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Exhibit 99 (c)(1)
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AGREEMENT AND PLAN OF MERGER
dated as of
August 25, 1999
among
SHERIDAN ENERGY, INC.,
CALPINE CORPORATION,
and
CPN SHERIDAN, INC.
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TABLE OF CONTENTS
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Introduction......................................................................................................1
ARTICLE I
The Offer
SECTION 1.1. The Offer...........................................................................................1
SECTION 1.2. Company Action......................................................................................3
SECTION 1.3. Directors...........................................................................................3
ARTICLE II
The Merger
SECTION 2.1. The Merger..........................................................................................4
SECTION 2.2. Conversion of Shares................................................................................5
SECTION 2.3. Surrender and Payment...............................................................................5
SECTION 2.4. Dissenting Shares...................................................................................6
SECTION 2.5. Stock Options.......................................................................................6
ARTICLE III
The Surviving Corporation
SECTION 3.1. Certificate of Incorporation........................................................................7
SECTION 3.2. Bylaws..............................................................................................7
SECTION 3.3. Directors and Officers..............................................................................7
ARTICLE IV
Representations and Warranties
SECTION 4.1. Representations and Warranties of the Company.......................................................8
(a) Organization, Standing and Corporate Power..............................................................8
(b) Subsidiaries............................................................................................8
(c) Capital Structure.......................................................................................8
(d) Authority; Noncontravention.............................................................................9
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities........................................10
(f) Disclosure Documents...................................................................................11
(g) Absence of Certain Changes or Events...................................................................11
(h) Litigation.............................................................................................12
(i) Absence of Changes in Stock or Benefit Plans...........................................................13
(j) Participation and Coverage in Benefit Plans............................................................13
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(k) ERISA Compliance.......................................................................................13
(l) Taxes..................................................................................................14
(m) State Takeover Statutes................................................................................15
(n) Brokers; Schedule of Fees and Expenses.................................................................16
(o) Permits; Compliance with Laws..........................................................................16
(p) Contracts; Debt Instruments............................................................................16
(q) Opinion of Financial Advisor...........................................................................18
(r) Interests of Officers and Directors....................................................................18
(s) Technology.............................................................................................18
(t) Change of Control......................................................................................19
(u) Environmental..........................................................................................19
(v) Title to Properties....................................................................................20
(w) Other Obligations......................................................................................21
(x) Public Utility Holding Company Act; Non-Utility Status.................................................22
(y) Year 2000..............................................................................................22
(z) Insurance..............................................................................................23
(aa) Disclosure.............................................................................................23
SECTION 4.2. Representations and Warranties of Parent and Merger Subsidiary.....................................23
(a) Organization, Standing and Corporate Power.............................................................23
(b) Authority; Noncontravention............................................................................23
(c) Disclosure Documents...................................................................................24
(d) Brokers................................................................................................24
ARTICLE V
Covenants of the Company
SECTION 5.1. Conduct of Business................................................................................25
SECTION 5.2. Stockholder Meeting; Proxy Material................................................................26
SECTION 5.3. Access to Information..............................................................................27
SECTION 5.4. Other Offers.......................................................................................27
SECTION 5.5. State Takeover Statutes............................................................................28
ARTICLE VI
Covenants of Parent
SECTION 6.1. Obligations of Merger Subsidiary...................................................................28
SECTION 6.2. Voting of Shares...................................................................................28
SECTION 6.3. Director and Officer Liability.....................................................................28
SECTION 6.4. Employees..........................................................................................29
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ARTICLE VII
Covenants of Parent and the Company
SECTION 7.1. HSR Act Filings; Reasonable Efforts; Notification..................................................29
SECTION 7.2. Public Announcements...............................................................................31
ARTICLE VIII
Conditions to the Merger
SECTION 8.1. Conditions to the Obligations of Each Party........................................................31
ARTICLE IX
Termination
SECTION 9.1. Termination........................................................................................32
SECTION 9.2. Effect of Termination..............................................................................33
ARTICLE X
Miscellaneous
SECTION 10.1. Notices...........................................................................................33
SECTION 10.2. Survival of Representations and Warranties........................................................34
SECTION 10.3. Amendments; No Waivers............................................................................34
SECTION 10.4. Fees and Expenses.................................................................................34
SECTION 10.5. Successors and Assigns............................................................................35
SECTION 10.6. Governing Law.....................................................................................35
SECTION 10.7. Counterparts; Effectiveness; Interpretation.......................................................36
SECTION 10.8. Enforcement.......................................................................................36
SECTION 10.9. Severability......................................................................................36
SECTION 10.10. Entire Agreement; No Third Party Beneficiaries...................................................36
SECTION 10.11. Standstill.......................................................................................36
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AGREEMENT AND PLAN OF MERGER, dated as of August 25, 1999
(this "Agreement"), among SHERIDAN ENERGY, INC., a Delaware
corporation (the "Company"), CALPINE CORPORATION, a Delaware
corporation ("Parent"), and CPN SHERIDAN, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary").
INTRODUCTION
WHEREAS, the respective Boards of Directors of the Company,
Parent and Merger Subsidiary have determined that it is advisable and in the
best interests of their respective stockholders for Parent to acquire the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company, Parent and Merger Subsidiary desire to
make certain representations, warranties, covenants and agreements in connection
with this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Merger Subsidiary to make the Offer (defined in Section 1.1) to
purchase all of the issued and outstanding shares of common stock, par value
$.01 per share, of the Company upon the terms and subject to the conditions of
this Agreement, and the Board of Directors of the Company (the "Board" or the
"Board of Directors") has unanimously approved the Offer and recommended that
the stockholders of the Company accept the Offer; and
WHEREAS, the respective Boards of Directors of the Company,
Parent and Merger Subsidiary have deemed advisable and have approved the Offer
and the Merger (defined in Section 2.1) of Merger Subsidiary with and into the
Company upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, and subject to the terms and
conditions herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer. (a) Provided that nothing shall have
occurred that would result in a failure to satisfy any of the conditions set
forth in Annex I hereto, Merger Subsidiary shall, as promptly as practicable
after the date hereof, but in no event later than one business day (as defined
in Rule 14b-1(c)(6) promulgated under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act")) following the execution of this Agreement,
issue a public announcement of the execution of this Agreement and as promptly
as practicable thereafter, but in no event later than five business days
following such public announcement, commence an offer (the "Offer") to purchase
all of the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of the Company at a price of $5.50 per Share, net to the seller in
cash. The initial expiration date (the "Initial Expiration Date") of the Offer
shall be 20 business days following the
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commencement of the Offer. The Offer shall be subject to the condition that
there shall be validly tendered in accordance with the terms of the Offer prior
to the expiration date of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Parent and Merger Subsidiary, represents
at least a majority of the total number of outstanding Shares, assuming the
exercise of all outstanding options, rights and convertible securities (if any)
and the issuance of all Shares that the Company is obligated to issue (such
total number of outstanding Shares being hereinafter referred to as the "Fully
Diluted Shares") (the "Minimum Condition") and to the other conditions set forth
in Annex I hereto. Parent and Merger Subsidiary expressly reserve the right to
waive the conditions to the Offer and to make any change in the terms or
conditions of the Offer; provided that, without the prior written consent of the
Company, no change may be made which (i) except as provided in the next
sentence, extends the Offer, (ii) changes the form of consideration to be paid,
(iii) decreases the price per Share or the number of Shares sought in the Offer,
(iv) imposes conditions to the Offer in addition to those set forth in Annex I,
(v) changes or waives the Minimum Condition, or (vi) makes any other change to
any condition to the Offer set forth in Annex I which is materially adverse to
the holders of Shares. Notwithstanding the foregoing, Merger Subsidiary may,
without the consent of the Company, (i) extend the Offer, if at any scheduled
expiration date of the Offer any of the conditions to Merger Subsidiary's
obligation to purchase Shares pursuant to the Offer shall not be satisfied or
waived, until such time as such conditions are satisfied or waived, (ii) extend
the Offer for a period of not more than 20 business days beyond the Initial
Expiration Date, if on the date of such extension less than 90% of the Fully
Diluted Shares have been validly tendered and not properly withdrawn pursuant to
the Offer, and (iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer. Parent and Merger
Subsidiary agree that if all of the conditions to Merger Subsidiary's obligation
to purchase Shares pursuant to the Offer are not satisfied on any scheduled
expiration date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Merger Subsidiary shall extend the Offer
from time to time in increments of at least five business days each until the
earliest to occur of (x) the satisfaction or waiver of the Minimum Condition or
such other condition, (y) the termination of this Agreement in accordance with
its terms and (z) December 1, 1999. Subject to the terms of the Offer in this
Agreement and the satisfaction (or waiver to the extent permitted by this
Agreement) of the conditions of the Offer, Merger Subsidiary shall accept for
payment all Shares validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after the applicable expiration of the Offer.
(b) As soon as practicable on the date of commencement of the
Offer, Parent and Merger Subsidiary shall (i) file with the SEC a Tender Offer
Statement on Schedule 14D-l with respect to the Offer which will contain the
offer to purchase and form of the related letter of transmittal (together with
any supplements or amendments thereto, collectively the "Offer Documents") and
(ii) cause the Offer Documents to be disseminated to holders of Shares. Parent,
Merger Subsidiary and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect. Parent
and Merger Subsidiary agree to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and Merger Subsidiary agree to provide the
Company and its counsel in writing with any comments Parent, Merger Subsidiary
or their counsel receive from the SEC or its staff with respect to the Offer
Documents, promptly after receipt of such comments. The Company and its counsel
shall be given a
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reasonable opportunity to review and comment upon the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC.
SECTION 1.2. Company Action. (a) The Company hereby consents
to the Offer and represents that its Board of Directors, at a meeting duly
called and held, has (i) unanimously determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger (defined
below in Section 2.1), and the Stockholder Option Agreement, dated as of August
25, 1999 (the "Stockholder Option Agreement"), among the stockholders of the
Company that are named therein ("Stockholders") and Merger Subsidiary, and the
transactions contemplated thereby, are fair to and in the best interest of the
Company's stockholders, (ii) unanimously approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and the
Stockholder Option Agreement and the transactions contemplated thereby, which
approval satisfies in full the requirements of Section 203 of the General
Corporation Law of the State of Delaware (the "Delaware Law"), and (iii)
unanimously resolved to recommend acceptance of the Offer and approval and
adoption of this Agreement and the Merger by its stockholders. The Company
further represents that ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
("DLJ") has delivered to the Company's Board of Directors its opinion that the
consideration to be paid in the Offer and the Merger is fair to the holders of
Shares from a financial point of view. The Company has been advised that each of
its directors and executive officers presently intend either to tender their
Shares pursuant to the Offer or to vote in favor of the Merger. The Company will
promptly furnish Parent and Merger Subsidiary with a list of its stockholders,
mailing labels and any available listing or computer file containing the names
and addresses of all record holders of Shares and lists of securities positions
of Shares held in stock depositories, in each case as of the most recent
practicable date, and will provide to Parent and Merger Subsidiary such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent or Merger Subsidiary may reasonably request in connection
with the Offer.
(b) As soon as practicable on the day that the Offer is
commenced the Company will file with the SEC and disseminate to holders of
Shares a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") which shall reflect the recommendations of the Company's Board of
Directors referred to above, subject to the fiduciary duties of the Board of
Directors of the Company as advised by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel
to the Company. The Company, Parent and Merger Subsidiary each agrees promptly
to correct any information provided by it for use in the Schedule 14D-9 if and
to the extent that it shall have become false or misleading in any material
respect. The Company agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given an opportunity to review
and comment on the Schedule 14D-9 prior to its being filed with the SEC.
SECTION 1.3. Directors. (a) Effective upon the acceptance for
payment by Merger Subsidiary of the Shares tendered pursuant to the Offer,
Parent shall be entitled to designate the number of directors, rounded up to the
next whole number, on the Company's Board of Directors that equals the product
of (i) the total number of directors on the Company's Board of Directors (giving
effect to the election of any additional directors pursuant to this Section) and
(ii) the percentage that the number of Shares owned by Parent or Merger
Subsidiary (including Shares
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accepted for payment) bears to the total number of Shares outstanding, and the
Company shall take all action necessary to cause Parent's designees to be
elected or appointed to the Company's Board of Directors, including, without
limitation, increasing the number of directors, or seeking and accepting
resignations of incumbent directors, or both; provided that, prior to the
Effective Time (defined below in Section 2.1), the Company's Board of Directors
shall always have one member who is neither a designee nor an affiliate of
Parent or Merger Subsidiary nor an employee of the Company (an "Independent
Director"). If the number of Independent Directors is reduced below one for any
reason prior to the Effective Time the departing Independent Director shall be
entitled to designate a person to fill such vacancy. No action proposed to be
taken by the Company to (i) amend or terminate this Agreement or the certificate
of incorporation or by-laws of the Company or (ii) waive any action required to
be taken by Parent or Merger Subsidiary hereunder or any rights of the Company
hereunder shall be effective without the approval of the Independent Director.
At such times, the Company will use its best efforts to cause individuals
designated by Parent to constitute the same percentage as such individuals
represent on the Company's Board of Directors of (x) each committee of the
Board, (y) each board of directors of each subsidiary (defined below in Section
4.1(a)) and (z) each committee of each such board.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act
(defined below in Section 4.1(d)) and Rule 14f-l promulgated thereunder. The
Company shall promptly take all actions required pursuant to Section 14(f) and
Rule 14f-l in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-l to
fulfill its obligations under this Section 1.3. Parent will supply to the
Company in writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. (a) At the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company in
accordance with Delaware Law, whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction of or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Subsidiary will file a certificate of merger with the Secretary of
State of the State of Delaware and make all other filings or recordings required
by Delaware Law in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or, with the consent of the Independent Director,
at such later time as is specified in the certificate of merger (the "Effective
Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and Merger Subsidiary, all as provided under Delaware Law.
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SECTION 2.2. Conversion of Shares. At the Effective Time:
(a) each Share held by the Company as treasury stock or owned
by Parent, Merger Subsidiary or any subsidiary of either of them
immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto;
(b) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
(c) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 2.2(a) or as
provided in Section 2.4 with respect to Shares as to which appraisal
rights have been exercised, be converted into the right to receive
$5.50 in cash or any higher price paid for each Share in the Offer,
without interest (the "Merger Consideration").
SECTION 2.3. Surrender and Payment. (a) Prior to the Effective
Time, Parent shall appoint a bank or trust company (the "Exchange Agent") for
the purpose of exchanging certificates representing Shares for the Merger
Consideration. Parent will make available to the Exchange Agent, as needed, the
Merger Consideration to be paid in respect of the Shares (the "Exchange Fund").
For purposes of determining the Merger Consideration to be made available,
Parent shall assume that no holder of Shares will perfect his right to appraisal
of his Shares. Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each holder of Shares at the Effective Time
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 the certificates representing Shares to the Exchange Agent).
The Exchange Agent shall, pursuant to irrevocable instructions, make the
payments provided in this Section 2.3. The Exchange Fund shall not be used for
any other purpose, except as provided in this Agreement.
(b) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, and such other
documents as shall be reasonably requested, will be entitled to receive the
Merger Consideration payable in respect of such Shares. Until so surrendered,
each such certificate shall, after the Effective Time, represent for all
purposes, only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid
to a person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
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this Agreement, "person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(e) Any portion of the Exchange Fund made available to the
Exchange Agent pursuant to Section 2.3(a) that remains unclaimed by the holders
of Shares six months after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 2.3 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of his Shares. Notwithstanding the foregoing, Parent shall not be liable
to any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Shares immediately prior to such time as such amounts would otherwise escheat
to or become property of any governmental entity shall, to the extent permitted
by applicable law, become the property of Parent, free and clear of any claims
or interest of any person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.3(a) to pay for Shares for which
appraisal rights have been perfected shall be returned to Parent, upon demand.
SECTION 2.4. Dissenting Shares. Notwithstanding Section 2.2,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Delaware Law shall not
be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses his right to appraisal.
If after the Effective Time such holder fails to perfect or withdraws or loses
his right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and Parent shall have the right
to participate in all negotiations and proceedings with respect to such demands.
The Company 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.
SECTION 2.5. Stock Options. (a) Upon acceptance for payment of
Shares pursuant to the Offer, each outstanding Company Option (defined below),
whether vested or unvested, shall be canceled, and each holder of any such
option shall be paid by the Company promptly after the acceptance for payment of
Shares pursuant to the Offer for each such option an amount determined by
multiplying (i) the excess, if any, of $5.50 per Share over the applicable
exercise price of such option by (ii) the number of Shares such holder could
have purchased had such holder exercised such option in full immediately prior
to the acceptance for payment of Shares pursuant to the Offer (as if such
Company Option was exercisable in full). Notwithstanding any other provisions of
this Agreement, immediately after the acceptance for payment of Shares pursuant
to the Offer no
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Company Options will remain outstanding. "Company Option" means any option
granted, whether or not exercisable, and not exercised or expired, to a current
or former employee, director or independent contractor of the Company or any of
its subsidiaries or any predecessor thereof to purchase Shares pursuant to any
stock option, stock bonus, stock award, or stock purchase plan, program, or
arrangement of the Company or any of its subsidiaries or any predecessor thereof
(collectively, the "Stock Plans") or any other contract or agreement entered
into by the Company any of its subsidiaries.
(b) As soon as practicable following the date of this
Agreement, the Company shall use its commercially reasonable efforts to (i)
obtain any consents from holders of Company Options and (ii) make any amendments
to the terms of such stock option or compensation plans or arrangements that, in
the case of either clauses (i) or (ii), are necessary to give effect to the
transactions contemplated by Section 2.5(a). Notwithstanding any other provision
of this Section 2.5, payment may be withheld in respect of any Company Option
until necessary consents are obtained. All amounts payable pursuant to this
Section 2.5 shall be subject to, and reduced by, any required withholding of
taxes and shall be paid without interest.
(c) The parties hereto acknowledge that consummation of the
Offer shall constitute a "change in control" pursuant to the terms of, and for
purposes of, the employment agreements and each of the Company's outstanding
stock option plans, preferred stock designations, warrant agreements and any
other agreements, in each case which are listed in Section 2.5(c) of the
Disclosure Schedule (defined below in Section 4.1(b)).
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law, except that the name of the Surviving
Corporation shall be changed to the name of the Company.
SECTION 3.2. Bylaws. The bylaws of Merger Subsidiary in effect
at the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.3. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation, and (ii) the
officers of the Merger Subsidiary at the Effective Time shall be the officers of
the Surviving Corporation.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Merger Subsidiary as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) could not reasonably be expected
to have a Material Adverse Effect (defined below). The Company has made
available to Parent complete and correct copies of its certificate of
incorporation and by-laws and the certificates of incorporation and by-laws of
its subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person. For the purposes hereof, "Material Adverse Effect" means a
material adverse effect on (a) the assets, liabilities, condition (financial or
otherwise), business, properties, results of operations or prospects of the
Company and its subsidiaries taken as a whole or (b) the consummation of the
transactions contemplated hereby; provided that occurrences or events resulting
from (i) changes in the prices of oil, gas, natural gas liquids or other
hydrocarbon products, (ii) changes in general economic conditions, including
general stock market conditions and interest rate changes, or (iii) the adverse
determination of any pending litigation disclosed in the Disclosure Schedule
shall in each case be excluded from consideration for purposes of the effect of
an occurrence or event on the Company and its subsidiaries taken as a whole.
(b) Subsidiaries. Section 4.1(b) of the disclosure schedule
delivered by the Company to Parent and Merger Subsidiary prior to the execution
of this Agreement (the "Disclosure Schedule") lists each subsidiary of the
Company and its respective jurisdiction of incorporation. Except as disclosed in
Section 4.1(b) of the Disclosure Schedule, all the outstanding shares of capital
stock of each such subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by another subsidiary of the Company
or by the Company and another such subsidiary, free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens") and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock). Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any person except as disclosed in Section
4.1(b) of the Disclosure Schedule.
(c) Capital Structure. The authorized capital stock of the
Company consists of 20,000,000 Shares and 5,000,000 shares of Preferred Stock,
par value $.01 per share ("Preferred
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Stock") of the Company. As of the date of this Agreement, (i) 6,733,770 Shares
were issued and outstanding, (ii) no Shares were held by the Company in its
treasury or by any of the Company's subsidiaries, (iii) 1,139,556.25 shares of
Preferred Stock were issued and outstanding, (iv) 725,500 Shares were reserved
for issuance pursuant to the outstanding Company Options, and (v) 150,000 Shares
were reserved for issuance upon exercise of warrants to purchase Shares
disclosed in Section 4.1(c) of the Disclosure Schedule (the "Warrants"). All
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Stock Plans will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 4.1(c) of the Disclosure Schedule, there
are not any bonds, debentures, notes or other indebtedness or securities of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote. Except as set forth above and in Section 4.1(c) of the
Disclosure Schedule, there are not any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 4.1(c) of
the Disclosure Schedule, there are no outstanding rights, commitments,
agreements, arrangements or undertakings of any kind obligating the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of the Company or any of its
subsidiaries or any securities of the type described in the two immediately
preceding sentences. The Company has delivered to Parent complete and correct
copies of the Stock Plans and all forms of Company Options. Section 4.1(c) of
the Disclosure Schedule sets forth a complete and accurate list of all Company
Options and Warrants outstanding as of the date of this Agreement and the
exercise price of each outstanding Company Option and Warrant.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, except for any
required approval by the Company's stockholders in connection with the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, except for any required approval by the Company's stockholders in
connection with the consummation of the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming this Agreement constitutes a
valid and binding agreement of Parent and Merger Subsidiary, constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability in
considered in a proceeding in equity or at law. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its
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14
subsidiaries under, (i) the Certificate of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets other than, in
the case of clause (ii) or (iii) above, any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate could not
reasonably be expected to (A) have a Material Adverse Effect, (B) impair the
ability of the Company to perform its obligations under this Agreement or (C)
prevent or materially delay consummation of any of the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with or exemption by (collectively,
"Consents") any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (i) the filing of a
certificate of merger in accordance with Delaware Law and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (ii) the filing of a premerger notification and report form by
the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iii)
compliance with any applicable requirements of the Exchange Act, (iv) such
notices, filings and consents as may be required under relevant state property
transfer or environmental laws, and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as to which the failure
to obtain or make could not reasonably be expected to (x) have a Material
Adverse Effect or (y) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities. The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1997 (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, applicable to such SEC Documents, and none of
the SEC Documents 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 financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring year-end audit adjustments). Except as set forth in the Company Filed
SEC Documents (defined below in Section 4.1(g)) or in Section 4.1(e), (g) or (h)
of the Disclosure Schedule, neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
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15
contingent or otherwise) and there is no existing condition, situation or set of
circumstances which are required by generally accepted accounting principles to
be set forth on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto, except for liabilities which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(f) Disclosure Documents. (i) Each document required to be
filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "Company Disclosure Documents"), including,
without limitation, the Schedule 14D-9, the proxy or information statement of
the Company (the "Company Proxy Statement"), if any, to be filed with the SEC in
connection with the Merger, 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.
(ii) At the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to stockholders of the Company, and at the
time such stockholders vote on adoption of this Agreement, the Company 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. At the time of the filing of any
Company Disclosure Document other than the Company Proxy Statement and at the
time of any distribution thereof, such Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state a 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 Section 4.1(f)(ii) will not apply to statements
or omissions included in the Company Disclosure Documents based upon information
furnished to the Company in writing by Parent or Merger Subsidiary specifically
for use therein.
(iii) The information with respect to the Company or any
subsidiary that the Company furnishes to Parent or Merger Subsidiary in writing
specifically for use in the Offer Documents will not, at the time of the filing
thereof, at the time of any distribution thereof and at the time of the
consummation of the Offer, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(g) Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents filed and publicly available prior to the date of this
Agreement (the "Company Filed SEC Documents") or in Section 4.1(g) of the
Disclosure Schedule, since December 31, 1998, the Company has conducted its
business only in the ordinary course consistent with past practice, and there
has not been (i) any event, occurrence or development of a state of
circumstances which has had or could reasonably be expected to have a Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of the Company or any of its subsidiaries,
(iii) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iv)
(A) any granting by the Company or any of its subsidiaries to any current or
former director, officer or employee of the Company or any
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of its subsidiaries of any increase in compensation or benefits, except in the
ordinary course of business consistent with past practice, (B) any granting by
the Company or any of its subsidiaries to any such director, officer or employee
of any increase in severance or termination pay (including the acceleration in
the exercisability of Company Options or in the vesting of Shares (or other
property) or the provision of any tax gross-up), except as was required under
employment, severance or termination agreements or plans in effect as of
December 31, 1998 which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, or (C) any entry by the Company or
any of its subsidiaries into any employment, deferred compensation, severance or
termination agreement with any such current or former director, officer or
employee, except in the ordinary course of business consistent with past
practice, (v) any damage, destruction or loss, whether or not covered by
insurance, that has had or could have a Material Adverse Effect, (vi) any change
in accounting methods, principles or practices by the Company or any of its
subsidiaries, except insofar as may have been required by a change in generally
accepted accounting principles, (vii) any amendment of any material term of any
outstanding security of the Company or any of its subsidiaries, (viii) any
incurrence, assumption or guarantee by the Company or any of its subsidiaries of
any material indebtedness for borrowed money other than in the ordinary course
of business consistent with past practice, but in no event in the amount of more
than $250,000 in the aggregate, (ix) any creation or assumption by the Company
or any of its subsidiaries of any Lien on any asset other than in the ordinary
course of business consistent with past practice, but in no event in the amount
of more than $250,000 for any one transaction or $500,000 in the aggregate, (x)
any making of any loan, advance or capital contributions to or investment in any
person other than (A) made in the ordinary course of business consistent with
past practice, but in no event in the amount of more than $100,000 for any one
transaction or $150,000 in the aggregate and (B) investments in cash equivalents
made in the ordinary course of business consistent with past practice, (xi) any
transaction or commitment made, or any contract or agreement entered into, by
the Company or any of its subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets or the merger or
consolidation with any person) or any relinquishment by the Company or any of
its subsidiaries of any contract or other right, in either case, material to the
Company or any of its subsidiaries, other than transactions and commitments in
the ordinary course of business consistent with past practice and those
contemplated by this Agreement, but in no event representing commitments on
behalf of the Company or any of its subsidiaries of more than $250,000 for any
transaction or $500,000 for any series of transactions, (xii) any material labor
dispute, other than routine individual grievances, or any activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its subsidiaries, which employees were not subject to a
collective bargaining agreement at December 31, 1998, or any material lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees or (xiii) any agreement, commitment, arrangement or undertaking by the
Company or any of its subsidiaries to perform any action described in clauses
(i) through (xii).
(h) Litigation. Except as disclosed in the Company Filed SEC
Documents or Section 4.1(h) of the Disclosure Schedule, there is no suit, action
or proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to (i) have a Material Adverse Effect,
(ii) impair the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or materially delay the consummation of the Offer,
the Merger or any of the other transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its
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subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Section 4.1(h) of the Disclosure Schedule
sets forth, with respect to any pending suit, action or proceeding to which the
Company or any its subsidiaries is a party and which involves claims which could
reasonably be expected to exceed $25,000, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed.
(i) Absence of Changes in Stock or Benefit Plans. Except as
disclosed in Section 4.1(i) or (g) of the Disclosure Schedule, since December
31, 1998, there has not been (i) any acceleration, amendment or change of the
period of exercisability or vesting of any Company Options or restricted stock,
stock bonus or other awards under the Stock Plans or any other options to
purchase Shares or stock of any subsidiary of the Company (including any
discretionary acceleration of the exercise periods or vesting by the Company's
Board of Directors or any committee thereof or any other persons administering a
Stock Plan) or authorization of cash payments in exchange for any Company
Options, restricted stock, stock bonus or other awards granted under any of such
Stock Plans or any other options to purchase Shares as stock of any subsidiary
of the Company or (ii) any adoption or amendment by the Company or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, stock appreciation right,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical, workers' compensation, disability, supplementary unemployment benefits,
or other plan, arrangement or understanding (whether or not legally binding) or
any employment agreement providing compensation or benefits to any current or
former employee, officer, director or independent contractor of the Company or
any of its subsidiaries or any beneficiary thereof or entered into, maintained
or contributed to, as the case may be, by the Company or any of its subsidiaries
(collectively, "Benefit Plans") other than immaterial amendments to any such
Benefit Plan. Section 4.1(i) of the Disclosure Schedule sets forth for each of
the five most highly compensated employees of the Company, the aggregate maximum
amount of all termination, severance or other similar benefits to which such
employee is entitled in connection with the Merger and the other transactions
contemplated by this Agreement.
(j) Participation and Coverage in Benefit Plans. There has
been no adoption of, or amendment to, or change in employee participation or
coverage under, or written interpretation or announcement (whether or not
written) by the Company or any of its subsidiaries relating to, any Benefit
Plans which would increase materially the expense of maintaining such Benefit
Plans above the level of the expense incurred in respect thereof for the fiscal
year ended on December 31, 1998.
(k) ERISA Compliance. (i) Section 4.1(k) of the Disclosure
Schedule contains a list and brief description of all "employee pension benefit
plans" (defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), "employee welfare benefit plans" (defined in
Section 3(l) of ERISA) and all other Benefit Plans maintained, or contributed
to, by the Company or any of its subsidiaries or ERISA affiliates (defined
below) for the benefit of any current or former employees, officers or directors
of the Company or any of its subsidiaries or ERISA affiliates or under which the
Company or any of its subsidiaries or ERISA affiliates has any liability. The
Company has made available to Parent complete and correct copies of (A) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof) and all amendments thereto and written interpretations thereof, (B) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was required), (C) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required
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and (D) each trust agreement and group annuity or insurance contract relating to
any Benefit Plan. For purposes of this Agreement, "ERISA affiliate" of the
Company means any person which, together with the Company or any of its
subsidiaries, would be treated as a single employer under Section 414 of the
Code. The only Benefit Plans which individually or collectively would constitute
an "employee pension benefit plan" defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as such in Section 4.1(k) of the Disclosure
Schedule.
(ii) Each Benefit Plan has been maintained and administered in
compliance in all material respects with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
and is, to the extent required by applicable law or contract, fully funded
without having any deficit or unfunded actuarial liability. Any Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified and nothing has occurred to
cause the loss of such qualified status.
(iii) No Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. Neither the Company nor any of its subsidiaries has
incurred or expects to incur any liability under Title IV of ERISA or any
liability or penalty under Section 4975 or 4980B of the Code or Section 502(i)
of ERISA.
(iv) There are no pending or anticipated material claims
against or otherwise involving any of the Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Benefit Plan activities) has been brought against or with respect to any
Benefit Plan.
(v) All material contributions, reserves or premium payments,
required to be made as of the date hereof to or with respect to the Benefit
Plans have been made or provided for.
(vi) Except as required by law, neither the Company nor any of
its subsidiaries has any obligations for post-retirement or post-termination
health and life benefits under any Benefit Plan.
(l) Taxes. As used in this Agreement, "tax" or "taxes" shall
include all Federal, state, local and foreign income, property, sales, excise
and other taxes, tariffs or governmental charges or assessments of any nature
whatsoever as well as any interest, penalties and additions thereto.
(i) Except as set forth in Section 4.1(l) of the Disclosure
Schedule, the Company and each of its subsidiaries have timely filed all tax
returns, statements, reports and forms required to be filed with any tax
authority and in accordance with all applicable laws (other than a failure in an
immaterial matter). All such tax returns are correct and complete in all
respects. Except as set forth in Section 4.1(l) of the Disclosure Schedule, the
Company and each of its subsidiaries have paid (or the Company has paid on its
behalf) all taxes required to be paid by it, and the most recent financial
statements contained in the Company Filed SEC Documents reflect an adequate
reserve for all taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements. There are no Liens on any of the assets of the Company or any of its
subsidiaries that arose in connection with any failure (or alleged failure) to
pay any tax.
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(ii) The Company and each of its subsidiaries has withheld and
timely paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Neither the Company nor any of its subsidiaries expects
any authority to assess any additional taxes against the Company or any of its
subsidiaries for any period for which tax returns have been filed. Except as set
forth in Section 4.1(l) of the Disclosure Schedule, no dispute or claim
concerning any tax liability of the Company or any of its subsidiaries has been
proposed or claimed in writing by any authority. The Company has provided Parent
with a list of all Federal, state, local, and foreign income tax returns filed
with respect to the Company and any of its subsidiaries for taxable periods
ended on or after December 31, 1995, indicating those tax returns that have been
audited, and indicating those tax returns that currently are the subject of
audit. The Company has made available to Parent correct and complete copies of
all its Federal income tax returns, and examination reports, and statements of
deficiencies assessed against or agreed to by the Company and any of its
subsidiaries since December 31, 1995.
(iv) Neither the Company nor any of its subsidiaries has
waived any statute of limitations in respect of taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries has filed
a consent pursuant to Section 341(f) of the Code concerning collapsible
corporations. Except as set forth in Section 4.1(l) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any tax allocation
or sharing agreement. Neither the Company nor any of its subsidiaries has any
liability for the taxes of any person (other than the Company and any of its
subsidiaries that is currently a member of the Company's affiliated group filing
a consolidated federal income tax return) under Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) As of the date of the most recent financial statements
included in the Company Filed SEC Documents, the unpaid taxes of the Company and
its subsidiaries did not exceed the liability for taxes (rather than any reserve
for deferred taxes established to reflect timing differences between book and
tax income) set forth on the face of such financial statements.
(vii) Neither the Company nor any of its subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method; nor does
the Company or any of its subsidiaries have any knowledge that the Internal
Revenue Service (or other taxing authority) has proposed or is considering
proposing, any such change in accounting method. Neither the Company nor any of
its subsidiaries is a party to any agreement, contract, or arrangement that,
individually or collectively, could give rise to the payment of any amount
(whether in cash or property, including Company Stock) that would not be
deductible pursuant to the terms of Sections 162(a)(1), 162(m), 162(n) or 280G
of the Code.
(m) State Takeover Statutes. The Board of Directors of the
Company has approved the Offer, the Merger, the Stockholder Option Agreement and
this Agreement, and such approval is sufficient to render inapplicable to the
Offer, the Merger, the Stockholder Option
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Agreement, this Agreement, and the transactions contemplated hereby or thereby,
the provisions of Section 203 of Delaware Law. To the Company's knowledge, no
other "fair price", "moratorium", "control share acquisition", or other
anti-takeover statute or similar statute or regulation, applies or purports to
apply to the Offer, the Merger, the Stockholder Option Agreement, this
Agreement, or any of the transactions contemplated hereby or thereby.
(n) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than DLJ, the fees
and expenses of which will be paid by the Company (and a copy of whose
engagement letter and a calculation of the fees that would be due thereunder has
been provided to Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any of its subsidiaries. No such engagement letter obligates the
Company to continue to use the services or pay fees or expenses in connection
with any future transaction.
(o) Permits; Compliance with Laws. Each of the Company and its
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has occurred no default under any such Permit, except for the absence of Permits
and for defaults under Permits which absence or defaults, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
The Company and its subsidiaries have been, and are, in compliance in all
material respects with all applicable statutes, laws, ordinances, regulations,
rules, judgments, decrees or orders of any Governmental Entity, and neither the
Company nor any of its subsidiaries has received any notice from any
Governmental Entity or any other person that either the Company or any of its
subsidiaries is in violation of, or has violated, in any material respect any
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees or
orders.
(p) Contracts; Debt Instruments; Leases. (i) Except as
otherwise disclosed in Section 4.1(p)(i)(A)-(F) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to or subject to:
(A) any union contract, or any employment consulting,
severance, termination, or indemnification agreement, contract or
arrangement providing for future payments, written or oral, with any
current or former officer, consultant, director or employee which (1)
exceeds $25,000 per annum or (2) requires aggregate annual payments or
total payments over the life of such agreement, contract or arrangement
to such current or former officer, consultant, director or employee in
excess of $25,000 or $50,000, respectively, and is not terminable by it
or its subsidiary on 30 days' notice or less without penalty or
obligation to make payments related to such termination;
(B) any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of
revenues that nets the Company $500,000 per annum or more of revenues;
(C) any lease for real or personal property (including mineral
leases (other than oil or gas leases)), "non-HBP" leases, take-or-pay
arrangements, recoupment arrangements,
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Fixed Price Contracts (as defined below in Section 4.1(w)(ii)),
agreements for the sale or production of Hydrocarbons (as defined below
in Section 4.1(w)(iii)), gas gathering agreements, gas treatment
agreements, gas compression agreements, transportation agreements,
agreements to purchase pipes, facilities or equipment or other
contracts or agreements relating to the Company's or any of its
subsidiaries' Oil and Gas Interests (as defined below in Section
4.1(w)(i));
(D) any material agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment which has not been
terminated or performed in its entirety and not renewed which may be,
by its terms, terminated, impaired or adversely affected by reason of
the execution of this Agreement, the closing of the Offer or the
Merger, or the consummation of the transactions contemplated hereby;
(E) any agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment that materially limits
the freedom of the Company or any subsidiary of the Company to compete
in any line of business or with any person or in any geographic area or
which would so materially limit the freedom of the Company or any
subsidiary of the Company after the Effective Time; or
(F) any other agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment not made in the
ordinary course of business which is material to the Company or any of
its subsidiaries.
(ii) All contracts, policies, agreements, leases, licenses,
Permits, documents, instruments, arrangements and other commitments listed in
Section 4.1(p)(i)(A)-(F) and Section 4.1(p)(iv) of the Disclosure Schedule or
otherwise disclosed in the Company Filed SEC Documents are valid and binding
agreements of the Company or a subsidiary of the Company and are in full force
and effect, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability in considered in
a proceeding in equity or at law, and, except as set forth in Section 4.1(p) of
the Disclosure Schedule, neither the Company, any of its subsidiaries nor, to
the knowledge of the Company, any other party thereto, is in default in any
material respect under the terms of any such contract, plan, arrangement,
agreement, lease, license, Permit, instrument or other commitment.
(iii) Except as set forth in Section 4.1(p) of the Disclosure
Schedule, neither the Company nor any subsidiary of the Company is in default in
any material respect under the terms of any exclusive license or distribution
agreement or arrangement, true and complete copies or descriptions of all of
which have been made available to Parent. To the knowledge of the Company, none
of the parties to any of the contracts identified pursuant to the immediately
proceeding sentence, in Section 4.1(p)(i)(A)-(F) of the Disclosure Schedule or
otherwise disclosed in the Company Filed SEC Documents has terminated, or in any
way expressed an intent to materially reduce or terminate the amount of, its
business with the Company or any of its subsidiaries in the future.
(iv) Set forth in Section 4.1(p)(iv) of the Disclosure
Schedule is (A) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments
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pursuant to which any indebtedness of the Company or any of its subsidiaries in
an aggregate principal amount in excess of $100,000 is outstanding or may be
incurred and (B) the respective principal amounts currently outstanding
thereunder. For purposes of this Section 4.1(p)(iv), "indebtedness" shall mean,
with respect to any person, without duplication, (A) all obligations of such
person for borrowed money, or with respect to deposits or advances of any kind
to such person, (B) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all obligations of such person
upon which interest charges are customarily paid, (D) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such person's business), (F) all
capitalized lease obligations of such person, (G) all obligations of others
secured by any Lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency swap transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued for the benefit
of suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations of such person to purchase securities
(or other property) which arises out of or in connection with the sale of the
same or substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(q) Opinion of Financial Advisor. The Company has received the
opinion of DLJ, dated the date hereof, a copy of which has been or, within two
business days of the date hereof, will be provided to Parent, to the effect
that, as of such date, the consideration to be paid in the Offer and the Merger
is fair to the Company's stockholders from a financial point of view.
(r) Interests of Officers and Directors. None of the Company's
or any of its subsidiaries' officers or directors has any interest in any
property, real or personal, tangible or intangible, including inventions,
patents, copyrights, trademarks, trade names, trade secrets or know-how, used in
or pertaining to the business of the Company or that of its subsidiaries, or any
supplier, distributor or customer of the Company or any of its subsidiaries,
except for the normal rights of a stockholder and rights under existing Benefit
Plans and Stock Plans.
(s) Technology. (i) Except as set forth in Section 4.1(s)(i)
of the Disclosure Schedule, the Company exclusively owns, or is licensed to use,
without restriction, the rights to all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, inventories, technology, trade
secrets, know-how, 3-D seismic data, computer software programs or applications
and tangible or intangible proprietary information or material that in any
material respect are used or proposed to be used in the business of the Company
and any of its subsidiaries as currently conducted or proposed to be conducted
(the "Company Intellectual Property Rights"). Section 4.1(s)(i) of the
Disclosure Schedule lists: (A) all patents, trademarks, trade names, service
marks, registered and unregistered copyrights, and any applications therefor
included in the Company Intellectual Property Rights; (B) all licenses and other
agreements to which the Company or any of its subsidiaries is a party and
pursuant to which the Company or any of its subsidiaries is authorized to use
any Company Intellectual Property Right, and includes the identities of the
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof; and (C) all 3-D seismic data included
in the Company Intellectual Property Rights. Neither the Company nor any of its
subsidiaries
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is, or as a result of the execution, delivery or performance of the Company's
obligations hereunder will be, in violation in any material respect of, or lose
any rights (other than immaterial rights) pursuant to, any license or agreement
described in Section 4.1(s) of the Disclosure Schedule.
(ii) No claims with respect to the Company Intellectual
Property Rights have been asserted or, to the knowledge of the Company, are
threatened by any person nor does the Company or any subsidiary of the Company
know of any valid grounds for any bona fide claims (A) to the effect that the
manufacture, sale or use of any product or process as now used or offered or
proposed for use or sale by the Company or any subsidiary of the Company
infringes on any copyright, trade secret, patent or other intellectual property
right of any person, (B) against the use by the Company or any subsidiary of the
Company of any Company Intellectual Property Rights, or (C) challenging the
ownership, validity or effectiveness of any of the Company Intellectual Property
Rights. All granted and issued patents and all registered trademarks and service
marks listed in Section 4.1(s) of the Disclosure Schedule and all copyrights
held by the Company or any of its subsidiaries are valid, enforceable and
subsisting. To the Company's knowledge, there has not been and there is not any
material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, employee or former
employee.
(t) Change of Control. Except as disclosed in Section 2.5(c),
4.1(i) or 4.1(t) of the Disclosure Schedule, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not (i) result in any payment (including severance, unemployment
compensation, tax gross-up, bonus or otherwise) becoming due to any current or
former director, employee or independent contractor of the Company or any of its
subsidiaries, from the Company or any of its subsidiaries under any Stock Plan,
Benefit Plan, agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Stock Plan, Benefit Plan, agreement or otherwise or
(iii) result in the acceleration of the time of payment, exercise or vesting of
any such benefits, in each case, that could reasonably be expected to have a
Material Adverse Effect.
(u) Environmental. Except as set forth in Section 4.1(u) of
the Disclosure Schedule, (i) the businesses as presently or formerly engaged in
by the Company and its subsidiaries are and have been conducted in compliance in
all material respects with all applicable Environmental Laws (defined below),
including having all permits, licenses and other approvals and authorizations,
during the time the Company (or such subsidiary) engaged in such businesses,
(ii) the properties presently or formerly owned or operated by the Company or
any subsidiary of the Company (including soil, groundwater or surface water on,
under or adjacent to the properties, and buildings thereon) ("Company
Properties") do not contain any Hazardous Substance (defined below) other than
as permitted under applicable Environmental Laws, (iii) neither the Company nor
any subsidiary of the Company has received any notices, demand letters or
requests for information from any federal, state, local or foreign governmental
entity or any third party indicating that the Company or any subsidiary of the
Company may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of the Company's or any of its
subsidiaries' businesses, (iv) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or proceedings pending
or threatened against the Company or any subsidiary of the Company with respect
to the Company or any subsidiary of the Company or the Company Properties
relating to any violation, or alleged violation, of any Environmental Law, (v)
no reports have been filed, or are required to be filed, by the Company or any
subsidiary of the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law on or at Company
Properties, (vi) no Hazardous Substance
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has been disposed of, transferred, released or transported from any Company
Property during the time such Company Property was owned or operated by the
Company or any subsidiary of the Company, other than as permitted under
applicable Environmental Law, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted by
or which are in the possession of the Company or any subsidiary of the Company
relating to the Company or any subsidiary of the Company or the Company
Properties which have not been delivered to Parent prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any of the Company
Properties and no underground storage tanks have been closed or removed from any
Company Properties while such Company Property was in the ownership of the
Company or any subsidiary of the Company, (ix) there is no asbestos present in
any Company Property presently owned or operated by the Company or any
subsidiary of the Company, and no asbestos has been removed from any Company
Property while such Company Property was owned or operated by the Company or any
subsidiary of the Company, (x) none of the Company Properties has been used at
any time by the Company or any subsidiary of the Company as a sanitary landfill
or hazardous waste disposal site, and (xi) neither the Company nor any
subsidiary of the Company has incurred, and none of the Company Properties are
presently subject to, any liabilities (fixed or contingent) relating to any
suit, settlement, court order, administrative order, judgment or claim asserted
or arising under any Environmental Law.
"Environmental Law" means (i) any federal, state, foreign and
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental
entity, (A) relating to the protection, preservation or restoration of
the environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or to human
health or safety or (B) relating to the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of, Hazardous
Substances, in each case as amended and as now or hereafter in effect
and (ii) any common law or equitable doctrine (including injunctive
relief) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. The term
"Hazardous Substance" includes any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos containing
material, urea formaldehyde foam insulation, lead and polychlorinated
biphenyl.
(v) Title to Properties. Except as set forth in Section 4.1(v)
of the Disclosure Schedule, (i) each of the Company and its subsidiaries has
good and indefeasible title to, or valid leasehold interests in, all its
properties and assets (including all oil and gas interests), free and clear of
all Liens, except for defects in title, easements, restrictive covenants and
similar encumbrances or impediments that, in the aggregate, do not and will not
materially interfere with the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties;
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(ii) each of the Company and its subsidiaries has complied in
all material respects with the terms of all leases to which it is a party and
under which it is in occupancy, and all such leases are in full force and effect
and each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases;
(iii) all royalties, rentals, shut-in gas payments and other
payments due with respect to the Company's and its subsidiaries' Oil and Gas
Interests (as defined in Section 4.1(w)(i)) have been properly and timely paid,
except (A) for payments held in suspense for title or other reasons which are
customary in the industry and which will not result in grounds for cancellation
of the Company's or its subsidiaries' rights in such Oil and Gas Interests and
(B) such failures as would not have a Material Adverse Effect; and
(iv) neither the Company nor any of its subsidiaries is in
default (and there exists no event or circumstance which with notice or the
passage of time or both could constitute a default by the Company or its
Subsidiaries) under the terms of any leases, farmout agreements or other
contracts or agreements respecting the Company's or its subsidiaries' Oil and
Gas Interests which could (A) interfere in any material respect with the
operation or use thereof, (B) prevent the Company or its subsidiaries from
receiving the proceeds of production attributable to their interest therein, (C)
result in cancellation of the Company's interest therein, or (D) impair the
value of the Company's or its subsidiaries' interest therein.
(w) Other Obligations. (i) Except as set forth in Section 4.1
(w) of the Disclosure Schedule, (i) none of the Company's or its subsidiaries'
Oil and Gas Interests are subject to any contract or agreement providing for
recoupment of sums paid in respect of take or pay gas purchase contracts or
other similar provision such that the owner of such assets will not receive the
full amount of revenue from the sale of production attributable to the ownership
interest therein; and (ii) there exists no imbalance regarding production taken
or marketed from such assets or any portion thereof which could result in (1) a
portion of the interest in production therefrom to be taken or delivered after
the Effective Time without the Company or any of its subsidiaries receiving
payment therefor and at the price it would have received absent such imbalance;
(2) the Company or any of its subsidiaries, after the Effective Time, being
obligated to make payment to any person or entity as a result of such imbalance;
or (3) production being shut-in or curtailed after the Effective Time due to
non-compliance with allowables, production quotas, proration rules or similar
orders or regulations of any governmental authorities. "Oil and Gas Interests"
means direct and indirect interests in and rights with respect to oil, gas,
helium, carbon dioxide, mineral, and related properties and assets of any kind
and nature, direct or indirect, including leasehold, working, royalty and
overriding royalty interests, production payments, operating rights, net profit
interests, other non-working interests, and non-operating interests.
(ii) Except as disclosed in Section 4.1(w) of the Disclosure
Schedule, none of the Company and its subsidiaries engages in any natural gas or
other futures or options trading or is a party to any price swaps, ▇▇▇▇▇▇,
futures or similar instruments. Section 4.1(w) of the Disclosure Schedule
discloses a true and correct statement of the position, as of the date hereof,
of the Company and its subsidiaries with respect to obligations under Fixed
Price Contracts (including, with respect to each Fixed Price Contract, location
of delivery and variations in the obligation to take or deliver)
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and related Hydrocarbon (as defined in Section 4.1(w)(iii)) price swaps, ▇▇▇▇▇▇,
futures or similar instruments to which the Company or any of its subsidiaries
is a party and that are material to the Company. "Fixed Price Contracts" shall
mean any contracts, commitments or agreements for the purchase or sale of
Hydrocarbons (x) having a remaining term of more than sixty (60) days, wherein
the purchase or sale price thereunder throughout part of the remaining life of
such contract, commitment or agreement is a fixed amount or an amount that is
otherwise reasonably determinable as of the date hereof pursuant to the terms of
such contract, commitment or agreement, or (y) which has been hedged with
futures contracts or otherwise; provided, however, that the term Fixed Price
Contracts will not include any contract, commitment or agreement under which the
purchase or sales price throughout the remaining life of the contract,
commitment or agreement is based on a market responsive reference price for a
Hydrocarbon.
(iii) Neither the Company nor any of its subsidiaries has
entered into, or is a party to, or has any obligations under, any contract for
the purchase of Hydrocarbons or other property or services that require payment
to be made by the Company or its subsidiaries regardless of whether or not
delivery is ever made of such Hydrocarbons or other property or services.
"Hydrocarbons" shall mean crude oil, natural gas, natural gas liquids and other
hydrocarbons produced from crude oil or natural gas.
(x) Public Utility Holding Company Act; Non-Utility Status.
Except as set forth in Section 4.1(x) of the Disclosure Schedule, (i) neither
the Company nor any of its subsidiaries is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended;
(ii) neither the Company nor any of its subsidiaries is a regulated utility
under the laws of any state; (iii) no claim or complaint to the effect that the
Company or any of its subsidiaries is a regulated utility under the laws of any
state has been made to the Company or any of its subsidiaries or by or, to the
knowledge of the Company, to any public utilities commission of any state; and
(iv) neither the Company nor any of its subsidiaries has offered pipeline
service or gas transportation services to the general public or to any
significant segment thereof or has dedicated its pipelines or related facilities
in any manner to public use. Section 4.1(x) of the Disclosure Schedule discloses
all persons or entities for whom gas has been transported by the Company or any
of its subsidiaries.
(y) Year 2000. Except as disclosed in Section 4.1(y) of the
Disclosure Schedule, all of the MIS Systems (other than immaterial Systems),
fuel operations and the Facilities (other than immaterial Facilities) are, or
prior to December 31, 1999 are reasonably expected to be, Year 2000 Compliant.
To the knowledge of the Company, all material vendors of products or services to
the Company and its subsidiaries will continue to furnish its products or
services to the Company and its subsidiaries (other than immaterial products and
services) without interruption or material delay, on and after January 1, 2000
and such products and services are Year 2000 compliant. Section 4.1(y) of the
Disclosure Schedule sets forth a list of all vendor and supplier Year 2000
compliance certificates received by the Company. "Year 2000 Compliant" means
that (i) the MIS Systems accurately process, provide and/or receive all
date/time data (including calculating, comparing, sequencing, processing and
outputting) within, from, into, and between centuries (including the twentieth
and twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (ii) neither the performance nor the functionality nor the
Company's or any of its subsidiaries' provision of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on, after,
or spanning January 1, 2000. "Facilities" means any facilities or equipment used
by the Company or
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any of its subsidiaries' in any location, including HVAC systems, mechanical
systems, elevators, security systems, fire suppression systems,
telecommunications systems, and equipment, whether or not owned by the Company
or any of its subsidiaries. "MIS Systems" means any computer software and
systems (including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of business by or on behalf
of the Company or any of its subsidiaries, including the Company's or any of its
subsidiaries' payroll, accounting, billing/receivables, inventory, asset
tracking, customer service, human resources, and e-mail systems.
(z) Insurance. Schedule 4.1(z) of the Disclosure Schedule
contains a true and complete list of all insurance policies held by either the
Company or any of its subsidiaries. All such policies held by the Company or its
subsidiaries, are in full force and effect and all related premiums have been
paid to date. To the knowledge of the Company, there are no pending or
threatened disputes or communications with or from any insurance carrier denying
or disputing any claim or regarding cancellation or nonrenewal of any such
policy.
(aa) Disclosure. No representation or warranty of the Company
contained in this Agreement, and no statement contained in the Disclosure
Schedule, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.2. Representations and Warranties of Parent and
Merger Subsidiary. Parent and Merger Subsidiary represent and warrant to the
Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Merger Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. Parent and Merger Subsidiary
have all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary. This Agreement has
been duly executed and delivered by Parent and Merger Subsidiary and, assuming
this Agreement constitutes a valid and binding agreement of the Company,
constitutes a valid and binding obligation of such party, enforceable against
such party in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law. The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent or Merger Subsidiary or the
comparable charter or organizational documents of any other subsidiary of
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Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent or Merger Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Merger Subsidiary or any
other subsidiary of Parent or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (A) have a
material adverse effect on Parent or any of its subsidiaries, (B) impair the
ability of Parent and Merger Subsidiary to perform their respective obligations
under this Agreement or (C) prevent the consummation of any of the transactions
contemplated by this Agreement. No Consent is required by or with respect to
Parent, Merger Subsidiary or any other subsidiary of Parent in connection with
the execution and delivery of this Agreement or the consummation by Parent or
Merger Subsidiary, as the case may be, of any of the transactions contemplated
by this Agreement, except for (i) the filing of a certificate of merger in
accordance with Delaware Law and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(ii) the filing of a premerger notification and report form under the HSR Act,
(iii) compliance with any applicable requirements of the Exchange Act, (iv) such
notices, filings and consents as may be required under relevant state property
transfer or environmental laws and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which the Company or any of its subsidiaries
conducts any business or owns any property or assets.
(c) Disclosure Documents. (i) The information with respect to
Parent and its subsidiaries that Parent furnishes to the Company in writing
specifically for use in any Company Disclosure Document 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 (A) in the case of the Company Proxy
Statement at the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company, at the time the
stockholders vote on adoption of this Agreement and at the Effective Time, and
(B) in the case of any Company Disclosure Document other than the Company Proxy
Statement, at the time of the filing thereof and at the time of any distribution
thereof.
(ii) The Offer Documents, when filed, will comply as to form
in all material respects with the applicable requirements of the Exchange Act
and will not at the time of the filing thereof, at the time of any distribution
thereof or at the time of consummation of the Offer, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, provided, that this representation and warranty
will not apply to statements or omissions in the Offer Documents based upon
information furnished to Parent or Merger Subsidiary in writing by the Company
specifically for use therein.
(d) Brokers. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent or
Merger Subsidiary.
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ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. Conduct of Business. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
its subsidiaries to, carry on their respective businesses in the ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all commercially reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company shall not, and shall not permit any of its subsidiaries to,
without the prior written approval of Parent (which determination by Parent
shall not be unreasonably delayed):
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (other than in connection
with the exercise of Company Options);
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
Shares upon the exercise of Company Options);
(c) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(d) except as set forth in Section 5.1(d) of the Disclosure
Schedule, acquire or agree to acquire (including, without limitation, by merger,
consolidation or acquisitions of stock or assets) any business, including
through the acquisition of any interest in any corporation, partnership, limited
liability company, joint venture, association or other business organization or
division thereof;
(e) mortgage or otherwise encumber or subject to any Lien or,
except in the ordinary course of business consistent with past practice and
pursuant to existing contracts or commitments, sell, lease, license, transfer or
otherwise dispose of any of the Company Intellectual Property Rights or any
other material properties or assets, except as disclosed in Section 5.1(e) of
the Disclosure Schedule;
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(f) except as set forth in Section 5.1(f) of the Disclosure
Schedule, make or agree to make any new capital expenditures in excess of
$500,000;
(g) make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(h) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice and in accordance with their
terms, or waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any of
its subsidiaries is a party;
(i) commence a lawsuit other than (i) for the routine
collection of bills or (ii) in such cases where the Company in good faith
determines that the failure to commence suit would result in a material
impairment of a valuable aspect of the Company's business, provided that the
Company consults with Parent prior to filing such suit;
(j) (i) enter into or amend any employment or severance
agreement or similar arrangements, (ii) make any determination as to amounts
payable under any plan, arrangement, or agreement, providing for discretionary
incentive compensation or bonus to any officer, director, employee or
independent contractor of the Company or any of its subsidiaries or (iii) enter
into, adopt, or amend any agreement, arrangement, or Benefit Plan so as to
increase the liability (whether or not contingent) of the Company or the Parent
or any of their subsidiaries in respect of compensation or benefits except as
may be required by law;
(k) incur any additional indebtedness (as defined in Section
4.1(p)(iv)) other than borrowings under the Company's senior bank credit
facilities as in effect on the date hereof; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions; or
(m) (i) take or agree or commit to take any action that would
make any representation or warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or (ii) omit
or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
SECTION 5.2. Stockholder Meeting; Proxy Material. The Company
shall cause a meeting of its stockholders (the "Company Stockholder Meeting") to
be duly called and held as soon as reasonably practicable following Merger
Subsidiary's acquisition of Shares in the Offer for the purpose of voting on the
approval and adoption of this Agreement and the Merger unless a vote of
stockholders of the Company is not required by Delaware Law. The Directors of
the Company shall, subject to their fiduciary duties as advised by ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel to the Company, recommend approval and adoption
of this Agreement and the Merger by the Company's stockholders. In connection
with such meeting, the Company (i) will promptly prepare and file with the SEC,
will use its best efforts to have cleared by the SEC and will thereafter mail to
its stockholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for such meeting, (ii) subject to the fiduciary duties of
the Board of Directors of the Company as
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advised by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel to the Company, will use its
best efforts to obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby and (iii) will otherwise
comply with all legal requirements applicable to such meeting.
SECTION 5.3. Access to Information. Subject to the terms of
that certain Confidentiality Agreement dated June 15, 1999, (a) from the date
hereof until the Effective Time, the Company shall, and shall cause each of its
subsidiaries to, give Parent, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, books and records of the
Company and the subsidiaries, will furnish to Parent, its counsel, financial
advisors, auditors and other authorized representatives all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws, (ii) a copy of each tax return, report and information
statement filed by it during such period, and (iii) all other information
concerning its business, assets, properties and personnel (including financial
and operating data) as such persons may reasonably request and will instruct the
Company's employees, counsel and financial advisors to cooperate with Parent in
its investigation of the business of the Company and the subsidiaries; provided
that no investigation pursuant to this Section 5.3 shall affect any
representation or warranty given by the Company hereunder.
(b) from the date hereof until the Effective Time, the Company
will give Parent, its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours and upon reasonable
notice) to all abstracts of title, title opinions, title files, ownership maps,
lease files, assignments, division orders, check vouchers and payment statements
as the same may now be in existence and in the possession of the Company.
(c) from the date hereof until the Effective Time, the Company
will give Parent, its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours at their actual
location) to all accounting, revenue, marketing, transportation, processing,
environmental, geological, geophysical, production and engineering books,
records and data in possession of Company, except such records or data which
Company is prevented by contractual obligations with third parties from
disclosing; provided that in the event Seller is prohibited from making files or
records available because of provisions of third party agreements, then Company
shall inform Parent of the existence of such records, the parties thereto and
the subject matter of such records.
SECTION 5.4. Other Offers. Until the termination of this
Agreement, the Company and its subsidiaries will not, and will not authorize or
permit the officers, directors, employees or other agents of the Company and its
subsidiaries to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal (defined below) or (ii) subject
to the fiduciary duties of the Board of Directors under applicable law, as
advised by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel to the Company, and in
response to an unsolicited request that has been submitted to the Company's
Board of Directors and determined to be a Superior Acquisition Proposal (defined
below), engage in negotiations with, or disclose any nonpublic information
relating to the Company or any of its subsidiaries or afford access to the
properties, books or records of the Company or any
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of its subsidiaries to, any person that has advised the Company that it may be
considering making, or that has made, an Acquisition Proposal, provided, nothing
herein shall prohibit the Company's Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act. The
Company will promptly notify Parent after receipt of any Acquisition Proposal or
any indication that any person is considering making an Acquisition Proposal or
any request for nonpublic information relating to the Company or any of its
subsidiaries or for access to the properties, books or records of the Company or
any of its subsidiaries by any person that has advised the Company that it may
be considering making, or that has made, an Acquisition Proposal and will keep
Parent fully informed of the status and details of any such Acquisition
Proposal, notice or request. For purposes of this Agreement, "Acquisition
Proposal" means any offer or proposal for, or any indication of interest in, a
merger or other business combination involving the Company or any of its
subsidiaries or the acquisition of any significant equity interest in, or a
significant portion of the assets of, the Company or any of its subsidiaries,
other than the transactions contemplated by this Agreement. "Superior
Acquisition Proposal" means an acquisition proposal which a majority of the
Company's disinterested directors determines in its good faith judgment (after
receiving the advice of the Company's independent financial advisor) to be more
favorable to the Company's stockholders than the Offer or the Merger, and for
which financing, to the extent required, is then committed or which a majority
of the Company's disinterested directors reasonably believes will be available
when required. For purposes of this Section 5.4, direct or indirect ownership of
Shares shall not by itself cause a director to not be deemed to be
disinterested.
SECTION 5.5. State Takeover Statutes. If any "fair price",
"control share acquisition", "moratorium" or other anti-takeover statute, or
similar statute or regulation shall become applicable to this Agreement, the
Stockholder Option Agreement or any of the transactions contemplated hereby or
thereby, including, without limitation, the Offer or the Merger, the Company and
its Board of Directors shall take all action necessary to ensure that the Offer,
the Merger and the other transactions contemplated hereby and thereby, may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on the Offer, the
Merger and the other transactions contemplated hereby or thereby.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1. Obligations of Merger Subsidiary. Parent will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Offer and the Merger on the terms and
conditions set forth in this Agreement.
SECTION 6.2. Voting of Shares. Parent agrees to make a quorum
and vote all Shares acquired in the Offer or otherwise beneficially owned by it
in favor of adoption of this Agreement at the Company Stockholder Meeting.
SECTION 6.3. Director and Officer Liability. Parent will cause
the Surviving Corporation to indemnify and hold harmless the present and former
officers, directors, employees
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and agents of the Company (the "Indemnified Parties") in respect of acts or
omissions occurring on or prior to the Effective Time to the extent provided
under the Company's certificate of incorporation and bylaws in effect on the
date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For three years after
the Effective Time, Parent will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect of
acts or omissions occurring on or prior to the Effective Time covering each such
person currently covered by the Company's officers' and directors' liability
insurance policy on terms substantially similar to those of such policy in
effect on the date hereof, provided that in satisfying its obligation under this
Section, Parent shall not be obligated to cause the Surviving Corporation to pay
premiums in excess of 150% of the amount per annum the Company paid in its last
full fiscal year, which amount has been disclosed to Parent, and if the
Surviving Corporation is unable to obtain the insurance required by this Section
6.3, it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount. Without limitation of the foregoing, in
the event any such Indemnified Party is or becomes involved in any capacity in
any action, proceeding or investigation in connection with any matter relating
to the Merger, the Offer or this Agreement occurring on or prior to the
Effective Time, Parent shall cause the Surviving Corporation to pay as incurred
such Indemnified Party's reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith. Parent
shall ensure that, at all relevant times, the Surviving Corporation will have
access to sufficient funds to fulfill its obligations pursuant to this Section
6.3.
SECTION 6.4. Employees. Parent agrees to honor (or cause the
Surviving Corporation to honor) in accordance with their terms all Benefit Plans
previously delivered to Parent and all accrued benefits vested thereunder; it
being understood and agreed that nothing in this Section 6.4 shall prevent
Parent from terminating any such Benefit Plan in accordance with its terms. For
purposes of this Section 6.4, any Benefit Plan that is a Company Filed SEC
Document shall be deemed to have been delivered to Parent. In the event that
Parent shall merge any Benefit Plan with any benefit plan of Parent or otherwise
modify any Benefit Plan, prior service with the Company will be counted for
purposes of employee eligibility, seniority and vesting under such benefit plan,
and any pre-existing condition shall be waived for each employee so long as such
employee has had medical coverage under the applicable Benefit Plan for at least
six months immediately prior to the Effective Time.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. HSR Act Filings; Reasonable Efforts;
Notification. (a) Each of Parent and the Company shall, if applicable, (i)
promptly make or cause to be made the filings required of such party or any of
its subsidiaries under the HSR Act with respect to the transactions contemplated
by this Agreement, (ii) comply at the earliest practicable date with any request
under the HSR Act for additional information, documents, or other material
received by such party or any of its subsidiaries from the Federal Trade
Commission or the Department of Justice or any other Governmental Entity in
respect of such filings or such transactions, and (iii) cooperate with the other
party in connection with any such filing and in connection with resolving any
investigation or other
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inquiry of any such agency or other Governmental Entity under any Antitrust Laws
(defined below) with respect to any such filing or any such transaction. Each
party shall promptly inform the other party of any communication with, and any
proposed understanding, undertaking, or agreement with, any Governmental Entity
regarding any such filings or any such transaction. Neither party shall
participate in any meeting with any Governmental Entity in respect of any such
filings, investigation, or other inquiry without giving the other party notice
of the meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) Each of Parent and the Company shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, and, if by
mutual agreement, Parent and the Company decide that litigation is in their best
interests, each of Parent and the Company shall cooperate and use all reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent (each an "Order"),
that is in effect and that prohibits, prevents, or restricts consummation of any
such transaction. Each of Parent and the Company shall use all commercially
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Each of the parties agrees to use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger, and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all other necessary registrations and
filings (including other filings with Governmental Entities, if any), (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the preparation of the Company Disclosure Documents and the Offer
Documents, and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement.
(d) Notwithstanding anything to the contrary in Section
7.1(a), (b) or (c), (i) neither Parent nor any of its subsidiaries shall be
required to divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of Parent or any
of its subsidiaries or the Surviving Corporation after the Effective Time, (ii)
neither the Company nor its subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect, (iii) no party shall be required to
agree to the imposition of, or to comply with, any condition,
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obligation or restriction on Parent or any of its subsidiaries or on the
Surviving Corporation or any of its subsidiaries of the type referred to in
clause (a) or (b) of Annex I and (iv) neither Parent nor Merger Subsidiary shall
be required to waive any of the conditions to the Offer set forth in Annex I or
any of the conditions to the Merger set forth in Section VIII.
(e) The Company shall give prompt notice to Parent of (i) any
material representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect, (ii) upon the Company's
obtaining knowledge thereof, any representation or warranty made by it contained
in this Agreement and not covered by clause (i) above becoming untrue or
inaccurate in any material respect, or (iii) the failure by it to comply with or
satisfy in any respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(f) The Company shall give prompt notice to Parent, and Parent
or Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting it or any of
its subsidiaries which, if pending on the date of this Agreement would
have been required to have been disclosed pursuant to Section 4.1(g),
4.1(h), 4.1(k) or 4.1(l) or which relate to the consummation of the
transactions contemplated by this Agreement.
SECTION 7.2. Public Announcements. Parent and Merger
Subsidiary, on the one hand, and the Company, on the other hand, will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement and the Stockholder Option
Agreement, including the Offer and the Merger, and shall not issue any such
press release or make any such public statement prior to such consultation.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
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(i) if required by Delaware Law, this Agreement shall have
been adopted by the stockholders of the Company in accordance with such
Law;
(ii) any applicable waiting period under the HSR Act relating
to the Merger shall have expired;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Merger;
(iv) Parent or Merger Subsidiary shall have purchased Shares
in an amount equal to at least the Minimum Condition pursuant to the
Offer; and
(v) other than the filing of the certificate of merger in
accordance with Delaware Law, all Consents required to permit the
consummation of the Merger including those set forth in Sections 4.1(d)
and 4.2(b) shall have been filed, occurred or been obtained (other than
any such Consents the failure to file, occur or obtain, in the
aggregate, could not reasonably be expected to (i) have a Material
Adverse Effect or (ii) prevent or materially delay the consummation of
the Merger).
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if the Merger has not
been consummated by June 30, 2000 (provided that the party seeking to
terminate the Agreement shall not have breached its obligations under
this Agreement in any material respect);
(iii) by either the Company or Parent, if there shall be any
law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Parent or the Company from consummating the Merger is entered
and such judgment, injunction, order or decree shall become final and
nonappealable;
(iv) by either the Company or Parent (provided that Parent
shall not be entitled to terminate this Agreement pursuant to this
clause (iv) as a result of its breach of this Agreement), (x) if Parent
or Merger Subsidiary shall have failed to commence the Offer within
five business days following the date of the announcement of this
Agreement, (y) if Parent or Merger Subsidiary shall not have purchased
any Shares pursuant to the Offer prior to December 1, 1999 or (z) the
Offer shall have been terminated without Parent or Merger Subsidiary
having purchased any Shares pursuant to the Offer;
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(v) by Parent, upon the occurrence of any Trigger Event
described in clauses (i) through (iii) of Section 10.4(b); or
(vi) by the Company, upon the occurrence of any Trigger Event
described in clause (i) of Section 10.4(b).
SECTION 9.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto or their respective
officers and directors, except that the agreements contained in Sections 10.4
and 10.6 shall survive the termination hereof and except to the extent that such
termination results from the material breach by a party of any representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given,
if to Parent or Merger Subsidiary, to:
Calpine Corporation
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company, to:
Sheridan Energy, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered at the address specified
in this Section.
SECTION 10.2. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement except for the
representations, warranties and agreements set forth in Sections 10.4 and 10.6.
SECTION 10.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and Merger Subsidiary or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.4. Fees and Expenses. (a) Except as otherwise
provided in this Section, all costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay the Parent a fee in immediately
available funds, promptly, but in no event later than one business day, after
the termination of this Agreement as a result of the occurrence of any of the
events set forth below (a "Trigger Event") in an amount equal to $2,000,000 in
the case of the occurrence of a Trigger Event described below:
(i) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or an
agreement in principle with respect to any Acquisition Proposal;
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(ii) any representation or warranty made by the Company in, or
pursuant to, this Agreement that is qualified as to materiality shall
not have been true and correct when made or at any time prior to the
consummation of the Offer as if made at and as of such time, or any
representation or warranty made by the Company in, or pursuant to, this
Agreement that is not so qualified shall not have been true and correct
in all material respects when made or at any time prior to the
consummation of the Offer as if made at and as of such time, or the
Company shall have failed to observe or perform in any material respect
any of its obligations under this Agreement; provided that it shall not
be a Trigger Event unless (x) the breaches of the representations and
warranties without regard to any materiality qualifier or threshold,
and failure to perform or breach of any obligation, individually or in
the aggregate, have had or could reasonably be expected to have or
result in a Material Adverse Effect and (y) with respect to breaches of
representations and warranties, such breaches in significant part were
intentional; provided further that it shall not be a Trigger Event if
(1) such breaches and failures to perform are reasonably capable of
being cured by December 1, 1999, (2) the Company diligently pursues
such cure beginning as soon as it obtains knowledge of such breaches
and failures to perform, and (3) the Company cures all of such breaches
and failures to perform that have given rise to the Trigger Event by
December 1, 1999; or
(iii) the Board of Directors of the Company (or any special
committee thereof) shall have withdrawn or materially modified in a
manner adverse to Parent or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or this Agreement or its
approval of the entry by Parent and Merger Subsidiary into the
Stockholder Option Agreement, in any such case whether or not such
withdrawal or modification is required by the fiduciary duties of the
Board of Directors (or any special committee thereof).
If (x) this Agreement is terminated as a result of the occurrence of the Trigger
Events described in clauses (i) and (iii) above, (y) prior to such termination
the Company was in material compliance with its obligations set forth herein,
and (z) the Company has paid to Parent the fee described in this Section
10.4(b), the Company shall have no further obligation or liability to Parent or
Merger Subsidiary hereunder.
SECTION 10.5. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of Parent or any of its wholly-owned subsidiaries, the right to purchase
Shares pursuant to the Offer, but any such transfer or assignment will not
relieve Merger Subsidiary of its obligations under the Offer or prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
SECTION 10.6. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Delaware, without
giving effect to the principles of conflicts of laws thereof.
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SECTION 10.7. Counterparts; Effectiveness; Interpretation.
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the other
parties hereto. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". Any representation or warranty in this Agreement which is expressed
as made to the Company's knowledge or to the knowledge of the Company means the
knowledge, after reasonable investigation and due inquiry, of the directors and
executive officers of the Company.
SECTION 10.8. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 10.9. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.10. Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the Disclosure Schedule) and, subject to Section 10.11
hereof, the Confidentiality Agreement dated as of June 15, 1999 (the
"Confidentiality Agreement") between Parent and the Company (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter
hereof, and (b) are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder other than rights to indemnity
under Section 6.3.
SECTION 10.11. Standstill. If (x) this Agreement is terminated
by either Parent or the Company in accordance with the terms of Section 9.1(i),
(iii) or (iv), (y) such termination was not related to the material breach by
the Company of any of its representations, warranties, covenants or agreements
set forth herein, and (z) Merger Subsidiary fails to exercise the Option
(defined in the Stockholder Option Agreement) prior to the expiration thereof,
neither Parent, Merger Subsidiary nor any subsidiary of either of them shall for
a period of two years following such expiration (i) acquire, offer to acquire or
agree to acquire directly or indirectly by purchase or otherwise any voting
securities of the Company, (ii) make or in any way participate directly or
indirectly, in any "solicitation" of "proxies" to vote (in such terms as used in
the proxy rules of the SEC) or seek to advise or influence any person or entity
with respect to the voting of any voting securities of the
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Company, (iii) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(iv) of the Exchange Act with respect to any voting
securities of the Company or (iv) otherwise act alone or in concert with others
to seek to control or influence the management, Board of Directors, or policies
of the Company. Notwithstanding anything to the contrary set forth herein, as of
the date of this Agreement, Section 9 of the Confidentiality Agreement is hereby
terminated and of no further force or effect.
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The parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SHERIDAN ENERGY, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇
Title: President and CEO
CALPINE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice-President - Business Development
CPN SHERIDAN, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Vice-President - Business Development
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ANNEX I
Notwithstanding any other provision of the Offer, Parent and
Merger Subsidiary shall not be required to accept for payment or (subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Subsidiary's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer)) to pay for
any Shares, and may terminate the Offer, if (i) by the expiration of the Offer,
the Minimum Condition shall not have been satisfied, or (ii) at any time on or
after August 25, 1999 and prior to the acceptance for payment of Shares pursuant
to the Offer, any of the following conditions exist:
(a) there shall be instituted or pending any action or
proceeding by any Governmental Entity or by any other person, domestic
or foreign, before any Governmental Entity or arbitrator, (i)
challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all
the Shares by Parent or Merger Subsidiary or the consummation by Parent
or Merger Subsidiary of the Merger, seeking to obtain material damages
or otherwise directly or indirectly relating to the transactions
contemplated by the Stockholder Option Agreement, this Agreement, the
Offer or the Merger, (ii) seeking to restrain or prohibit Parent's or
Merger Subsidiary's ownership or operation (or that of their respective
subsidiaries or affiliates) of all or any material portion of the
business or assets of the Company or any of its subsidiaries or of
Parent and its subsidiaries or to compel Parent or any of its
subsidiaries or affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company or any of its
subsidiaries or of Parent and its subsidiaries (iii) seeking to impose
material limitations on the ability of Parent or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Parent or any of its subsidiaries
or affiliates on all matters properly presented to the Company's
stockholders, (iv) seeking to require divestiture by Parent or any of
its subsidiaries or affiliates of any Shares, or (v) that otherwise, in
the judgment of Parent, is likely to materially adversely affect the
business, assets, liabilities, operations, condition (financial or
otherwise), results of operations or prospects of the Company or any of
its subsidiaries, or Parent and its subsidiaries, taken as a whole; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Stockholder Option
Agreement, this Agreement, the Offer or the Merger, by any Governmental
Entity or arbitrator (other than the application of the waiting period
provisions of the HSR Act to the Stockholder Option Agreement, this
Agreement, the Offer or the Merger), that, in the reasonable judgment
of Parent, is substantially likely, directly or indirectly, to result
in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
44
(c) any change shall have occurred (or any development shall
have occurred involving a prospective change) in the business, assets,
liabilities, financial condition, capitalization, operations, results
of operations or prospects of the Company and its subsidiaries taken as
a whole that, in the reasonable judgment of Parent, is or is likely to
be materially adverse to the Company and its subsidiaries taken as a
whole or Parent shall have become aware of any facts that, in the
reasonable judgment of Parent, have or are likely to have or result in
a Material Adverse Effect; or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange or in the NASDAQ over-the-counter market in the United
States that lasts or has lasted for at least two full consecutive
trading days, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
any material limitation (whether or not mandatory) by any Governmental
Entity on the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly
involving the United States which would reasonably be expected to have
a Material Adverse Effect or prevent (or materially delay) the
consummation of the Offer or (v) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material
acceleration or worsening thereof; or
(e) a tender or exchange offer for some or all of the Shares
shall have been publicly proposed to be made or shall have been made by
another person, or it shall have been publicly disclosed or Parent
shall have otherwise learned that (i) any person or "group" (defined in
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed
to acquire beneficial ownership of more than 50% of any class or series
of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall
have been granted any option, right or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 50% of any
class or series of capital stock of the Company (including the Shares)
or (ii) any person shall have filed a Notification and Report Form
under the HSR Act or made a public announcement reflecting an intent to
acquire the Company or any of its subsidiaries or any assets or
securities of the Company or any of its subsidiaries; or
(f) any Consent (other than the filing of certificate of
merger or approval by the stockholders of the Company of the Merger (if
required by Delaware law)) required to be filed, occurred or been
obtained by the Company or any of its subsidiaries or Parent of any of
its subsidiaries (including Merger Subsidiary) in connection with the
execution and delivery of this Agreement, the Offer and the
consummation of the transactions contemplated by this Agreement shall
not have been filed, occurred or been obtained (other than any such
Consents the failure to file, occur or obtain in the aggregate, could
not reasonably be expected to (i) have a
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Material Adverse Effect or (ii) prevent or materially delay the
consummation of the Offer or the Merger); or
(g) the Company shall have breached or failed to perform in
any material respect any of its covenants or agreements under this
Agreement, or any of the representations and warranties of the Company
set forth in this Agreement that is qualified as to materiality shall
not be true when made or at any time prior to consummation of the Offer
as if made at and as of such time, or any of the representations and
warranties set forth in this Agreement that is not so qualified shall
not be true in any material respect when made or at any time prior to
the consummation of the Offer as if made at and as of such time;
provided that this condition shall not be deemed to exist unless, in
the reasonable judgment of Parent, such breaches or failures to perform
any covenant, obligation or agreement, and any breach of representation
or warranty without regard to any materiality qualifier or threshold,
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect; or
(h) any party to the Stockholder Option Agreement (other than
Merger Subsidiary or Parent) shall have breached or failed to perform
in any material respect any of its agreements under the Stockholder
Option Agreement or any of the representations and warranties of any
such party set forth in the Stockholder Option Agreement shall not be
true in any material respect, in each case, when made or at any time
prior to the consummation of the Offer as if made at and as of such
time, or the Stockholder Option Agreement shall have been invalidated
or terminated with respect to any Shares subject thereto; or
(i) this Agreement or the Stockholder Option Agreement shall
have been terminated in accordance with its terms; or
(j) the Board of Directors of the Company (or any special
committee thereof) shall have withdrawn or materially modified in a
manner adverse to Parent or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or this Agreement or its
approval of the entry by Parent and Merger Subsidiary into the Stock
Option Agreement; or
(k) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or
agreement in principle with respect to any Acquisition Proposal;
which, in the judgment of Parent in any such case, and regardless of the
circumstances (including any action or omission by Parent or Merger Subsidiary)
giving rise to any such condition, makes it inadvisable to proceed with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent
and Merger Subsidiary and may be asserted by Parent in its sole discretion
regardless of the circumstances (including any action or omission by Parent or
Merger Subsidiary) giving rise to any such condition or (other than the
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Minimum Condition) may be waived by Parent and Merger Subsidiary in their
discretion in whole at any time or in part from time to time. The failure by
Parent or Merger Subsidiary at any time to exercise its rights under any of the
foregoing conditions shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Any determination by Parent concerning the events described
in this Section will be final and binding upon all parties.
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