EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
dated as of September 22, 2003
among
UNITED STATES EXPLORATION, INC.,
DGL ACQUISITION CORP.,
and
DGL MERGERCO, INC.
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TABLE OF CONTENTS
Page
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SECTION 1 DEFINITIONS...................................................... 1
SECTION 2 THE MERGER....................................................... 7
2.1 Basic Structure................................................. 7
2.2 Conversion of Shares............................................ 7
2.3 Dissenting Shares............................................... 7
2.4 Stock Options; Directors Plan................................... 8
2.5 Shareholder Approval............................................ 9
2.6 Surrender and Payment........................................... 10
2.7 ▇▇▇▇▇▇▇ Money................................................... 11
2.8 Closing......................................................... 11
SECTION 3 REPRESENTATIONS AND WARRANTIES OF UXP............................ 11
3.1 Due Incorporation and Good Standing............................. 11
3.2 Authorization of Transaction.................................... 12
3.3 Charter Documents............................................... 12
3.4 No Conflicting Agreements; Consents............................. 12
3.5 Capitalization.................................................. 12
3.6 Subsidiaries.................................................... 13
3.7 Company Filings; Proxy Statement................................ 13
3.8 Absence of Changes; Operation in the Ordinary Course............ 13
3.9 No Undisclosed Liabilities...................................... 13
3.10 Taxes........................................................... 14
3.11 Properties...................................................... 14
3.12 Intellectual Property........................................... 15
3.13 Plans........................................................... 16
3.14 Labor Relations................................................. 16
3.15 Licenses, etc................................................... 16
3.16 Compliance with Laws............................................ 16
3.17 Environmental Matters........................................... 17
3.18 Litigation...................................................... 18
3.19 Material Contracts.............................................. 18
3.20 Accounting Controls............................................. 18
3.21 Reserve Report.................................................. 19
3.22 Certain Agreements.............................................. 19
3.23 Brokers, Finders, etc........................................... 19
SECTION 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO............ 19
4.1 Due Incorporation and Good Standing............................. 19
4.2 Authorization of Transaction.................................... 20
4.3 No Conflicting Agreements; Consents............................. 20
4.4 Solvency........................................................ 20
4.5 No Prior Activities............................................. 20
4.6 Financing....................................................... 20
4.7 Independent Evaluation.......................................... 21
4.8 Brokers, Finders, etc........................................... 21
SECTION 5 CERTAIN COVENANTS................................................ 21
5.1 Conduct of Business Pending the Closing Date.................... 21
5.2 Access to Information........................................... 24
5.3 Consents........................................................ 24
5.4 Announcements................................................... 24
5.5 Risk Management................................................. 25
5.6 No Solicitation; Subsequent Determination....................... 25
5.7 Indemnification and Insurance................................... 26
5.8 Performance by Mergerco......................................... 27
5.9 Employee Matters................................................ 27
5.10 Notification of Certain Matters................................. 28
5.11 Section 16 Matters.............................................. 28
5.12 Certain Contracts............................................... 28
5.13 Other Actions................................................... 28
SECTION 6 CONDITIONS PRECEDENT............................................. 29
6.1 Conditions Precedent to Obligations of UXP...................... 29
6.2 Conditions Precedent to Obligations of Parent and Mergerco...... 29
6.3 Conditions Precedent to the Obligations of Each Party........... 30
SECTION 7 TERMINATION...................................................... 31
7.1 Right to Terminate.............................................. 31
7.2 Effect of Termination........................................... 32
7.3 Termination Fee................................................. 33
7.4 Disposition of Escrow........................................... 33
SECTION 8 MISCELLANEOUS.................................................... 34
8.1 Survival........................................................ 34
8.2 Jurisdiction; Venue............................................. 34
8.3 Amendments and Supplements...................................... 34
8.4 Governing Law................................................... 34
8.5 Notices......................................................... 35
8.6 Entire Agreement, Assignability, Etc............................ 35
8.7 Exclusivity of Representations.................................. 36
8.8 Counterparts.................................................... 36
8.9 Headings; Terms................................................. 36
8.10 Waivers......................................................... 36
8.11 Severability.................................................... 36
8.12 Expenses........................................................ 36
8.13 Construction.................................................... 37
8.14 Incorporation of Disclosure Schedule............................ 37
ANNEXES
Annex I - Plan of Merger
Annex II - Transition Agreement
Annex III - Voting Agreement
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 22, 2003, is entered into by and among United States Exploration,
Inc., a Colorado corporation ("UXP"), DGL Acquisition Corp., a Delaware
corporation ("Parent"), and DGL Mergerco, Inc., a Colorado corporation
("Mergerco").
RECITALS
A. The respective Boards of Directors of UXP, Parent and Mergerco
have determined that the merger of Mergerco with and into UXP (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement and the
plan of merger attached hereto as ANNEX I (the "Plan of Merger"), would be
advisable and in the best interests of their respective shareholders, and have
approved the Plan of Merger and the Merger, pursuant to which each outstanding
share of UXP Common Stock will, except as otherwise provided herein, be
converted into the right to receive a cash payment.
B. The Board of Directors of UXP has resolved to recommend that
the holders of the outstanding shares of UXP Common Stock approve this Agreement
and the Merger and the consummation of the transactions contemplated hereby upon
the terms and subject to the conditions set forth herein.
C. In furtherance thereof, the Boards of Directors of UXP, Parent
and Mergerco have approved this Agreement and the Merger in accordance with
Colorado law and upon the terms and subject to the conditions set forth herein.
AGREEMENT
In consideration of the premises and the mutual covenants set forth
herein, and intending to be legally bound hereby, UXP, Parent and Mergerco agree
as follows:
SECTION 1
DEFINITIONS
As used in this Agreement, the following terms have the indicated
meanings:
"Acquisition Proposal" means any offer or proposal for a merger or
other business combination involving UXP or the acquisition of an equity
interest in, or a substantial portion of the assets of, UXP, other than the
transactions contemplated or permitted by this Agreement.
"Affiliate" means, as to a designated Person, another Person that
controls, is controlled by or is under common control with the designated
Person, and control means the power, directly or indirectly, by stock ownership,
contract, family relationship, employment, position or otherwise, to
significantly influence the business decisions of another Person.
"Agreement" has the meaning given in the Preamble.
"Alternative Transaction" has the meaning given in Section 2.5.2.
"Background Materials" has the meaning given in Section 4.7.
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"Bank of Oklahoma Hedge" has the meaning given in Section 5.5.
"Business Day" means any day on which banking institutions in Denver,
Colorado are open for business.
"Certificates" has the meaning given in Section 2.6.1.
"Charter Documents" means the articles or certificate of incorporation
and bylaws of a corporation.
"Closing" has the meaning given in Section 2.8
"Closing Date" has the meaning given in Section 2.8
"COBRA" has the meaning given in Section 3.13.5.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Company Filings" has the meaning given in Section 3.7.
"Company Stock Option" has the meaning given in Section 2.4.1.
"Confidentiality Agreement" has the meaning given in Section 5.2.
"Cost and Expense Sharing Agreement" means the Cost and Expense Sharing
Agreement dated August 7, 1997, between UXP and ▇▇▇▇▇▇ Mineral Group, Inc., as
amended by the letter agreement dated December 21, 2000 and the Amendment to
Cost and Expense Sharing Agreement dated March 1, 2001.
"Defensible Title" means such title of UXP in and to the Leases and
▇▇▇▇▇ that, subject to and except for the Permitted Encumbrances: (i) entitles
UXP to receive a share of revenues from the Leases and ▇▇▇▇▇ not less than the
Net Revenue Interest described in Section 3.11.1 of the UXP Disclosure Schedule;
(ii) obligates UXP to bear a share of the costs and expenses relating to the
Leases and ▇▇▇▇▇ not greater than the Working Interest described in Section
3.11.1 of the UXP Disclosure Schedule; and (iii) is free and clear of material
liens, encumbrances, mortgages and claims and any defects that would create a
material impairment of use and enjoyment of or loss of interest in the affected
Lease or Well.
"Dissenting Shares" has the meaning given in Section 2.3.
"Effective Time" has the meaning given in Section 2.1.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including, without limitation, environmental and tax liens), charge,
encumbrance, adverse claim, preferential arrangement or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.
"Environmental Laws" means any United States federal, state or local
laws, regulations, orders, decrees, permits, authorizations, or agency
requirements relating to (1) pollution,
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protection, or restoration of the environment, health or safety (in each case
relating to the environment) including, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act, the Clean Water Act and the Clean
Air Act or (2) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance.
"ERISA" has the meaning given in Section 3.13.2.
"Escrow Account" has the meaning given in Section 2.7.
"Escrow Agent" has the meaning given in Section 2.7.
"Escrow Date" has the meaning given in Section 2.7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations of the SEC thereunder.
"Exchange Agent" has the meaning given in Section 2.6.1.
"Exchange Agreement" means the Exchange Agreement dated July 15, 2003
between UXP and ▇▇▇▇-▇▇▇▇▇ Rocky Mountain Corporation.
"Exploration Agreement" has the meaning given in Section 3.11.1.
"Financial Statements" has the meaning given in Section 3.7.1.
"Hazardous Substances" means any material, chemical, compound, mixture,
hazardous substance or hazardous waste listed in, classified by, or regulated
under any Environmental Law.
"Indemnified Persons" has the meaning given in Section 5.7.1.
"Intellectual Property" means all intellectual property rights
pertaining to the business of UXP, including all (i) trademarks, tradenames,
service marks or other trade rights, whether or not registered, and all pending
applications for any such registrations; (ii) copyrights, copyrightable
materials or pending applications therefor; (iii) trade secrets; (iv)
inventions, discoveries, designs, and drawings; (v) computer software, including
all source and object codes and manuals; and (vi) patents and patent
applications.
"Knowledge" of UXP means the actual knowledge that any of the Chief
Executive Officer, Chief Financial Officer or Vice President Land has or would
have had after reasonable investigation. For that purpose, reasonable
investigation shall mean, with respect to matters for which a particular officer
does not have direct operational responsibility, inquiry of employees
responsible for the applicable area of operations or subject matter.
"Leases" means oil, gas and mineral leasehold interests and other
leasehold interests, subleases, mineral servitudes, licenses, concessions,
working interests, farmout or farmin rights, royalties, overriding royalties or
other non-working or carried interests, operating rights or other rights and
interests described or referred to in Section 3.11.1 of the UXP Disclosure
Schedule,
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including, without limitation, all right, title, and interest of UXP in all
pooled or unitized areas in which the Leases are included, to the extent that
such rights and interests arise from and are associated with the Leases or
▇▇▇▇▇, and all right, title and interest owned by UXP in, under or derived from
all or any presently existing unitization, pooling, operating, communitization
or other agreements, whether voluntary or involuntary, or formed under orders,
regulations, rules or declaration or other official acts of any governmental
authority.
"Material Adverse Effect" means any change in or effect on the business
of UXP that is or would be materially adverse to the results of operations,
properties, condition (financial or otherwise) or business of UXP, except for
changes or effects resulting from or in connection with (i) general economic,
industry (whether affecting the oil and gas industry nationally or in the Rocky
Mountain region) or financial market conditions, (ii) the announcement or
expectation of the transactions contemplated hereby or (iii) acts or omissions
of UXP required or contemplated by this Agreement.
"Material Contracts" has the meaning given in Section 3.19.
"Merger" has the meaning given in the Recitals.
"Mergerco" has the meaning given in the Preamble.
"Merger Consideration" means $2.82 per share of UXP Common Stock.
"Net Revenue Interest" means UXP's interest in a Lease or Well, after
deducting all lessors' royalties, overriding royalties, production payments, net
profits interests and other interests or burdens on or that are measured by or
are payable out of the production of hydrocarbons produced therefrom or the
proceeds realized from the sale or other disposition thereof.
"Option Plans" has the meaning given in Section 2.4.
"Parent" has the meaning given in the Preamble.
"Parent Expenses" has the meaning give in Section 7.3.1.
"Parent Plan" has the meaning given in Section 5.9.1(ii).
"Permitted Encumbrances" means: (a) liens for taxes, assessments and
governmental charges or levies not yet due and payable; (b) Encumbrances imposed
by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's
liens, and operator's liens and other similar liens arising in the ordinary
course of business and securing amounts not yet delinquent or being contested in
good faith and for which appropriate accruals have been made; (c) pledges or
deposits to secure obligations under workers' compensation laws or similar
legislation or to secure public or statutory obligations; (d) minor survey
exceptions, reciprocal easement agreements and other customary encumbrances on
title to real property that do not, individually or in the aggregate, materially
adversely affect the value, operation or use of property subject thereto for its
current and anticipated purposes; (e) lessor's royalties, overriding royalties,
nonparticipating royalties, net profits interests, carried interests, production
payments,
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reversionary interests, and other burdens, if the net cumulative effect of such
burdens does not operate to reduce the Net Revenue Interest of UXP in any Well
or Lease to an amount less than the Net Revenue Interest for such Well or Lease
set forth in Section 3.11.1 of the UXP Disclosure Schedule, and does not
obligate UXP to bear costs and expenses relating to any Well or Lease in a
proportion greater than the Working Interest of UXP for such Well or Lease as
set forth in Section 3.11.1 of the UXP Disclosure Schedule (unless the actual
Net Revenue Interest for such Well is greater than the Net Revenue Interest set
forth in Section 3.11.1 of the UXP Disclosure Schedule in at least the same
proportion as the proportion that such costs and expenses required to be borne
is greater than such Working Interest); (f) easements, rights-of-way,
servitudes, permits, licenses, surface leases, and other rights in respect of
surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or
the like; conditions, covenants or other restrictions, and easements for
streets, alleys, highways, pipelines, telephone lines, power lines, railways,
and other easements and rights-of-way on, over, or in respect of any lands which
will not materially interfere with the operation or use of any of the affected
Leases; (g) farmout and farmin agreements, participation agreements, joint
operating agreements (including operators' liens granted therein), division
orders, pooling agreements, unitization orders or agreements, and hydrocarbon
sales agreements entered into in the ordinary course of business to the extent
that such orders and agreements do not operate to reduce the Net Revenue
Interest of UXP in any Well or Lease to an amount less than the Net Revenue
Interest for such Well or Lease set forth in Section 3.11.1 of the UXP
Disclosure Schedule and do not obligate UXP to bear costs and expenses relating
to any Well or Lease in a proportion greater than the Working Interest of UXP
for such Well or Lease as set forth in Section 3.11.1 of the UXP Disclosure
Schedule (unless the actual Net Revenue Interest for such Well or Lease is
greater than the Net Revenue Interest set forth in Section 3.11.1 of the UXP
Disclosure Schedule in at least the same proportion as the proportion that such
costs and expenses required to be borne is greater than such Working Interest);
(h) all liens, contracts, agreements, instruments, obligations, defects, and
irregularities affecting the ▇▇▇▇▇ and Leases that, individually or in the
aggregate, are not such as to materially and adversely interfere with the
operation or use, if any, of ▇▇▇▇▇ or Leases, do not prevent UXP from receiving
the proceeds of production from any of the ▇▇▇▇▇ or Leases, do not reduce the
Net Revenue Interest of UXP for any Well or Lease below that set forth in
Section 3.11.1 of the UXP Disclosure Schedule, and do not obligate UXP to bear
costs and expenses of any Well or Lease in an amount greater than the Working
Interest of UXP for such Well or Lease as set forth in Section 3.11.1 of the UXP
Disclosure Schedule (unless the actual Net Revenue Interest for such Well or
Lease is greater than the Net Revenue Interest set forth in Section 3.11.1 of
the UXP Disclosure Schedule in at least the same proportion as the proportion
that such costs and expenses required to be borne is greater than such Working
Interest); (i) 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; (j) traditional rights of reassignment requiring notice and/or the
reassignment of a leasehold interest to the holders of such reassignment rights
prior to surrendering or releasing such leasehold interest or operating right;
(k) rights reserved to or vested in any governmental authority by statute or
regulation to control or regulate any Lease in any manner, and (l) any defect,
irregularity, deficiency in title or other matter that a reasonable and prudent
operator, experienced and knowledgeable in the domestic oil and gas business,
would not consider a material impairment of UXP's title in a Lease or Well.
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"Person" means an individual and any corporation, partnership, trust,
limited liability company, association, governmental authority or other entity.
"Plan of Merger" has the meaning given in the Recitals.
"Plans" has the meaning given in Section 3.13.1.
"Proxy Statement" has the meaning given in Section 2.5.1(ii).
"Reserve Report" has the meaning given in Section 3.21.
"Risk Management Decision" has the meaning given in Section 5.5.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations of the SEC thereunder.
"Special Meeting" has the meaning given in Section 2.5.1(i).
"Subsequent Determination" has the meaning given in Section 5.6(iii).
"Superior Proposal" means any unsolicited bona fide Acquisition
Proposal for at least a majority of the outstanding UXP Common Stock or
substantially all of UXP's assets by a third party on terms that the Board of
Directors of UXP determines in its good faith judgment, after receiving the
advice of its financial advisors, to be more favorable from a financial point of
view to UXP's shareholders than the Merger, after taking into account the
likelihood of consummation of such transaction on the terms set forth therein,
all legal, financial (including the financing terms of any such proposal),
regulatory and other aspects of such proposal and any other relevant factors
permitted under applicable law.
"Tax" means any federal, state or local tax or any foreign tax
(including, without limitation, any net income, gross income, profits, premium,
estimated, excise, sales, value added, services, use, occupancy, gross receipts,
franchise, license, ad valorem, real property, personal property, severance,
production, capital levy, production, stamp, transfer, withholding, employment,
unemployment, social security (including FICA), payroll or property tax, customs
duty, or any other governmental charge or assessment), together with any
interest, addition to tax, or penalty.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Termination Date" has the meaning given in Section 7.1.2.
"Termination Fee" has the meaning given in Section 7.3.1.
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"Transition Agreement" means an agreement between UXP and ▇▇▇▇▇▇
Mineral Group, Inc. substantially in the form attached hereto as ANNEX II.
"UPRC" has the meaning given in Section 3.11.1.
"UXP" has the meaning given in the Preamble.
"UXP Common Stock" means the common stock, $.0001 par value, of UXP.
"UXP Disclosure Schedule" has the meaning given in the introductory
language to Section 3.
"Voting Agreement" means a Voting Agreement substantially in the form
attached hereto as ANNEX III.
"▇▇▇▇▇" means those oil or natural gas ▇▇▇▇▇ (whether producing, not
producing, abandoned or temporarily abandoned), water source ▇▇▇▇▇, and water
and other types of injection or disposal ▇▇▇▇▇ and systems located on the
Leases, including, without limitation, the ▇▇▇▇▇ described and identified in
Section 3.11.1 of the UXP Disclosure Schedule.
"Working Interest" means UXP's interest in a Lease or Well, before
deducting any lessors' royalties, ownership royalties, production payments, net
profit interests and other interests or burdens on or that are measured by or
payable out of the production of hydrocarbon produced therefrom or the proceeds
realized from the sale or other disposition thereof.
SECTION 2
THE MERGER
2.1 BASIC STRUCTURE. On the terms and subject to the conditions
set forth in this Agreement, Mergerco, as the disappearing corporation, will be
merged with and into UXP, as the surviving corporation, all as more specifically
provided in the Plan of Merger. After the Merger, Parent will own all of the
issued and outstanding stock of UXP. On the Closing Date, UXP and Mergerco will
cause articles of merger in the form required by Colorado law to be filed with
the Colorado Secretary of State. The Merger will become effective upon such
filing (the "Effective Time").
2.2 CONVERSION OF SHARES. In the Merger, each share of UXP Common
Stock outstanding at the Effective Time (other than shares held by Parent or
Mergerco and Dissenting Shares) shall be converted into the right to receive an
amount of cash equal to the Merger Consideration. Each outstanding share of UXP
Common Stock which is held by Parent or Mergerco and any issued shares of UXP
Common Stock held in the treasury of UXP shall be canceled and retired and no
payment shall be made with respect thereto. Each share of the common stock of
Mergerco outstanding at the Effective Time shall be converted into and become
one validly issued, fully paid and non-assessable share of UXP Common Stock.
2.3 DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, shares of UXP Common Stock outstanding immediately prior to the
Effective Time and held by holders who comply with all of the relevant
provisions of Section ▇-▇▇▇-▇▇▇ et seq. of the
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Colorado Business Corporation Act ("Dissenting Shares") shall not be converted
into the right to receive the Merger Consideration and shall be purchased and
paid for in accordance with Section ▇-▇▇▇-▇▇▇ et. seq. of the Colorado Business
Corporation Act. If, after the Effective Time, any such holder fails to perfect
or withdraws or otherwise loses such right, each of such holder's shares of UXP
Common Stock shall thereupon be deemed to have been converted into the right to
receive, as of the Effective Time, the Merger Consideration, without interest.
UXP shall give Parent prompt notice of any demands received by UXP for appraisal
of shares of UXP Common Stock, and, prior to the Effective Time, Parent shall
have the right to direct all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, UXP shall not, except with the prior
written consent of Parent, make any payment with respect to, or settle or offer
to settle, any such demands.
2.4 STOCK OPTIONS; DIRECTORS PLAN.
2.4.1 SETTLEMENT OF STOCK OPTIONS. As soon as practicable
following the date of this Agreement, UXP (or, if appropriate, any committee
administering any stock option or compensation plan or arrangement) shall take
such actions as are required (including, if necessary, entering into agreements
with individual optionees) to provide that upon the consummation of the Merger,
each holder of a then outstanding stock option or other right to purchase or
otherwise acquire shares of UXP Common Stock granted under any stock option or
compensation plan or arrangement of UXP (a "Company Stock Option"), whether or
not then exercisable, shall: (i) if such Company Stock Option is in-the-money
(based on the Merger Consideration), upon surrender thereof to UXP or its
designee, receive from UXP the excess, if any, of the Merger Consideration over
the exercise price per share for each share of UXP Common Stock covered by such
Company Stock Option, net of any applicable tax withholding, or (ii) if such
Company Stock Option is not in-the-money (based on the Merger Consideration),
surrender such Company Stock Option to UXP for cancellation. Subject to the
terms and conditions set forth herein, UXP and such committee shall further take
all actions necessary to cause each stock option or compensation plan or
arrangements of UXP providing for the granting of Company Stock Options ("Option
Plans") to terminate at the Effective Time.
2.4.2 DIRECTORS FEE STOCK PLAN. The UXP Board of Directors
shall take such actions as are required to terminate UXP's Directors Fee Stock
Plan effective at the Effective Time and to otherwise amend the Directors Fee
Stock Plan as required to carry out the provisions of this Section 2.4.2. In
lieu of issuing additional shares of UXP Common Stock under the Directors Fee
Stock Plan, UXP shall pay to each of its outside directors, as of the earlier of
such director's resignation, other termination of service, or the Effective
Time, (i) for all meetings of the Board of Directors or any Committee thereof on
or before the date of this Agreement, an amount of cash equal to the product of
the Merger Consideration multiplied by the number of shares of UXP Common Stock
to which such Director would otherwise be entitled pursuant to the Directors Fee
Stock Plan if such Director had resigned on the last trading day before the date
of this Agreement and (ii) for all meetings of the Board of Directors or any
Committee thereof after the date of this Agreement and prior to the Effective
Time, directors' fees in cash at the rates in effect prior to the date of this
Agreement.
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2.5 SHAREHOLDER APPROVAL.
2.5.1 SPECIAL MEETING; PROXY STATEMENT. UXP, acting through
its Board of Directors, shall in accordance with applicable law and its Charter
Documents:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Special Meeting") as soon as practicable
following the date of this Agreement for the purpose of considering and taking
action upon this Agreement and the Merger;
(ii) except as expressly permitted by Section 5.6, include
in the proxy or information statement (the "Proxy Statement") with respect to
the Special Meeting the recommendation of its Board of Directors that its
shareholders vote in favor of the approval and adoption of this Agreement, the
Plan of Merger, the Merger and the transactions contemplated hereby; and
(iii) use its reasonable best efforts (a) to obtain and
furnish the information required to be included by it in the Proxy Statement,
(b) to file the Proxy Statement with the SEC as promptly as is practicable,
after consultation with and review by, Parent and its advisors, (c) after
consultation with the other parties hereto, respond as promptly as is reasonably
practicable to any comments made by the SEC with respect to the Proxy Statement
and any preliminary version thereof, (d) cause the Proxy Statement to be mailed
to its shareholders at the earliest practicable time, and (e) subject to the
fiduciary duties of its Board of Directors under applicable laws, to obtain the
necessary approval and adoption of this Agreement, the Plan of Merger, the
Merger and the transactions contemplated hereby by its shareholders.
Any information in the Proxy Statement or any amendment or supplement thereto
relating to Parent, its stockholders or Affiliates, or Mergerco or the sources
or status of the financing for the Merger shall be subject to the prior approval
of Parent, which approval shall not be unreasonably withheld or delayed, and UXP
shall not file or disseminate the Proxy Statement without such consent.
2.5.2 NO WITHDRAWAL OR MODIFICATION OF RECOMMENDATION.
Neither the Board of Directors of UXP nor any committee thereof will, except as
expressly permitted by Section 5.6, (i) withdraw, qualify or modify, or propose
publicly to withdraw, qualify or modify, in a manner adverse to Parent or
Mergerco, the approval or recommendation of the Board of Directors or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any transaction involving an Acquisition
Proposal from a party other than Parent or Mergerco (an "Alternative
Transaction"), or (iii) cause UXP to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement related to any
Alternative Transaction.
2.5.3 VOTING BY PARENT. Parent, as the sole shareholder of
Mergerco, hereby consents to the adoption of this Agreement by Mergerco and
agrees that such consent shall be treated for all purposes as a vote duly taken
at a meeting of the shareholders of Mergerco held for this purpose.
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2.6 SURRENDER AND PAYMENT.
2.6.1 EXCHANGE AGENT. Prior to the Effective Time, Parent
shall appoint an agent who shall be reasonably acceptable to UXP (the "Exchange
Agent") for the purpose of exchanging certificates representing shares of UXP
Common Stock ("Certificates") for the payments contemplated in Section 2.2. As
of the Effective Time, Parent shall deposit with the Exchange Agent the Merger
Consideration to be paid in respect of each outstanding share of UXP Common
Stock other than shares owned by Parent, Mergerco or UXP and Dissenting Shares.
Promptly after the Effective Time, Parent will send, or will cause the Exchange
Agent to send, to each holder of shares of UXP Common Stock at the Effective
Time (other than those beneficially owned by Parent, Mergerco or UXP and other
than Dissenting Shares) a letter of transmittal for use in such exchange (which
shall specify that the delivery shall be effected, and risk of loss and title
shall pass, only upon proper delivery of Certificates to the Exchange Agent).
2.6.2 SURRENDER OF CERTIFICATES. As promptly as practicable
after surrender to the Exchange Agent of a Certificate, together with such
letter of transmittal duly executed and completed in accordance with the
instructions thereon, the holder of such Certificate shall be paid in exchange
therefor cash in the amount that the holder of such Certificate is entitled to
receive under Section 2.2 and such Certificate shall be canceled. No interest
shall be paid or accrued in respect of the Merger Consideration. If payment is
to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of Parent or UXP as the surviving
corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 2.6.2, each Certificate (other
than Certificates representing shares held by Parent or Mergerco and Dissenting
Shares) shall represent for all purposes solely the right to receive the Merger
Consideration, without interest.
2.6.3 LIMITATIONS. After the Effective Time, holders of UXP
Common Stock shall cease to be, and shall have no rights as, shareholders of
UXP, and there shall be no transfers of shares of UXP Common Stock on the stock
transfer books of UXP as the surviving corporation. If, after the Effective
Time, Certificates are presented to the Exchange Agent or UXP as the surviving
corporation, they shall be canceled and exchanged for cash as provided in this
Section 2.6, subject to applicable law in the case of Dissenting Shares.
2.6.4 UNCLAIMED FUNDS. Any portion of the funds made
available to the Exchange Agent which remain unclaimed by the shareholders of
UXP on the date 180 days after the Effective Time shall be repaid to the
surviving corporation, upon demand, and any shareholder of UXP who has not
theretofore surrendered a Certificate pursuant to Section 2.6.2 shall thereafter
look only to UXP as a general creditor for payment of the Merger Consideration,
without interest. Any amounts remaining unclaimed by holders of shares of UXP
Common Stock immediately prior to the time when the amounts would otherwise
escheat to or become property of any governmental authority shall become, to the
extent permitted by applicable law, the property of Parent free and clear of any
claims or interest of any person previously entitled thereto.
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2.6.5 WITHHOLDING RIGHTS. Each of the surviving corporation
and Parent shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to Section 2.2, and shall pay to the
appropriate taxing authority, 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. If the surviving corporation or
Parent, as the case may be, so withholds amounts, such amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of UXP Common Stock in respect of which the surviving corporation or
Parent, as the case may be, made such deduction and withholding.
2.6.6 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,
the Exchange Agent 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 Certificate, as contemplated by Section 2.2.
2.7 ▇▇▇▇▇▇▇ MONEY. Upon the execution of this Agreement, Parent
has deposited in an escrow account (the "Escrow Account") at Colorado Business
Bank N.A. (the "Escrow Agent") its promissory note in the principal amount of
$2,000,000, payable on or before October 6, 2003 (the "Escrow Note"). On or
before October 6, 2003, Parent will deposit in the Escrow Account, in
substitution for the Escrow Note, $2,000,000 in cash.
2.8 CLOSING. As soon as reasonably practicable after the
satisfaction or waiver of all of the conditions precedent set forth in Section
6, the closing of the Merger (the "Closing") shall be held at the Denver,
Colorado offices of ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, or at such other place as Parent
and UXP may agree upon (the date upon which the Closing occurs being referred to
as the "Closing Date").
SECTION 3
REPRESENTATIONS AND WARRANTIES OF UXP
In order to induce Parent and Mergerco to enter into this Agreement,
UXP represents and warrants, except as set forth in the Company Filings or as
set forth in the disclosure schedule delivered by UXP to Parent on the date
hereof (the "UXP Disclosure Schedule"), as follows:
3.1 DUE INCORPORATION AND GOOD STANDING. UXP is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Colorado and is duly qualified to do business and is in good standing as a
foreign corporation in the jurisdictions set forth in Section 3.1 of the UXP
Disclosure Schedule, which are all of the jurisdictions where such qualification
is required and where the failure to be qualified would have a Material Adverse
Effect. UXP has the requisite corporate power and authority to own its assets
and carry on its business as presently conducted and to enter into and perform
its obligations under this Agreement.
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3.2 AUTHORIZATION OF TRANSACTION. This Agreement has been duly
authorized, validly executed and delivered by UXP and constitutes the legal,
valid and binding obligation of UXP, enforceable in accordance with its terms,
subject to bankruptcy and other laws affecting creditors' rights generally and
to general principles of equity.
3.3 CHARTER DOCUMENTS. The copies of the Charter Documents of UXP
previously provided to Parent are true and complete and reflect all amendments
through the date hereof.
3.4 NO CONFLICTING AGREEMENTS; CONSENTS. The execution, delivery
and performance by UXP of this Agreement and each of the other agreements or
instruments to be delivered pursuant to this Agreement and the consummation of
the transactions contemplated hereby and thereby do not and will not (whether
with the passage of time, the giving of notice or both) result in (i) a
violation of any law, statute, rule, regulation, order, judgment or decree of
any court or any governmental authority or body having jurisdiction over UXP or
any of its assets; or (ii) a breach of or default under or the acceleration of
any obligation under any material agreement, instrument, lease, contract,
mortgage, deed or license to which UXP is a party or by which UXP or any of its
assets are bound or affected; or (iii) assuming the approval of the shareholders
of UXP as contemplated by Section 2.5, a violation of or a conflict with any
Charter Document of UXP. Except for the approval of the Merger by the
shareholders of UXP as contemplated by Section 2.5, compliance with any
applicable requirements of the Exchange Act, compliance with the rules of the
American Stock Exchange and the filing of articles of merger pursuant to
Colorado law, no notice to, or consent, approval, order or authorization of, or
declaration or filing with, any governmental authority or other Person is
required to be obtained or made by UXP in connection with the execution,
delivery and performance of or the consummation of the transactions contemplated
by this Agreement, except where any of the foregoing, individually or in the
aggregate, does not and would not reasonably be expected (i) to have a Material
Adverse Effect or (ii) to prevent or materially delay the consummation of the
Merger. UXP is subject to no agreement that includes a preferential right in any
Person to purchase any Lease or Well that would be triggered by the execution of
this Agreement or the consummation of the Merger.
3.5 CAPITALIZATION. The authorized capital stock of UXP consists
of 500,000,000 shares of UXP Common Stock, $.0001 par value, of which 18,739,939
shares are issued and outstanding and 139,590 shares are held in treasury as of
the date hereof, and 100,000,000 shares of preferred stock, $.01 par value, of
which (i) 250,000 shares have been designated the 1994 Series A Convertible
Preferred Stock, none of which are issued and outstanding as of the date hereof,
(ii) 104,000 shares have been designated the 1994 Series B Convertible Preferred
Stock, none of which are issued and outstanding as of the date hereof, (iii)
4,000,000 shares have been designated the 1996 Series C Convertible Preferred
Stock, none of which are issued and outstanding as of the date hereof, and (iv)
the remainder are undesignated, none of which are issued and outstanding as of
the date hereof. All of the outstanding UXP Common Stock is duly authorized,
validly issued, fully paid and nonassessable. Section 3.5 of the UXP Disclosure
Schedule reflects all outstanding options, warrants, convertible securities or
other rights to purchase, subscribe for or otherwise acquire any capital stock
of UXP from UXP, including the shares of UXP Common Stock issuable pursuant to
the Directors' Fee Stock Plan as of the date set forth therein. The outstanding
UXP Common Stock was not issued in violation of the preemptive rights of any
Person.
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3.6 SUBSIDIARIES. Except for joint ventures, operating agreements
and similar arrangements set forth in Section 3.6 of the UXP Disclosure
Schedule, UXP does not own, directly or indirectly, any capital stock, any
partnership, equity or other ownership interest in, or any security issued by,
any other corporation, organization, association, entity, business enterprise or
other Person.
3.7 COMPANY FILINGS; PROXY STATEMENT.
3.7.1 COMPANY FILINGS. Since January 1, 2000, UXP has filed
all forms, reports and documents with the SEC required to be filed by it
pursuant to the Securities Act or the Exchange Act (the "Company Filings"), all
of which have complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. None of the Company Filings,
including without limitation any financial statements or schedules included
therein, at the time filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited and unaudited financial statements
of UXP included in the Company Filings (the "Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as stated in such financial statements and except as
permitted by applicable SEC regulations) and fairly present the consolidated
financial position of UXP as of the dates thereof and the results of operations,
cash flows, and changes in shareholders' equity of UXP for the periods presented
therein, subject, in the case of unaudited financial statements, to normal
year-end audit adjustments. UXP has made available to Parent and Mergerco all of
the Company Filings.
3.7.2 PROXY STATEMENT. The Proxy Statement and any
amendments or supplements thereto will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act. At the
time the Proxy Statement or any amendment or supplement thereto is first mailed
to shareholders of UXP, and at the time such shareholders vote on approval and
adoption of this Agreement, Proxy Statement, as supplemented or amended, if
applicable, will 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.
The representations and warranties contained in this 3.7(b) will not apply to
statements or omissions included in the Proxy Statement based upon information
furnished to UXP in writing by Parent specifically for use therein.
3.8 ABSENCE OF CHANGES; OPERATION IN THE ORDINARY COURSE. Since
December 31, 2002, UXP has conducted its business only in the ordinary and usual
course, and there has not occurred any event or change having or reasonably
likely to have a Material Adverse Effect. Since June 30, 2003, UXP has not taken
any other action which, if it had been taken after the date hereof, would have
required the consent of Parent under any of clauses (i) through (ix), (xi),
(xiii) or (xiv) of Section 5.1.2 hereof.
3.9 NO UNDISCLOSED LIABILITIES. Except for liabilities and
obligations (i) disclosed in Section 3.9 of the UXP Disclosure Schedule, (ii)
disclosed in the Company Filings, or (iii) incurred in connection with the
Merger, UXP has no liabilities or obligations of any nature,
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whether accrued, contingent or otherwise, that have, or would be reasonably
likely to have, a Material Adverse Effect.
3.10 TAXES. UXP has furnished correct and complete copies of US
federal income tax returns that have been filed by it for all periods commencing
on or after January 1, 1997. UXP has filed all Tax Returns that it has been
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes that have become due and payable from UXP have been paid,
except for taxes which are payable by third parties for which UXP has not been
billed and for which appropriate reserves or accruals have been made on the
Financial Statements. UXP is not currently the beneficiary of any extension of
time within which to file any Tax Return. UXP has not received notice from an
authority in any jurisdiction where it does not file Tax Returns that it may be
subject to taxation by that jurisdiction. UXP has withheld and paid all Taxes
required to have been withheld and paid in connection with material amounts paid
or owing to any employee, independent contractor, creditor, shareholder or other
third party. There is no dispute, audit, investigation, proceeding or claim
concerning any liability with respect to Taxes of UXP either (i) claimed or
raised by any government authority in writing or (ii) as to which UXP has
Knowledge based upon contact with any agent of such authority. UXP has not
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency. UXP has not been a
member of an affiliated group filing a consolidated federal Income Tax Return
(or any other consolidated, combined or unitary Income Tax Return), except as
the common parent entity of such group. UXP has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will be
non-deductible under Code section 162, 280G or 404. There has been no change in
the accounting methods of UXP with respect to which any amounts are reportable
under Code Section 481. UXP has not entered into any transaction that is being
accounted for as an installment sale under Code Section 453. UXP is not a party
to any tax sharing agreements. Prior to the Effective Time, none of UXP's net
operating losses are subject to limitations under Code Section 382 or to
separate return year limitations, aside from any limitations arising as a result
of the Merger. Neither UXP nor any property of UXP is part of an arrangement
that constitutes a partnership for purposes of Subchapter K of Chapter 1 of
Subtitle A of the Code ("Subchapter K"), unless an effective election has been
made to exclude such arrangement from the application of Subchapter K.
3.11 PROPERTIES.
3.11.1 TITLE. Section 3.11.1 of the UXP Disclosure Schedule
sets forth a brief description of all Leases and ▇▇▇▇▇ in which UXP owns an
interest and specifies UXP's interests in the Leases and ▇▇▇▇▇. UXP has good and
Defensible Title to its interests in the Leases and ▇▇▇▇▇ forming the basis for
the proved reserves to which value is assigned in the Reserve Report that are
attributable to such interests and to all other assets, real and personal,
reflected in the most recent balance sheet in the Company Filings filed prior to
the date of this Agreement as owned by UXP, other than equipment sold or
otherwise disposed of (and replaced if necessary) in the ordinary course of
business and oil, gas and other liquid products produced from the ▇▇▇▇▇ in the
ordinary course of business, in each case since the date of such balance sheet.
UXP has met all of its commitments under the Exploration Agreement with Union
Pacific Resources Company ("UPRC") dated April 9, 1998, as amended (the
"Exploration Agreement"), during the initial term and the first three option
terms thereof and has validly elected to extend that agreement pursuant to its
terms for a fourth option term ending November 30, 2003. UXP has completed
drilling all of the required commitment ▇▇▇▇▇ under the Exploration Agreement to
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extend the Exploration Agreement to the fifth option term. UXP has the right to
earn interests in the acreage covered by the Exploration Agreement, (i) to the
extent that UPRC has interests in such acreage and (ii) subject to the terms and
conditions of the Exploration Agreement. The locations to which proved
undeveloped reserves are assigned in the Reserve Report that are covered by the
Exploration Agreement and for which UXP does not currently have a Lease are
available to be earned pursuant to the Exploration Agreement, and the interests
in such locations forming the basis for such proved undeveloped reserves are the
interests that UXP has the right to earn under the Exploration Agreement;
provided, however, that UXP makes no representation or warranty as to UPRC's
title to or interest in any such location.
3.11.2 STATUS OF LEASES. All Leases, which Leases are set
forth in Section 3.11.1 of the UXP Disclosure Schedule, are in full force and
effect, are valid and enforceable and grant the rights purported to be granted
thereby. No material amount of the royalties, rentals and other payments due
under the Leases is past due. UXP has not been notified in writing and has no
Knowledge of a material breach or default by it under any Lease, which claim of
breach or default has not been resolved. To the Knowledge of UXP, no event has
occurred or failed to occur which constitutes, or which, with the giving of
notice or the passage of time or both, would constitute, a default, violation or
breach under any material Lease.
3.11.3 CALLS ON PRODUCTION; TAKE-OR-PAY DELIVERIES. Except
as set forth in Section 3.11.3 of the UXP Disclosure Schedule, there are no
calls on UXP's oil or gas production and UXP has no obligation to deliver oil or
gas pursuant to any take-or-pay, prepayment or similar arrangement without
receiving full payment therefor.
3.11.4 GAS IMBALANCES. Section 3.11.4 of the UXP Disclosure
Schedule sets forth UXP's imbalances in gas production as provided to it by the
operators of the ▇▇▇▇▇ to which the imbalances relate as of the dates set forth
therein. UXP does not have any other imbalances in gas production that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
3.11.5 HEDGING. UXP is not a party to or bound by any
future, hedge, swap, collar, put, call, floor, cap, option or other contract
intended to benefit from, relate to or reduce or eliminate the risk of
fluctuations in the price of hydrocarbons as of the date hereof other than the
Bank of Oklahoma Hedge.
3.12 INTELLECTUAL PROPERTY. UXP does not own any patents, patent
applications, trademarks or trademark applications or copyrights or copyright
applications. The computer software listed in Section 3.12 of the UXP Disclosure
Schedule is licensed by UXP. All other computer software used in the conduct of
UXP's business is owned or licensed by ▇▇▇▇▇▇ Mineral Group, Inc. and is made
available to UXP under the Cost and Expense Sharing Agreement. No person or
entity has notified UXP that its use of any Intellectual Property infringes on
the rights of any person or entity. No claims are pending or, to UXP's
Knowledge, threatened that it is infringing upon the rights of any person or
entity with regard to any intellectual property.
15
3.13 PLANS.
3.13.1 IDENTIFICATION. All material plans, agreements,
policies and arrangements, whether or not reduced to writing, to which UXP
contributes or is obligated to contribute, or under which UXP has or may have
any liability for premiums or benefits, and which benefit any active, former or
retired employee, outside director, consultant or other independent contractor
who provides or provided services to or for the benefit of UXP, are listed in
Section 3.13 of the UXP Disclosure Schedule (the "Plans"). UXP has delivered to
Parent a true and complete copy of the most recent plan document for each of the
Plans, the most recent determination letters issued by the Internal Revenue
Service with respect to the Plans and the most recent Form 5500s for the Plans.
3.13.2 ERISA; CODE. No circumstance exists and no event has
occurred with respect to any Plan maintained or formerly maintained by UXP, or
to which UXP is or has been required to contribute, that would subject UXP to
material liability, or its assets to any material lien, under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the Code, nor
will the transactions contemplated by this Agreement give rise to any such
liability or lien.
3.13.3 CODE SECTION 401(a). Each Plan that is required or
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified during the period since its adoption.
3.13.4 TITLE IV OF ERISA. No Plan currently or previously
maintained or contributed to by UXP is covered by Title IV of ERISA or subject
to the minimum funding standards of ERISA Section 302.
3.13.5 RETIREE OBLIGATIONS. Except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), UXP has no
obligations for retiree health or life insurance benefits under any Plan.
3.14 LABOR RELATIONS. There is no claim, including any claim
relating to unlawful discrimination or sexual harassment, pending or, to the
Knowledge of UXP, threatened against UXP by any current or former employee. UXP
is not a party to any collective bargaining agreement or other labor union
contract applicable to individuals employed by UXP, nor, to the Knowledge of
UXP, are there any activities or proceedings of any labor union to organize any
such employees.
3.15 LICENSES, ETC. UXP has all material governmental and
regulatory licenses and permits necessary for the conduct of its business as
presently conducted or the ownership of its assets. UXP has not received any
written notice and has no Knowledge that any proceeding or investigation is
pending or threatened that would have the effect of revoking or limiting any
licenses, authorizations, orders, approvals, or permits, nor to the Knowledge of
UXP do reasonable grounds for any of the foregoing exist.
3.16 COMPLIANCE WITH LAWS. Except with respect to Environmental
Laws, UXP and, to the Knowledge of UXP, its officers and employees acting in
their roles as such:
(i) are in compliance in all material respects with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees
16
applicable to UXP or to the employees conducting the business of UXP, including,
without limitation, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002;
(ii) have received, since January 1, 2000, no written
notice and have no Knowledge of an assertion by any governmental authority that
UXP is not in compliance with any of the statutes, regulations, or ordinances
that such governmental authority enforces that has not been fully resolved
without continuing liability to UXP; and
(iii) since January 1, 2000, have filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that were required to be filed under any applicable law,
regulation or rule, with any applicable governmental authority, which reports,
registration statements and amendments, as of their respective dates, complied
in all material respects with the applicable statutes, rules, regulations and
orders enforced or promulgated by the regulatory authority with which they were
filed.
3.17 ENVIRONMENTAL MATTERS.
3.17.1 CONDITION OF PROPERTIES. There is no condition
existing on any real property or other asset owned, leased or operated by UXP or
resulting from operations conducted by UXP (or, to UXP's Knowledge, any other
Person) thereon that would reasonably be expected to give rise to any liability
to UXP under Environmental Laws or constitute a violation of any Environmental
Laws, and UXP is otherwise in compliance in all material respects with all
applicable Environmental Laws.
3.17.2 ENVIRONMENTAL LITIGATION. Neither UXP, any real
property or other asset owned, leased or operated by UXP, nor the operations
conducted thereon or in relation thereto by UXP nor, to the Knowledge of UXP,
any former real property or other assets owned, leased or operated by UXP, are
subject to any pending or, to the Knowledge of UXP, threatened action, suit,
investigation, inquiry or proceeding relating to any Environmental Laws by or
before any court or other governmental authority.
3.17.3 ENVIRONMENTAL PERMITS. All material permits, notices
and authorizations, if any, required to be obtained or filed by UXP in
connection with the operation or use of any real property or other asset owned,
leased or operated by UXP, including without limitation, past or present
treatment, storage, disposal, handling, or release of a Hazardous Substance or
solid waste into the environment, have been duly obtained or filed, and UXP is
in compliance in all material respects with the terms and conditions of all such
permits, notices and authorizations.
3.17.4 HAZARDOUS SUBSTANCES. Hazardous Substances have not
been released, disposed of or arranged to be disposed of by UXP, in a manner or
to a location that would reasonably be expected to give rise to liability under,
any Environmental Laws.
3.17.5 ASSUMED ENVIRONMENTAL LIABILITIES. UXP has not
assumed, contractually or, to the Knowledge of UXP, by operation of law, any
liabilities or obligations of third parties under any Environmental Laws, except
in connection with the acquisition of assets or entities associated therewith.
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3.17.6 ENVIRONMENTAL INDEMNIFICATION. Except with respect to
joint operating agreements, UXP is not subject to any environmental
indemnification obligation regarding businesses currently or formerly owned or
operated by UXP or regarding properties currently or formerly owned or leased by
UXP.
3.17.7 ENVIRONMENTAL ASSESSMENTS. UXP has made available to
Parent all material site assessments, compliance audits, and other similar
studies in its possession, custody or control relating to (i) the environmental
conditions on, under or about the properties or assets currently or formerly
owned, leased, operated or used by UXP, or any predecessor in interest thereto
and (ii) any Hazardous Substances used, managed, handled, transported, treated,
generated, stored, discharged, emitted, or otherwise released by UXP or any
other Person on, under, about or from any of the properties or assets currently
or formerly owned or leased by, or otherwise in connection with the use or
operation of any of the properties or assets owned or leased by, UXP;
3.17.8 NOTICES. UXP has not received any written notice, and
has no Knowledge of any other communication, whether from a governmental
authority, citizen's group, employee or otherwise, alleging that it is liable
under or not in compliance with any Environmental Law.
3.18 LITIGATION. There is no litigation, suit, action, proceeding
or investigation pending or, to the Knowledge of UXP, threatened against UXP.
3.19 MATERIAL CONTRACTS. Section 3.19 of the UXP Disclosure
Schedule sets forth a true and complete list of all material agreements to which
UXP is a party (the "Material Contracts"). The term Material Contracts does not
include the Leases. Without limiting the generality of the foregoing, the
Material Contracts include, and Section 3.19 of the UXP Disclosure Schedule
specifically identifies: (i) all agreements relating to indebtedness for
borrowed money, all leases capitalized for financial reporting purposes and all
agreements relating to an obligation to pay the deferred purchase price of goods
or services, other than trade payables arising in the ordinary course of
business, (ii) all leases of real property (other than the Leases) and each
lease of personal property requiring payments by the Company in excess of $5,000
per year (other than capitalized leases); (iii) all agreements requiring capital
expenditures in excess of $50,000 individually; (iv) any non-competition
agreements or any other agreements or obligations which purport to limit in any
material respect the manner in which, or the localities in which, all or any
substantial portion of the business of UXP is conducted; (v) all operating
agreements under which UXP is the operator or which are applicable to ▇▇▇▇▇ in
which the value of UXP's interest exceeds $50,000, based on the discounted
present value of estimated future net revenues therefrom as specified in the
Reserve Report; and (vi) any agreement with any officer, director, or beneficial
owner of five percent or more of the outstanding voting securities of UXP or any
Affiliate of any such officer, director or beneficial owner. All Material
Contracts are valid and in full force and effect on the date hereof. UXP has not
committed or failed to perform any act which, with or without notice, lapse of
time or both, constitutes or would constitute a material default under the
provisions of any Material Contract.
3.20 ACCOUNTING CONTROLS. UXP has devised and maintained systems of
internal accounting controls sufficient to provide reasonable assurances, in the
judgment of UXP Board of Directors, that (1) all material transactions are
executed in accordance with management's
18
general or specific authorization; (2) all material transactions are recorded as
necessary to permit the preparation of financial statements in conformity with
generally accepted accounting principals consistently applied with respect to
any criteria applicable to such statements, (3) access to the material property
and assets of UXP is permitted only in accordance with management's general or
specific authorization; and (4) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
3.21 RESERVE REPORT. UXP has delivered to Parent a copy of the oil
and gas reserve report for UXP dated June 11, 2003, prepared by Netherland,
▇▇▇▇▇▇ & Associates, Inc. as of April 1, 2003 (the "Reserve Report"). UXP has no
Knowledge of any facts that would make the factual, noninterpretive information
provided by UXP to Netherland, ▇▇▇▇▇▇ & Associates, Inc. on which the estimates
of proved reserves and future net cash flows from proved reserves in the Reserve
Report were based (in each case, to the extent that value was assigned to such
proved reserves in the Reserve Report), inaccurate in any material respect at
the time provided. OTHER THAN AS EXPRESSLY SET FORTH IN THIS SECTION 3.21, UXP
MAKES NO REPRESENTATION OR WARRANTY, AND HEREBY DISCLAIMS ANY REPRESENTATION OR
WARRANTY, THAT THE RESERVE 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 COMPLETE, ACCURATE OR NOT
MISLEADING, SUCH ESTIMATES BEING PREDICTIONS AS TO FUTURE EVENTS WHICH ARE
INHERENTLY SUBJECT TO INCOMPLETENESS, INACCURACY AND UNCERTAINTY.
3.22 CERTAIN AGREEMENTS. Except as contemplated by Section 2.4,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any of UXP's employees, officers or directors under any Plan, agreement or
otherwise, other than payments of the Merger Consideration, (ii) increase any
benefits otherwise payable to any of its employees, officers or directors under
any Plan or agreement, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
3.23 BROKERS, FINDERS, ETC. Except for the fees and expenses paid
and payable to McDonald Investments, Inc. under the engagement agreement
previously provided to Parent, the consummation of the transactions contemplated
hereby will not, as a result of any action taken by or on behalf of UXP, give
rise to any valid claim against UXP, Parent or Mergerco for any brokerage or
finder's commission, fee or similar compensation.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
In order to induce UXP to enter into this Agreement, Parent and
Mergerco jointly and severally represent and warrant as follows:
4.1 DUE INCORPORATION AND GOOD STANDING. Parent and Mergerco are
corporations duly incorporated, validly existing and in good standing under the
laws of the State of Delaware
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and Colorado, respectively. Each of Parent and Mergerco has the requisite
corporate power and authority to own its assets and carry on its business as
presently conducted and to enter into and perform its obligations under this
Agreement.
4.2 AUTHORIZATION OF TRANSACTION. This Agreement has been duly
authorized, validly executed and delivered by Parent and Mergerco and
constitutes the legal, valid and binding obligation of Parent and Mergerco,
enforceable in accordance with its terms, subject to bankruptcy and other laws
affecting creditors rights' generally and to general principles of equity.
4.3 NO CONFLICTING AGREEMENTS; CONSENTS. The execution, delivery
and performance by each of Parent and Mergerco of this Agreement and each of the
other agreements or instruments to be delivered pursuant to this Agreement and
the consummation of the transactions contemplated hereby and thereby do not and
will not (whether with the passage of time, the giving of notice or both) result
in (i) a violation of any law, statute, rule, regulation, order, judgment or
decree of any court or any governmental agency or body having jurisdiction over
Parent or Mergerco or any of their assets, (ii) a breach of or default under or
the acceleration of any obligation under any material agreement, instrument,
lease, contract, mortgage, deed or license to which Parent or Mergerco is a
party or by which Parent or Mergerco or any of their assets are bound or
affected, or (iii) a violation of or a conflict with their respective Charter
Documents. Except for compliance with applicable requirements of the Exchange
Act and the filing of articles of merger pursuant to Colorado law, no notice to,
or consent, approval, order or authorization of, or declaration or filing with,
any governmental authority or other Person is required to be obtained or made by
Parent or Mergerco in connection with the execution, delivery and performance of
or the consummation of the transactions contemplated by this Agreement.
4.4 SOLVENCY. Based on the assumption that UXP's representations
and warranties in this Agreement are true and correct in all material respects
on the date hereof and will be true and correct in all material respects at the
Closing, at the Effective Time and after giving effect to the Merger, the
financing for the Merger, and the use of the proceeds from such financing: (i)
the fair value and present fair saleable value of UXP's assets would exceed its
stated liabilities (including identified contingent liabilities), (ii) UXP
should be able to pay its debts as they become absolute and mature and (iii) the
capital remaining in UXP should not be unreasonably small capital for the
business in which UXP is engaged, as management of UXP has indicated that such
business is now conducted and as management of Parent has indicated that such
business is proposed to be conducted following the consummation of the Merger.
4.5 NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Mergerco has not incurred any obligations or liabilities, engaged in any
business or activities or entered into any agreements or arrangements with any
Person.
4.6 FINANCING. Parent has written commitments (subject to certain
conditions set forth in such commitments) to obtain sufficient funds to
consummate the transactions contemplated by this Agreement. Parent has
previously provided UXP with copies of signed
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financing commitments for the full amount payable in the Merger. Parent shall
keep UXP fully informed with respect to the status and details of such financing
and shall give UXP prompt notice of any adverse change with respect to such
financing.
4.7 INDEPENDENT EVALUATION. Parent and Mergerco are experienced
and knowledgeable in the oil and gas business and are aware of its risks. Parent
and Mergerco have been afforded the opportunity to examine materials made
available by UXP with respect to UXP (the "Background Materials"). The
Background Materials include files, or copies thereof, that UXP has used in its
normal course of business and other information about UXP that UXP has compiled
or generated; however, Parent and Mergerco acknowledge and agree that, except
for the representations and warranties of UXP contained in this Agreement,
neither UXP nor any other person has made any representations or warranties,
express or implied, written or oral, as to the accuracy or completeness of the
Background Materials or as to any other information relating to UXP furnished to
Parent or Mergerco or their representatives by or on behalf of UXP. In entering
into this Agreement, Parent and Mergerco acknowledge and affirm that each has
relied and will rely solely on the terms of this Agreement, the UXP Disclosure
Schedule, and upon its independent analysis, evaluation and investigation of,
and judgment with respect to, the business, economic, legal, tax or other
consequences of this transaction.
4.8 BROKERS, FINDERS, ETC. Except for the fees and expenses paid
and payable to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., the consummation of the transactions
contemplated hereby will not, as a result of any action taken by or on behalf of
Parent or Mergerco, give rise to any valid claim against UXP, Parent or Mergerco
for any brokerage or finder's commission, fee or similar compensation.
SECTION 5
CERTAIN COVENANTS
5.1 CONDUCT OF BUSINESS PENDING THE CLOSING DATE.
5.1.1 CONSULTATION. From the date of this Agreement to the
Effective Time, UXP shall keep Parent advised on a reasonably current basis of
developments in the operation of UXP's business and shall consult with Parent in
advance with respect to all material decisions and expenditures during that
period, to the extent reasonably practicable in the circumstances.
5.1.2 ORDINARY COURSE OF BUSINESS. Except as contemplated
by this Agreement or as disclosed in Section 5.1.2 of the UXP Disclosure
Schedule, during the period from the date of this Agreement until the Effective
Time, UXP shall in all material respects conduct its operations according to its
ordinary and usual course of business and consistent with past practice, and UXP
shall use commercially reasonable efforts to preserve intact in all material
respects the business organization of UXP, keep available the services of its
current officers and key employees, and preserve in all material respects the
good will of those having advantageous business relationships with it; provided
that UXP shall not be required to make any payments or enter into or amend any
contractual arrangements or understandings to satisfy the foregoing obligations.
Without limiting the generality of the foregoing, and except as contemplated by
this Agreement or as disclosed in Section 5.1.2 of the UXP Disclosure Schedule,
prior to the Effective Time, UXP will not, without the prior written consent of
Parent:
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(i) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of, additional shares of its capital stock or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities, including pursuant
to the Directors Fee Stock Plan, other than shares of UXP Common Stock issuable
pursuant to currently outstanding options or other rights disclosed in Section
3.5 of the UXP Disclosure Schedule;
(ii) purchase or otherwise acquire, or propose to purchase
or otherwise acquire, any of its outstanding securities;
(iii) declare or pay any dividend or distribution on the
UXP Common Stock;
(iv) except pursuant to agreements or arrangements in
effect on the date hereof and disclosed in Section 3.19 of the UXP Disclosure
Schedule, purchase or otherwise acquire any property or asset or group of
related properties and assets with a cost in excess of $50,000, in one
transaction or a series of related transactions;
(v) except pursuant to agreements or arrangements in
effect on the date hereof and disclosed in Section 3.19 of the UXP Disclosure
Schedule, sell or otherwise dispose of or encumber (other than Permitted
Encumbrances) any property or asset or group of related properties and assets
with a price in excess of $50,000 in one transaction or a series of related
transactions;
(vi) subject to the rights of the shareholders of UXP
under applicable law, adopt any amendments to the Charter Documents of UXP;
(vii) (a) increase the compensation of any of its
directors, officers or key employees, (b) pay or agree to pay any pension,
retirement allowance or other employee benefit to any director, officer or key
employee which is not required or permitted by any existing plan, agreement or
arrangement disclosed in Section 3.13 or 3.19 of the UXP Disclosure Schedule,
(c) commit itself to any additional pension, employment, severance,
profit-sharing, bonus, extra compensation, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, or to any employment or consulting agreement with or for the
benefit of any director, officer or key employee, whether past or present,
except for insurance policy renewals in the ordinary course or (d) except as
required by applicable law or as disclosed in Section 5.1.2 of the UXP
Disclosure Schedule, amend any such plan, agreement or arrangement;
(viii) except in the ordinary course of business and
consistent with past practice, (a) except for borrowings on its credit line with
Bank of Oklahoma, N.A. (not to exceed $2.5 million at any time outstanding after
the date of this Agreement, excluding any outstanding amounts relating to the
Bank of Oklahoma Hedge and any outstanding amounts resulting from the payment of
amounts due McDonald Investments, Inc. under the engagement agreement described
in Section 3.23.), incur any amount of indebtedness for borrowed money or issue
any amount of debt securities or assume, guarantee or endorse the obligations of
any other person, other than endorsements of negotiable instruments in the
ordinary course of business, or (b) make any loans, advances or capital
contributions to, or investments in, any other person (other
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than customary loans or advances to employees in amounts of less than $500 in
the aggregate that are in compliance with the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and the
regulations promulgated thereunder);
(ix) implement or adopt any change in the accounting
principles, practices or methods used by UXP, other than as may be required by
generally accepted accounting principles, the Exchange Act or other applicable
law or regulation;
(x) except pursuant to contracts disclosed in Section
3.19 of the UXP Disclosure Schedule that renew automatically, enter into, amend,
renew or terminate any Material Contract;
(xi) settle any claim, action or proceeding, except for
any claim, action or proceeding involving solely money damages which was settled
for an amount, individually or in the aggregate for all such settlements, not
more than $50,000 and which would not reasonably be expected to establish an
adverse precedent or reasonable basis for subsequent settlements or require any
change in material business practices;
(xii) cause any insurance policy naming it as a
beneficiary, loss-payable payee or additional insured to be cancelled or
terminated, other than expirations of policies in accordance with their terms;
(xiii) make any election with respect to Taxes; provided
that UXP shall elect to capitalize intangible drilling costs under Section 59(e)
of the Code for 2002;
(xiv) make any payment of cash or other consideration to,
or make any loan (other than customary advances to employees for expenses) to or
on behalf of, or enter into, amend or grant a consent or waiver under, or fail
to enforce, any contract with, any person (or family member of such person) (1)
that directly or indirectly, controls, or is under common control with, UXP or
any of its Affiliates; (2) that serves as a director, officer, employee,
partner, member, executor, or trustee of UXP or any of its Affiliates; (3) that
has, or is a member of a group having, direct or indirect beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least five percent of the outstanding voting
power or equity securities or other equity interests representing at least five
percent of the outstanding equity interests in UXP or any of its Affiliates; or
(4) in which any person (or family member of such person) that falls under (1),
(2) or (3) above directly or indirectly holds a material interest or serves as a
director, officer, employee, partner, member, executor, or trustee (or in any
other similar capacity);
(xv) make any capital expenditures in excess of $50,000 in
the aggregate or enter into any agreement contemplating capital expenditures in
excess of $50,000; or
(xvi) agree or commit to do, or enter into any contract
regarding, anything that would be precluded by clauses (i) through (xv).
Upon receiving any request for a consent under this Section 5.1.2, Parent will
promptly consider the request and discuss it with UXP's officers and will advise
UXP whether or not Parent consents to the proposed action within a reasonable
time, taking into account the nature and
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urgency of the proposed action. Parent shall not unreasonably withhold any
requested consent, taking into account not only the interests of UXP, but also
the effect of the proposed action or omission on Parent's financing commitments
described in Section 4.6 or on its proposed operation of UXP following the
Effective Time. All requests for such a consent shall be addressed to and
considered by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the President of Parent. Failure of Parent to
respond to a written request for consent within five Business Days of receipt,
or sooner if UXP is contractually obligated to respond in a shorter period of
time and notifies Parent of such shorter period at the time of the request,
shall be deemed consent.
5.1.3 PLANNED OPERATIONS. Section 5.1.3 of the UXP
Disclosure Schedule summarizes the planned drilling operations of UXP during the
period between the date of this Agreement and the Effective Time based on the
currently anticipated timing of the Merger. For all purposes of this Agreement,
Parent shall be deemed to have consented to those operations and to all
expenditures, purchases and agreements made or entered into by UXP in the
ordinary course of business in connection with such operations.
5.2 ACCESS TO INFORMATION. UXP shall afford Parent, its
accountants, counsel and other representatives reasonable access during
reasonable business hours prior to the Closing Date to (i) all of UXP's
financial statements, properties, books, contracts, commitments and records, and
(ii) all other information concerning the business or the assets of UXP as
Parent may reasonably request. Information obtained by Parent pursuant to this
Section 5.2 shall be subject to the provisions of the confidentiality agreement
between UXP and Parent dated September 22, 2003 (the "Confidentiality
Agreement"), which agreement remains in full force and effect except insofar as
such provisions would expressly prohibit Parent from taking any of the actions
contemplated by this Agreement. No investigation by Parent of the business and
affairs of UXP shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Agreement.
5.3 CONSENTS. UXP will use reasonable commercial efforts to, and
Parent and Mergerco will each cooperate in good faith with UXP to, obtain the
consents, authorizations, approvals or notices listed in Section 3.4 of the UXP
Disclosure Schedule. Without limiting the generality of the foregoing, Parent
agrees upon the reasonable request of UXP to provide financial and other
information to any person from whom a consent is required.
5.4 ANNOUNCEMENTS. Promptly following the execution of this
Agreement, UXP and Parent shall issue a joint press release announcing the
transactions contemplated hereby, which shall be reasonably acceptable to UXP
and Parent. Following that release and prior to the consummation of the Merger,
except as required by law or the rules or listing agreement of the American
Stock Exchange, UXP, Parent and Mergerco will not, with respect to the
transactions contemplated hereby, issue any press release or make any public
statements or mail any communications or, with respect to UXP, letters to its
shareholders generally, except with the prior approval of the other party or as
otherwise permitted by this Agreement. With respect to any communication
believed to be required by law or the rules or listing agreement of the American
Stock Exchange, the party making such communication agrees to use its best
efforts to provide a copy of the text of such communication to the other party
prior to its release and to afford the other party a reasonable opportunity to
comment thereon.
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5.5 RISK MANAGEMENT. On the date of this Agreement, at the request
of Parent, UXP has entered into the hedging arrangements with Bank of Oklahoma,
N.A. described in Section 5.5 of the UXP Disclosure Schedule (the "Bank of
Oklahoma Hedge"). During the period from the date of this Agreement until the
Effective Time, UXP shall not enter into any commitment or agreement to hedge
interest rates or commodity prices other than the Bank of Oklahoma Hedge, and
shall not amend or modify the Bank of Oklahoma Hedge, without the advance
written consent of Parent; provided, however, that if the Board of Directors of
UXP determines, by a majority vote of its members, after taking into account the
possible effects of such determination on the transactions contemplated by this
Agreement, that it is obligated by its fiduciary duties to cause UXP to enter
into another hedge or to amend or modify the Bank of Oklahoma Hedge, and Parent
has refused to consent to such hedge, amendment or modification in its sole
discretion, then UXP may enter into such other hedge or amend or modify the Bank
of Oklahoma Hedge (a "Risk Management Decision").
5.6 NO SOLICITATION; SUBSEQUENT DETERMINATION. From the date
hereof until the Closing or the termination hereof, UXP shall not, and shall
cause its officers, directors, employees, representatives or other agents of UXP
not to, directly or indirectly, (i) take any action to solicit, initiate or
encourage any Acquisition Proposal or inquiry or proposal with respect thereto,
(ii) engage in negotiations or discussions concerning any Acquisition Proposal
with, or provide or disclose any nonpublic information relating to UXP or afford
access to the properties, books or records of UXP to, any Person that may be
considering making, or has made, an Acquisition Proposal, (iii) grant any waiver
or release under any standstill or similar agreement with respect to any class
of equity securities of UXP or (iv) enter into any agreement with respect to an
Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent UXP or the Board of Directors of UXP at any time prior
to the consummation of the Merger from:
(i) furnishing nonpublic information to, or affording
access to the properties, books or records of UXP to, or entering into
negotiations with, any Person who has made a bona fide, unsolicited, written
Acquisition Proposal received after the date hereof, if (a) UXP has notified
Parent of the Acquisition Proposal as provided below, (b) UXP's Board of
Directors determines in good faith that, based on the information then available
to it, such Acquisition Proposal is or may be a Superior Proposal; (c) UXP's
Board of Directors concludes in good faith that providing such information or
engaging in such discussions or negotiations is required in order to discharge
the directors' fiduciary duties to UXP and its shareholders in accordance with
Colorado law; and (d) prior to furnishing any such nonpublic information to, or
entering into discussions or negotiations with, such Person, UXP's Board of
Directors receives from such Person an executed confidentiality agreement with
substantially the same terms as the Confidentiality Agreement;
(ii) making any disclosure to its shareholders if, in the
good faith judgment of the UXP Board of Directors, failure so to disclose would
be inconsistent with its obligations under applicable law;
(iii) if a bona fide, unsolicited, written Acquisition
Proposal is received, informing the shareholders of UXP that it no longer
believes that the Merger is advisable and no longer recommends approval of the
Merger (a "Subsequent Determination"), or approving or
25
recommending an Alternative Transaction based on that unsolicited Acquisition
Proposal if (a) such Acquisition Proposal is a Superior Proposal; and (b) UXP's
Board of Directors concludes in good faith that such action is necessary to
comply with its fiduciary duties to UXP and its shareholders in accordance with
Colorado law.
Notwithstanding anything in the forgoing to the contrary, any determination
required to be made by UXP's Board of Directors in clauses (i) - (iii) shall be
made (A) by a majority vote and (B) if such determination is with regard to the
directors' duties under Colorado law, after considering the advice of outside
legal counsel to UXP.
UXP will promptly (within 24 hours) notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to UXP or
for access to the properties, books or records of UXP by any Person that has
made an Acquisition Proposal and will keep Parent fully informed of the status
and details of any such Acquisition Proposal, indication or request. Such
written notice shall specify the material terms and conditions of the
Acquisition Proposal, identify the Person making the Acquisition Proposal and
state whether the Board of Directors of UXP intends to make, or is considering
making, a Subsequent Determination. Notwithstanding any other provision of this
Agreement, before reaching a final determination that an Acquisition Proposal is
a Superior Proposal or taking any action with respect to an Acquisition Proposal
under clause (iii) above or under Section 7.1.4(ii), UXP shall give Parent at
least three business days to respond to the Acquisition Proposal after notifying
Parent that, in the absence of any further action by Parent, UXP's Board of
Directors would consider such Acquisition Proposal to be a Superior Proposal.
During such three-business-day period, UXP shall provide Parent the opportunity
to propose adjustments to the terms and conditions of this Agreement and the
final determination by UXP's Board of Directors as to whether such Acquisition
Proposal is a Superior Proposal shall take such proposed adjustments into
account.
UXP also agrees immediately to cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any parties other than the Parent, with respect to any of the foregoing. UXP
will use its reasonable efforts to cause any persons (and their agents and/or
advisors) in possession of any UXP confidential information provided with
respect to any Acquisition Proposal to return or destroy all such information.
Nothing contained in this Section 5.6 or any other provision of this Agreement
will prohibit UXP or the UXP Board of Directors from notifying any third party
that contacts UXP on an unsolicited basis after the date hereof concerning an
Acquisition Proposal of UXP's obligations under this Section 5.6.
5.7 INDEMNIFICATION AND INSURANCE.
5.7.1 INDEMNIFICATION. After the Effective Time, UXP and
Parent shall indemnify and hold harmless each present and former employee,
agent, director or officer of UXP (the "Indemnified Persons") from and against
any and all claims arising out of or in connection with activities in such
capacity, or on behalf of, or at the request of, UXP, to the fullest extent
permitted under Colorado law and in addition, to the fullest extent provided in
UXP's Charter Documents or any contract or other arrangement in effect at the
date hereof, which obligations shall survive the Merger. Without limiting the
foregoing, UXP shall advance expenses incurred with respect to the foregoing, as
they are incurred, to the fullest extent
26
permitted under applicable law, provided that the person on whose behalf the
expenses are advanced undertakes in writing (which need not be secured) to repay
such advances if it is ultimately determined that such person is not entitled to
indemnification. Parent agrees that, following the Effective Time, all
provisions of its Charter Documents and any related policies and procedures
relating to the indemnification of its current and former employees, agents,
directors an officers shall extend and apply to the persons who are or were
employees, agents, directors or officers of UXP at or before the Effective Time.
Any determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the Colorado
Business Corporation Act or the Charter Documents shall initially be made by
independent counsel reasonably acceptable to both the Indemnified Party and UXP,
subject to the right of either party to seek a judicial determination of that or
any other matter relating to an Indemnified Person's right to indemnification.
5.7.2 PROCEDURE. Any Indemnified Person wishing to claim
indemnification under Section 5.7.1, upon learning of any claim, action, suit,
proceeding or investigation described above, shall promptly notify UXP thereof.
In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), UXP shall have the right
to assume the defense thereof and, following written notice of such assumption
to the Indemnified Person, neither Parent nor UXP shall be liable to such
Indemnified Person for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Person in connection with the defense
thereof; provided that, if the defense of an Indemnified Person by UXP is
reasonably likely to present a conflict of interest for counsel retained by UXP,
the Indemnified Person shall be entitled to defend using counsel reasonably
satisfactory to UXP and UXP shall be responsible for the costs of defense
incurred by the Indemnified Person. The Indemnified Person will cooperate in the
defense of any such matter and UXP shall not be liable for any settlement
effected without its prior written consent. UXP shall not have any obligation
hereunder to any Indemnified Person when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, that the indemnification of such Indemnified
Person in the manner contemplated hereby is prohibited by applicable law.
5.7.3 INSURANCE. At the Effective Time, UXP as the
surviving corporation shall, and Parent shall cause UXP as the surviving
corporation to, purchase and pay for in full "tail" coverage covering a period
of three years after the Effective Time under UXP's current directors' and
officers' liability insurance policy, provided that the cost of the tail
coverage shall not exceed 175% of the annual premium for the current policy.
5.8 PERFORMANCE BY MERGERCO. Parent shall cause Mergerco to
perform all of Mergerco's obligations under this Agreement.
5.9 EMPLOYEE MATTERS.
5.9.1 EMPLOYMENT; COVERAGE.
(i) UXP will terminate all of its employees as of the
Effective Time. Immediately after the Effective Time, UXP as the surviving
corporation, in its sole discretion, may offer to hire any of UXP's former
employees.
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(ii) With respect to each individual who is employed by
UXP immediately after the Effective Time, Parent shall permit such individual to
participate in an employee welfare plan sponsored by Parent or any affiliate of
parent (a "Parent Plan") which provides substantially similar benefits as prior
to the Effective Time, on the same terms and to the same extent as similarly
situated employees of Parent; provided, that such employee shall (x) not be
subject to any preexisting condition provision or waiting period under any
Parent Plan which provides medical, dental, vision or prescription drug
benefits; and (y) be credited with prior service with UXP for all purposes
related to eligibility and vesting under any Parent Plan in which such employee
participates.
(iii) UXP will terminate its participation in or freeze all
Plans at or prior to the Effective Time.
5.9.2 COBRA. With respect to any employee of UXP as of the
date hereof who is not employed by UXP immediately after the Effective Time, the
surviving corporation shall be responsible for making available, at such former
employee's expense, continuation coverage to such employee (and his or her
dependents), as required under COBRA. Further, with respect to any former
employee of UXP (or their dependents) who is receiving continuation coverage
under COBRA as of the Effective Time, the surviving corporation shall be
responsible to maintain such continuation coverage in compliance with COBRA.
5.10 NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and
the Effective Time, UXP shall give prompt notice to Parent, and Parent shall
give prompt notice to UXP, of (i) any fact or the occurrence or non-occurrence
of any event or circumstance which could reasonably be expected to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate without regard to the use of "material," "materiality," "Material
Adverse Effect" or other similar qualifiers; (ii) any material failure of UXP or
Parent to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; or (iii) any fact, event or
circumstance not covered by (i) above that could materially and adversely affect
the likelihood of consummating the transactions contemplated by this Agreement.
5.11 SECTION 16 MATTERS. Prior to the Effective Time, Parent,
Mergerco and UXP shall take all such steps as may be required to cause any
dispositions of capital stock of UXP resulting from the Merger by each
individual who is subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to UXP to be exempt under Rule 16b-3 promulgated under
the Exchange Act.
5.12 CERTAIN CONTRACTS. Prior to the Effective Time, UXP shall
cause the contracts listed in Section 5.12 of the UXP Disclosure Schedule to be
terminated (effective prior to or as of the Effective Time) without any penalty
or other adverse consequences to Parent or the surviving corporation.
5.13 OTHER ACTIONS. Prior to the Closing, UXP will take the other
actions described in Section 5.13 of the UXP Disclosure Schedule.
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SECTION 6
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF UXP. The obligations of
UXP to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, prior to or contemporaneously with the Closing, of
the following conditions, compliance with which, or the occurrence of which, may
be waived in whole or in part by UXP in writing:
6.1.1 REPRESENTATIONS; COVENANTS; CERTIFICATE. The
representations and warranties of Parent and Mergerco contained in Section 4, if
qualified by a reference to materiality or similar qualifiers, shall be correct
and complete, and if not so qualified, shall be correct and complete in all
material respects, as of the date of this Agreement and as of the Closing Date
with the same effect as though made as of the Closing Date (except that
representations and warranties that are made as of a specific date shall be
correct and complete only as of such date). Parent and Mergerco each shall have
complied in all material respects (without giving duplicative effect to any
materiality qualifier contained in such covenant) with all covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date. Each of Parent and Mergerco shall have delivered to UXP a certificate,
dated the Closing Date and signed by its President or a Vice President, to the
effect that the conditions set forth in this Section 6.1.1 have been fulfilled.
6.1.2 OTHER AGREEMENTS. Parent and Mergerco shall have
executed and delivered each of the other agreements and instruments to be
delivered by them pursuant to this Agreement.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGERCO.
The obligations of Parent and Mergerco to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, prior to or
contemporaneously with the Closing, of the following conditions, compliance with
which, or the occurrence of which, may be waived in whole or in part by Parent
in writing:
6.2.1 REPRESENTATIONS; COVENANTS; CERTIFICATE. The
representations and warranties of UXP contained in Section 3, if qualified by a
reference to materiality or similar qualifiers, shall be correct and complete,
and if not so qualified, shall be correct and complete in all material respects,
as of the date of this Agreement and as of the Closing Date with the same effect
as though made as of the Closing Date (except that representations and
warranties that are made as of a specific date shall be correct and complete
only as of such date and except for changes in the number of outstanding shares
of UXP Common Stock upon the exercise of options, warrants, securities or other
rights to purchase, subscribe for or otherwise acquire any shares of UXP Common
Stock as disclosed in Section 3.5 of the UXP Disclosure Schedule); provided that
this condition shall be deemed satisfied unless the facts and circumstances
causing such representations and warranties to be incorrect or incomplete,
individually or in the aggregate, have had or are reasonably likely to have a
Material Adverse Effect. UXP shall have complied in all material respects
(without giving duplicative effect to any materiality qualifier contained in
such covenant) with all covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date. UXP shall have delivered to
Parent a
29
certificate, dated the Closing Date and signed by its President or a Vice
President, to the effect that the conditions set forth in this Section 6.2.1
have been fulfilled.
6.2.2 ADVERSE CHANGES. From the date hereof to the Closing
Date, UXP shall not have suffered or incurred any Material Adverse Effect.
6.2.3 OTHER AGREEMENTS. UXP shall have executed and
delivered each of the other agreements and instruments to be delivered by it
pursuant to this Agreement.
6.2.4 REQUIRED CONSENTS. All notices, consents, approvals,
orders, authorizations, declarations and filings described in Section 3.4 of the
UXP Disclosure Schedule, if any, shall have been given, obtained or made;
provided that the failure to give, obtain or make one or more of the foregoing
shall not result in the nonfulfillment of this condition unless such failure
would reasonably be expected to have a Material Adverse Effect.
6.2.5 VOTING AGREEMENTS. Upon or before the execution and
delivery of this Agreement by UXP, each of the directors of UXP and ▇▇▇▇ ▇.
▇▇▇▇▇▇ shall have executed and delivered to Parent a Voting Agreement.
6.2.6 RELEASES. Each of the directors and officers of UXP
as of the date of this Agreement shall have resigned effective as of the
Effective Time and executed a release in the form for directors and officers
approved by UXP and Parent prior to signing this Agreement.
6.2.7 DISSENTERS' RIGHTS. The aggregate number of shares of
UXP Common Stock, which are entitled to vote at the Special Meeting and are
Dissenting Shares shall not exceed ten percent (10%) of the total number of
issued and outstanding shares of UXP Common Stock held of record as of the
record date for the Special Meeting and entitled to vote on the Merger at such
meeting.
6.2.8 TRANSITION AGREEMENT. ▇▇▇▇▇▇ Mineral Group, Inc.
shall have executed and delivered to Parent the Transition Agreement; provided
that this condition shall apply only if Parent has caused UXP, as the surviving
corporation, to execute and deliver to ▇▇▇▇▇▇ Mineral Group, Inc. the Transition
Agreement.
6.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY. The
obligations of each party to consummate the transactions contemplated by this
Agreement shall be subject to the additional conditions that (i) no temporary
restraining order, preliminary or permanent injunction or other order by any
United States federal or state court or governmental body prohibiting,
preventing or materially restraining the consummation of the transactions
contemplated by this Agreement shall have been issued and shall not have expired
or been withdrawn or reversed; it being agreed that the parties shall use their
commercially reasonable efforts to cause any such temporary restraining order,
preliminary or permanent injunction or other order to be vacated or lifted as
promptly as possible; (ii) there shall be no pending or threatened litigation or
other proceeding seeking to prohibit, prevent or materially restrict or impose
any material limitations on the consummation of such transactions; (iii) the
shareholders of UXP shall have adopted this Agreement and approved the Merger in
accordance with applicable law and the Charter Documents of UXP; and (iv) all
approvals and authorizations of, filings and registrations with, and
notifications to, all governmental authorities required for the
30
consummation of the Merger, and for the prevention of any termination of any
material right, privilege, license or agreement of either Parent or UXP, shall
have been obtained or made and shall be in full force and effect and all waiting
periods required by law shall have expired; provided, however, that none of the
preceding in this clause (iv) shall be deemed obtained or made if it shall be
subject to any condition or restriction the effect of which, together with any
other such conditions or restrictions, could reasonably be expected to have a
Material Adverse Effect on the surviving corporation or Parent after the
Effective Time.
SECTION 7
TERMINATION
7.1 RIGHT TO TERMINATE. The parties may terminate this Agreement
as follows:
7.1.1 MUTUAL CONSENT. Parent and UXP may terminate this
Agreement by mutual written consent at any time prior to the consummation of the
Merger.
7.1.2 MUTUAL TERMINATION RIGHTS. Either UXP or Parent may
terminate this Agreement if (i) the Effective Time shall not have occurred on or
before January 31, 2004 (the "Termination Date"); provided, however, that the
right to terminate this Agreement under this clause (i) shall not be available
to any party whose breach of any representation, warranty or covenant under this
Agreement has been the primary cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; (ii) the condition set forth in
clause (i) of Section 6.3 is not fulfilled and the restraining order, injunction
or order has become final or nonappealable; provided that the terminating party
has used reasonable commercial efforts to remove or vacate such restraining
order, injunction or other order; (iii) the shareholders of UXP do not approve
this Agreement and the Merger at the Special Meeting or any adjournment or
postponement thereof (provided that such meeting may not be adjourned or
postponed to any date later than five business days prior to the Termination
Date) or (iv) there shall be any law or regulation that makes consummation of
the Merger illegal or otherwise prohibited.
7.1.3 TERMINATION RIGHTS OF PARENT. Parent may terminate
this Agreement at any time prior to the Closing:
(i) if UXP's Board of Directors shall have (a) failed to
include in the Proxy Statement its recommendation without modification or
qualification that the shareholders of UXP approve this Agreement and the
Merger, (b) withdrawn, modified or qualified its recommendation of this
Agreement or the Merger in a manner adverse to the interests of Parent or
Mergerco, (c) failed to call and convene the Special Meeting in accordance with
Section 2.5 or (d) resolved to do any of the foregoing; or
(ii) if UXP has breached any representation, warranty or
covenant contained in this Agreement, which breach would result in the
nonfulfillment of one or more of the conditions to the obligations of Parent and
Mergerco set forth in Section 6.2, Parent has notified UXP of the breach, and
either such breach is incapable of being cured or, if capable of being cured,
has not been cured within 30 days after the notice of breach; or
(iii) if a Risk Management Decision shall have been made;
or
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(iv) if any indemnification claim or claims have been made
against the Company under the Asset Purchase and Sale Agreement dated as of
April 9, 1998 between the Company and UPRC that exceed or would reasonably be
expected to exceed $250,000 and such indemnification claim or claims have not
been resolved to the reasonable satisfaction of Parent.
7.1.4 TERMINATION RIGHTS OF UXP. UXP may terminate this
Agreement:
(i) at any time prior to the Closing, if Parent or
Mergerco has breached any representation, warranty or covenant contained in this
Agreement, which breach would result in the nonfulfillment of one or more of the
conditions to the obligations of UXP set forth in Section 6.1, UXP has notified
Parent of the breach, and either such breach is incapable of being cured or, if
capable of being cured, has not been cured within 30 days after the notice of
breach; or
(ii) at any time prior to the approval of the Merger and
this Agreement by the shareholders of UXP, if (x) UXP has received a Superior
Proposal, (y) UXP has complied with all of its obligations under Section 5.6,
and (z) a majority of UXP's Board of Directors determines in good faith to
terminate this Agreement and pursue a transaction that constitutes a Superior
Proposal, after concluding that such action is necessary to comply with its
fiduciary duties to the shareholders of UXP under applicable law and after
considering the advice of outside legal counsel to UXP; provided that, if any of
the conditions to UXP's obligations to consummate the transactions contemplated
by this Agreement under Section 6.1 or 6.3 has not been fulfilled or waived as
of the date that such shareholder approval is obtained, then UXP's right to
terminate under this clause (ii) shall continue until the satisfaction or waiver
of such condition; or
(iii) if Parent fails to substitute $2,000,000 in cash for
the Escrow Note as required by Section 2.7 on or before October 6, 2003.
7.1.5 NOTICE OF TERMINATION. The party desiring to exercise
a right to terminate this Agreement pursuant to Sections 7.1.2, 7.1.3 or 7.1.4
shall do so by giving written notice of termination to the other party,
specifying the Section and the particular clause under which the termination is
being effected. UXP agrees to notify Parent promptly if it elects not to enter
into a written agreement with the third party that presented the Superior
Proposal resulting in a notice of termination from UXP pursuant to Section
7.1.4(ii).
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1, no party hereto (or any of its officers or
directors) shall have any liability or further obligation to any other party to
this Agreement, except as provided in Sections 7.3 and 8.1 and except that
nothing herein will relieve any party from liability for any willful breach of
this Agreement giving rise to such termination. For that purpose, any failure or
refusal of either party to consummate the Merger shall constitute a willful
breach unless (i) such party has terminated or has the right to terminate this
Agreement as provided in this Section 7 or (ii) a condition to the obligation of
such party under Section 6 has not been fulfilled (other than a condition that,
by its terms, was not to be fulfilled until after the date that this Agreement
was terminated).
32
7.3 TERMINATION FEE.
7.3.1 UPON TERMINATION. If (i) Parent shall terminate this
Agreement pursuant to clause (i) or (iii) of Section 7.1.3 or (ii) UXP shall
terminate this Agreement pursuant to clause (ii) of Section 7.1.4, then, in
either case, UXP shall pay to Parent, within five Business Days of such
termination, a fee, in cash and without setoff, in an amount equal to 4% of the
aggregate Merger Consideration (the "Termination Fee") (it being understood that
such fee is not intended as liquidated damages), plus the out-of-pocket expenses
reasonably incurred by Parent in connection with its performance of this
Agreement and the transactions contemplated hereby and related hereto,
including, without limitation, financing commitment fees and expenses (the
"Parent Expenses"); provided that, in each case, neither Parent nor Mergerco is
in material breach of this Agreement.
7.3.2 UPON SUBSEQUENT TRANSACTION. If (a) this Agreement is
terminated by either party pursuant to clause (iii) of Section 7.1.2, (b) an
Acquisition Proposal (other than by Parent) is pending at the time of the
Special Meeting and (c) within 12 months after the Special Meeting, UXP shall
consummate an Alternative Transaction with the Person who made such Acquisition
Proposal, then UXP shall pay to Parent on demand an amount in cash equal to the
Termination Fee; provided that no such amount shall be payable if (i) either
Parent or Mergerco was in material breach of this Agreement on the date of such
termination or (ii) the Termination Fee and Parent Expenses were paid under
Section 7.3.1. Whether or not the Termination Fee becomes payable, upon a
termination by either party pursuant to clause (iii) of Section 7.1.2, UXP shall
promptly pay to Parent the Parent Expenses upon receipt of a statement thereof;
provided that the Parent Expenses shall not be payable if either Parent or
Mergerco was in material breach of this Agreement on the date of such
termination or the Parent Expenses were paid under Section 7.3.1.
7.3.3 ENFORCEMENT. UXP acknowledges that the agreements
contained in this Section 7.3 are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Parent and
Mergerco would not enter into this Agreement. Accordingly, if UXP fails promptly
to pay any amount due to Parent pursuant to this Section 7.3, it shall also pay
any costs and expenses incurred by Parent or Mergerco in connection with a legal
action to enforce this Agreement that results in a judgment against UXP for such
amount. If Parent or Mergerco does not prevail in any such legal action, Parent
and Mergerco shall pay any costs and expenses incurred by UXP in connection with
such legal action.
7.4 DISPOSITION OF ESCROW.
7.4.1 AT CLOSING. If the Closing occurs, Parent shall be
entitled to instruct the Escrow Agent as to the disposition of all amounts and
items then on deposit in the Escrow Account.
7.4.2 UPON TERMINATION. In the event that this Agreement is
terminated as provided in Section 7.1:
(a) If the termination is by mutual consent
pursuant to Section 7.1.1, by Parent pursuant to clause (i) of Section 7.1.2, by
any party pursuant to clause (ii), (iii) or (iv) of Section 7.1.2, by Parent
pursuant to Section 7.1.3, or by UXP pursuant to clause (ii) of Section 7.1.4,
Parent shall be entitled to withdraw all amounts and items then on deposit in
the Escrow Account; and
33
(b) If the termination is by UXP pursuant to
clause (i) of Section 7.1.2 at a time when all of the conditions to Parent's
obligations to consummate the transactions contemplated by this Agreement had
been satisfied (or that UXP had tendered performance which would have the effect
of satisfying such conditions) or by UXP pursuant to clause (i) or (iii) of
Section 7.1.4, UXP shall be entitled to withdraw all amounts and items then on
deposit in the Escrow Account and retain such items as liquidated damages.
7.4.3 JOINT INSTRUCTIONS. When a party becomes entitled to
instruct the Escrow Agent as to the disposition of or to withdraw the contents
of the Escrow Account under this Section 7.4, the other parties shall join in
joint written instructions to the Escrow Agent as necessary to allow such
disposition or withdrawal.
SECTION 8
MISCELLANEOUS
8.1 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement or in any instrument, agreement, certificate
or other document delivered pursuant to this Agreement shall not survive the
Closing or any termination of this Agreement except that (i) the Confidentiality
Agreement shall survive the execution and any termination of this Agreement,
(ii) the provisions of Sections 2.3, 2.6, 5.7, 5.8, and 5.9 shall survive the
Closing, (iii) Section 2.7, Section 7.1.5 (last sentence), Section 7.2 and
Section 7.3 shall survive any termination of this Agreement and (iv) the
provisions of this Section 8 shall survive the Closing and any termination of
this Agreement.
8.2 JURISDICTION; VENUE. Each of the parties hereto (i) agrees
that any legal action or proceeding with respect to any dispute that arises out
of this Agreement or any of the transactions contemplated hereby shall be
brought in the state or federal courts of appropriate subject matter
jurisdiction in Denver, Colorado and (ii) hereby submits itself to the exclusive
personal jurisdiction of such courts. Each party waives any objection to venue
in any such court.
8.3 AMENDMENTS AND SUPPLEMENTS. At any time prior to the Closing
Date, this Agreement may be amended or supplemented by a written instrument
signed by Parent, Mergerco and UXP; provided that, notwithstanding the
provisions of this Section 8.3, after the adoption of this Agreement by the
shareholders of UXP, without the affirmative vote of the holders of shares of
UXP Common Stock representing a majority of the votes that may be cast by the
holders of all then outstanding shares of UXP Common Stock, UXP will not (i)
enter into any amendment to this Agreement that would alter or change any of the
terms and conditions of this Agreement if such alteration or change would
materially adversely affect the holders of shares of UXP Common Stock, or (ii)
waive any condition set forth in Section 6.1 or 6.3 if such waiver would
materially adversely affect the holders of shares of UXP Common Stock
8.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado without giving
effect to any choice of law or conflict of laws rule or provision that would
cause the application of the domestic substantive laws of any other
jurisdiction.
34
8.5 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by telecopy, hand
delivery or reputable overnight courier. The telecopier numbers and addresses of
the parties set forth below shall be used for the delivery of notices unless and
until a party changes its telecopier number or address for such purposes by
notice to the other parties. Each such notice or other communication shall be
deemed received for all purposes (i) if given by telecopy, when transmission of
the telecopy is confirmed by the sender's telecopier, (ii) if given by reputable
overnight courier, one business day after being delivered to the courier or
(iii) if given by any other means, when actually received.
To UXP:
United States Exploration, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
and President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
To Parent or Mergerco:
DGL Acquisition Corp.
DGL Mergerco, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
8.6 ENTIRE AGREEMENT, ASSIGNABILITY, ETC. This Agreement
(including the UXP Disclosure Schedule) and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the transactions and matters contemplated hereby, (ii) are
35
not intended to confer any right or remedies upon any Person other than the
parties hereto and the shareholders of UXP, provided that the Indemnified
Persons shall be third party beneficiaries of the obligations of UXP and Parent
under Section 5.7, and (iii) shall not be assignable by either party without the
prior written consent of the other party.
8.7 EXCLUSIVITY OF REPRESENTATIONS. UXP has not and shall not be
deemed to have made to Parent or Mergerco any representation or warranty other
than as expressly made by UXP in Section 3. Parent and Mergerco have not and
shall not be deemed to have made to UXP any representation or warranty other
than as expressly made by Parent and Mergerco in Section 4.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument. The signatures of the
parties on this Agreement may be delivered by facsimile and any such facsimile
signature shall be deemed an original.
8.9 HEADINGS; TERMS. The section headings contained in this
Agreement are for convenience only and will not affect in any way the meaning or
interpretation of this Agreement. Defined terms will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense. The word day means a calendar day, unless a Business Day is
specified. All references to "Sections" are to sections of this Agreement unless
indicated otherwise.
8.10 WAIVERS. No waiver by either party of any default,
misrepresentation or breach of warranty or covenant hereunder will be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence, and no waiver will be effective
unless set forth in writing and signed by the party against whom such waiver is
asserted.
8.11 SEVERABILITY. The invalidity or unenforceability of any term
or provision of this Agreement shall not affect the validity or enforceability
of the remaining terms and provisions hereof.
8.12 EXPENSES. Except as otherwise expressly provided herein,
whether or not the transactions contemplated hereby are consummated, each party
shall bear its own costs and expenses (including, without limitation, legal fees
and expenses) incurred either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated hereby. The fact
that such expenses have been paid or incurred by UXP shall not constitute or
give rise to a breach of any of its representations, warranties or covenants
hereunder. Notwithstanding the foregoing, either party may recover its costs and
expenses, including reasonable attorney's fees, incurred in connection with this
Agreement or the transactions contemplated hereby as damages in a suit for
willful breach permitted by Section 7.2.
36
8.13 CONSTRUCTION. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring a party by virtue of the authorship of any of the
provisions of this Agreement.
8.14 INCORPORATION OF DISCLOSURE SCHEDULE. The UXP Disclosure
Schedule is incorporated herein by reference and made a part hereof. For
purposes of this Agreement, any matter disclosed in any portion of the UXP
Disclosure Schedule shall be deemed to have been disclosed for purposes of and
to be an exception to all representations and warranties of UXP in this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
UXP:
UNITED STATES EXPLORATION, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer and President
PARENT:
DGL ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
MERGERCO:
DGL MERGERCO, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
37
ANNEX I
PLAN OF MERGER
DGL MERGERCO, INC.
WITH AND INTO
UNITED STATES EXPLORATION, INC.
1. PARTIES. The parties to the merger are DGL Mergerco, Inc., a Colorado
corporation ("Mergerco"), and United States Exploration, Inc., a Colorado
corporation ("UXP").
2. SURVIVING CORPORATION. Mergerco shall be merged with and into UXP, which
shall be the surviving corporation in the merger. The merger shall be effective
upon the filing of Articles of Merger with the Colorado Secretary of State. The
separate existence of Mergerco shall cease at the effective time of the merger.
3. ARTICLES AND BYLAWS. Upon the effective time of the merger, (a) the Articles
of Incorporation of UXP as the surviving corporation shall be amended and
restated to read in their entirety as reflected in EXHIBIT A attached hereto and
(b) the Bylaws of Mergerco shall be the Bylaws of UXP as the surviving
corporation, in each case, until amended in accordance with Colorado law.
4. DIRECTORS AND OFFICERS. The directors and officers of Mergerco at the
effective time of the merger shall, from and after such effective time, be the
directors and officers of the surviving corporation, and shall hold their
positions until the election or appointment and qualification of their
respective successors or until their tenure is otherwise terminated in
accordance with the Articles of Incorporation and Bylaws of the surviving
corporation, or as otherwise provided by applicable law.
5. EFFECT OF MERGER. Upon the effective time of the merger, all property, real,
personal and mixed, and all debts due to either UXP or Mergerco, as well as all
other things and causes of action belonging to each of them, shall be vested in
UXP as the surviving corporation, and shall thereafter be the property of the
surviving corporation as they were of each of the corporations that have been
merged, and all debts, liabilities and duties of each of the corporations that
have been merged shall thereafter attach to the surviving corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
6. CONVERSION OF SHARES. At the effective time of the merger, by virtue of the
merger and without any action on the part of any other person or entity (i) each
share of common stock of Mergerco issued and outstanding immediately prior to
such effective time shall automatically be converted into and become one validly
issued, fully paid and non-assessable share of UXP common stock, (ii) each share
of common stock of UXP which is held by DGL Acquisition Corp., a Delaware
corporation, or Mergerco and any issued shares of UXP common stock held in the
treasury of UXP shall automatically be canceled and retired and no payment shall
be made with respect thereto, and (iii) each share of common stock of UXP issued
and outstanding immediately prior to such effective time, other than those
shares described in clause (ii), shall be
I-1
automatically converted into the right to receive $2.82 in cash; provided that
any shares of UXP common stock as to which dissenter's rights are properly
exercised and maintained pursuant to Article 113 of the Colorado Business
Corporation Act shall not be converted as provided in clause (iii), but shall be
disposed of as required by that Article.
I-2
ANNEX II
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement ("Agreement") is made and entered
into as of this _____ day of ___________, 2003, by and between United States
Exploration, Inc. ("UXP"), a Colorado corporation and wholly owned subsidiary of
DGL Acquisition Corp., a Delaware corporation, and ▇▇▇▇▇▇ Mineral Group, Inc.
("BMG"), an Oklahoma corporation. UXP and BMG are referred to individually
herein as a "Party" and collectively as the "Parties."
WITNESSETH:
A. UXP desires to retain BMG to provide certain administrative and
other services to UXP, as further described in Section 1 below, during the term
of this Agreement.
B. BMG is agreeable to providing such services pursuant to the terms
hereof.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, the Parties hereto agree as follows:
1. SERVICES
1.1 During the term of this Agreement, BMG shall make available each of
the employees listed on EXHIBIT A hereto, to the extent that such employees
continue to be employed by BMG (each, an "Employee"), to provide or cause to be
provided the services set forth on EXHIBIT B attached hereto or as otherwise
agreed in writing by UXP and BMG (the "Services").
1.2 EXHIBIT A sets forth for each Employee the amount of time per week
that such Employee customarily devotes to the affairs of UXP based on a 40-hour
week (such Employee's "UXP Time") and an hourly rate that is agreed by the
parties to request BMG's cost of providing the services of that Employee,
including salary, benefits, rent, systems, supplies and all other costs (such
Employee's "Hourly Rate"). Subject to the terms of this Agreement, BMG shall
make available and UXP shall pay for the Services of each Employee as follows:
(a) during the first 30 days of the term of this Agreement, 100% of such
Employee's UXP Time; (b) during the second 30 days of the term of this
Agreement, 67% of such Employee's UXP Time; and (c) during the final 30 days of
the term of this Agreement, 33% of such Employee's UXP Time. If UXP fails to use
the full available time of any Employee in any 30-day period, the unused time
shall not carry over to a subsequent period.
1.3 The parties acknowledge that the Services will not be required at
an even rate over each 30-day period. UXP and BMG shall cooperate to schedule
the time and responsibilities of each Employee so as to maximize efficiency,
including, without limitation, coordinating the time spent at BMG's offices and
UXP's offices so as to minimize travel time for the Employees. All time spent
traveling to and from UXP's offices shall count as time worked for UXP under
this Agreement. UXP shall provide or pay for all necessary transportation for
Employees to and from UXP's offices and any incremental parking charges incurred
by Employees. BMG shall cause each Employee to keep accurate records of daily
hours worked for UXP ("Time Sheets") so as to enable BMG and UXP to determine
when the maximum hours of Services for each Employee have been provided in any
30-day period. No Employee shall be
II-1
required to work more than eight hours a day or 40 hours a week, including both
time worked for UXP and time worked for BMG.
1.4 UXP shall provide direction to the Employees where business
decisions are required in the performance of the Services.
1.5 During the term of this Agreement, BMG shall maintain its licenses
to use the software described in EXHIBIT C so that such software is available to
the Employees in connection with the provision of the Services.
2. PERFORMANCE OBLIGATIONS
2.1 The Employees shall, subject to Section 4.2 and subject to any
Employee's right to terminate his or her employment, be employees of BMG and be
paid by and enjoy the benefits to which they are entitled as employees of BMG.
2.2 UXP agrees to make appropriate personnel reasonably available to
answer any questions that BMG or the Employees may have in relation to the
Services to be provided under this Agreement and to provide such additional
information as BMG or the Employees may reasonably require to perform the
requested Services.
3. COMPENSATION
3.1 UXP shall pay BMG on a bi-weekly basis for the Services. The amount
to be paid for each Employee for each week shall be the product of that
Employee's Hourly Rate times that Employee's UXP Time, times the percentage of
that Employee's UXP Time applicable to that week under Section 1.2. If the
applicable percentage changes during a week, the calculation shall be made
separately for the portion of the week in which each percentage was applicable.
UXP shall pay the full amount due whether or not it used all of the available
time of each Employee during the week; provided that, if an Employee quits or is
terminated during a week, UXP shall only pay for a pro rata portion of such
Employee's UXP Time based on the number of days during the week that he or she
was employed by BMG.
3.2 BMG shall provide to UXP the Time Sheets for each week on Monday of
the following week so that UXP can keep track of the hours worked by each
Employee on a reasonably current basis.
3.3 Invoices for Services will be rendered on a bi-weekly basis.
Invoices shall be due and payable within 10 days following UXP's receipt of an
itemized invoice.
3.4 No contract or agreement requiring BMG to compensate outside
vendors to perform the Services hereunder shall be entered into without UXP's
prior written approval.
4. INDEPENDENT CONTRACTOR STATUS
4.1 Nothing contained in this Agreement shall constitute either Party
hereto the agent of the other Party for any purpose. BMG shall be engaged as an
independent contractor with full control over the manner and method of
performance of the Services, subject to EXHIBIT B.
II-2
4.2 BMG shall retain the absolute right to discipline or dismiss any
BMG employee and UXP shall not purport to exercise any such right; provided that
at any time UXP may require BMG to cause an Employee to cease to provide
Services to UXP.
4.3 BMG is not required to hire any new employees to provide Services
during the term of this Agreement. Accordingly, in the event an Employee is
terminated by BMG, is asked by UXP to cease to provide Services, or is otherwise
not available to provide Services due to illness or any other cause, BMG shall
not be obligated to provide a replacement employee to perform the Services
previously provided by such Employee. If BMG is unable to provide Services
hereunder, BMG shall notify UXP of such fact as promptly as practicable.
Notwithstanding the foregoing, subject to Section 3.4 above, BMG may, but shall
not be obligated to, hire an outside vendor to perform the Services. In the
event an outside vendor is hired, the provisions of this Agreement shall remain
in full force and effect as to the Services to be provided by the outside vendor
and UXP shall pay BMG 110% of all amounts paid by BMG to such outside vendor for
the Services.
5. STANDARD OF CARE
While performing the Services hereunder, BMG shall perform its duties
in a commercially reasonable manner; provided, however, that BMG shall not be
liable to UXP for any error of judgment or for any loss suffered by UXP or any
third party in connection with the subject matter of this Agreement (howsoever
any such loss may have occurred) unless such loss arises from the gross
negligence, bad faith, fraud, intentional misconduct or willful default in the
performance or non-performance by BMG or any Employee of the Services provided
under or pursuant to the terms of this Agreement.
6. TERM AND TERMINATION
6.1 This Agreement, upon execution hereof, shall be effective as of the
date hereof and shall continue in effect for a period of 90 days thereafter,
subject, however, to termination at any time by UXP giving thirty (30) days
prior written notice to BMG.
6.2 In the event of a termination of this Agreement, BMG shall be
entitled to all outstanding amounts due from UXP for Services provided under
this Agreement up to the date of termination.
6.3 Sections 3.1, 3.2, 3.3, 5, this Section 6 and Section 8 shall
survive any termination of this Agreement.
7. ASSIGNMENT
Each Party hereto agrees not to assign or dispose of any of its rights
and obligations under this Agreement without the prior consent of the other
Party, which consent the other Party may withhold in its sole discretion.
II-3
8. MISCELLANEOUS
8.1 Entire Agreement. This Agreement, including the Exhibits attached
hereto, constitutes the entire agreement between the Parties with respect to the
subject matter herein and supersedes any and all prior or contemporaneous
understandings, negotiations or agreements between the Parties and, subject to
the provisions of Section 7, shall be binding upon and inure to the benefit of
the Parties hereto and their respective legal representatives and permitted
successors and assigns.
8.2 Amendments. Any amendment, supplement, variation, alteration or
modification to the Agreement must be made in writing and duly executed by an
authorized representative or agent of each of the Parties hereto.
8.3 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction, shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any other jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, each Party hereby waives any law which renders any provision
hereof prohibited or unenforceable in any respect.
8.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, and all such counterparts shall be
deemed to constitute one and the same instrument.
8.5 Governing Law. This Agreement shall be governed and controlled as
to its validity, enforcement, interpretation, construction, effect and in all
other respects by the laws of the State of Colorado (without regard to the
conflicts of laws provisions thereof) applicable to contracts made in that
state.
8.6 Confidentiality. The Parties agree to maintain the confidentiality
of all non-public information relating to the other Party and its affiliates
regarding the Services and each Parties' business activities, except as may be
required to be disclosed by law.
8.7 Notices. Except as otherwise provided in this Agreement, whenever
it is provided in this Agreement that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon one of the Parties by the other Party, or whenever either Party desires to
give or serve upon the other Party any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and either shall be delivered in person
with receipt acknowledged or sent by registered or certified-mail, return
receipt requested, postage prepaid, or by overnight mail or courier, or delivery
service or by facsimile and confirmed by facsimile answer back, addressed as
follows:
II-4
If to BMG to: If to UXP to:
------------- -------------
▇▇▇▇▇▇ Mineral Group, Inc. United States Exploration, Inc..
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (406) ___-____
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by written notice given as in
this Section 8.7. The furnishing of any notice required under this Agreement may
be waived in writing by the Party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication under
this Agreement shall be deemed to have been duly given or served on (i) the date
on which personally delivered, with receipt acknowledged, (ii) the date on which
sent by facsimile and confirmed by answer back, (iii) the next business day if
delivered by overnight or express mail, courier or delivery service, or (iv)
three business days after the same shall have been deposited in the United
States mail, as the case may be.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
II-5
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
effective as of the date first above written.
UNITED STATES EXPLORATION, INC.,
a Colorado company
BY:
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ MINERAL GROUP, INC.
BY:
--------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
II-6
EXHIBIT A
EMPLOYEES
NAME AREA OF RESPONSIBILITY HOURLY RATE HOURS/WEEK*
---- ---------------------- ----------- -----------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Executive Assistant $ 46.33
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Receptionist and Mail $ 23.72
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Finance and Accounting $105.59
▇▇▇▇▇▇▇ ▇▇▇▇▇** Land $ 86.30
▇▇▇ ▇▇▇▇ Accounting, Payroll and $ 56.32
Employee Benefits
▇▇▇▇▇▇▇ ▇▇▇▇▇ Revenue Accounting $ 44.78
-----------------
* To be determined based on average time during July and August, 2003.
** Although ▇▇. ▇▇▇▇▇ is a licensed attorney, she does not render title or
other legal opinions to the Company.
II-7
EXHIBIT B
SERVICES
1. GENERAL. BMG shall cause the Employees to continue to perform the
same functions for UXP that they have historically performed prior to the date
of this Agreement as reflected in EXHIBIT A and to assist the new personnel
hired by UXP in transitioning into those functions. However, the Employees shall
not be authorized or required to make management decisions and UXP shall have
appropriate representatives available to make all necessary management
decisions.
2. FACILITIES. BMG shall make available to the Employees for the
performance of Services all of the offices, equipment, supplies, software and
other facilities that they have historically used in performing services for
UXP, without additional charge to UXP. BMG shall use reasonable efforts to
accommodate UXP personnel on BMG's premises for purposes of training and
transition, but UXP recognizes that BMG will not be able to provide offices or
separate systems or equipment for such personnel.
3. PURPOSE. The purpose of the Services is to assist UXP in making a
smooth transition from the facilities and personnel that have previously been
used to perform the functions listed in EXHIBIT A to new facilities and
personnel acquired and hired by UXP. However, the Employees may only be required
to perform and train UXP personnel to perform the services they have
historically performed using the systems they have historically used and may not
be required to perform or participate in any conversion to different systems or
procedures that UXP may decide to implement.
II-8
EXHIBIT C
SOFTWARE
SOFTWARE USE
-------- ---
M/S Word Word processing
M/S Excel Spreadsheets
M/S Access Land database
Word Perfect 9.0 Word processing/legal docs
SSI Accounting
FAS Fixed Assets
ADP Payroll
II-9
ANNEX III
VOTING AGREEMENT
THIS VOTING AGREEMENT is made as of September ___, 2003 by the
undersigned shareholder (the "Shareholder") of United States Exploration, Inc.,
a Colorado corporation ("UXP"), for the benefit of DGL Acquisition Corp.,
Delaware corporation (the "Purchaser.")
Recitals
Pursuant to the terms of an Agreement and Plan of Merger of
even date herewith (the "
Merger Agreement") among UXP, the Purchaser and DGL
Mergerco, Inc., a Colorado corporation ("Mergerco"), the Purchaser has agreed to
acquire UXP in a merger in which the outstanding shares of Common Stock of UXP
will be converted into the right to receive $2.82 per share in cash (the
"Merger.") As a condition to its willingness to enter into the
Merger Agreement,
the Purchaser has required that the Shareholder agree, and the Shareholder is
willing to agree, to the matters set forth herein.
Agreement
Accordingly, in consideration of the agreements of the
Purchaser in the
Merger Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Shareholder, intending to be legally bound hereby, agrees as follows for the
benefit of the Purchaser:
1. Representations and Warranties of Shareholder.
(a) Ownership. The Shareholder represents and warrants to the
Purchaser that he is the record and/or beneficial owner of and has the sole
power to vote or direct the voting of the number of shares of UXP Common Stock
set forth opposite his signature below (together with any other shares of UXP
Common Stock or other voting capital stock acquired by the Shareholder prior to
the termination of this Agreement, the "Shares.") As of the date hereof, listed
opposite the name of the Shareholder on the signature page hereof are all the
Shares, which constitute all of the shares of UXP Common Stock held of record,
owned by or for which voting power or disposition power is held or shared by the
Shareholder or any of its affiliates, and in each case identifies the record
owner of such Shares on the stock transfer records of UXP if the Shareholder is
not the record owner. The Shareholder has and will have at all times through the
Effective Time (as defined in the
Merger Agreement) sole voting power, sole
power of disposition, sole power to issue instructions with respect to the
matters set forth in this Agreement hereof and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all of the
Shares, with no limitations, qualifications or restrictions on such rights,
subject to applicable federal securities laws and the terms of this Agreement.
(b) No Inconsistent Agreements. The Shareholder hereby
covenants and agrees that, except for this Agreement, the Shareholder (i) has
not entered into any voting agreement or voting trust with respect to the Shares
owned beneficially or of record by the Shareholder
III-1
and (b) has not granted a proxy, a consent or power of attorney with respect to
the Shares owned beneficially or of record by the Shareholder.
(c) Authorization; Validity of Agreement; Necessary Action.
The Shareholder has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Shareholder and constitutes a valid and binding obligation of
the Shareholder, enforceable against it in accordance with its terms.
(d) No Violation. The execution and delivery of this Agreement
by the Shareholder does not, and the performance by the Shareholder of its
obligations under this Agreement will not, (i) conflict with or violate any law,
ordinance or regulation of any governmental authority applicable to the
Shareholder or by which any of its assets or properties are bound or (ii)
conflict with, result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or require redemption or repurchase of or otherwise
require the purchase or sale of any securities, or result in the creation of any
lien on the properties or assets of the Shareholder pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Shareholder is a party or by which
the Shareholder or any of its assets or properties is bound.
2. Transfer and Other Restrictions. The Shareholder agrees that, prior
to the Merger, he shall not, and shall not enter into any agreement to:
(a) sell, exchange, transfer, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, exchange, transfer, pledge, encumbrance,
assignment or other disposition of, any of the Shares;
(b) grant any proxies or enter into any voting agreement or
similar arrangement with respect to any of the Shares, except proxies
instructing that the Shares be voted in accordance with Section 3; or
(c) deposit any of the Shares into a voting trust or other
similar arrangement.
3. Voting. The Shareholder agrees to attend, in person or by proxy, all
meetings of the shareholders of UXP and, at any meeting of the shareholders of
UXP, agrees to vote all of the Shares:
(a) in favor of the transactions contemplated by the
Merger
Agreement;
(b) against any action or agreement that could result in a
breach of any covenant, representation or warranty of UXP in the
Merger
Agreement;
(c) except as otherwise agreed by the Purchaser, against any
action or agreement that would impede, interfere with or discourage the
transactions contemplated by the
Merger Agreement (or attempt to do any of the
foregoing), including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, rights offering, reorganization,
III-2
recapitalization or liquidation involving UXP, other than the Merger; (ii) a
sale or transfer of a material portion of the assets of UXP or the issuance of
any securities of UXP, other than upon exercise of outstanding options; (iii)
any change in the executive officers or Board of Directors of UXP; (iv) any
change in the present authorized, issued or outstanding capital stock of UXP
(other than as a result of the exercise of options outstanding on the date of
this Agreement), or the issuance by UXP of any options, warrants, debentures or
other securities convertible into or exercisable or exchangeable for capital
stock of UXP or any other change in the present capitalization or dividend
policy of UXP; (v) any change in the articles of incorporation or bylaws of UXP;
or (vi) any other change in UXP's corporate structure or business; and
(d) in the manner specified by the Purchaser from time to time
with respect to any other matter which, in the Purchaser's reasonable judgment,
may contradict any provision of this Agreement or the
Merger Agreement or may
make it more difficult or less desirable for the Purchaser to consummate the
Merger or may delay or hinder the consummation of the Merger.
4. Proxy. The Shareholder agrees to grant to the Purchaser a proxy to
vote the Shares above if the Shareholder fails for any reason to vote such
Shares in accordance with this Agreement. The Shareholder agrees that such a
proxy would be coupled with an interest and irrevocable for so long as this
Agreement is in effect, and the Shareholder will take such further action or
execute such other instruments as may be necessary to effectuate the intent of
such proxy.
5. Other Agreements.
(a) In case of a stock dividend or distribution, or any change
in UXP Common Stock by reason of any stock dividend or distribution, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any securities into which or for which any or
all of the Shares may be changed or exchanged or which are received in such
transaction.
(b) The Shareholder hereby agrees, while this Agreement is in
effect, to notify the Purchaser promptly in writing of the number of any
additional shares of UXP Common Stock or other securities of UXP acquired by the
Shareholder, if any, after the date hereof.
6. Specific Enforcement. The Shareholder acknowledges that damages
would be an inadequate remedy for a breach of this Agreement and that the
obligations of the Shareholder shall be specifically enforceable, in addition to
any other remedy which may be available to the Purchaser at law or in equity.
7. Termination. This Agreement shall terminate without any action by
any of the parties hereto upon the earlier to occur of (i) the termination of
the
Merger Agreement pursuant to its terms or (ii) the Effective Time of the
Merger.
8. Stop Transfer Order. In furtherance of this Agreement, the
Shareholder shall and hereby does authorize and instruct UXP to instruct its
transfer agent to enter a stop transfer order with respect to all of the Shares
owned beneficially and of record by the Shareholder and all Shares acquired by
the Shareholder after the date hereof.
III-3
9. Further Assurances. From time to time, at the other party's request
and without further consideration, each party shall execute and deliver such
additional documents and take all such further action as may be reasonably
necessary or desirable to consummate the transactions contemplated by this
Agreement.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent via facsimile
(with confirmation) or delivered by an overnight courier (with confirmation) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to UXP, to:
United States Exploration, Inc.
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to the Purchaser, to:
DGL Acquisition Corp.
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Double D Energy, LLC
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with copies to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(c) if to Shareholder, to the address listed next to the
Shareholder's name on the signature page hereto.
11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12. Entire Agreement. This Agreement (together with the
Merger
Agreement, to the extent referred to herein) constitutes the entire agreement
and supersedes all prior agreements
III-4
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
13. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
14. Severability. Any term or provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction, and if any provision of this Agreement is
determined to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby
is affected in any manner materially adverse to any party or its stockholders or
limited partners. Upon any such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
15. Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns. This Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
16. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and performed entirely within such State. The parties hereby irrevocably submit
to the jurisdiction of the courts of the State of Colorado and the federal
courts of the United States of America located in the State of Colorado solely
in respect of the interpretation and enforcement of the provisions of this
Agreement and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Colorado State or federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute (solely for purposes
of this Section 16 with respect to matters involving this Agreement and the
transactions provided for herein) and agree that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 8 or in such other manner as may be permitted by law shall be valid
and sufficient service thereof.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
III-5
IN WITNESS WHEREOF, this Voting Agreement has been duly executed and
delivered by the Shareholder as of the date first written above.
Shareholder:
No. of Shares*:
---------------------------- ----------------------------------
----------
*Identify Shares held of record by a person or entity other than the Shareholder
and name such person or entity.
No. of Shares: Record Owner:
---------- ---------------------------------
---------- ---------------------------------
---------- ---------------------------------
III-6
