therein, (B)
creates or imposes confidentiality obligations on the Company, or (C)
creates an area of mutual interest.
(b) Except as set forth on Schedule 3.14, each Material
Contract listed on Schedule 3.14 is a valid and binding obligation of the
Company or the Subsidiary, as the case may be, enforceable against the Company
or the Subsidiary, as the case may be, in accordance with its
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terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws of general
application with respect to creditors, (ii) general principles of
equity, and (iii) the power of a court to deny enforcement of remedies
generally based upon public policy. Except as set forth on Schedule
3.14, the Company and the Subsidiary have performed all obligations
required to be performed by them through the date hereof under the
Material Contracts listed on Schedule 3.14, other than any such
obligations the failure of which to perform are not reasonably
expected to have, individually or in the aggregate, a Company Material
Adverse Effect, and are not (with or without the lapse of time or the
giving of notice, or both) in breach or default in any respect
thereunder, except in any such case for such breaches or defaults that
are not reasonably expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
(c) Except as set forth on Schedule 3.14, no purchaser
under any gas sales agreement has, since the Company Unaudited Balance Sheet
Date, notified the Company or the Subsidiary (or, to the Company's or the
Subsidiary's Knowledge, the operator of any Property), of its intent to cancel,
terminate, or renegotiate any gas sales agreement or otherwise to fail and
refuse to take and pay for gas in the quantities and at the price set out in
any gas sales agreement, whether such failure or refusal was pursuant to any
force majeure, market out, or similar provisions contained in the gas sales
agreement, or otherwise, except in any such case where such cancellation,
termination, renegotiation, failure, or refusal is not reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Except as set forth on Schedule 3.14, neither the Company nor the Subsidiary is
obligated under any gas sales agreement by virtue of (i) any prepayment
arrangement, (ii) a take-or-pay or similar provision, or (iii) a production
payment, or any other arrangements, to deliver hydrocarbons produced from the
Properties at some future time without then or thereafter receiving a fair
market value payment therefor.
Section 3.15 Environmental Matters. Other than violations
that are not reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect, the Properties have been operated in
compliance with all applicable Environmental Laws. Without limitation of the
foregoing, there are no existing, pending or, to the Company's or the
Subsidiary's Knowledge, threatened actions, suits, investigations, inquiries,
proceedings or clean-up obligations by any Governmental Authority relating to
any Environmental Laws with respect to the Properties, except for actions,
suits, investigations, inquiries, proceedings, and obligations that are not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All notices, permits, or similar authorizations, if
any, required to be obtained or filed in connection with the operation of the
Properties by the Company or the Subsidiary, including, without limitation,
treatment, storage, disposal, or release of a hazardous substance or solid
waste into the environment, have been duly obtained or filed, other than any
such notices, permits, or similar authorizations the failure of which to obtain
or file is not reasonably expected to have, individually or in the aggregate, a
Company Material Adverse Effect. The term "release" has the meaning specified
in CERCLA (as hereinafter defined), and the term "disposal" (or "disposed") has
the meaning specified in RCRA (as hereinafter defined). For the purposes
hereof, "Environmental Laws" shall mean any and all laws, statutes, ordinances,
rules, regulations, orders, or determinations of any Governmental Authority
pertaining to the environment in effect on the date of this Agreement and in
effect at such time in
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any and all jurisdictions in which the Properties are operated, including,
without limitation, the Clean Air Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended ("CERCLA"),
the Federal Water Pollution Control Act, as amended, the Resource Conservation
and Recovery Act, as amended ("RCRA"), the Safe Drinking Water Act, as amended,
the Toxic Substances Control Act, as amended, comparable state and local laws
and other material environmental protection laws in effect on the date of this
Agreement.
Section 3.16 Condemnation. There are, at the date hereof,
no pending or, to the Company's or the Subsidiary's Knowledge, threatened
condemnation or eminent domain proceedings, or contemplated sales in lieu
thereof, involving a partial or total taking of any of the Properties, other
than proceedings or sales in lieu thereof that are not reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
Section 3.17 Taxes. (a) (i) Except as set forth on
Schedule 3.17, the Company and the Subsidiary have filed when due all material
Company Returns (as defined in Section 10.16) in connection with and in respect
of the Business, and have, except for Taxes that are being contested in good
faith and set forth on Schedule 3.17, timely paid and discharged all Tax
obligations shown thereon, (ii) the Company Returns correctly and accurately
reflect the facts regarding the income, business and assets, operations,
activities, status, or other matters of the Company and the Subsidiary, and any
other information required to be shown thereon, and are not subject to
penalties under Section 6662 of the Code, relating to accuracy-related
penalties, or any corresponding provision of applicable state, local, or
foreign Tax law or any predecessor provision of law, and (iii) neither the
Company nor the Subsidiary has received any notice of any Tax deficiency
outstanding, proposed, or assessed against or allocable to it, nor has either
of them executed any waiver of any statute of limitations on the assessment or
collection of any Tax, or executed or filed with the Internal Revenue Service
or any other governmental body any agreement now in effect extending the period
for assessment or collection of any Taxes against the Company or the
Subsidiary. For purposes of this Agreement, "Tax" or "Taxes" means taxes of
any kind, levies, or other like assessments, customs, duties, imposts, charges,
or fees, including, without limitation, income, gross receipts, ad valorem,
value added, excise, real or personal property, asset, sales, use, license,
payroll, transaction, capital, net worth and franchise taxes, estimated taxes,
withholding, employment, social security, workers compensation, utility,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer, and gains taxes or other governmental taxes imposed or
payable to the United States, or any state, county, local, or foreign
government or subdivision or agency thereof, and in each instance such term
shall include any interest, penalties, or additions to tax attributable to any
such Tax, including penalties for the failure to file any Tax return or report.
Federal or state royalty payments shall not be Taxes for purposes of this
Agreement.
(b) Except for the group of which the Company is
currently the parent, neither the Company nor the Subsidiary has ever been a
member of an affiliated group of corporations, within the meaning of Section
1504 of the Code, other than as a common parent corporation.
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(c) None of the assets of the Company or the Subsidiary
is property that the Company is required to treat as being owned by any other
Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code.
(d) None of the assets of the Company or the Subsidiary
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(e) None of the assets of the Company or the Subsidiary
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(f) Neither the Company nor the Subsidiary has agreed to
make, nor is either of them required to make, any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise.
(g) Neither the Company nor the Subsidiary has
participated in, nor will either of them participate in, an international
boycott within the meaning of Section 999 of the Code.
(h) Neither the Company nor the Subsidiary has or had a
permanent establishment in any foreign country, as defined in any applicable
tax treaty or convention between the United States and such foreign country.
(i) Neither the Company nor the Subsidiary has filed a
consent pursuant to the collapsible corporation provisions of Section 341(f) of
the Code (or any corresponding provision of state, local, or foreign income tax
law) or agreed to have Section 341(f)(2) of the Code (or any corresponding
provision of state, local, or foreign income tax law) apply to any disposition
of any asset owned by it.
Section 3.18 Employee Benefit Plans. (a) Schedule 3.18
contains a list of all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Company Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(l) of ERISA, hereinafter a
"Company Welfare Plan"), stock option, stock purchase, incentive, deferred
compensation plans or arrangements, vacation, change in control, stay-on bonus
plans or arrangements, and other material employee compensation and fringe
benefit plans or agreements, maintained, contributed to, or pursuant to which
the Company or the Subsidiary has any liability (all the foregoing being herein
called "Company Benefit Plans"). The Company has made available to Parent
true, complete, and correct copies of (i) each Company Benefit Plan and any
subsequently adopted amendments thereto (or, in the case of unwritten Company
Benefit Plans, descriptions thereof), (ii) the most recent annual report on
Form 5500 filed with respect to each Company Benefit Plan (if any such report
was required), (iii) the most recent summary plan description for each Company
Benefit Plan for which such a summary plan description is required (with all
summaries of material modifications provided after the most recent summary plan
description was distributed), (iv) each trust agreement and group annuity
contract relating to any Company Benefit Plan and (v) each favorable
determination letter
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from the Internal Revenue Service with respect to each Company Benefit Plan
that is intended to be qualified under Section 401(a) of the Code.
(b) All Company Benefit Plans are and have been
administered in material compliance with their terms and all applicable laws,
including, without limitation, ERISA and the Code, except where the failure to
so administer the Company Benefit Plans or to comply with such laws is not
reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect. There are no pending or, to the Company's or the
Subsidiary's Knowledge, threatened investigations by any governmental entity,
termination proceedings, or other claims (except claims for benefits payable in
the normal operation of the Company Benefit Plans), suits or proceedings
against or involving any Company Benefit Plan or asserting any rights or claims
to benefits under any Company Benefit Plan that are reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
(c) All contributions to, and payments from, the Company
Benefit Plans required to be made in accordance with the Company Benefit Plans
have been timely made, other than contributions or payments the failure of
which to make are not reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(d) No Company Benefit Plan is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code or is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
(e) (i) No "prohibited transaction" (under Section 4975
of the Code or Section 406 of ERISA) has occurred with respect to any Company
Benefit Plan and (ii) there has been no breach of any fiduciary duty with
respect to any Company Benefit Plan, other than, in the case of (i) and (ii),
those that are not reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(f) Neither the Company nor the Subsidiary maintains or
contributes to any Company Welfare Plan which could not be terminated by the
Company or the Subsidiary without material liability.
Section 3.19 Reserve Report. (a) The Company has delivered
to Parent a copy of the oil and gas reserve report for the Company prepared by
Xxxxxxx X. Xxxx & Associates, Inc. as of July 1, 1997 (the "Reserve Report").
Neither the Company nor the Subsidiary has Knowledge of any facts that would
make the factual information provided by the Company and the Subsidiary to
Xxxxxxx X. Xxxx & Associates, Inc., and on which the Reserve Report was based,
inaccurate in any material respect at the time provided.
(b) OTHER THAN AS EXPRESSLY SET FORTH ABOVE IN THIS
SECTION 3.19, THE COMPANY MAKES NO REPRESENTATION OR WARRANTY, AND HEREBY
DISCLAIMS ANY REPRESENTATION OR WARRANTY, THAT THE RESERVE
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ESTIMATES, COST AND CASH FLOW ESTIMATES, PRICE ESTIMATES, OR PRODUCTION OR FLOW
RATE ESTIMATES CONTAINED IN THE RESERVE REPORT, OR IN ANY SUPPLEMENT THERETO OR
UPDATE THEREOF, ARE IN ANY WAY COMPLETE, ACCURATE OR NOT MISLEADING, THE SAME
BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE INHERENTLY SUBJECT TO
INCOMPLETENESS AND INACCURACY.
Section 3.20 Title. The Company or the Subsidiary, as the
case may be, has Defensible Title (as defined in Section 10.16) to the Leases
and Xxxxx (as such terms are defined in Section 10.16), except as to those
matters set forth in Schedule 3.20 and except where the failure to have
Defensible Title is not reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
Section 3.21 Financial and Commodity Hedging. Schedule
3.21 sets forth the outstanding hydrocarbon and financial hedging positions of
the Company and the Subsidiary (including fixed price controls, collars, swaps,
caps, xxxxxx, and puts) as of November 22, 1997.
Section 3.22 Production and Pipeline Imbalances and
Penalties. Schedule 3.22 sets forth all Company and Subsidiary pipeline and
production imbalances and penalties as of July 31, 1997 arising with respect to
the Properties.
Section 3.23 Preference Rights. Schedule 3.23 sets forth
all Preference Rights (as defined in Section 10.16) arising from the
consummation of the transactions contemplated by this Agreement, other than
those Preference Rights that are not reasonably expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
Section 3.24 Brokerage Fees and Commissions. Except as set
forth on Schedule 3.24, the Company has not incurred any obligation or entered
into any agreement for any investment banking, brokerage or finder's fee, or
commission in respect of the transactions contemplated by this Agreement for
which Parent or the Company shall incur any liability.
Section 3.25 Tax Treatment and Pooling of Interests.
Neither the Company nor, to the Company's Knowledge, any of its affiliates has
taken, has agreed or failed to take, or intends to take any action or has any
Knowledge of any fact or circumstance that would prevent the Merger from (a)
qualifying as a reorganization within the meaning of Section 368 of the Code (a
"368 Reorganization") or (b) being treated for financial accounting purposes as
a "pooling of interests" (a "Pooling Transaction") in accordance with GAAP and
the rules, regulations and interpretations of the Securities and Exchange
Commission ("SEC") if consummated in accordance with this Agreement.
Section 3.26 Registration Statement and Proxy Statement.
None of the information to be supplied by the Company or the Subsidiary for
inclusion in (a) the Registration Statement on Form S-4 to be filed under the
Securities Act of 1933, as amended (the "1933 Act") with the SEC
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by Parent in connection with the Merger for the purpose of registering the
shares of Parent Common Stock to be issued in the Merger (the "Registration
Statement") or (b) the proxy statement to be distributed in connection with the
Parent Stockholders' Meeting (as hereinafter defined) to vote upon this
Agreement and the transactions contemplated hereby (the "Proxy Statement" and,
together with the prospectus included in the Registration Statement, the "Proxy
Statement/Prospectus") will, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the Parent Stockholders' Meeting, or, in the case of the Registration
Statement, as amended or supplemented, at the time it becomes effective and at
the time of the Parent Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. No representation is
made by the Company with respect to information supplied by Parent or Merger
Subsidiary for inclusion therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 4.1 Organization and Qualification. Parent is, and
at the Effective Time, Merger Subsidiary will be, a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and Parent has the requisite corporate power to carry on its
business as it is now conducted. Parent is duly qualified to conduct business
as a foreign corporation in each jurisdiction in which its ownership or lease
of property or the conduct of its business and operations makes such
qualification necessary, except for such jurisdictions in which the Parent's
failure to be so qualified is not reasonably expected to have, individually or
in the aggregate, a Parent Material Adverse Effect (as defined in Section
10.16). Parent has heretofore delivered to the Company true and complete
copies of the certificate of incorporation and bylaws of Parent as currently in
effect. From the date of its incorporation, the Merger Subsidiary will not
engage in any activities other than in connection with or as contemplated by
this Agreement.
Section 4.2 Capitalization. (a) The authorized capital
stock of Parent consists of 400,000,000 shares of Parent Common Stock, and
10,000,000 shares of preferred stock, $1.00 par value. As of September 30,
1997, there were outstanding 85,745,685 shares of Parent Common Stock
(including 1,484,685 shares of treasury stock) and options to purchase an
aggregate of 3,727,069 shares of Parent Common Stock. All outstanding shares
of capital stock of Parent have been duly authorized and validly issued and are
fully paid and non-assessable and free of preemptive rights. Parent has issued
rights to the holders of Parent Common Stock pursuant to the Rights Agreement
(as hereinafter defined). Except as set forth in this Section 4.2 and except
for changes since September 30, 1997 resulting from the exercise of stock
options outstanding as of September 30, 1997 or the grant of stock based
compensation to directors or employees, there are no outstanding (i) shares of
capital stock or voting securities of Parent, (ii) securities of Parent
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convertible into or exchangeable for shares of capital stock or voting
securities of Parent, or (iii) options or other rights to acquire from Parent
or other obligation of Parent to issue, any capital stock, voting securities,
or securities convertible into or exchangeable for capital stock or voting
securities of Parent. There are no outstanding obligations of Parent or any of
its subsidiaries to repurchase, redeem, or otherwise acquire any securities
referred to in clauses (i), (ii), or (iii) above.
(b) The shares of Parent Common Stock to be issued as
part of the Merger Consideration have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will have been
validly issued and will be fully paid and non-assessable, and the issuance
thereof is not subject to any preemptive or other similar right.
Section 4.3 Authorization. The execution, delivery and
performance by Parent of this Agreement, and the consummation by Parent and the
Merger Subsidiary of the transactions contemplated hereby, are within the
corporate powers of Parent and the Merger Subsidiary and, subject to Parent
Stockholders' Approval (as hereinafter defined), have been duly authorized by
all necessary corporate action. This Agreement has been duly executed and
delivered by Parent and constitutes the valid and binding obligation of Parent
enforceable against Parent in accordance with its terms, subject to (a)
applicable bankruptcy, insolvency, reorganization, moratorium, and other
similar laws of general application with respect to creditors, (b) general
principles of equity, and (c) the power of a court to deny enforcement of
remedies generally based upon public policy.
Section 4.4 Consents and Approval; No Violation. Neither
the execution and delivery of this Agreement by Parent, nor the consummation by
Parent of the transactions contemplated by this Agreement, will: (a) require
any consent, approval, authorization, or permit of, or filing with or
notification to, any Governmental Authority, except (i) the filing of a
certificate of merger in accordance with Delaware Law, (ii) compliance with any
applicable requirements of the 1933 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and foreign or state securities or Blue Sky laws,
(iii) in connection with the HSR Act, (iv) any regulatory approvals or routine
governmental consents normally acquired after the consummation of transactions
such as transactions of the nature contemplated by this Agreement, or (v) where
the failure to obtain such consent, approval, authorization, or permit, or to
make such filing or notification, is not reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect or prevent
or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement; (b) result in a default (or give rise to any
right of termination, cancellation, or acceleration) under any of the terms,
conditions, or provisions of any agreement or other instrument binding upon
Parent or any of its subsidiaries, except for such defaults (or rights of
termination, cancellation, or acceleration) as to which requisite waivers or
consents have been obtained or will be obtained prior to the Effective Time or
which are not reasonably expected to have, individually or in the aggregate, a
Parent Material Adverse Effect or prevent or delay, in any material respect,
the consummation of the transactions contemplated by this Agreement; or (c)
assuming compliance with the matters referred to in Section 4.4(a) and assuming
Parent Stockholders' Approval is obtained, violate any order, writ, injunction,
decree, statute, rule, or regulation applicable to Parent or any of its
subsidiaries or any of their assets, except for violations which are not
reasonably expected to
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have, individually or in the aggregate, a Parent Material Adverse Effect or
prevent or delay, in any material respect, the consummation of the transactions
contemplated by this Agreement.
Section 4.5 SEC Filings. (a) Parent has delivered to the
Company (i) Parent's annual report on Form 10-K for the fiscal year ended
December 31, 1996 ("Parent 10-K"), (ii) its quarterly reports on Form 10-Q for
its fiscal quarters ended after December 31, 1996, (iii) its proxy or
information statements relating to meetings of or actions taken without a
meeting by Parent's stockholders held since December 31, 1996, and (iv) all of
its other reports, statements, schedules, and registration statements filed
with the SEC since December 31, 1996 (the documents referred to in this Section
4.5(a) being referred to collectively as the "Parent SEC Filings"). The
Parent's quarterly report on Form 10-Q for its fiscal quarter ended September
30, 1997 is referred to herein as the "Parent 10-Q."
(b) As of its filing date, each Parent SEC Filing
complied as to form in all material respects with the applicable requirements
of the 1933 Act and the 1934 Act.
(c) As of its filing date, each Parent SEC Filing filed
pursuant to the 1934 Act did not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each such registration statement as amended or
supplemented, if applicable, filed pursuant to the 1933 Act did not, as of the
date such statement or amendment became effective, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
Section 4.6 Financial Statements. The audited consolidated
financial statements and the unaudited interim consolidated financial
statements of Parent included in the Parent SEC Filings present fairly the
consolidated financial position, results of operations, and changes in
financial position of Parent and its subsidiaries as of the respective dates or
for the respective periods to which they apply in accordance with GAAP. For
purposes of this Agreement, "Parent Unaudited Balance Sheet" means the
consolidated balance sheet of Parent as of September 30, 1997 set forth in the
Parent 10-Q and "Parent Unaudited Balance Sheet Date" means September 30, 1997.
Section 4.7 Undisclosed Liabilities. Except as set forth
in the Parent SEC Filings or as reflected, reserved against, or otherwise
disclosed in the Parent Unaudited Balance Sheet, Parent did not have, at the
Parent Unaudited Balance Sheet Date, does not have, at the date hereof, and
will not have, at the Effective Time, any liabilities or obligations, whether
accrued, contingent, absolute, determined, determinable or otherwise, that are
reasonably expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 4.8 Conduct of the Business Since Parent Unaudited
Balance Sheet Date. Except as expressly contemplated by this Agreement, since
the Parent Unaudited Balance Sheet
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Date, (a) the business and operations of Parent and its subsidiaries have been
conducted in the ordinary and usual course in all material respects in
accordance with past practices, (b) Parent has not paid or declared any
dividend on, or made any distribution with respect to, or purchased or redeemed
any of its capital stock, except for quarterly cash dividends by Parent and
stock repurchases by Parent for stock based compensation plans, in each case
not in excess of historical amounts, and (c) no Parent Material Adverse Effect
has occurred and is continuing.
Section 4.9 Litigation; Orders. Except as affects the oil
and gas industry generally or as set forth in the Parent SEC Filings, as of the
date hereof, there are no Actions pending or, to Parent's Knowledge, threatened
against Parent or any of its subsidiaries that are reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect or that
would prevent or delay, in any material respect, the consummation of the
transactions contemplated by this Agreement. Except as affects the oil and gas
industry generally or as set forth in the Parent SEC Filings, as of the date
hereof there are no judgments or outstanding orders, injunctions, decrees,
stipulations, or awards (whether rendered by a court or administrative agency
or by arbitration) against Parent or any of its subsidiaries that are
reasonably expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or that would prevent or delay, in any material
respect, the consummation of the transactions contemplated by this Agreement.
Section 4.10 Licenses; Approvals. Parent and its
subsidiaries possess all Licenses that are necessary to the ownership or
operation of their business as currently conducted, and all such Licenses are
in full force and effect, except where the failure to possess any License or
the failure to be in full force and effect is not reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. No
proceeding is pending or, to Parent's Knowledge, threatened seeking the
revocation or limitation of any such License that is reasonably expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.11 Labor Matters. Except as set forth in the
Parent SEC Filings, there are no agreements with labor unions or associations
representing employees of Parent or any of its subsidiaries. No material work
stoppage against Parent or any of its subsidiaries is pending or, to Parent's
Knowledge, threatened. Neither Parent nor any of its subsidiaries is involved
in or, to Parent's Knowledge, is threatened with any labor dispute,
arbitration, lawsuit, or administrative proceeding relating to labor matters
involving the employees of Parent or any of its subsidiaries (excluding routine
workers' compensation claims) that is reasonably expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
Section 4.12 Compliance with Laws. Parent and its
subsidiaries have conducted their business in compliance with all statutes,
laws, regulations, ordinances, rules, judgments, orders, or decrees applicable
thereto (other than Environmental Laws which are governed solely by Section
4.13), except as set forth in the Parent SEC Filings and except for violations
or failures so to comply, if any, that are not reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
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Section 4.13 Environmental Matters. Except as set forth in
the Parent SEC Filings prior to the date hereof and other than violations that
are not reasonably expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, the properties of Parent and its subsidiaries have
been operated in compliance with all applicable Environmental Laws. Without
limitation of the foregoing, there are no existing, pending or, to Parent's
Knowledge, threatened actions, suits, investigations, inquiries, proceedings or
clean-up obligations by any Governmental Authority relating to any
Environmental Laws with respect to the properties of Parent and its
subsidiaries, except for actions, suits, investigations, inquiries,
proceedings, and obligations that are set forth in the Parent SEC Filings prior
to the date hereof or are not reasonably expected to have, individually or in
the aggregate, a Parent Material Adverse Effect. All notices, permits, or
similar authorizations, if any, required to be obtained or filed in connection
with the operation by the Parent or any of its subsidiaries of their
properties, including, without limitation, treatment, storage, disposal, or
release of a hazardous substance or solid waste into the environment, have been
duly obtained or filed, other than any such notices, permits, or similar
authorizations the failure of which to obtain or file is not reasonably
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
Section 4.14 Taxes. (a) (i) Except as set forth on
Schedule 4.14, Parent and its subsidiaries have filed when due all material
Parent Returns (as defined in Section 10.16) in connection with and in respect
of their business, and have, except for Taxes that are being contested in good
faith and set forth on Schedule 4.14, timely paid and discharged all Tax
obligations shown thereon, (ii) the Parent Returns correctly and accurately
reflect the facts regarding the income, business and assets, operations,
activities, status, or other matters of Parent and its subsidiaries, and any
other information required to be shown thereon, and are not subject to
penalties under Section 6662 of the Code, relating to accuracy-related
penalties, or any corresponding provision of applicable state, local, or
foreign Tax law or any predecessor provision of law, (iii) neither Parent nor
any of its subsidiaries has received any notice of any Tax deficiency
outstanding, proposed, or assessed against or allocable to it, nor has Parent
nor any of its subsidiaries executed any waiver of any statute of limitations
on the assessment or collection of any Tax, or executed or filed with the
Internal Revenue Service or any other governmental body any agreement now in
effect extending the period for assessment or collection of any Taxes against
Parent, (iv) Parent and its subsidiaries have made provision for all Taxes
payable by Parent and its subsidiaries for which no Parent Return has yet been
filed, (v) the charges, accruals, and reserves for Taxes with respect to Parent
and its subsidiaries reflected on the Parent Unaudited Balance Sheet are
adequate under GAAP to cover the Tax liabilities accruing through the date
thereof, (vi) there is no action, suit, proceeding, audit, or claim now
proposed or pending against or with respect to Parent or any of its
subsidiaries in respect of any Tax where there is a reasonable possibility of
an adverse determination, and (vii) neither Parent nor any of its subsidiaries
has been a member of an affiliated, consolidated, combined or unitary group
other than one of which Parent was the common parent.
Section 4.15 Employee Benefit Plans. (a) Each Parent
Employee Plan, as hereinafter defined, has been funded and maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules, and regulations (including, but not
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limited to ERISA and the Code) which are applicable to such Plan, except where
failure to so comply would not be reasonably expected to have, individually or
in the aggregate, a Parent Material Adverse Effect. For purposes of this
Agreement, "Parent Employee Plan" shall mean each material "employee benefit
plan" as defined in Section 3(3) of ERISA, each employment, severance, or
similar contract, plan, arrangement, or policy and each plan or arrangement
(written or oral), providing for compensation, bonuses, profit-sharing, stock
option, or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance coverage (including any self-insured
arrangements), health or medical benefits, disability benefits, workers'
compensation, supplemental unemployment benefits, severance benefits and
post-employment or retirement benefits (including compensation, pension,
health, medical, or life insurance benefits) which is maintained, administered,
or contributed to by Parent or any affiliate of Parent and covers any employee
or former employee of Parent or any affiliate of Parent or under which Parent
or any affiliate of Parent has any liability.
(b) Each Parent Employee Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified and has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
Section 4.16 Tax Treatment and Pooling of Interests.
Neither Parent nor, to Parent's Knowledge, any of its affiliates has taken, has
agreed or failed to take, or intends to take any action or has any Knowledge of
any fact or circumstance that would prevent the Merger from (a) qualifying as a
368 Reorganization or (b) being treated as a Pooling Transaction if consummated
in accordance with this Agreement.
Section 4.17 Registration Statement and Proxy Statement.
None of the information to be supplied by Parent or its subsidiaries for
inclusion in (a) the Registration Statement or (b) the Proxy Statement will, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments
or supplements thereto, and at the time of the Parent Stockholders' Meeting,
or, in the case of the Registration Statement, as amended or supplemented, at
the time it becomes effective and at the time of the Parent Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement/Prospectus will, as of its mailing date,
comply as to form in all material respects with all applicable laws, including
the provisions of the 1933 Act and the 1934 Act and the rules and regulations
promulgated thereunder, except that no representation is made by Parent or
Merger Subsidiary with respect to information supplied by the Company or the
Company Stockholders for inclusion therein.
Section 4.18 Parent Stockholders' Approval. The
affirmative vote of stockholders of Parent required for the issuance of Parent
Common Stock in the Merger as required by the
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regulations of the NYSE, is a majority of the shares of Parent Common Stock
present in person or by proxy at a meeting of such stockholders and entitled to
vote thereat.
Section 4.19 Opinion of Financial Advisor. The financial
advisor of Parent, Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, has
rendered a written opinion to Parent to the effect that the Merger
Consideration is fair from a financial point of view to Parent.
Section 4.20 Amendment of Rights Agreement. Prior to the
execution of this Agreement by Parent and the Company, Parent has signed
Amendment No. 1 dated as of November 22, 1997 ("Amendment") to the Rights
Agreement between Parent and Chemical Mellon Shareholder Services, L.L.C., as
Rights Agent ("Rights Agent"), dated as of January 8, 1996 (the "Rights
Agreement") in the form attached as Exhibit G hereto. Parent agrees to
transmit promptly the Amendment to the Rights Agent for execution by it. The
Amendment reflects all action that must be taken by Parent to except each of
Xxxxx X. Xxxxxx and the Company Stockholders from the definition of Acquiring
Person (as defined in the Rights Agreement) with respect to the execution of
this Agreement and the consummation of the Merger. To the extent that the
execution of this Agreement by Parent and the Company prior to the execution of
the Amendment by the Rights Agent results in the characterization of each of
Xxxxx X. Xxxxxx and the Company Stockholders as an Acquiring Person under the
Rights Agreement, Parent has determined that execution of the Amendment by the
Rights Agent in due course will not result in an amendment to the Rights
Agreement in a manner that adversely affects the interests of the holders of
the Rights (as defined in the Rights Agreement).
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Conduct of Business. From the date hereof
until the Effective Time, except as set forth on Schedule 5.1 or otherwise
expressly contemplated by this Agreement, or, except as consented to or
approved by Parent in writing, the Company covenants and agrees that it will
and will cause the Subsidiary to:
(a) operate the Business (including the making of capital
expenditures) in the ordinary and usual course in all material respects in
accordance with past practices;
(b) not make any change or amendment in their respective
certificate of incorporation or bylaws;
(c) not issue, sell, or agree to issue or sell (i) any
shares of its capital stock or (ii) any securities convertible into, or options
with respect to, or warrants to purchase or rights to subscribe for, any shares
of its capital stock;
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(d) except in the ordinary course of business and
consistent with past practices, or as required by law or contractual
obligations or other policies, benefit proposals, understandings, or
arrangements existing on the date hereof, not (i) increase in any manner the
base compensation of, or enter into any new bonus or incentive agreement or
arrangement with, any of its directors, officers, or other employees; (ii) pay
or agree to pay any pension, retirement allowance, or other employee benefit to
any such director, officer, or employee, whether past or present; (iii) enter
into any new employment, severance, consulting or other compensation agreement
with any existing director, officer, or employee; or (iv) commit itself to any
additional pension, profit-sharing, deferred compensation, group insurance,
severance pay, retirement, or other employee benefit plan, fund, or similar
arrangement or amend or commit itself to amend any of such plans, funds, or
similar arrangements in existence on the date hereof;
(e) not (i) sell, transfer, or otherwise dispose of any
of its assets, except in the ordinary course of business and consistent with
past practices, (ii) create or permit to exist any new material Lien on its
assets, other than Permitted Encumbrances (as defined in Section 10.16), (iii)
enter into any material joint venture, partnership, or other similar
arrangement or form any other new material arrangement for the conduct of the
Business, (iv) purchase any material assets or securities of any Person, (v)
enter into any agreement for the forward sale of production of oil, gas, or
liquids or other hedging transaction, or (vi) except in the ordinary course of
business and consistent with past practices, enter into any other material
agreement;
(f) not pay or declare any dividend on, or make any
distribution with respect to, or purchase or redeem any of its capital stock;
and
(g) not take any action that would make any
representation and warranty of the Company hereunder materially inaccurate in
any respect at, or as of any time prior to, the Effective Time.
Section 5.2 Financial Reporting Matters. (a) The Company
agrees that it will (i) to the maximum extent permitted by GAAP, expense in
1997 all of the expenses related to the Merger and (ii) with respect to its
1997 financial results and all prior year financial results, use its reasonable
best efforts to convert from the "full cost" to the "successful efforts" method
of accounting.
(b) The Company agrees to use its reasonable best efforts
to negotiate (i) the payment by the Company of a specific amount to be paid in
1998 for the buy-down of the premium on the Company's indebtedness under the
First Amended and Restated Note Purchase Agreement dated October 30, 1996
between the Company and Joint Energy Development Investments Limited
Partnership, (ii) the payment by the Company of a specific amount to be paid in
1998 for the right to transfer pursuant to the Merger the right to use the
Company's seismic data and (iii) the payment by the Company of the minimum
investment banking fee to be paid at the earlier of the Effective Time or the
termination of this Agreement.
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ARTICLE VI
COVENANTS OF PARENT
Section 6.1 Conduct of Business. From the date hereof
until the Effective Time, except as provided for in, or contemplated by, this
Agreement, or, except as consented to or approved by the Company in writing,
Parent covenants and agrees that it will and will cause each of its
subsidiaries to:
(a) operate their businesses (including the making of
capital expenditures) in the ordinary and usual course in all material respects
in accordance with past practices;
(b) not make any change or amendment in their respective
articles of incorporation or bylaws that would have a material adverse effect
on the Company or the Company Stockholders;
(c) not issue, sell, or agree to issue or sell (i) any
shares of their capital stock or (ii) any securities convertible into, or
options with respect to, or warrants to purchase or rights to subscribe for,
any shares of their capital stock, except that (A) Parent may issue shares upon
conversion of convertible securities and exercise of options and as otherwise
described in Section 4.2 and (B) Parent may issue options with an exercise
price per share of Parent Common Stock no less than the fair market value of a
share of Parent Common Stock on the date of grant thereof (and shares upon
exercise of such options) pursuant to its employee stock option plans in effect
on the date hereof;
(d) except in the ordinary course of business and
consistent with past practices, not (i) sell, transfer, or otherwise dispose of
any of its assets, (ii) create or permit to exist any new material Lien on its
assets, other than Permitted Encumbrances, or (iii) enter into any material
joint venture, partnership, or other similar arrangement;
(e) not pay or declare any dividend on, or make any
distribution with respect to, or purchase or redeem any of their capital stock,
except for quarterly cash dividends by Parent and stock repurchases by Parent
for stock based compensation plans, in each case not in excess of historical
amounts, and dividends by wholly-owned subsidiaries; and
(f) not take any action that would make any
representation and warranty of Parent hereunder materially inaccurate in any
respect at, or as of any time prior to, the Effective Time.
Section 6.2 Obligations of Merger Subsidiary. Parent will
take all action necessary to create Merger Subsidiary and to cause it to
perform its obligations under this Agreement and to consummate the Merger on
the terms and conditions set forth in this Agreement.
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Section 6.3 Registration Statement and Proxy Statement.
Parent shall promptly prepare and file with the SEC the Registration Statement
and the Proxy Statement and shall use its reasonable best efforts to cause the
Registration Statement to be declared effective by the SEC as promptly as
practicable. Parent shall promptly take any action required to be taken under
foreign or state securities or Blue Sky laws in connection with the issuance of
Parent Common Stock in the Merger.
Section 6.4 Parent Stockholders' Approvals. Parent shall,
as promptly as practicable, submit the issuance of Parent Common Stock in the
Merger as required by the NYSE for the approval of its stockholders at a
meeting of its stockholders (the "Parent Stockholders' Meeting") and shall,
subject to the fiduciary duties of the Board of Directors of Parent under
Delaware Law, use its reasonable best efforts to obtain stockholder approval
thereof (the "Parent Stockholders' Approval"). Parent shall, through its Board
of Directors (i) subject to the fiduciary duties of the members thereof under
Delaware Law, recommend to its stockholders approval of the issuance of Parent
Common Stock in the Merger as required by the NYSE and (ii) authorize and cause
an officer of Parent to vote Parent's shares of common stock of the Merger
Subsidiary for approval and adoption of this Agreement and the transactions
contemplated hereby and shall take all additional actions as the sole
stockholder of the Merger Subsidiary necessary to approve and adopt this
Agreement and the transactions contemplated hereby.
Section 6.5 Stock Exchange Listing. Parent shall use its
reasonable best efforts to cause the shares of Parent Common Stock to be issued
in connection with the Merger to be listed on the NYSE, subject to official
notice of issuance.
Section 6.6 Employee Benefits. At or immediately
following Closing, Buyer shall make or cause the Company to make all payments
due under the Stay-On Bonus Program and under the Long Term Unit Value Plan
III. From and after the Effective Time, Parent (a) shall provide the employees
of the Surviving Corporation with compensation and benefits on the same basis
as Parent provides compensation and benefits to similarly situated employees of
Parent and its affiliates, and shall credit each person who is an employee of
the Company at the Effective Time with such employee's service that is
recognized as of the Effective Time under the Company's Benefit Plans
(including industry service for vacation purposes) for all purposes under
Parent's plans or programs, except for the accrual of benefits under a defined
benefit plan, (b) shall waive any exclusion or limitation with respect to
pre-existing conditions under Parent's group health plan and shall provide that
any out-of-pocket health expenses incurred by a Company employee or his or her
covered dependants prior to the Effective Time shall be taken into account
under Parent's group health plan for purposes of satisfying applicable
deductible, coinsurance and maximum covered health benefit claims for services
rendered on and after the Effective Time, and (c) shall not permit the
Surviving Corporation to amend, revise or terminate (i) the Severance Plan,
(ii) the Incentive Pool Plan or the Amended and Restated Incentive Pool Plan in
a manner that would adversely affect the interest of any participant in such
plans (who is a participant in such plans as of the date of this Agreement) in
any prospect that has been designated or assigned prior to the Effective Time
or, with respect to properties owned by the Company as of the Effective Time,
designated or assigned within three
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years following the Effective Time, in each case pursuant to Articles II and
III of the Incentive Pool Plan or Articles II and III of the Amended and
Restated Incentive Pool Plan, or (iii) the Retirement Savings Plan in a manner
that would adversely affect the vesting of the participants thereunder.
Section 6.7 Corporate Name; Trademark Rights. (a) Upon or
immediately following the Effective Time, Parent will cause the Surviving
Corporation and the Subsidiary shall cease to use the name "Zilkha," or any
similar name, and Parent will take all action, including causing the Surviving
Corporation and the Subsidiary to file all documents, necessary to change the
name of the Surviving Corporation and the Subsidiary to a name that does not
use the name "Zilkha."
(b) Parent understands and agrees that nothing in this
Agreement confers upon Parent or the Surviving Corporation any rights to or
under any trademarks, service marks, logos, or trade names of the Company or
any of its affiliates ("Marks"). Parent agrees that, upon the Effective Time,
Parent will cause the Surviving Corporation and the Subsidiary to cease all use
of the Marks, including, without limitation, any name including the word
"Zilkha," the "Zilkha logo," and all marks, names, and trade styles confusingly
similar to such word and symbol. Parent further agrees that it will, as
promptly as practicable and in any event within 90 calendar days following the
Effective Time cause the Surviving Corporation and the Subsidiary to remove all
references to and representations of any of the Marks from the Properties.
Section 6.8 Registration Rights Agreement. Parent will
enter into a Registration Rights Agreement at the Effective Time in the form
attached hereto as Exhibit A.
Section 6.9 Post-Merger Combined Financial Statements.
Parent will issue, in a manner satisfying the requirements of SEC Accounting
Series Release No. 135, an earnings statement containing at least 30 days of
post- Merger combined financial results of Parent and the Company as soon as
reasonably practicable following the Effective Time but in no event later than
30 days following such 30-day period.
Section 6.10 Shareholder Loan. If the promissory note in
favor of the Xxxxx X. Xxxxxx Trust has not been paid in full prior to the
Effective Time, Parent will immediately cause the Surviving Corporation to pay
in full all of the outstanding principal of and unpaid interest on such
promissory note.
Section 6.11 Rights Agreement Amendment. Parent will not
take, or permit to be taken, any action that would make the representation set
forth in Section 4.20 inaccurate in any material respect at any time, whether
at or prior to the Effective Time or thereafter.
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ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
Section 7.1 Reasonable Best Efforts. Subject to the terms
and conditions of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.
Section 7.2 Certain Filings. (a) The Company and Parent
shall cooperate with one another (i) in connection with the preparation of the
Registration Statement and the Proxy Statement, (ii) in determining whether any
action by or in respect of, or filing with, any Governmental Authority is
required, or any actions, consents, approvals, or waivers are required to be
obtained from parties to any material agreements, in connection with the
consummation of the transactions contemplated by this Agreement, and (iii) in
taking such actions or making such filings, furnishing information required in
connection therewith or with the Registration Statement and seeking timely to
obtain such actions, consents, approvals, or waivers.
(b) If not previously filed by Parent and the Company,
within ten Business Days (as defined in Section 10.16) after the date hereof
Parent and the Company will make such filings as may be required by the HSR Act
with respect to the consummation of the transactions contemplated by this
Agreement and will use all reasonable efforts to obtain early termination of
any waiting period under the HSR Act. Parent and the Company will file or
cause to be filed as promptly as practicable with the United States Federal
Trade Commission ("FTC") and the United States Department of Justice ("Justice
Department") any supplemental information which may be requested pursuant to
the HSR Act. All filings referred to in this Section 7.2(b) will comply in all
material respects with the requirements of the respective laws pursuant to
which they are made.
(c) Without limiting the generality or effect of Section
7.2(b), and notwithstanding any provision herein to the contrary, each of the
parties will (i) use reasonable efforts to comply as expeditiously as possible
with all lawful requests of Governmental Authorities for additional information
and documents pursuant to the HSR Act, (ii) not (A) extend any waiting period
under the HSR Act or (B) enter into any voluntary agreement with any
Governmental Authorities not to consummate the transactions contemplated by
this Agreement, except with the prior consent of the other, and (iii) cooperate
with each other and use reasonable efforts to obtain the requisite approval of
the FTC and Justice Department, including, without limitation, (A) the
execution, delivery, and performance by the appropriate entity of such
divestiture agreements or other actions, as the case may be, as may be
necessary to secure the expiration or termination of the applicable waiting
periods under the HSR Act, (B) the removal, dissolution, stay, or dismissal of
any temporary restraining order, preliminary injunction or other judicial or
administrative order which prevents the consummation of the transactions
contemplated by this Agreement or requires as a condition thereto that all or
any part of the Business be held separate, or (C) the pursuit of necessary
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litigation or administrative proceedings (including, if necessary,
participation in proceedings through the trial court level).
Section 7.3 Public Announcements. Without the prior
consent of the other, which consent shall not be unreasonably withheld, neither
Parent nor the Company will issue, or permit any agent or affiliate to issue,
any press releases or otherwise make or permit any agent or affiliate to make,
any public statements with respect to this Agreement or the transactions
contemplated by this Agreement.
Section 7.4 Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company or
Merger Subsidiary, any deeds, bills of sale, assignments, or assurances and to
take and do, in the name and on behalf of the Company or Merger Subsidiary, any
other actions and things to vest, perfect, or confirm of record or otherwise in
the Surviving Corporation any and all right, title, and interest in, to, and
under any of the rights, properties, or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
Section 7.5 Notices of Certain Events. Each of the Company
and Parent shall promptly notify the other party hereto of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to its Knowledge, threatened against, relating to, or
involving or otherwise affecting such party that, if pending on the date of
this Agreement, would have been required to have been disclosed pursuant to
Sections 3.9, 3.12, 3.15, 4.9, 4.12, or 4.13 (as the case may be) or that
relate to the consummation of the transactions contemplated by this Agreement;
and
(d) (i) the discovery by such party that any
representation or warranty contained in this Agreement is untrue or inaccurate
in any material respect, (ii) the occurrence or failure to occur of any event
which occurrence or failure to occur would be likely to cause any of the
representations or warranties in this Agreement to be untrue or incorrect in
any material respect at the Effective Time, except for representations and
warranties that speak as of a specified date, which need only be true and
correct as of the specified date, and (iii) any material failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.5(d) shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
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Section 7.6 Tax-Free Reorganization and Pooling. Prior to
the Effective Time, each party shall use its best efforts to cause the Merger
to qualify as a 368 Reorganization and to be treated as a Pooling Transaction,
and in each case will not take or fail to take any action reasonably likely to
cause the Merger not to so qualify or to be so treated.
Section 7.7 Affiliates. (a) The Persons named on Exhibit
B-1 are, to the Company's Knowledge, the only Persons who may be deemed
affiliates of the Company under Rule 145 of the 1933 Act. Each Person named on
Exhibit B-1 has executed a written agreement substantially in the form of
Exhibit B-1.
(b) At least 30 days prior to the Effective Time, Parent
shall deliver to the Company a list of names and addresses of those Persons who
were, in Parent's reasonable judgment, at the record date for the Parent
Stockholders' Meeting, affiliates (each such person, a "Parent Affiliate") of
Parent within the meaning of Rule 145 of the 1933 Act. Parent shall use all
reasonable efforts to deliver or cause to be delivered to the Company, prior to
the Effective Time, from each of the Parent Affiliates identified in the
foregoing list, a written agreement substantially in the form of Exhibit B-2.
Section 7.8 Access to Information; Confidentiality. (a)
From the date hereof until the Effective Time, the Company and Parent will give
to the other party, its counsel, financial advisors, auditors, and other
authorized representatives reasonable access to the offices, properties, books,
and records of such party, furnish to the other party and its representatives
such financial and other data and information as such party and its
representatives may reasonably request and instruct its own employees and
representatives to cooperate with the other party in its investigations;
provided, however, that any such access may be denied which, in the reasonable
judgment of the party asserting such denial, could operate to cause the waiver
of any attorney-client, work product, or other privilege or result in the
violation of an obligation or agreement of confidentiality. Any investigation
pursuant to this Section 7.8 shall be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the Company and
Parent, as the case may be. No investigation pursuant to this Section 7.8
shall affect any representation or warranty made by any party hereunder.
(b) All information obtained by Parent or the Company
pursuant to this Section 7.8 shall be kept confidential in accordance with, and
shall otherwise be subject to the terms of, the Confidentiality Agreements
dated September 10, 1997 and November 20, 1997 between Parent and the Company
(the "Confidentiality Agreements").
Section 7.9 Registration Statement and Proxy Statement.
Parent and the Company shall promptly furnish to each other all information,
and take such other actions, as may reasonably be requested in connection with
any action by any of them in connection with the preparation and filing of the
Registration Statement and the Proxy Statement. The information provided and
to be provided by Parent and the Company, respectively, for use in the Proxy
Statement/Prospectus shall
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be true and correct in all material respects without omission of any material
fact which is required to make such information not false or misleading as of
the date thereof and in light of the circumstances under which given or made.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1 Conditions to the Obligations of Each Party.
The obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted
by the stockholders of Parent in accordance with applicable NYSE listing
requirements;
(b) any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated;
(c) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the consummation of the
Merger;
(d) the shares of Parent Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance;
(e) Ernst & Young LLP, certified public accountants for
Parent, shall have delivered a letter dated the day of the Effective Time,
addressed to Parent, in form and substance reasonably satisfactory to Parent,
to the effect that the Merger will qualify as a Pooling Transaction if
consummated in accordance with this Agreement; and
(f) KPMG Peat Marwick LLP, certified public accountants
for the Company, shall have delivered a letter dated the day of the Effective
Time, addressed to the Company, in form and substance reasonably satisfactory
to the Company, to the effect that the Company has met the requirements of a
Pooling Transaction.
Section 8.2 Conditions to the Obligations of Parent and
Merger Subsidiary. The obligations of Parent and Merger Subsidiary to
consummate the Merger are subject to the satisfaction of the following further
conditions:
(a) The (i) representations and warranties of the Company
contained in Article III, shall not, as of the Effective Time, be untrue or
incorrect in any respect that fails to correctly state facts in existence at
the Effective Time that, individually or in the aggregate, constitute a Company
Material Adverse Effect, except for representations and warranties that speak
as of a specified date,
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which need only be true and correct as of the specified date, and (ii)
covenants and agreements of the Company contained in this Agreement to be
performed on or before the Effective Time in accordance with this Agreement
shall have been duly performed in all material respects; and Parent shall have
received at the Effective Time a certificate(s), dated the day of the Effective
Time and validly executed by or on behalf of the Company, to the effect that
the conditions set forth in clauses (i) and (ii) above have been so satisfied;
(b) Parent shall have received an opinion of Xxxxxxxxx &
Xxxxxxxxx, L.L.P. in form and substance reasonably satisfactory to Parent, on
the basis of certain facts, representations, and assumptions set forth in such
opinion, dated the Effective Time, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon representations of the Company
Stockholders substantially in the form of Exhibit C hereto and the officers of
the Parent and the Company substantially in the form of Exhibits D and E
hereto;
(c) the Closing Price as computed pursuant to Section
1.2(a) shall not be less than $39.00 (the "Floor Amount"); provided, however,
if the Company notifies Parent of the Company's agreement to fix the Closing
Price at the Floor Amount this condition shall be deemed to be satisfied. The
Floor Amount is subject to appropriate adjustment in the event of any change in
the Parent Common Stock during the period between the date of this Agreement
and the Effective Time, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period;
and
(d) either (i) the Registration Statement shall have been
declared effective and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the SEC or (ii) the issuance of the
Parent Common Stock in the Merger shall be exempt from the registration
requirements of the 1933 Act.
Section 8.3 Conditions to the Obligations of the Company.
The obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) The (i) representations and warranties of Parent
contained in Article IV, shall not, as of the Effective Time, be untrue or
incorrect in any respect that fails to correctly state facts in existence at
the Effective Time that constitute, individually or in the aggregate, a Parent
Material Adverse Effect, except for representations and warranties that speak
as of a specified date, which need only be true and correct as of the specified
date, and (ii) covenants and agreements of Parent and the Merger Subsidiary
contained in this Agreement to be performed on or before the Effective Time in
accordance with this Agreement shall have been duly performed in all material
respects; and Parent shall have received at the Effective Time a
certificate(s), dated the day of the Effective Time and validly executed by or
on behalf of Parent, to the effect that the conditions set forth in clauses (i)
and (ii) above have been so satisfied;
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(b) the Company shall have received an opinion of Xxxxxxx
& Xxxxx L.L.P., in form and substance reasonably satisfactory to the Company,
on the basis of certain facts, representations, and assumptions set forth in
such opinion, dated the Effective Time, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization qualifying under
the provisions of Section 368(a) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon representations of the Company
Stockholders substantially in the form of Exhibit C hereto and the officers of
Parent and the Company substantially in the form of Exhibits D and E hereto;
and
(c) the Registration Statement shall have been declared
effective and no stop order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the SEC.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Board of Directors of
the Company or Parent or the stockholders of the Company or Parent):
(a) by mutual written agreement of the Company and
Parent; or
(b) by either the Company or Parent, if
(i) the Merger has not been consummated on or
before May 31, 1998; provided that the right to terminate this
Agreement pursuant to this Section 9.1(b)(i) shall not be available to
any party whose breach of any covenant, agreement or other obligation
contained in this Agreement results in the failure of the Merger to be
consummated by such time;
(ii) there shall be any law or regulation that
makes consummation of the Merger illegal or otherwise prohibited or if
any judgment, injunction, order, or decree enjoining any party from
consummating the Merger is entered and such judgment, injunction,
order, or decree shall have become final and non-appealable; or
(iii) this Agreement shall not have been approved
and adopted by the stockholders of Parent in accordance with
applicable NYSE listing requirements after the matter shall have been
presented to them for a vote at the Parent Stockholders' Meeting
(including any adjournment thereof).
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The party desiring to terminate this Agreement pursuant to this Section 9.1
(other than pursuant to Section 9.1(a)) shall give notice of such termination
to the other party.
Section 9.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except that (i) the
agreements contained in Sections 7.8(b), 10.2, 10.4, 10.12, and 10.13 shall
survive the termination of this Agreement and (ii) such termination shall not
relieve any party hereto of any liability for any breach by that party of its
covenants, agreements or other obligations under this Agreement occurring prior
to such termination.
ARTICLE X
MISCELLANEOUS
Section 10.1 Representations, Warranties and Agreements.
All representations and warranties of the parties, or any authorized
representative thereof, contained in this Agreement, or in any certificate,
document or other instrument delivered in connection herewith, shall terminate
and cease to be of further force and effect as of the Effective Time. Each of
Parent and the Company covenant never to institute, directly or indirectly, any
action or proceeding of any kind against the other based on or arising out of,
or in any manner related to, the breach of a representation or warranty
contained in this Agreement. The agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time except for the agreements set forth in Sections 2.3(b), 2.3(c),
6.6, 6.7, 6.9, 6.10, 6.11, 10.2, 10.12, and 10.13.
Section 10.2 Governing Law. This Agreement shall be
governed by and construed in accordance with the law of the State of Texas
without reference to the choice of law principles thereof.
Section 10.3 Entire Agreement. This Agreement, together
with the Schedules and Exhibits hereto, and the Confidentiality Agreements
constitute the entire agreement between the parties with respect to the subject
matter hereof and there are no agreements, understandings, representations or
warranties between the parties other than those set forth or referred to
herein.
Section 10.4 Expenses and Fees. (a) Except as otherwise
provided in this Section 10.4, all costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
(b) With respect to litigation in connection with Section
7.2(c)(iii), all expenses incurred by Parent and the Company contemplated by
such litigation will be shared equally between Parent and the Company.
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(c) Parent agrees to pay the Company in immediately
available funds by wire transfer an amount equal to $25,000,000 (the
"Termination Fee") in the event that this Agreement is terminated (i) by Parent
pursuant to Section 9.1(b) (i) at a time when the condition set forth in
Section 8.2(c) has not been satisfied, (ii) by Parent pursuant to Section
9.1(b)(i) prior to approval and adoption of this Agreement by the stockholders
of Parent at the Parent Stockholders' Meeting or (iii) by the Company or Parent
pursuant to Section 9.1(b)(iii), in each case at a time when the Company was
not in material breach of its representations and warranties or covenants
contained in this Agreement; provided, however, that if this Agreement has been
terminated by the Company or Parent pursuant to Section 9.1(b)(iii) and the
Board of Directors of Parent shall have withdrawn or modified in a manner
adverse to the Company its recommendation of the Parent Stockholders' Approval
the Termination Fee shall be $50,000,000. The Termination Fee payable as
provided in this Section 10.4(c) shall be in lieu of any other damages arising
out of such termination. Any amounts payable pursuant to this Section 10.4(c)
shall be paid promptly, but in no event later than two Business Days, after the
date of such termination.
(d) In the event that the Merger does not occur, Parent
agrees to reimburse the Company for any payments made by the Company as
contemplated by Section 5.2(b).
Section 10.5 Notices. All notices hereunder shall be
sufficient upon receipt for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax, or other electronic transmission
service to the appropriate address or number as set forth below.
If to Parent or Merger Subsidiary, to:
Sonat Inc.
Amsouth-Sonat Tower
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
with a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx III
if to the Company, to:
Zilkha Energy Company
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
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with a copy to:
Xxxxxxx & Xxxxx L.L.P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, XX
Section 10.6 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that no party may assign,
delegate, or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except the Parent or
Merger Subsidiary may transfer or assign, in whole or from time to time in
part, to one or more of their affiliates, the right to enter into the
transactions contemplated by this Agreement, but any such transfer or
assignment will not relieve Parent or Merger Subsidiary of its obligations
hereunder.
Section 10.7 Headings; Definitions. The Section and
Article headings contained in this Agreement are inserted for convenience of
reference only and will not affect the meaning or interpretation of this
Agreement. All references to Sections or Articles contained herein mean
Sections or Articles of this Agreement unless otherwise stated. All
capitalized terms defined herein are equally applicable to both the singular
and plural forms of such terms.
Section 10.8 Amendments and Waivers. This Agreement may
not be modified or amended except by an instrument or instruments in writing
signed by the party against whom enforcement of any such modification or
amendment is sought. Any party hereto may, only by an instrument in writing,
waive compliance by any other party hereto with any term or provision of this
Agreement on the part of such other party hereto to be performed or complied
with. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach.
Section 10.9 Construction of Certain Provisions. It is
understood and agreed that the specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion of
any specific item in the Schedules or Exhibits is not intended to imply that
such amounts or higher or lower amounts, or the items so included or other
items, are or are not material, and no party shall use the fact of the setting
of such amounts or the fact of the inclusion of any such item in the Schedules
in any dispute or controversy between the parties as to whether any obligation,
item, or matter not described herein or included in a Schedule or Exhibit is or
is not material for purposes of this Agreement.
Section 10.10 Agreement for the Parties' Benefit. This
Agreement is not intended to confer upon any Person not a party hereto (other
than the Merger Subsidiary and the Zilkhas) any rights or remedies hereunder,
and no Person other than the parties hereto or such Persons described above is
entitled to rely on any representation, warranty, or covenant contained herein.
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Section 10.11 Severability. If any term or other
provision of this Agreement is invalid, illegal, or incapable of being enforced
by any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal, or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are fulfilled to the extent possible.
Section 10.12 Jurisdiction. Any legal action, suit, or
proceeding in law or equity arising out of or relating to this Agreement and
transactions contemplated by this Agreement may be instituted in any state or
federal court in Xxxxxx County, Houston, Texas, and each party agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action,
suit, or proceeding, any claim that it is not subject personally to the
jurisdiction of such court, that its property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper or that this Agreement, or the subject matter hereof or thereof may
not be enforced in or by such court. Each party further irrevocably submits to
the jurisdiction of any such court in any such action, suit, or proceeding.
Any and all service of process and any other notice in any such action, suit,
or proceeding shall be effective against any party if given by registered or
certified mail, return receipt requested, or by any other means of mail which
requires a signed receipt, postage prepaid, mailed to such party at the address
listed in Section 10.5. Nothing herein contained shall be deemed to affect the
right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against any other party in any
jurisdiction other than Texas.
Section 10.13 Waiver of Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.14 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 to which they are entitled at law or in equity.
Section 10.15 Counterparts; Effectiveness. This Agreement
may be executed in one or more counterparts, all of which shall be considered
one and the same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party. In making proof of this Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
Section 10.16 Definitions and Usage. For the purposes of
this Agreement:
"368 Reorganization" shall have the meaning specified in
Section 3.25.
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"1933 Act" shall have the meaning specified in Section 3.26.
"1934 Act" shall have the meaning specified in Section 4.4.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding, or investigation by or before any Governmental Authority.
"Adjusted Purchase Price" means the Purchase Price reduced by
the Reserve Adjustment Amount as provided in Section 1.3.
"affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person.
"Agreement" shall have the meaning specified in the
introductory paragraph of this Agreement and Plan of Merger.
"Amended and Restated Incentive Pool Plan" shall mean that
certain Amended and Restated Incentive Pool Plan adopted by the Company
effective November 1, 1992.
"Amendment" shall have the meaning specified in Section 4.20.
"Business" shall mean all oil and gas exploration and
all operations related thereto, including, without limitation, (a) the
acquisition, purchase, sale, development, operation, maintenance, and
abandonment of oil, gas, and mineral leases and related interests, (b) the
drilling, reworking, production, purchase, sale, transportation, storage,
processing, treating, manufacture, and disposal of or for oil, gas, natural gas
liquids, and other hydrocarbon gases and liquids, and associated byproducts and
wastes, and (c) the acquisition, construction, installation, maintenance, and
operation of related plants, platforms, pipelines, gathering lines, compressors,
facilities, storage facilities, and equipment.
"Business Day" shall mean any day other than a Saturday,
Sunday, or legal holiday recognized by banking institutions in the State
of Texas.
"Ceiling Amount" shall have the meaning specified in
Section 1.2(a).
"CERCLA" shall have the meaning specified in Section 3.15.
"Certificates" shall have the meaning specified in Section 1.4.
"Certificate of Merger" shall have the meaning specified in
Section 1.1(b).
"Closing Price" shall have the meaning specified in
Section 1.2(a).
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"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"Commitment" shall have the meaning specified in
Section 3.2(a).
"Company" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Company Audited Financial Statements" shall have the meaning
specified in Section 3.5.
"Company Benefit Plans" shall have the meaning specified in
Section 3.18(a).
"Company Common Stock" shall have the meaning specified in
Section 1.2(a).
"Company Material Adverse Effect" shall mean any fact,
circumstance, event, or condition which has or would have a materially adverse
effect on the business, condition (financial or otherwise), assets, or
liabilities of the Company and the Subsidiary, taken as a whole (after taking
into account insurance recoveries in respect thereof); provided, however,
that any actual or prospective change or changes relating to or resulting from
any change or changes in reserves (including, without limitation, any
reclassification or recalculation of reserves in the ordinary course of
business) or in the prices of oil, gas, natural gas liquids, or other
hydrocarbon products, natural declines in well performance, general economic
conditions, or local, regional, national, or international industry conditions
(including, without limitation, changes in applicable laws or regulations, and
changes in financial or market conditions) shall be deemed not to constitute a
"Company Material Adverse Effect;" and, provided, further, that (a) any change
in the financial condition of the Company resulting from or related to the
Company's change of financial reporting from "full cost" to "successful efforts"
accounting, (b) the incurrence by the Company of the expenses as provided in
Section 5.2(a) and (c) the payments by the Company as contemplated by Section
5.2(b) shall be deemed not to constitute a "Company Material Adverse Effect."
"Company Pension Plans" shall have the meaning specified in
Section 3.18(a).
"Company Preferred Stock" shall have the meaning specified in
Section 1.2(a).
"Company Returns" shall mean all returns, declarations,
reports, statements, and other documents required to be filed by the
Company or the Subsidiary in respect of Taxes, and the term "Company Return"
means any one of the foregoing Company Returns.
"Company Shares" shall have the meaning specified in
Section 3.2(a).
"Company Stock" shall have the meaning specified in
Section 1.2(a).
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44
"Company Stockholders" shall have the meaning specified in
Section 1.4.
"Company Unaudited Balance Sheet Date" shall have the meaning
specified in Section 3.6.
"Company Unaudited Financial Statements" shall have the
meaning specified in Section 3.5.
"Company Welfare Plan" shall have the meaning specified in
Section 3.18(a).
"Confidentiality Agreements" shall have the meaning specified
in Section 7.8(b).
"Delaware Law" shall have the meaning specified in
Section 1.1(a).
"Defensible Title" shall mean, with respect to any Lease or
Well, such record and beneficial right, title, and interest in and to
such Lease or Well that, subject to Permitted Encumbrances:
(a) entitles the Company or the Subsidiary, as
applicable, to a Net Revenue Interest in such Lease or Well that is
equal to or greater than the Net Revenue Interest set forth on Exhibit F
therefor, without reduction, suspension, or diminution throughout the duration
of the estate constituting such Property, except as shown on Exhibit F and
except for changes or adjustments that result from the establishment of units,
changes in existing units (or the participating areas therein), or the entry
into of pooling or unitization agreements after the date hereof or result from
or are incidental to operations conducted as permitted or required by Section
5.1; and
(b) subjects the Company or the Subsidiary, as
applicable, to a Working Interest in such Lease or Well that is no greater
than the record title or operating rights interest set forth on Exhibit F
therefor, without increase throughout the duration of the estate constituting
such Property, except as shown on Exhibit F and except for changes or
adjustments that result from the establishment of units, changes in existing
units (or the participating areas therein), or the entry into of pooling or
unitization agreements after the date hereof or result from or are incidental to
operations conducted as permitted or required by Section 5.1.
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.
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45
"disposal" or "disposed" shall have the meaning specified in
Section 3.15.
"Effective Time" shall have the meaning specified in
Section 1.1(b).
"Environmental Laws" shall have the meaning specified in
Section 3.15.
"Equipment" shall mean 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 the 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, flow lines, tanks, and communication systems and equipment.
"ERISA" shall have the meaning specified in Section 3.18(a).
"Floor Amount" shall have the meaning specified in
Section 8.2(c).
"FTC" shall have the meaning specified in Section 7.2(b).
"GAAP" shall have the meaning specified in Section 3.5.
"Governmental Authority" shall mean (a) the United States of
America, (b) any state, county, municipality, or other governmental
subdivision within the United States of America, and (c) any court or any
governmental department, commission, board, bureau, agency, or other
instrumentality of the United States of America or of any state, county,
municipality, water rights, taxing, or zoning authority, or other governmental
subdivision within the United States of America.
"HSR Act" shall have the meaning specified in Section 3.4.
"Incentive Pool Plan" shall mean that certain Incentive Pool
Plan adopted by the Company effective July 1, 1997.
"Justice Department" shall have the meaning specified in
Section 7.2(b).
"Knowledge" when used in relation to any Person shall mean the
actual (but not constructive) knowledge of such Person's officers after
reasonable inquiry and when used in relation to the Company shall mean the
actual (but not constructive) knowledge of Xxxxx X. Xxxxxx, Xxxxxxx Xxxxxx, Xxxx
X. Xxxxxx, Xx., Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, and Xxxxxxxxx X. Xxxxxxxxx,
after reasonable inquiry.
"Leases" shall mean the fee mineral interests, oil, gas and
mineral leasehold interests and other leasehold interests, subleases, mineral
servitudes, licenses, concessions, working
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interests, farmout or farmin rights, royalty, overriding royalty or
other non-working or carried interests, operating rights, or other rights and
interests described or referred to in Exhibit F.
"Licenses" shall have the meaning specified in Section 3.10.
"Liens" shall mean all liens, mortgages, security interests,
pledges, claims, options, and other encumbrances of any kind.
"Long Term Unit Value Plan III" shall mean collectively, those
certain Long Term Unit Value Plan III agreements executed December 15,
1995, but effective January 1, 1995, between the Company and each of
Xxxx X. Xxxxxx, Xx., Xxxxxxx Xxxxxx, Xxxx X. Xxxxxx, and Xxxxxx X. Xxxxxx.
"Marks" shall have the meaning specified in Section 6.7(b).
"Material Contracts" shall have the meaning specified in
Section 3.14(a).
"Merger"shall have the meaning specified in Section 1.1(a).
"Merger Consideration"shall have the meaning specified in
Section 1.2(a).
"Merger Subsidiary" shall have the meaning specified in
Section 1.1(a).
"Net Revenue Interest" means an overall interest in
hydrocarbons produced from or attributable to the Leases and Xxxxx,
after deducting all lessors' royalties, overriding royalties, production
payments, and other interests or burdens on hydrocarbons produced therefrom.
"NYSE" shall have the meaning specified in Section 1.2(a).
"officer" means in the case of Parent and the Company, any
executive officer of Parent or the Company, as applicable, within the meaning
of Rule 3b-7 of the 1934 Act.
"Parent" shall have the meaning specified in the introductory
paragraph of this Agreement.
"Parent 10-K" shall have the meaning specified in
Section 4.5(a).
"Parent 10-Q" shall have the meaning specified in
Section 4.5(a).
"Parent Affiliate" shall have the meaning specified in
Section 7.7(b).
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"Parent Common Stock" shall have the meaning specified in
Section 1.2(a).
"Parent Employee Plan" shall have the meaning specified in
Section 4.15(a).
"Parent Material Adverse Effect" shall mean any fact,
circumstance, event, or condition which has or would have a materially
adverse effect on the business, condition (financial or otherwise), assets, or
liabilities of Parent and its subsidiaries, taken as a whole (after taking into
account insurance recoveries in respect thereof); provided, however, that any
actual or prospective change or changes relating to or resulting from any change
or changes in reserves (including, without limitation, any reclassification or
recalculation of reserves in the ordinary course of business) or in the prices
of oil, gas, natural gas liquids, or other hydrocarbon products, natural
declines in well performance, general economic conditions, or local, regional,
national, or international industry conditions (including, without limitation,
changes in applicable laws or regulations, and changes in financial or market
conditions) shall be deemed not to constitute a "Parent Material Adverse
Effect."
"Parent Returns" shall mean all returns, declarations,
reports, statements, and other documents required to be filed by parent
or any of its subsidiaries in respect of Taxes, and the term "Parent Return"
means any one of the foregoing Parent Returns.
"Parent SEC Filings" shall have the meaning specified in
Section 4.5(a).
"Parent Stockholders' Approval" shall have the meaning
specified in Section 6.4.
"Parent Stockholders' Meeting" shall have the meaning
specified in Section 6.4.
"Parent Unaudited Balance Sheet" shall have the meaning
specified in Section 4.6.
"Parent Unaudited Balance Sheet Date" shall have the meaning
specified in Section 4.6.
"Permitted Encumbrances" shall mean:
(a) 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
Subsidiary, as applicable, in any Property to an
amount less than the Net Revenue Interest for such
Property set forth on Exhibit F;
(b) 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
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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 operation or use of any
of the affected Properties;
(c) farmout and farmin agreements, participation
agreements, joint operating agreements, division
orders, pooling agreements, unitization orders or
agreements, and hydrocarbon sales agreements entered
into in the ordinary course of business;
(d) calls on production, in effect as of the date hereof,
which entitle the Company or the Subsidiary, as the
case may be, to receive a current market price for
such production;
(e) Liens for taxes or assessments, to the extent not yet
delinquent or, if delinquent, to the extent being
contested in good faith by appropriate proceedings;
(f) any materialman's, mechanics', repairman's,
employees', contractors', operators', or other
similar liens, security interests, or charges for
liquidated amounts arising in the ordinary course of
business incidental to construction, maintenance,
drilling, development, production, or operation of
the Properties, or the production, gathering,
transporting, treating, separating, or processing of
hydrocarbons therefrom, that are not delinquent or,
if delinquent, are being contested in good faith by
appropriate proceedings;
(g) all Liens, contracts, agreements, instruments,
obligations, defects, and irregularities affecting
the Properties that, individually, or in the
aggregate, are not such as to materially and
adversely interfere with the operation or use of any
of Properties, do not prevent the Company or the
Subsidiary, as applicable, from receiving the
proceeds of production from any of the Properties, do
not reduce the Net Revenue Interest of the Company or
the Subsidiary, as applicable, for such Property
below that set forth on Exhibit F, and do not
obligate the Company or the 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 the Subsidiary, as applicable, for such
Property as set forth on Exhibit F (unless the actual
Net Revenue Interest for such Property is greater
than the Net Revenue Interest set forth on Exhibit F
in the same proportion as any increase in such
Working Interest);
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(h) any Liens created by law or reserved in oil,
gas, and/or mineral leases for royalty, bonus,
or rental, or securing compliance with the terms of
such leases;
(i) all Preference Rights and Transfer Requirements;
(j) all agreements, instruments, documents, Liens, and
other matters described or referred to in
Schedule I or in any other Schedule attached hereto,
or which are waived by Parent;
(k) traditional rights of reassignment requiring
notice and/or the reassignment (or granting an
opportunity to receive a reassignment) of a leasehold
interest to the holders of such reassignment rights
prior to surrendering or releasing such leasehold
interest or operating right;
(l) rights reserved to or vested in any municipality or
governmental, statutory, or public authority to
control or regulate any Property in any manner, and
all applicable laws, rules, and orders of a
Governmental Authority; and
(m) any defect, irregularity, deficiencies in title, or
other matter that a reasonable and prudent operator,
experienced and knowledgeable in the offshore Gulf of
Mexico oil and gas business, would not consider a
material impairment of the Company's or the
Subsidiary's title.
"Person" shall mean an individual, partnership, corporation,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, Governmental Authority or other legal
entity of any kind.
"Pooling Transaction" shall have the meaning specified in
Section 3.25.
"Preference Rights" shall mean any right or agreement that
purports to enable any Person to purchase, acquire, or otherwise encumber
any Company Common Stock, Company Preferred Stock, Subsidiary Common Stock, or
Property, or any interest therein or in a portion thereof, as a result of or
in connection with any sale, assignment, encumbrance, or other transfer of
any Company Common Stock, Company Preferred Stock, Subsidiary Common Stock or
Property, or any interest therein.
"Property" or "Properties" shall mean the Leases, Xxxxx and
Equipment.
"Proved Reserves" means those oil and gas reserves defined as
Proved Oil and Gas Reserves in the Reserve Report.
"Proxy Statement" shall have the meaning specified in
Section 3.26.
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"Proxy Statement/Prospectus" shall have the meaning specified
in Section 3.26.
"Purchase Price" means $1,044,850,000.
"RCRA" shall have the meaning specified in Section 3.15.
"Registration Statement" shall have the meaning specified in
Section 3.26.
"release" shall have the meaning specified in Section 3.15.
"Reserve Adjustment Amount" shall have the meaning specified
in Section 1.3.
"Reserve Engineer" means Xxxxxxx X. Xxxx & Associates, Inc.
"Reserve Loss Amount" means, for any Reserve Report Field, the
difference between (i) the estimated future net revenues, discounted at
10%, of the Proved Reserves shown in the Reserve Report for such Reserve Report
Field and (ii) the estimated future net revenues, discounted at 10%, of such
Reserve Report Field, as redetermined by the Reserve Engineer under Section 1.3.
"Reserve Report" shall have the meaning specified in
Section 3.19(a).
"Reserve Report Field" means each producing oil or gas field
or area shown in the Reserve Report and to which the Reserve Engineer has
assigned Proved Reserves.
"Retirement Savings Plan" shall mean that certain Retirement
Savings Plan adopted by the Company effective January 1, 1989, and amended
effective October 9, 1997.
"Rights Agreement" shall have the meaning specified in
Section 4.20.
"Rights Agent" shall have the meaning specified in
Section 4.20.
"SEC" shall have the meaning specified in Section 3.25.
"Severance Plan" shall mean that certain Severance Plan
adopted by the Company effective October 9, 1997.
"Stay-On Bonus Program" shall mean that certain Stay-On Bonus
Program adopted by the Company effective September 1, 1997, and amended
effective November 20, 1997.
"Subsidiary" shall have the meaning specified in Section 3.1.
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"subsidiary" means, with respect to any Person, any entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at any time directly or indirectly owned by
such Person.
"Subsidiary Common Stock" shall have the meaning specified in
Section 3.2(b).
"Subsidiary Shares" shall have the meaning specified in
Section 3.2(b).
"Surviving Corporation" shall have the meaning specified in
Section 1.1(a).
"Tax" or "Taxes" shall have the meaning specified in
Section 3.17(a).
"Termination Fee" shall have the meaning specified in
Section 10.4(c).
"Transfer Requirements" shall mean any consent, approval,
authorization, or permit of, or filing with or notification to, any Person
which is required to be obtained, made, given or complied with for or in
connection with any sale, assignment, encumbrance, or other transfer of any
Company Common Stock, Company Preferred Stock, Subsidiary Common Stock or
Property, or any interest therein.
"Xxxxx" shall mean those oil, condensate, or natural gas
xxxxx, water source xxxxx, and water and other types of injection or disposal
xxxxx identified in Exhibit F.
"Working Interest" shall mean that share of all of the costs,
expenses, burdens, and obligations of any type or nature attributable to
the Company's or the Subsidiary's, as applicable, interest in any Lease or Well.
"Zilkhas" shall have the meaning specified in Section 2.3(b).
A reference in this Agreement to any statute shall be to such
statute as amended from time to time, and the rules and regulations promulgated
thereunder.
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52
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
ZILKHA ENERGY COMPANY
By: /s/XXXX X. XXXXXX, XX.
--------------------------------
Name: Xxxx X. Xxxxxx, Xx.
Title: President
SONAT INC.
By: /s/ XXXXXXX X. XXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President
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53
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
________, ____ by and among Sonat Inc., a Delaware corporation (the "Company"),
and Xxxxx X. Xxxxxx, Xxxxxxx Xxxxxx, Xxxxx X. Xxxxxx Trust and Xxxxx X. Xxxxxx
(1996) Annuity Trust (collectively, the "Zilkha Entities"). Capitalized terms
not otherwise defined herein have the meaning ascribed to them in the Merger
Agreement (as hereinafter defined).
WHEREAS, the Company and Zilkha Energy Company, a Delaware
corporation ("Zilkha"), have entered into an Agreement and Plan of Merger,
dated as of __________, 1997 (the "Merger Agreement"), that provides, subject
to the terms and conditions thereof, for the merger (the "Merger") of Zilkha
with a wholly owned subsidiary of the Company.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used in this Agreement, the
following capitalized terms shall have the following meanings:
"Affiliate" of any Person means any Person that controls, is
controlled by, or is under common control with such Person.
"Common Stock" means the common stock, $1.00 par value per
share, of the Company.
"Effective Time" shall have the meaning specified in the
Merger Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"NASD" means The National Association of Securities Dealers,
Inc. or any successor entity.
"Participating Purchasers" means with respect to any
Registration Statement, any Purchasers holding any Registrable Securities
covered by such Registration Statement.
"Person" means an individual, partnership, corporation,
limited liability company, trust, unincorporated organization or other entity,
or a government or agency or political subdivision thereto.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering or any portion of the Registrable Securities
covered by such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
54
"Purchaser(s)" shall mean, collectively, as the context may
require the Zilkha Entities, and shall also include any Affiliate of any Zilkha
Entities.
"Registrable Securities" means (a) any of the Securities, and
(b) any securities (of the Company or any other Person) issued or issuable
with respect to any of the Securities by way of stock dividend or stock split,
a dividend or other distribution, in connection with a combination of shares,
recapitalization, reclassification, merger, consolidation or other
reorganization or otherwise. Any Registrable Security will cease to be a
Registrable Security when (i) a registration statement covering such
Registrable Security has been declared effective by the SEC and the Registrable
Security has been disposed of pursuant to such effective registration
statement, or (ii) the Registrable Security is sold under circumstances in
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act are met.
"Registration Statement" means the Registration Statement of
the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated by
reference in such Registration Statement.
"Requesting Purchaser(s)" means any one or more Purchasers
holding Registrable Securities representing in the aggregate not less than 50%
of the aggregate Registrable Securities then outstanding.
"SEC" means the Securities and Exchange Commission or any
successor entity.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securities" means any of the Common Stock held by Zilkha
Entities as of the Effective Time.
"Underwritten Registration" or "Underwritten Offering" means a
registration in which securities of the Company are sold to an underwriter for
re-offering to the public.
Section 2. Registration Rights.
(a) Demand Registration.
(i) At any time during the five-year period
following the Effective Time, one or more Requesting
Purchasers may make a written request (the "Demand Notice")
for registration under the Securities Act (a "Demand
Registration") of any Registrable Securities (such securities
are herein referred to as "Demand Securities") held by such
Requesting Purchasers. The Demand Notice will specify the
number of Demand Securities proposed to be sold and will also
specify the intended method of disposition thereof. Once
given, a Demand Notice will be irrevocable. Following receipt
of a Demand Notice from such Requesting Purchasers, the
Company promptly will give written notice of the requested
registration to all other
55
Purchasers, and will thereafter file a registration statement
on any appropriate form which will cover (1) the Demand
Securities that the Company has been so requested to register
by such Requesting Purchasers, (2) all other Demand Securities
that the Company has been requested to registered by any other
Purchasers by written request given to the Company within 15
days after the Company's giving of written notice of the
Requesting Purchasers' requested registration and (3) any
other securities the Company determines to register for its
own account.
(ii) Unless the Requesting Purchasers shall
consent in writing, no party (other than the Company or any
other Purchaser) shall be permitted to offer securities under
any such Demand Registration. The Company shall not be
required to effect more than three Demand Registrations under
this Section 2(a). A registration requested pursuant to this
Section 2(a) will not be deemed to have been effected (and it
shall not count as one of the three Demand Registrations)
unless the Registration Statement relating thereto has become
effective under the Securities Act; provided, however, that
if, after such Registration Statement has become effective,
the offering of the Demand Securities pursuant to such
registration is interfered with by any stop order, injunction
or other order or requirement of the SEC or other governmental
agency or court, such registration will be deemed not to have
been effected (and it shall not count as one of the three
Demand Registrations).
(iii) If the Requesting Purchasers so elect, the
offering of Demand Securities pursuant to such registration
shall be in the form of an Underwritten Offering. If the
managing underwriter or underwriters of such offering advise
the Company and the Participating Purchasers that in their
view the number of Demand Securities requested to be included
in such offering is sufficiently large so as to materially and
adversely affect the success of such offering, the Company
will include in such registration the aggregate number of
Demand Securities which in the view of such managing
underwriter or underwriters can be sold without any such
material adverse effect; provided, however, that no Demand
Securities may be excluded before all securities proposed to
be sold by the Company and any other Person have been
excluded. If any Demand Securities are excluded, such
registration shall not count as one of the three Demand
Registrations. If any Demand Securities are required to be
excluded pursuant to this Section 2(a), the number of Demand
Securities of each Participating Purchaser to be included in
such registration shall be reduced pro rate (according to the
total number of Demand Securities beneficially owned by each
such holder), to the extent necessary to reduce the total
number of Demand Securities to be included in the offering to
the number recommended by such managing underwriter or
underwriters.
(iv) Notwithstanding anything in this Agreement to
the contrary, the Company may postpone the filing,
effectiveness, supplementing or amending of a Registration
Statement (a "Demand Suspension Notice") for up to 90 days if,
in the good faith judgment of the Company's Board of
Directors, the registration or sale of the Demand Securities
would adversely
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56
affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or
would require the Company to make public disclosure of
information the public disclosure of which would have a
material adverse effect upon the Company; provided further,
however that the Company may not give more than one Demand
Suspension Notice in any 12 month period. If the Company
shall deliver any Demand Suspension Notice with respect to any
Demand Registration, such Demand Registration shall not be
counted in determining whether the Company is required to file
more than three Demand Registrations pursuant to this
Agreement.
(b) Incidental Registration. If at any time during the
five year period following the Effective Time, the Company proposes to file a
registration statement under the Securities Act (other than in connection with
a Demand Registration or a Registration Statement on Form S-4 or S-8, or any
form that is substituting therefor or is a successor thereto) with respect to
an offering of any Common Stock for its own account, then the Company shall
give written notice of such proposed filing to all Purchasers as soon as
practicable (but in no event less than three business days before the
anticipated filing date), and such notice shall (i) offer each Purchaser the
opportunity to register such number of Registrable Securities as it may request
and (ii) describe such securities and specifying the form and manner and other
relevant facts involved in such proposed registration (including, without
limitation, whether or not such registration will be in connection with an
Underwritten Offering and, if so, the identity of the managing underwriter and
whether such Underwritten Offering will be pursuant to a "best efforts" or
"firm commitment" underwriting). Each Purchaser shall advise the Company in
writing within two business days after the date of receipt of such notice from
the Company of the number of Registrable Securities for which registration is
requested. The Company shall include in such Registration Statement all such
Registrable Securities so requested to be included therein, and, if such
registration is an Underwritten Registration, the Company shall use its best
efforts to cause the managing underwriter or underwriters to permit the
Registrable Securities requested to be included in the registration statement
for such offering to be included (on the same terms and conditions as similar
securities of the Company included therein to the extent appropriate);
provided, however, that if in the view of the managing underwriter or
underwriters of such offering the success of the offering would be materially
and adversely affected by inclusion of the Registrable Securities requested to
be included, then (I) the amount of securities to be offered for the account of
each Participating Purchaser and other holders registering securities of the
Company pursuant to similar incidental registration rights shall be reduced pro
rata (according to the Registrable Securities beneficially owned by each such
holder) to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
underwriter or underwriters; and (II) if the actions described in clause (I)
would, in the reasonable good faith judgment of the managing underwriter, be
insufficient to substantially eliminate the adverse effect that inclusion of
the Registrable Securities requested to be included would have on such
offering, such Registration Securities will be excluded from such offering.
Nothing in this Agreement shall prevent the Company from granting any other
Person or Persons any incidental registration rights on offerings by or on
behalf of the Company from time to time.
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57
Section 3. Hold-Back Agreements. Each Purchaser agrees,
if reasonably requested by the managing underwriters in an Underwritten
Offering to which the provisions of Section 2(b) apply, not to effect any
public sale or public distribution of securities of the Company of the same
class as the securities included in the Registration Statement relating to such
Underwritten Offering, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such Underwritten Offering), during the
10-day period prior to the filing of such Registration Statement, and during
the 90-day period beginning on the closing date of each Underwritten Offering
made pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or the managing underwriters.
Section 4. Registration Procedures.
(a) In connection with the Company's registration
obligations pursuant to Section 2 hereof, the Company will use its
best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended method or
methods of distribution thereof, and pursuant thereto, the Company
will use its best efforts to as expeditiously as possible:
(i) prepare and file with the SEC, as soon as
practicable, and in any event within 60 days from the date of
request (unless a shorter period is expressly set forth
herein), a Registration Statement relating to the applicable
registration on any appropriate form under the Securities Act,
which forms shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods
of distribution thereof and shall include all financial
statements of the Company, and use its best efforts to cause
such Registration Statement to become effective; provided that
before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, including documents
incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish each
Participating Purchaser and the underwriters, if any, copies
of all such documents proposed to be filed, which documents
will be subject to the review of the Participating Purchasers
and the underwriters, if any, and the Company will not file
any Registration Statement or amendment thereto or any
Prospectus or any supplement thereto (including such documents
incorporated by reference) to which Participating Purchasers
holding in the aggregate in excess of 50% of the Registrable
Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;
(ii) prepare and file with the SEC such amendments
and post-effective amendments to the Registration Statement as
may be necessary to keep the Registration Statement effective
for the applicable period, or such shorter period which will
terminate when all Registrable Securities included in such
Registration Statement have been sold; cause the Prospectus to
be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of all
securities included in such Registration Statement during the
applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
the Company shall not be deemed
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58
to have used best efforts to keep a Registration Statement
effective during the applicable period if it voluntarily takes
any action that would result in any Participating Purchaser
not being able to sell its Registrable Securities during that
period unless such action is required under applicable law;
(iii) notify each Participating Purchase and the
managing underwriters, if any, promptly, and (if requested by
any such Person) confirm such advice in writing, (1) when the
Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when
the same has become effective, (2) of any request by the SEC
for amendments or supplements to the Registration Statement or
the Prospectus or for additional information, (3) of the
issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation
of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by
Section 4(a)(xiv) cease to be true and correct, (5) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities
for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose and (6) of the happening of
any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein
by reference untrue or which requires the making of any
changes in the Registration Statement, the Prospectus or any
document incorporated therein by reference in order to make
the statements therein not misleading;
(iv) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible moment;
(v) if reasonably requested by the managing
underwriter or underwriters or by Participating Purchasers
holding in the aggregate in excess of 50% of the Registrable
Securities covered by the Registration Statement, promptly
incorporate in a Prospectus supplement or post- effective
amendment such information as the managing underwriters and
such Participating Purchasers agree should be included therein
relating to the sale of the Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and
with respect to any other terms of the Underwritten Offering
of the Registrable Securities to be sold in such offering; and
make all required filing of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to
be incorporated in such Prospectus supplement or
post-effective amendment;
(vi) prior to the filing of any document which is
to be incorporated by reference into the Registration
Statement or the Prospectus (after initial filing of the
Registration Statement), make available representatives of the
Company for discussion of such document and make such changes
in such document prior to the filing thereof as any
Participating Purchaser or the underwriters, if any, may
reasonable request;
-6-
59
(vii) furnish to each Participating Purchaser and
each managing underwriter, if any, without charge, at least
one signed copy of the Registration Statement and any
post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by
reference);
(viii) deliver to each Participating Purchaser and
the underwriters, if any, without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons may reasonable
request; the Company consents to the use of the Prospectus or
any amendment or supplement thereto by any such Purchasers and
the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the Prospectus
or any amendment or supplement thereto;
(ix) prior to any public offering of Registrable
Securities, register or qualify or cooperate with each
Participating Purchaser, the underwriters, if any, and their
respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such
jurisdictions as any Participating Purchaser or any
underwriter reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
(x) cooperate with the Participating Purchasers
and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any
restrictive legends; and enable such Registrable Securities to
be in such denominations and registered in such names as the
managing underwriters may request at least two (2) business
days prior to any sale of Registrable Securities to the
underwriters;
(xi) cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable each Participating Purchaser or the
underwriters, if any, to consummate the disposition of such
Registrable Securities;
(xii) upon the occurrence of any event contemplated
by Section 4(a)(iii)(6) hereof, prepare a supplement or
post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to Purchasers of the Registrable
Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(xiii) cause all Registrable Securities covered by
the Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are
then listed;
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60
(xiv) enter into such agreements (including an
underwriting agreement) and take all such other actions in
connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in connection
therewith, whether or not an underwriting agreement is entered
into and whether or not the registration is an Underwritten
Registration, (1) make such representations and warranties to
each Participating Purchaser and the underwriters, if any, in
form, substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings; (2) obtain
opinions of counsel to the Company and updates thereof (which
counsel and opinions, in form, scope and substance) shall be
reasonably satisfactory to each Participating Purchaser and
the managing underwriters, if any, covering the matters
customarily covered in opinions requested in Underwritten
Offerings and such other matters as may be reasonably
requested by any Participating Purchaser and the underwriters,
if any; (3) obtain "cold comfort" letters and updates thereof
from the Company's independent certified public accountants
addressed to each Participating Purchaser and the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with primary
underwritten offerings; (4) if an underwriting agreement is
entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 6 hereof
with respect to all parties to be indemnified pursuant to said
underwriting agreement; and (5) deliver such documents and
certificates as may be requested by any Participating
Purchaser and the managing underwriters, if any, to evidence
compliance with clause (1) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be
done at each closing under such underwriting or similar
agreement or as and to the extent required thereunder;
(xv) make available for inspection by a
representative of any Participating Purchaser, any underwriter
participating in any disposition pursuant to such
registration, and any attorney or accountant retained by any
Participating Purchaser or any underwriter, all financial and
other records, pertinent corporate documents and properties of
the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by
any such representative, underwriter, attorney or accountant
in connection with such registration; provided that any
records, information or documents that are designated by the
Company in writing as confidential shall be kept confidential
by such Persons unless disclosure of such records, information
or documents is required by court or administrative order;
(xvi) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period of twelve
(12) months, beginning within three months after the effective
date of the Registration Rtatement, which earnings statement
shall satisfy the provisions of Section 11(a) of the
Securities Act;
-8-
61
(xvii) cooperate with the Participating Purchasers
and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD;
(xviii) in the case of any Demand Registration which
is an Underwritten Offering, participate in customary
"roadshow" and similar marketing presentations as reasonably
requested by the underwriters (it being agreed that
representatives of the Zilkha Entities may participate in such
roadshows to the extent the underwriters determine it is
advisable for them to do so); and
(xix) take such other actions as reasonably may be
requested by the Participating Purchasers in order to effect
the applicable registration.
(b) The Company may require each Purchaser to furnish to
the Company such information regarding the distribution of Registrable
Securities as the Company may from time to time reasonably request in
writing.
(c) Each Purchaser agrees by acquisition of the
Registrable Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
4(a)(iii)(6) hereof, such Purchaser will forthwith discontinue
disposition of Registrable Securities until such Purchaser's receipt
of the copies of the supplemented or amended Prospectus contemplated
by Section 4(a)(xii) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental
filings which are incorporated by reference in the Prospectus, and, if
so directed by the Company, such Purchaser will deliver to the Company
(at Company's expense), all copies, other than permanent file copies
then in such Purchaser's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
In the event the Company shall give any such notice, the time periods
regarding the effectiveness of Registration Statements set forth in
Section 2 hereof and Section 4(b) hereof shall be extended by the
number of days during the period from and including the date of the
giving of such notice pursuant to Section 4(a)(iii)(6) hereof to the
date when such Purchaser shall receive copies of the supplemented or
amended Prospectus contemplated by Section 4(a)(xii) hereof or the
Advice, as applicable.
Section 5. Registration Expenses. All expenses incident
to the Company's performance of or compliance with this Agreement, including
without limitation: all registration and filing fees; fees with respect to
filings required to be made with the NASD; fees and expenses of compliance with
securities or blue sky laws (including fees and disbursements of counsel for
the underwriters or the Purchasers in connection with blue sky qualifications
of the Registrable Securities and determination of their eligibility for
investment under the laws of such jurisdictions as the managing underwriters
and Purchasers may designate); printing expenses, messenger, telephone and
delivery expenses; fees and disbursements of counsel for the Company, for the
underwriters and for one counsel for the Participating Purchasers and fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any comfort letters or costs associated with the
delivery by independent certified public accountants of a comfort letter or
comfort
-9-
62
letters requested pursuant to Section 4(a)(xiv) hereof); securities acts
liability insurance, if the Company so desires; all internal expenses of the
Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties); the expense of
any annual audit; the fees and expenses incurred in connection with the listing
of the securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed; and the fees and expenses of
any Person, including special experts, retained by the Company (all such
expenses being herein called "Registration Expenses") will be borne by the
Company regardless of whether the Registration Statement becomes effective.
The Company shall not have any obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities.
Section 6. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees
to indemnify and hold harmless the Zilkha Entities and each Purchaser
and their respective partners, officers, directors, employees and
agents, and each Person who controls any such Persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) against all losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any
information furnished in writing to the Company by the Zilkha Entities
or such Purchaser, as the case may be, expressly for use therein. The
Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating
in the distribution, their officers and directors and each Person who
controls such Persons (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent
as provided above with respect to the indemnification of the Zilkha
Entities and each Purchaser, if requested, and shall otherwise entered
in such indemnification and contribution agreements with such
underwriters, selling brokers, dealer managers and similar securities
industry professionals as are then customary.
(b) Indemnification By Holder of Registrable Securities.
Each Purchaser, severally and not jointly, agrees to indemnify and
hold harmless the Company and its directors, officers, employees and
agents, and each Person who controls the Company (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act)
against any losses, claims, damages, liabilities and expenses
resulting from any untrue statement of a material fact or any omission
of a material fact required to be stated in the Registration Statement
or Prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in any
information furnished by such Purchaser to the Company specifically
for inclusion in such Registration Statement or Prospectus. The
Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as
provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Prospectus or
Registration Statement.
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63
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification (although the failure to give prompt notice shall not
relieve any indemnifying party of any obligation hereunder except to
the extent such indemnifying party is actually prejudiced by such
failure) and (ii) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided, however, that any Person entitled to
indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person
unless (1) the indemnifying party has agreed to pay each fees or
expenses, (2) the indemnifying party shall have failed to assume the
defense of such claim and employ counsel reasonably satisfactory to
such Person or (3) based upon written advice of counsel to such
Person, there shall exist conflicts of interest pursuant to applicable
rules of professional conduct between such Person and the indemnifying
party, in which case the fees and expenses of one counsel to the
indemnified parties shall be at the expense of the indemnifying party.
The indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld), but if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party shall indemnify and hold harmless
the indemnified parties from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
(d) Contribution. If for any reason the indemnification
provided for in the preceding clauses (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless in respect of
any loss, claim, damage, liability or expense as contemplated by the
preceding clauses (a) and (b), then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by
the indemnified party and the indemnifying party, but also the
relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant
equitable considerations. The relative fault of the Company on the one
hand and of Purchasers on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 10(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentations.
Section 7. Rule 144. The Company hereby agrees that,
for a period of five years from the Effective Time, it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder (or, if Company is not
required to file such reports, it will, upon the request of any Purchaser, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 under the Securities Act), and it will take such further
action as any Purchaser may reasonably request, all to the extent required from
time to time to enable each Purchaser to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act,
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64
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC.
Section 8. Participation in Underwritten Registrations.
(a) If any of the Registrable Securities are to be sold
in an Underwritten Offering, whether pursuant to a Demand Registration
or otherwise, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the
Company. In the case of any Underwritten Offering or Underwritten
Registration, the underwriting agreement will provide that the
underwriters will use their best efforts to cause such Underwritten
Offering to be widely distributed.
(b) No Person may participate in any Underwritten
Registration hereunder unless such Person completes and executes all
customary and reasonably requested questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements. Nothing in this
Section 8 shall be construed to create any additional rights regarding
the registration of Registrable Securities in any Person otherwise
than as set fourth herein.
Section 9. Miscellaneous.
(a) Remedies. Each party hereto, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement to the extent available under applicable law. Each party
hereto agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
and hereby agrees to waive the defense in any action for specific performance
that a remedy at law would be adequate.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may only be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may only be given, with the written consent of the Company
and the holders of a majority of the Registrable Securities.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telecopier, or air courier guaranteeing overnight
delivery:
(i) if to any of Purchasers:
(ii) if to the Company:
and thereafter at such other address as may be designated from time to time by
notice given in accordance with the provisions of this Section 9(c).
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65
(d) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties. Except for the indemnification and contribution rights under this
Agreement (which are intended to and shall create third party beneficiary
rights), the provisions of this Agreement are solely for the benefit of the
parties and are not intended to confer upon any Person except the parties any
rights or remedies hereunder, and there are no third party beneficiaries of
this Agreement.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
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66
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SONAT INC.
By:
------------------------------------
Name:
Title:
---------------------------------------
Xxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx Xxxxxx
XXXXX X. XXXXXX TRUST
By:
------------------------------------
Name:
Title:
XXXXX XXXXXX (1996) ANNUITY TRUST
By:
------------------------------------
Name:
Title:
-14-
67
EXHIBIT B-1
COMPANY AFFILIATES
Xxxxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxx X. Xxxxxx Trust
Xxxxx X. Xxxxxx (1996) Annuity Trust
68
EXHIBIT B-1
ZILKHA ENERGY COMPANY AFFILIATE LETTER
November 22, 1997
Zilkha Energy Company
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Sonat Inc.
Amsouth-Sonat Tower
Birmingham, Alabama 35203
Gentlemen:
The undersigned has been advised that as of the date of this letter
the undersigned may be deemed to be an "affiliate" of Zilkha Energy Company, a
Delaware corporation (the "Company"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Act"). Pursuant to
the terms of the Agreement and Plan of Merger dated as of November 22, 1997
(the "Agreement"), between the Company and Sonat Inc., a Delaware corporation
("Parent"), a newly formed wholly owned subsidiary of Parent ("Merger
Subsidiary") will be merged with and into the Company with the Company to be
the surviving corporation in the merger (the "Merger").
As a result of the Merger, the undersigned will receive shares of
Common Stock, par value $1.00 per share, of Parent (the "Parent Common Stock")
in exchange for shares of Common Stock, par value $1.00 per share, of the
Company (the "Company Common Stock") owned by the undersigned.
The undersigned agrees that the undersigned will not revoke or
otherwise rescind its approval of the Merger. It is understood that the
foregoing agreement shall not affect the rights of the Company under the
Agreement, including the right of the Company to terminate the Agreement and
the Merger as provided therein.
The undersigned represents, warrants and covenants to Parent and the
Company that in the event the undersigned receives any Parent Common Stock as a
result of the Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of the Parent Common Stock in violation of the Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the
Agreement and discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to
69
Zilkha Energy Company EXHIBIT B-1
Sonat Inc.
November 22, 1997
sell, transfer or otherwise dispose of the Parent Common Stock to the extent
the undersigned felt necessary with the undersigned's counsel or counsel for
the Company.
C. The undersigned has been advised that the issuance of Parent
Common Stock to the undersigned pursuant to the Merger will be registered with
the SEC under the Act on a Registration Statement on Form S-4. However, the
undersigned has also been advised that, since at the time the Merger is
submitted for a vote of the stockholders of Company, the undersigned may be
deemed to be an affiliate of the Company, the undersigned may not sell,
transfer or otherwise dispose of the Parent Common Stock issued to the
undersigned in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by the SEC under
the Act, or (iii) in the opinion of counsel reasonably acceptable to Parent, or
pursuant to a "no action" letter obtained by the undersigned from the staff of
the SEC, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. From and after the date that is 30 days prior to the
Effective Time (as defined in the Agreement) the undersigned shall not offer to
sell, sell or otherwise dispose of, or in any other way reduce the
undersigned's risk relative to, any shares of Parent Common Stock or Company
Common Stock (other than by way of conversion into shares of Parent Common
Stock pursuant to the Merger) in any case until an earnings statement
containing at least 30 days of post- Merger combined financial results of
Parent and the Company have been issued in a manner satisfying the requirements
of SEC Accounting Release No. 135.
E. The undersigned will not take or fail to take any action
reasonably likely to cause the Merger not to qualify as a 368 Reorganization
(as defined in the Agreement) or to be treated as a Pooling Transaction (as
defined in the Agreement).
F. The undersigned understands and agrees that this letter
agreement shall apply to all shares of the capital stock of Parent and the
Company that are deemed to be beneficially owned by the undersigned pursuant to
applicable federal securities laws.
G. The undersigned understands that, as an affiliate of the
Company, the undersigned possesses information about the Company which may be
considered confidential and agrees to keep all such information confidential
after the Merger.
H. The undersigned further understands and agrees that the
representations, warranties, covenants and agreements of the undersigned set
forth herein are for the benefit of Parent, Company and the Surviving
Corporation (as defined in the Agreement) and will be relied upon by such
entities and their respective counsel and accountants.
70
Zilkha Energy Company EXHIBIT B-1
Sonat Inc.
November 22, 1997
Execution of this letter should not be considered an admission on the
part of the undersigned that the undersigned is an "affiliate" of the Company
as described in the first paragraph of this letter or as a waiver of any rights
the undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
-----------------------------------
Signature
-----------------------------------
Print Name
Accepted this ___ day of
________________, 1997
ZILKHA ENERGY COMPANY
By:
---------------------------------
Name:
Title:
Dated:
SONAT INC.
By:
---------------------------------
Name:
Title:
Dated:
71
EXHIBIT B-2
SONAT INC. AFFILIATE LETTER
_________________, 1997
Zilkha Energy Company
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Gentlemen:
The undersigned has been advised that as of the date of this
letter the undersigned may be deemed to be an "affiliate" of Sonat Inc., a
Delaware corporation ("Parent"), as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Act"). Pursuant to
the terms of the Agreement and Plan of Merger dated as of November 22, 1997
(the "Agreement"), between Parent and Zilkha Energy Company, a Delaware
corporation (the "Company"), a newly formed wholly owned subsidiary of Parent
("Merger Subsidiary") will be merged with and into the Company with the Company
to be the surviving corporation in the merger (the "Merger").
The undersigned represents, warrants and covenants to Parent
and the Company that:
A. From and after the date that is 30 days prior to the
Effective Time (as defined in the Agreement) the undersigned shall not offer to
sell, sell or otherwise dispose of, or in any other way reduce the
undersigned's risk relative to, any shares of Parent Common Stock in any case
until an earnings statement containing at least 30 days of post-Merger combined
financial results of Parent and the Company have been issued in a manner
satisfying the requirements of SEC Accounting Release No. 135.
B. The undersigned will not take or fail to take any
action reasonably likely to cause the Merger not to qualify as a 368
Reorganization (as defined in the Agreement) or to be treated as a Pooling
Transaction (as defined in the Agreement).
C. The undersigned further understands and agrees that
the representations, warranties, covenants and agreements of the undersigned
set forth herein are for the benefit of Parent, Company and the Surviving
Corporation (as defined in the Agreement) and will be relied upon by such
entities and their respective counsel and accountants.
72
Execution of this letter should not be considered an admission
on the part of the undersigned that the undersigned is an "affiliate" of Parent
as described in the first paragraph of this letter or as a waiver of any rights
the undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
-------------------------------------
Signature
-------------------------------------
Print Name
ACCEPTED:
ZILKHA ENERGY COMPANY
By:
------------------------------
Name:
Title:
Dated:
SONAT INC.
By:
------------------------------
Name:
Title:
Dated:
73
EXHIBIT C
ZILKHA ENERGY COMPANY
0000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Gentlemen:
The undersigned, being a prospective holder of stock in Sonat,
Inc., a Delaware corporation ("Sonat"), by reason of the merger (the "Merger")
of Zilkha Energy Company, a Delaware corporation ("Zilkha"), with and into
Merger Subsidiary, a Delaware corporation and wholly-owned subsidiary of Sonat,
does hereby represent to you and the other stockholders of Zilkha as follows:
The undersigned has, and at the time of the closing of the Merger
the undersigned will have, no plan or intention to sell, exchange or otherwise
dispose of (including by gift) any shares of the common stock, par value $1.00
per share, of Sonat ("Sonat Common Stock") received by the undersigned,
directly or indirectly, in the Merger that would reduce my ownership of Sonat
Common Stock to a number of shares having a value, as of the Effective Time,
of less than fifty percent (50%) of the total value of the common stock, par
value $1.00 per share, of Zilkha and 11% cumulative preferred stock, no par
value, of Zilkha owned by the undersigned immediately prior to the Effective
Time.
The undersigned agrees that should the facts or circumstances on
which any of the foregoing representations are based change between the date of
this letter and the closing of the Merger, the undersigned will immediately
notify Zilkha, at the above address, of the changed facts and circumstances.
The undersigned agrees that the foregoing representations may be
relied on (i) by Zilkha and Sonat, and their respective legal counsel, in
connection with opinions as to the tax consequences of the Merger to be
rendered by such counsel, and as more fully described in the Proxy
Statement/Prospectus distributed by Sonat in connection with the approval of
the Merger, and (ii) by the boards of directors of Zilkha and Sonat in
proceeding with the Merger.
Very truly yours,
Signature:
--------------------------------
Printed Name:
-----------------------------
Date:
-------------------------------------
74
SONAT INC. EXHIBIT D
November __, 0000
Xxxxxxxxx & Xxxxxxxxx L.L.P.
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Xxxxxxx & Xxxxx L.L.P.
4200 Texas Commerce Tower
000 Xxxxxx
Xxxxxxx, XX 00000
Ladies and Gentlemen:
In connection with the opinion to be delivered pursuant to
Sections 8.2(b) and 8.3(b) of the Agreement and Plan of Merger (the
"Agreement") dated as of November 22, 1997, between Zilkha Energy Company, a
Delaware corporation ("Company") and Sonat Inc., a Delaware corporation
("Parent"), the undersigned officers of Parent and Merger Subsidiary (as
defined in the Agreement) hereby certify and represent as to Parent and Merger
Subsidiary that the facts relating to the merger (the "Merger") of Merger
Subsidiary with and into Company pursuant to the Agreement, and as described in
the Company Proxy Statement dated _______________ (the "Proxy Statement") are
true, correct and complete in all respects at the Effective Time and that:
1. The consideration to be received in the Merger by holders of
common stock, $1.00 par value, of the Company ("Company Common Stock") and 11%
cumulative preferred stock, no par value, of the Company ("Company Preferred
Stock" and, together with the Company Common Stock, "Company Stock") was
determined by arm's length negotiations between the managements of Parent and
Company. In connection with the Merger, no holder of Company Stock will
receive in exchange for such stock, directly or indirectly, any consideration
other than Parent Common Stock (as defined in the Agreement) and, in lieu of
fractional shares of Parent Common Stock, cash.
2. To the knowledge of the management of Parent and Merger
Subsidiary, there is no plan or intention on the part of the holders of Company
Stock to sell, exchange, transfer or otherwise
75
November __, 1997
Page 2
dispose (including by transactions such as a short sale or an equity swap which
would have the economic effect of a disposition) of a number of shares of
Parent Common Stock to be received by them in connection with the Merger that
would reduce the Company shareholders' ownership of Parent Common Stock to a
number of shares having a value, as of the Effective Time, of less than 50% of
the total value of all of the formerly outstanding capital stock of Company
immediately prior to the Effective Time. For purposes of this representation,
shares of Company Stock exchanged for cash or other property or exchanged for
cash in lieu of fractional shares of Parent Common Stock are treated as
outstanding shares of Company Stock at the Effective Time. Moreover, shares of
Company Stock that are sold, redeemed or disposed of prior to the Merger and in
contemplation or as part of the Merger, and shares of Parent Common Stock that
are held by holders of Company Stock at or prior to the Effective Time and that
are otherwise sold, redeemed, or disposed of subsequent to the Merger will be
taken into account for purposes of this representation.
3. After the Merger, to the knowledge of the management of
Parent, Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Merger Subsidiary immediately prior to the Merger, and at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Company immediately prior to the Merger. For purposes of
this representation, assets of Merger Subsidiary or Company held immediately
prior to the Merger include amounts paid or incurred by Merger Subsidiary or
Company in connection with the Merger, including amounts used to pay
reorganization expenses and all payments, redemptions and distributions made in
contemplation or as part of the Merger. Any dispositions in contemplation or
as part of the Merger of assets held by Merger Subsidiary prior to the Merger
will be for fair market value.
4. Prior to the Merger, Parent will be in control of Merger
Subsidiary within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code"). Merger Subsidiary has been formed solely in
order to consummate the Merger, and at no time has or will Merger Subsidiary
conduct any business activities or other operations of any kind other than the
issuance of its stock to Parent prior to the Effective Time.
5. Following the Merger, Company has no plan or intention to
issue and Parent has no plan or intention to cause Company to issue additional
shares of capital stock that would result in Parent losing control of Company
within the meaning of Section 368(c) of the Code.
6. Neither Parent nor any corporation affiliated with Parent has
any plan or intention to purchase, redeem or otherwise acquire any of the
Parent Stock issued pursuant to the Merger.
7. Parent has no plan or intention to liquidate Company, to merge
Company with or into another corporation, to sell, exchange, transfer or
otherwise dispose of any stock of Company or to
76
November __, 1997
Page 3
cause Company to sell, exchange, transfer or otherwise dispose of any of its
assets or of any assets acquired from Merger Subsidiary in the Merger, except
for (i) dispositions made in the ordinary course of business, (ii) transfers
described in Section 368(a)(2)(C) of the Code, or (iii) asset dispositions to
the extent that all such dispositions, sale, transfer or exchange of assets
will not, in the aggregate, violate paragraph 3 of this letter.
8. In the Merger, Merger Subsidiary will have no liabilities
assumed by Company and will not transfer to Company any assets subject to
liabilities.
9. Following the Merger, Company will continue (and Parent will
cause Company to continue) its historic business or use a significant portion
of its historic business assets in a business.
10. Parent and Merger Subsidiary each will pay its or their own
expenses, if any, incurred in connection with or as part of the Merger or
related transactions. Neither Parent nor Merger Subsidiary has paid or will
pay, directly or indirectly, any expenses (including transfer taxes) incurred
by any holder of Company Stock in connection with or as part of the Merger or
any related transactions. Neither Parent nor Merger Subsidiary has agreed to
assume, nor will it directly or indirectly assume, any expense or other
liability, whether fixed or contingent, of any holder of Company Stock.
11. There is no intercorporate indebtedness existing between
Parent and Company or between Merger Subsidiary and Company that was issued,
acquired or will be settled at a discount.
12. All shares of Parent Common Stock into which shares of Company
Stock will be converted pursuant to the Merger will be newly issued or treasury
shares, and will be issued by Parent directly to holders of Company Stock
pursuant to the Merger.
13. In the Merger, shares of Company Stock representing control of
Company, as defined in Section 368(c) of the Code, will be exchanged solely for
voting stock of Parent. For purposes of this representation, any shares of
Company Stock exchanged for cash or other property will be treated as
outstanding Company Stock at the Effective Time.
14. In the Merger, no liabilities of shareholders of Company will
be assumed by Parent, and none of the Company Stock acquired by Parent will be
subject to liabilities. Furthermore, there is no plan or intention for Parent
to assume any liabilities of Company.
15. Neither Parent nor Merger Subsidiary is an "investment
company" within the meaning of Section 368(a)(2)(F) of the Code.
77
November __, 1997
Page 4
16. The payment of cash in lieu of fractional shares of Parent
Common Stock to holders of Company Stock is solely for the purpose of avoiding
the expense and inconvenience to Parent of issuing fractional shares and does
not represent separately bargained for consideration. The total cash
consideration that will be paid in the Merger to the holders of Company Stock
instead of issuing fractional shares of Parent Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to the
holders of Company Stock with respect to their shares of Company Stock. The
fractional share interests in Parent of each holder of Company Stock will be
aggregated, and no holder of Company Stock will receive cash in an amount equal
to or greater than the value of one full share of Parent Common Stock.
17. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Common Stock to be received by any
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of Company
who will be an employee of or perform advisory services for Parent, Merger
Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
18. During the past 5 years, neither Parent nor any subsidiary
thereof has owned or owns, beneficially or of record, any class of stock of
Company or any securities of Company or any instrument giving the holder the
right to acquire any such stock or securities.
19. The Merger is being effected for bona fide business reasons
and will be carried out strictly in accordance with the Agreement, as amended
by the Amendment, and as described in the Proxy Statement, and none of the
material terms and conditions therein have been or will be waived or modified.
20. The Agreement, as amended by the Amendment, and the documents
described in the Agreement, as amended by the Amendment, represent the entire
understanding of Parent, Merger Subsidiary, and Company with respect to the
Merger.
21. Neither Parent nor Merger Subsidiary will take any position on
any Federal, state or local income or franchise tax return, or take any other
tax reporting position, that is inconsistent with the treatment of the Merger
as a reorganization within the meaning of Section 368(a) of the Code, unless
otherwise required by a "determination" (as defined in Section 1313(a)(1) of
the Code) or by applicable state or local income or franchise tax law.
78
November __, 1997
Page 5
We understand that Xxxxxxxxx & Xxxxxxxxx L.L.P. and Xxxxxxx & Xxxxx
L.L.P. will rely on this Certificate in rendering their opinions as to certain
United States Federal income tax consequences of the Merger and we will
promptly and timely inform them if, after signing this Certificate, we have
reason to believe that any of the facts described herein or in the Proxy
Statement or any of the representations made in this Certificate are untrue,
incorrect or incomplete in any respect.
Very truly yours,
SONAT INC.
By:
-------------------------------------
Title:
----------------------------------
[MERGER SUBSIDIARY]
By:
-------------------------------------
Title:
----------------------------------
00
XXXXXX ENERGY COMPANY EXHIBIT E
0000 Xxxxxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
November __, 0000
Xxxxxxx & Xxxxx X.X.X.
0000 Xxxxx Commerce Tower
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Bracewell & Xxxxxxxxx L.L.P.
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.2(b) and 8.3(b) of the Agreement and Plan of Merger (the "Agreement") dated
as of November 22, 1997, between Zilkha Energy Company, a Delaware corporation
("Company") and Sonat Inc., a Delaware corporation ("Parent"), the undersigned
officer of Company hereby certifies and represents as to Company that the facts
relating to the merger (the "Merger") of Merger Subsidiary (as defined in the
Agreement) with and into Company pursuant to the Agreement, are true, correct
and complete in all respects at the Effective Time and that:
1. The consideration to be received in the Merger by holders of
common stock, $1.00 par value, of the Company ("Company Common Stock") and 11%
cumulative preferred stock, no par value, of the Company ("Company Preferred
Stock" and, together with the Company Common Stock "Company Stock") was
determined by arm's length negotiations between the managements of Parent and
Company. In connection with the Merger, no holder of Company Stock will
receive in exchange for such stock, directly or indirectly, any consideration
other than Parent Common Stock (as defined in the Agreement) and, in lieu of
fractional shares of Parent Common Stock, cash.
2. There is no plan or intention by any of the holders of Company
Stock who own 1% or more of the Company Stock, and to the knowledge of the
management of Company, there is no plan or intention on the part of the
remaining holders of Company Stock to sell, exchange, transfer or otherwise
dispose (including by transactions such as a short sale or an equity swap which
would have the economic effect of a disposition) of a number of shares of
Parent Common Stock to be received by them in connection with the Merger that
would reduce the Company shareholders' ownership of Parent Common Stock to a
number of shares having a value, as of the Effective Time,
80
November ___, 1997
Page 2
of less than 50% of the total value of all of the formerly outstanding capital
stock of Company immediately prior to the Effective Time. For purposes of this
representation, shares of Company Stock exchanged for cash or other property or
exchanged for cash in lieu of fractional shares of Parent Common Stock are
treated as outstanding shares of Company Stock at the Effective Time. Moreover,
shares of Company Stock that are sold, redeemed or disposed of prior to the
Merger and in contemplation or as part of the Merger, and shares of Parent
Common Stock that are held by holders of Company Stock at or prior to the
Effective Time and that are otherwise sold, redeemed or disposed of subsequent
to the Merger will be taken into account for purposes of this representation.
3. After the Merger, to the knowledge of the management of
Company, Company will hold at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held by
Merger Subsidiary immediately prior to the Merger and at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Company immediately prior to the Merger. For purposes of
this representation, assets of Merger Subsidiary or Company held immediately
prior to the Merger include amounts paid or incurred by Merger Subsidiary or
Company in connection with the Merger, including amounts used to pay Company's
reorganization expenses and all payments, redemptions and distributions (except
for regular, normal dividends, if any) made in contemplation or as part of the
Merger. Any dispositions in contemplation or as part of the Merger of assets
held by Company prior to the Merger will be for fair market value.
4. The Company has no plan or intention to issue additional
shares of its capital stock that would result in Parent losing control (within
the meaning of Section 368(c) of the Code) of the Company.
5. No assets of Company have been sold, transferred or otherwise
disposed of which would prevent Parent from continuing the historic business of
Company or from using a significant portion of Company's historic business
assets in a business following the Merger, and Company intends to continue its
historic business or use a significant portion of its historic business assets
in a business.
6. Company and the holders of Company Stock each will pay its or
their own expenses, if any, incurred in connection with or as part of the
Merger or related transactions. Company has not paid or will not pay, directly
or indirectly, any expenses (including transfer taxes) incurred by any holder
of Company Stock in connection with or as part of the Merger or any related
transactions. Company has not agreed to assume, nor will it directly or
indirectly assume, any expense or other liability, whether fixed or contingent,
of any holder of Company Stock.
7. There is no intercorporate indebtedness existing between
Parent and Company or between Merger Subsidiary and Company that was issued,
acquired or will be settled at a discount.
81
November ___, 1997
Page 3
8. Company has no authorized stock other than Company Common
Stock and Company Preferred Stock. At the date hereof, the only capital stock
of Company issued and outstanding is Company Stock.
9. In the Merger, Company Stock representing control of Company,
as defined in Section 368(c) of the Code, will be exchanged solely for voting
stock of Parent. For purposes of this representation, any shares of Company
Stock exchanged for cash or other property will be treated as outstanding
Company Stock at the Effective Time.
10. There exist no options, warrants, convertible securities or
other rights to acquire Company Stock, including rights pursuant to employee
stock options and employee stock purchase plans in existence as of the date of
the Agreement, that if exercised or converted would affect Parent's acquisition
or retention of control of Company as defined in Section 368 (c) of the Code.
11. In the Merger, no liabilities of the shareholders of Company
will be assumed by Parent and none of the Company Stock acquired by Parent will
be subject to liabilities. Furthermore, to the knowledge of the management of
Company, there is no plan or intention for Parent to assume any liabilities of
Company.
12. Company is not an "investment company" within the meaning of
Section 368(a)(2)(F) of the Code.
13. Company is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
14. At the Effective Time, the total fair market value of the
assets of Company exceeds the total liabilities of Company assumed, including
the amount of any liabilities to which the assets of Company are subject.
15. The payment of cash in lieu of fractional shares of Parent
Common Stock to holders of Company Stock is solely for the purpose of avoiding
the expense and inconvenience to Parent of issuing fractional shares and does
not represent separately bargained for consideration. The total cash
consideration that will be paid in the Merger to the holders of Company Stock
instead of issuing fractional shares of Parent Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to the
holders of Company Stock with respect to their shares of Company Stock. The
fractional share interests in Parent of each holder of Company Stock will be
aggregated, and no holder of Company Stock will receive cash in an amount equal
to or greater than the value of one full share of Parent Common Stock.
16. None of the employee compensation received by any
shareholder-employees of Company is or will be separate consideration for, or
allocable to, any of their shares of Company Stock to be surrendered in the
Merger. None of the shares of Parent Common Stock received by any
82
November ___, 1997
Page 4
shareholder-employee of Company in the Merger is or will be separate
consideration for, or allocable to, any employment, consulting or similar
arrangement. Any compensation paid or to be paid to any shareholder of Company
who will be an employee of or perform advisory services for Parent, Merger
Subsidiary, Company, or any affiliate thereof after the Merger, will be
determined by bargaining at arm's length.
17. Since the date of the Agreement, except for the issuance of
Company Stock pursuant to the rights described in paragraph 10 hereof, Company
has not issued any additional shares of Company Stock.
18. No holders of Company Stock have dissenters' rights with
respect to the Merger under applicable laws.
19. Except as disclosed in the Exhibit A hereto, Company has not
redeemed any of its stock, made any distributions with respect to its stock, or
disposed of any of its assets in contemplation or as part of the Merger,
excluding for purposes of this representation regular, normal dividends and
Company Stock acquired in the ordinary course of business in connection with
employee incentive and benefit programs, or other programs or arrangements in
existence on the date hereof.
20. The Merger is being effected for bona fide business reasons
and will be carried out strictly in accordance with the Agreement, as amended
by the Amendment, and none of the material terms and conditions therein have
been or will be waived or modified.
21. Company will not take any position on any Federal, state or
local income or franchise tax return, or take any other tax reporting position
that is inconsistent with the treatment of the Merger as a reorganization
within the meaning of Section 368(a) of the Code, unless otherwise required by
a "determination" (as defined in Section 1313(a)(1) of the Code) or by
applicable state or local income or franchise tax law.
We understand that Xxxxxxx & Xxxxx L.L.P. and Xxxxxxxxx & Xxxxxxxxx
L.L.P. will rely on this Certificate in rendering their opinions as to certain
United States Federal income tax
83
November ___, 1997
Page 5
consequences of the Merger and we will promptly and timely inform them if,
after signing this Certificate, we have reason to believe that any of the facts
described herein or in the Proxy Statement or any of the representations made
in this Certificate are untrue, incorrect or incomplete in any respect.
Very truly yours,
ZILKHA ENERGY COMPANY
By:
-------------------------------
Title: President
84
EXHIBIT G
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT, dated as of November 22, 1997, to the Rights Agreement
between Sonat Inc., a Delaware corporation (the "Company"), and Chemical Mellon
Shareholder Services, L.L.C., as Rights Agent (the "Rights Agent"), dated as of
January 8, 1996 (the "Rights Agreement").
Pursuant to Section 27 of the Rights Agreement, the Company and the
Rights Agent may from time to time supplement or amend the Rights Agreement in
accordance with the provisions of said Section 27 subject to the terms and
conditions thereof. All acts and things necessary to make this Amendment a
valid agreement, enforceable according to its terms have been done and
performed, and the execution and delivery of this Amendment by the Company and
the Rights Agent have been in all respects duly authorized by the Company and
the Rights Agent.
In consideration of the foregoing and the mutual agreements set forth
herein, the parties hereto agree as follows:
1. Effective as of the consummation of the Merger (as defined in
the Agreement and Plan of Merger, dated as of the date hereof, by and among the
Company and Zilkha Energy Company, a Delaware corporation), Section 1(a) of the
Rights Agreement is hereby amended by inserting the following at the end of
such section:
Notwithstanding anything in this Agreement to the contrary, no
Zilkha Entity (as defined below) shall be deemed to be an
"Acquiring Person" solely as a result of the acquisition of
the Common Shares pursuant to the Agreement and Plan of
Merger, dated as of November 22, 1997, by and among the
Company and Zilkha Energy Company, a Delaware corporation (the
"Merger Agreement"), as long as (a) all Zilkha Entities, all
affiliates and associates of any Zilkha Entity and all persons
acting in concert with any of the foregoing (collectively, the
"Zilkha Group") do not beneficially own in the aggregate a
number of Common Shares representing in excess of the lesser
of (i) the percentage of the Common Shares issued in the
aggregate to the Zilkha Entities pursuant to the Merger
Agreement, or (ii) any percentage of the Common Shares
beneficially owned by the members of the Zilkha Entities in
the aggregate at any time after the consummation of the
transactions contemplated by the Merger Agreement (the lesser
of clause (i) or (ii), the "Permitted Percentage"), and (b) no
member of the Zilkha Group has or acquires beneficial
ownership of any Common Shares other than the Common Shares
issued pursuant to the Merger Agreement.
-1-
85
In addition, no Zilkha Entity shall be come an "Acquiring
Person" solely as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by the Zilkha Entities in the aggregate to
the then applicable Permitted Percentage or more of the Common
Shares of the Company then outstanding; provided, however,
that if any member of the Zilkha Group shall thereafter become
the Beneficial Owner of any additional Common Shares of the
Company, then the members of the Zilkha Group shall be deemed
to be an "Acquiring Person."
Further, no Zilkha Entity shall be deemed to beneficially own
any Common Shares that are acquired directly (other than in
connection with the transactions contemplated by the Merger
Agreement) from, and in a transaction involving, the Company,
unless such Common Shares are acquired as a result of a stock
split, stock dividend or other dividend or distribution made
generally to all holders of Common Shares.
If the Board of Directors of the Company determines in good
faith that a Zilkha Entity who would otherwise be an
"Acquiring Person" has become such inadvertently, and such
Zilkha Entity immediately divests a sufficient number of
Common Shares so that such Zilkha Entity would no longer be an
"Acquiring Person," then such Zilkha Entity shall not be
deemed to be an "Acquiring Person" for any purposes of this
Agreement.
The term "Zilkha Entity" shall mean each of Xxxxx X. Xxxxxx
and Xxxxxxx Xxxxxx (collectively, the "Initial Holders"), each
member of the immediate family of any of the Initial Holders,
and any trust holding Common Shares solely for the benefit of
the Initial Holders or the members of their immediate
families.
2. Effective as of the date hereof, Section 1(a) of the Rights
Agreement is hereby amended by inserting the following at the end of such
section:
Notwithstanding anything in this Agreement to the contrary, no
Person shall become or be deemed to be an "Acquiring Person"
solely as a result of the execution and delivery of the
Agreement and Plan of Merger, dated as of November 22, 1997,
by and between the Company and Zilkha Energy Company, a
Delaware corporation (the "Merger Agreement").
-2-
86
3. This Amendment to the Rights Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and performed entirely within such
State.
4. This Amendment to the Rights Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute one and the same instrument. Terms not
defined herein shall, unless the context otherwise requires, have the meanings
assigned to such terms in the Rights Agreement, as previously amended. Nothing
in this Amendment, and no beneficial ownership by any member of the Zilkha
Group, shall prevent any future or additional amendment to the Rights
Agreement, and each Initial Holder on behalf of itself and each Zilkha Entity
hereby expressly affirms the foregoing.
5. In all respects not inconsistent with the terms and provisions
of this Amendment to the Rights Agreement, the Rights Agreement is hereby
ratified, adopted, approved and confirmed. In executing and delivering this
Amendment, the Rights Agent shall be entitled to all the privileges and
immunities afforded to the Rights Agent under the terms and conditions of the
Rights Agreement.
6. If any term, provision, covenant or restriction of this
Amendment to the Rights Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment to the Rights
Agreement, and of the Rights Agreement, shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
-3-
87
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and attested, all as of the date and year first above written.
Attest: SONAT INC.
By: By:
---------------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest: CHEMICAL MELLON SHAREHOLDER
SERVICES, L.L.C., as Rights Agent
By: By:
---------------------------------- ----------------------------------
Name: Name:
Title: Title:
AGREED:
-------------------------------------
Xxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx Xxxxxx
XXXXX X. XXXXXX TRUST
By:
----------------------------------
Name:
Title:
XXXXX X. XXXXXX (1996) ANNUITY TRUST
By:
----------------------------------
Name:
Title:
-4-
