EXHIBIT 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PIONEER NATURAL RESOURCES COMPANY,
BC MERGER SUB, INC.
AND
EVERGREEN RESOURCES, INC.
DATED AS OF MAY 3, 2004
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger.................................................................2
1.2 Closing..................................................................................................2
1.3 Effects of the Merger....................................................................................2
1.4 Post-Closing Merger......................................................................................3
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES
2.1 Effect of Merger on Capital Stock........................................................................3
2.2 Anti-Dilution Provisions.................................................................................7
2.3 Shares Held by Parent, the Company or Subsidiaries.......................................................8
2.4 Dissenting Stockholders..................................................................................8
2.5 Treatment of Stock Options and Restricted Stock..........................................................8
2.6 Fractional Shares........................................................................................8
2.7 Exchange of Certificates.................................................................................9
2.8 Expiration of Company Rights............................................................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company...........................................................12
3.2 Representations and Warranties of Parent and Merger Sub.................................................34
ARTICLE IV
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company and Parent Pending the Merger........................................52
4.2 Acquisition Proposals...................................................................................56
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement........................................................59
5.2 Letter of the Company's Accountants.....................................................................60
5.3 Letter of Parent's Accountants..........................................................................60
5.4 Access to Information...................................................................................60
5.5 Stockholders Meetings...................................................................................61
5.6 HSR and Other Approvals.................................................................................63
5.7 Agreements of Rule 145 Affiliates.......................................................................63
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5.8 Authorization for Shares and Stock Exchange Listing.....................................................64
5.9 Employee Matters........................................................................................64
5.10 Stock Options; Restricted Stock.........................................................................65
5.11 Indemnification; Directors' and Officers' Insurance.....................................................68
5.12 Agreement to Defend.....................................................................................69
5.13 Public Announcements....................................................................................69
5.14 Other Actions...........................................................................................69
5.15 Notification of Certain Matters; SEC Filings............................................................69
5.16 Conveyance Taxes........................................................................................70
5.17 Board of Directors......................................................................................70
5.18 Indenture Matters.......................................................................................70
5.19 Section 16(b) Matters...................................................................................70
5.20 Plan of Reorganization..................................................................................70
5.21 Certain Hedging Activities..............................................................................71
5.22 Exchange Offer Obligation...............................................................................71
5.23 Indenture Amendment.....................................................................................71
5.24 Kansas Sale.............................................................................................72
5.25 Rights Agreement Amendment..............................................................................72
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger..............................................72
6.2 Conditions of Obligations of Parent.....................................................................73
6.3 Conditions of Obligations of the Company................................................................74
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination.............................................................................................75
7.2 Effect of Termination...................................................................................77
7.3 Amendment...............................................................................................79
7.4 Extension; Waiver.......................................................................................79
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses.....................................................................................79
8.2 Nonsurvival of Representations, Warranties and Agreements...............................................79
8.3 Notices.................................................................................................80
8.4 Interpretation..........................................................................................81
8.5 Counterparts............................................................................................81
8.6 Entire Agreement; No Third Party Beneficiaries..........................................................81
8.7 Governing Law...........................................................................................81
8.8 No Remedy in Certain Circumstances......................................................................81
8.9 Assignment..............................................................................................82
8.10 Specific Performance....................................................................................82
8.11 Schedule Definitions....................................................................................82
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EXHIBITS:
Exhibit A Form of Carlton Consulting and Non-Competition Agreement
Exhibit B Form of ▇▇▇▇▇▇▇ Consulting and Non-Competition Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Rights Agreement Amendment
Exhibit E LLC Sub
Merger Agreement
Exhibit F Rule 145 Affiliate Letter
DISCLOSURE SCHEDULES:
COMPANY DISCLOSURE SCHEDULE:
Schedule 3.1(a) Company Significant Subsidiaries
Schedule 3.1(b) Company Capital Structure
Schedule 3.1(c) Company Conflicts
Schedule 3.1(d) Knowledge; Company Off-Balance Sheet Arrangements
Schedule 3.1(f) Company Events
Schedule 3.1(g) Undisclosed Material Liabilities
Schedule 3.1(j) Company Litigation
Schedule 3.1(k) Company Tax Information
Schedule 3.1(l) Company Employee Benefits Information
Schedule 3.1(m) Company Labor Matters
Schedule 3.1(n) Property
Schedule 3.1(o) Company Environmental Matters
Schedule 3.1(p) Company Insurance
Schedule 3.1(y) Hedging
Schedule 3.1(aa) Company Agreements
Schedule 4.1(a) Conduct of Business Pending the Merger
Schedule 6.3(e) Tax Opinion Representation Letter
PARENT DISCLOSURE SCHEDULE:
Schedule 3.2(a) Parent Significant Subsidiaries
Schedule 3.2(b) Parent Capital Structure
Schedule 3.2(c) Parent Conflicts
Schedule 3.2(d) Knowledge; Parent Off-Balance Sheet Arrangements
Schedule 3.2(f) Parent Events
Schedule 3.2(g) Undisclosed Material Liabilities
Schedule 3.2(j) Parent Litigation
Schedule 3.2(k) Parent Tax Information
Schedule 3.2(l) Parent Employee Benefits Information
Schedule 3.2(m) Parent Labor Matters
Schedule 3.2(n) Property
Schedule 3.2(o) Parent Environmental Matters
Schedule 3.2(p) Parent Insurance
Schedule 3.2(x) Hedging
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Schedule 3.2(y) Natural Gas Act
Schedule 3.2(z) Parent Agreements
Schedule 5.9 Change in Control Severance Policy
Schedule 6.2(h) Tax Opinion Representation
Letter
iv
GLOSSARY OF DEFINED TERMS
DEFINED TERMS DEFINED IN SECTION
------------- ------------------
Acquisition Proposal 4.2(g)(i)
Affected Employee 5.9(c)
Affiliate 4.1(a)(ix)
Aggregate Cash Amount 2.1(c)
Aggregate Stock Number 2.1(c)
Agreement Preamble
Antitrust Division 5.6(a)
Articles of Merger 1.1
Average Closing Price 2.6
business day 2.7(a)
Cash Election 2.1(d)
Cash Election Share 2.1(f)
Cash Payment 2.1(b)
CBCA 1.1
Certificate of Merger 1.1
Certificates 2.7(a)
Change of Recommendation 4.2(d)
Closing 1.1
Closing Date 1.2
COBRA 3.1(l)(v)
Code Recitals
Common Stock Trust 2.6(c)(iii)
Company Preamble
Company Budget 4.1(a)(xiii)
Company Common Stock 2.1
Company Contracts 3.1(aa)
Company Disclosure Schedule 3.1
Company Employee Benefit Plans 3.1(l)(i)
Company Employee Pension Benefit Plan 3.1(l)(i)
Company Employee Welfare Benefit Plan 3.1(l)(i)
Company ERISA Affiliate 3.1(l)(i)
Company Executives 5.9(a)
Company Indemnified Parties 5.11(a)
Company Intangible Property 3.1(n)(i)
Company Litigation 3.1(j)
Company Material Adverse Effect 3.1(a)(ii)
Company Options 5.10
Company Order 3.1(j)
Company Permits 3.1(i)
Company Preferred Stock 3.1(b)
Company Reserve Reports 3.1(x)
Company Restricted Stock 5.10(b)
Company Right 2.8
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Company Rights Agreement Recitals
Company SEC Documents 3.1(d)
Company Stock Plans 3.1(b)(iii)
Company Termination Fee 7.2(b)
Confidentiality Agreement 5.4
Consulting and Non-Competition Agreement Recitals
DGCL 5.5(a)
Dissenter Shares 2.1(b)
Effective Time 1.1
Effective Time Restricted Stock 2.1(d)
Election Deadline 2.1(j)
Elections 2.1(d)
Environmental Laws 3.1(o)(A)
ERISA 3.1(l)(xv)
Excess Shares 2.6(c)(i)
Exchange Act 3.1(c)(iii)(B)
Exchange Agent 2.7(a)
Exchange Fund 2.7(a)
Exchange Ratio 2.1(b)
FERC 3.1(z)
Form of Election 2.1(d)
FTC 5.6(a)
GAAP 3.1(d)
Governmental Entity 3.1(c)(iii)
Hazardous Materials 3.1(o)(B)
Hedge 3.1(y)
HIPAA 3.1(l)(xiv)
HSR Act 3.1(c)(iii)(A)
Initial Termination Date 7.1(c)
Injunction 6.1(f)
IRS 3.1(k)(ii)(A)
Joint Proxy Statement 3.1(c)(iii)(B)
Kansas Sale Consideration 2.1(b)
Kansas Sale Proceeds 2.1(b)
knowledge 3.1(d)(ii)
LLC Sub Recitals
LLC Sub Merger Recitals
Maximum Amount 5.11(c)
Merger Recitals
Merger Sub Preamble
Merger Consideration 2.1(b)
Mixed Consideration 2.1(d)
Mixed Election 2.1(d)
Mixed Election Shares 2.1(e)
NGA 3.1(z)
Non-Competition Agreements Recitals
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NYSE 2.6
Parent Preamble
Parent Common Stock 2.1(b)
Parent Contracts 3.1(y)
Parent Disclosure Schedule 3.2
Parent Employee Benefit Plans 3.2(l)(i)
Parent Employee Pension Benefit Plan 3.2(l)(i)
Parent Employee Welfare Benefit Plan 3.2(l)(i)
Parent ERISA Affiliate 3.2(l)(i)
Parent Intangible Property 3.2(n)
Parent Litigation 3.2(j)
Parent Material Adverse Effect 3.2(a)
Parent Order 3.2(j)
Parent Permits 3.2(i)
Parent Preferred Stock 3.2(b)
Parent Right 2.1(b)
Parent SEC Documents 3.2(d)
Parent Stock Plans 3.2(b)(iv)
Parent Termination Fee 7.2(c)
Qualified Company Employee Benefit Plan 3.2(l)(iii)
Qualified Parent Employee Benefit Plan 3.2(l)(iii)
Release 3.1(o)(C)
Remedial Action 3.1(o)(D)
Representative 2.1(d)
Rights Agreement Amendment Recitals
Rule 145 Affiliate Letter 5.7
Rule 145 Affiliates 5.7
S-4 3.1(e)
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act 3.1(d)(ii)
SEC 3.1(a)(i)
Securities Act 3.1(d)
Senior Sub Notes 5.22
Significant Subsidiary 3.1(a)(i)
Stock Election 2.1(d)
Stock Election Share 2.1(f)
Subsidiary 3.1(a)(iii)
Surviving Corporation 1.3(a)(i)
Surviving Corporation Material Adverse Effect 6.1(d)
Tax and Taxes 3.1(k)
Tax Return 3.1(k)
2004 Company Restricted Stock 5.10(b)
Voting Debt 3.1(b)
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AGREEMENT AND PLAN OF
MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 3, 2004 (this
"Agreement"), by and among
Pioneer Natural Resources Company, a
Delaware
corporation ("Parent"), BC Merger Sub, Inc., a Colorado corporation ("Merger
Sub"), and Evergreen Resources, Inc., a Colorado corporation (the "Company").
WHEREAS, Parent and the Company have determined to engage in a
strategic business combination whereby Merger Sub will be merged with and into
the Company, with the Company continuing as the surviving corporation in such
merger as a direct wholly-owned subsidiary of Parent (the "Merger");
WHEREAS, Parent and the Company have determined that immediately after
the effectiveness of the Merger, the Company shall be merged with and into a
wholly-owned limited liability company subsidiary of Parent ("LLC Sub," and such
merger being referred to herein as the "LLC Sub Merger"), with LLC Sub
continuing as the surviving entity in the LLC Sub Merger as a direct
wholly-owned subsidiary of Parent;
WHEREAS, for federal income tax purposes, it is intended that the
Merger and the LLC Sub Merger constitute an integrated plan described in Rev.
Rul. 2001-46, 2001-2 C.B. 321;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have approved this Agreement and the Merger.
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and an inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is entering into a consulting and non-competition agreement
with Parent in the form attached hereto as Exhibit A, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is
entering into a consulting and non-competition agreement with Parent in the form
attached hereto as Exhibit B (collectively, the "Consulting and Non-Competition
Agreements"), which Consulting and Non-Competition Agreements shall be effective
upon the Closing;
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and an inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein,
▇▇▇▇ ▇. ▇▇▇▇▇▇ is entering into a non-competition agreement with Parent in the
form attached hereto as Exhibit C (the "Non-Competition Agreement"), which
Non-Competition Agreement shall be effective upon the Closing;
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and an inducement to Parent's and Merger Sub's
entering into this Agreement and incurring the obligations set forth herein, the
Company is entering into an amendment to the Shareholder Rights Agreement (the
"Company Rights Agreement"), dated as of July 7, 1997, by and between the
Company and Computershare Trust Company, Inc. as successor to American
Securities Transfer & Trust, Inc., as Rights Agent, in the form attached hereto
as Exhibit D (the "Rights Agreement Amendment");
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties to this Agreement agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger; Effective Time of the Merger. Upon the terms and
subject to the conditions of this Agreement, at the Effective Time, Merger Sub
shall be merged with and into the Company in accordance with the Colorado
Business Corporation Act (the "CBCA"). As soon as practicable at or after the
closing of the Merger (the "Closing"), articles of merger, prepared and executed
in accordance with the relevant provisions of the CBCA (the "Articles of
Merger"), shall be filed with the Colorado Secretary of State. The Merger shall
become effective at such time as the Articles of Merger are duly filed with the
Colorado Secretary of State, or at such later time as Parent and the Company
shall agree and specify in the Articles of Merger (the "Effective Time").
1.2 Closing. The Closing shall take place at 9:30 a.m., Dallas, Texas
time, on a date to be specified by the parties, which shall be no later than the
fifth business day after satisfaction (or waiver in accordance with this
Agreement) of the latest to occur of the conditions set forth in Article VI
(other than any such conditions which by their nature cannot be satisfied until
the Closing Date, which shall be required to be so satisfied or (to the extent
permitted by applicable law) waived on the Closing Date), at the offices of
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, unless another
date or place is agreed to in writing by the parties (such date on which the
Closing occurs, the "Closing Date").
1.3 Effects of the Merger.
(a) At the Effective Time: (i) Merger Sub shall be merged with
and into the Company, the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the Company is sometimes
referred to herein as the "Surviving Corporation"); (ii) the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Articles of Incorporation of the Surviving Corporation until
duly amended or repealed; and (iii) the Bylaws of the Company as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until duly amended or repealed.
(b) The directors of Merger Sub shall, from and after the
Effective Time, be the directors of the Surviving Corporation, and such
directors shall serve until their successors have been duly elected or appointed
and qualified or until their death, resignation or removal in accordance with
Surviving Corporation's Articles of Incorporation and Bylaws. The officers of
Merger Sub shall, from and after the Effective Time, be the officers of the
Surviving Corporation, and such officers shall serve until their successors have
been duly elected or
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appointed and qualified or until their death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
(c) The Merger shall have the effects set forth in this
Section 1.3 and the applicable provisions of the CBCA.
1.4 Post-Closing Merger. Immediately following the Effective Time,
Parent shall cause the Surviving Corporation to merge with and into LLC Sub,
with LLC Sub continuing as the surviving entity in such merger as a direct
wholly-owned subsidiary of Parent, substantially in accordance with the terms of
the
merger agreement attached hereto as Exhibit E. From and after such merger,
LLC Sub shall be the Surviving Corporation for purposes of this Agreement. When
the LLC Sub Merger occurs, Parent shall own all the membership interests and
other equity in LLC Sub, and LLC Sub shall be disregarded for United States
federal income tax purposes.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES
2.1 Effect of Merger on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or any holder of any shares of common stock, no par value, of the
Company ("Company Common Stock") or capital stock of Merger Sub:
(a) Conversion of Capital Stock of Merger Sub. Each issued and
outstanding share of the capital stock of Merger Sub shall be converted into one
share of Company Common Stock.
(b) Conversion of Shares. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
held by any Subsidiary of the Company or Parent or any Subsidiary of Parent, and
excluding Dissenter Shares (as defined below), but including shares of Company
Restricted Stock as to which the applicable forfeiture restrictions lapse as of
the Effective Time) shall cease to be outstanding and shall be converted into
and exchanged for the right to receive from Parent (i) (A) 1.1635 of a share of
common stock, $.01 par value per share, of Parent ("Parent Common Stock") (each
share of Parent Common Stock includes a right (each, a "Parent Right") to
purchase one-thousandth of a share of Series A Junior Participating Preferred
Stock, par value $.01 per share, of Parent pursuant to the Rights Agreement
dated as of July 20, 2001, between Parent and Continental Stock Transfer & Trust
Company, as Rights Agent (references in this Agreement to shares of Parent
Common Stock shall also be deemed to refer to the Parent Rights associated
therewith, as appropriate)) (such applicable fraction of Parent Common Stock,
the "Exchange Ratio"), (B) $39.00 in cash, without interest (the "Cash
Payment"), or (C) a combination of shares of Parent Common Stock and cash (other
than the Kansas Sale Consideration) determined in accordance with Section
2.1(e), Section 2.1(f), Section 2.1(g) or Section 2.1(h) (collectively, the
"Base Merger Consideration"), and (ii) $0.35 in cash, without interest, plus an
amount equal
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to the quotient of (A) the difference of the Kansas Sale Proceeds minus $15
million, divided by (B) the sum of 49,889,446 plus any shares of Company
Restricted Stock issued after the date hereof and prior to the Effective Time
and any shares of Company Common Stock and securities convertible or
exchangeable into or exercisable for shares of Company Common Stock that are
outstanding as of the date hereof that are not included in the 49,889,446 number
listed above (the "Kansas Sale Consideration," and collectively with the Base
Merger Consideration, the "Merger Consideration"), in each case upon surrender
by the holder of such share of Company Common Stock of the Certificate
representing such share in accordance with Section 2.7. For purposes of this
Agreement, Merger Consideration shall not include any consideration received by
any dissenting stockholder of the Company that after the Effective Time fails to
perfect, or effectively withdraws or loses, such holder's right to appraisal of
and payment for such holder's shares. "Dissenter Shares" means shares
outstanding immediately prior to the Effective Time and held by any holder who,
immediately prior to the Effective Time, has the right to obtain payment for
such holder's shares in accordance with Article 113 of the CBCA. "Kansas Sale
Proceeds" means the difference of (i) the gross cash proceeds from the sale of
the Company's and its Subsidiaries' assets located in Kansas, which proceeds are
actually received by the Company no later than the close of business on the
business day prior to the Closing Date, minus (ii) all out-of-pocket costs
(excluding income taxes) incurred by the Company and its Subsidiaries in the
disposition of such assets in such sale transaction.
(c) Notwithstanding anything in this Agreement to the
contrary, the aggregate number of shares of Parent Common Stock (the "Aggregate
Stock Number") to be issued as Base Merger Consideration shall be equal to the
product of (i) the Exchange Ratio multiplied by 50% of (ii) the difference of
(A) the number of shares of Company Common Stock outstanding immediately prior
to the Effective Time (including shares of Company Restricted Stock as to which
the applicable forfeiture restrictions lapse as of the Effective Time) minus (B)
the sum of (x) the number of shares of Company Common Stock held by any
Subsidiary of the Company or Parent or any Subsidiary of Parent and (y) the
number of Dissenter Shares. Notwithstanding anything in this Agreement to the
contrary, the aggregate amount of cash to be paid by Parent as Base Merger
Consideration (the "Aggregate Cash Amount") shall be equal to the product of (i)
the Cash Payment multiplied by 50% of (ii) the difference of (A) the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time (including shares of Company Restricted Stock as to which the applicable
forfeiture restrictions lapse as of the Effective Time) minus (B) the sum of (x)
the number of shares of Company Common Stock held by any Subsidiary of the
Company or Parent or any Subsidiary of Parent and (y) the number of Dissenter
Shares.
(d) Subject to the allocation and election procedures set
forth in this Section 2.1 and subject to the last sentence of this Section
2.1(d) with respect to shares of Company Restricted Stock that are outstanding
as of the Effective Time and as to which the applicable forfeiture restrictions
have not lapsed as of the Effective Time (the "Effective Time Restricted
Stock"), each record holder immediately prior to the Effective Time of shares of
Company Common Stock (other than (1) shares of Company Common Stock held by the
Company or any Subsidiary of the Company or Parent or any Subsidiary of Parent
and (2) Dissenter Shares but including shares of Company Restricted Stock as to
which the applicable forfeiture restrictions lapse as of the Effective Time)
will be entitled (i) to elect to receive $39.00 cash plus the Kansas Sale
Consideration in cash, without interest, for all of such shares (a "Cash
4
Election"), (ii) to elect to receive 1.1635 shares of Parent Common Stock and a
per share amount in cash equal to the Kansas Sale Consideration for all of such
shares, without interest (a "Stock Election"), or (iii) to elect to receive the
"Mixed Consideration" which consists of (x) $19.50 cash plus the Kansas Sale
Consideration in cash, without interest, and (y) .58175 of a share of Parent
Common Stock (a "Mixed Election," and collectively with the Cash Election and
the Stock Election, the "Elections"). Each holder shall make the same Election
with respect to all of such holder's shares of Company Common Stock, except with
respect to Effective Time Restricted Stock as contemplated by the last sentence
of this Section 2.1(d). All such Elections shall be made on a form designed for
that purpose, which shall include (i) a letter of transmittal which specifies
that delivery shall be effected, and risk of loss and title to any Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
that otherwise complies with the terms of Section 2.7(a) and (ii) a form of
instruction pursuant to which a beneficial owner of Company Common Stock may
instruct a Representative (as defined below) as to such beneficial owner's
Election (a "Form of Election"). Holders of record of shares of Company Common
Stock who hold such shares as nominees, trustees or in other representative
capacities (a "Representative") may submit multiple Forms of Election, provided
that such Representative certifies that each such Form of Election covers all
the shares of Company Common Stock held by each Representative for a particular
beneficial owner. For purposes hereof, a holder of Company Common Stock who does
not make a valid Election prior to the Election Deadline, including by failure
to return the Form of Election to the Exchange Agent prior to the Election
Deadline and as a result of revocation, shall be deemed to have made a Mixed
Election. A holder of any security of the Company that is convertible or
exchangeable into or exercisable for Company Common Stock immediately prior to
the Effective Time shall (unless otherwise provided in this Agreement) upon
conversion, exchange or exercise of such security, receive settlement therefor
as though each such holder had made a Mixed Election. If Parent or the Exchange
Agent shall determine that any purported Cash Election or Stock Election was not
properly made, such purported Cash Election or Stock Election shall be deemed to
be of no force and effect and the stockholder making such purported Cash
Election or Stock Election shall for purposes hereof be deemed to have made a
Mixed Election. A holder shall be deemed to have made a Stock Election with
respect to all shares of Effective Time Restricted Stock held by such holder,
and any Election made by the record holder pursuant to the first sentence of
this Section 2.1(d) shall be effective only as to shares that are not Effective
Time Restricted Stock.
(e) At the Effective Time, each share covered by a Mixed
Election (a "Mixed Election Share") shall be converted into and exchanged for
the right to receive from Parent the Mixed Consideration.
(f) If, taking into account the Elections made and deemed made
pursuant to Section 2.1(d) and but for the terms of Section 2.1(c), the number
of shares of Parent Common Stock to be issued as Base Merger Consideration would
exceed the Aggregate Stock Number, then, at the Effective Time, each share
covered by a Cash Election (a "Cash Election Share") shall be converted into the
right to receive the Cash Payment and the Kansas Sale Consideration, each Mixed
Election Share shall be converted into the right to receive the Mixed
Consideration, each share of Effective Time Restricted Stock shall be converted
into the right to receive the number of shares of Parent Common Stock equal to
the Exchange Ratio and the Kansas Sale Consideration, and each share covered by
a Stock Election (a "Stock Election Share") that is not Effective Time
Restricted Stock shall be converted into the right to receive:
5
(i) a number of shares of Parent Common Stock equal
to the quotient determined by (A) the difference of the Aggregate Stock Number
minus the number of shares of Parent Common Stock to be issued in exchange for
Mixed Election Shares, divided by (B) the number of Stock Election Shares;
(ii) an amount in cash, without interest, equal to
the quotient determined by (A) the difference of the Aggregate Cash Number minus
the sum of (x) the amount of cash (other than Kansas Sale Consideration) to be
paid in exchange for Cash Election Shares plus (y) the amount of cash (other
than Kansas Sale Consideration) to be paid in exchange for Mixed Election
Shares, divided by (B) the number of Stock Election Shares; and
(iii) an amount in cash, without interest, equal to
the Kansas Sale Consideration.
(g) If, taking into account the Elections made and deemed made
pursuant to Section 2.1(d) and but for the terms of Section 2.1(c), the amount
of cash to be paid by Parent as Base Merger Consideration would exceed the
Aggregate Cash Amount, then each Stock Election Share shall be converted into
the right to receive the number of shares of Parent Common Stock equal to the
Exchange Ratio and the Kansas Sale Consideration, each Mixed Election Share
shall be converted into the right to receive the Mixed Consideration, and each
Cash Election Share shall be converted into the right to receive:
(i) an amount in cash, without interest, equal to the
quotient determined by (A) the difference of the Aggregate Cash Number minus the
amount of cash (other than Kansas Sale Consideration) to be paid in exchange for
Mixed Election Shares, divided by (B) the number of Cash Election Shares;
(ii) a number of shares of Parent Common Stock equal
to the quotient determined by (A) the difference of the Aggregate Stock Number
minus the sum of (x) the number of shares of Parent Common Stock to be issued in
exchange for Stock Election Shares plus (y) the number of shares of Parent
Common Stock to be issued in exchange for Mixed Election Shares, divided by (B)
the number of Cash Election Shares; and
(iii) an amount in cash, without interest, equal to
the Kansas Sale Consideration.
(h) In the event that neither 2.1(f) nor Section 2.1(g) above
is applicable, at the Effective Time, each Cash Election Share shall be
converted into the right to receive the Cash Payment and the Kansas Sale
Consideration, each Stock Election Share shall be converted into the right to
receive the number of shares of Parent Common Stock equal to the Exchange Ratio
and the Kansas Sale Consideration, and each Mixed Election Share, if any, shall
be converted into the right to receive the Mixed Consideration.
(i) Parent and the Company shall mail the Form of Election to
each person who is a holder of record of Company Common Stock on the record date
for the Company's stockholders' meeting contemplated by Section 5.5 and shall
use their commercially reasonable efforts to make the Form of Election available
to all persons who become holders of Company Common Stock during the period
between such record date and the Election Deadline. Parent
6
and the Company agree to promptly comply with applicable SEC requirements with
respect to the actions contemplated by this Section 2.1.
(j) To be effective, a Form of Election must be properly
completed and signed by a record holder of Company Common Stock and submitted to
the Exchange Agent and accompanied by the Certificates as to which the Election
is being made. All Certificates so surrendered shall be subject to the exchange
procedures set forth in Section 2.7. Parent will have the discretion, which it
may delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted or revoked
and to disregard immaterial defects in Forms of Election. The decision of Parent
(or the Exchange Agent) in such matters shall be conclusive and binding. Neither
Parent nor the Exchange Agent will be under any obligation to notify any person
of any defect in a Form of Election submitted to the Exchange Agent. The
Exchange Agent shall also make all computations contemplated by this Section 2.1
and all such computations shall be conclusive and binding on the holders of
Company Common Stock absent manifest error. The Form of Election and the
Certificates must be received by the Exchange Agent by the close of business on
the last business day prior to the date on which the vote with respect to the
adoption and approval of this Agreement and the approval of the Merger at the
Company's stockholders' meeting contemplated by Section 5.5 hereof is held (the
"Election Deadline") in order to be effective. The Exchange Agent shall not
accept guarantee of delivery of Certificates in lieu of physical delivery of
Certificates. An Election may be revoked, but only by written notice received by
the Exchange Agent prior to the Election Deadline. Upon any such revocation,
unless a duly completed Form of Election, accompanied by a Certificate, is
thereafter submitted in accordance with this Section 2.1(j), such shares shall
be deemed to be Mixed Election Shares. In the event that this Agreement is
terminated pursuant to the provisions hereof and any Certificates have been
transmitted to the Exchange Agent pursuant to the provisions hereof, such
Certificates shall be promptly be returned without charge to the person
submitting same.
2.2 Anti-Dilution Provisions.
(a) In the event that Parent changes the number of shares of
Parent Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock combination, stock dividend, or similar
recapitalization with respect to such stock and if the record date therefor (in
the case of a stock dividend) or the effective date thereof (in the case of a
stock split, stock combination or similar recapitalization for which a record
date is not established) shall be prior to the Effective Time, the Exchange
Ratio shall be appropriately adjusted.
(b) In the event that, prior to the Effective Time, Parent
shall consummate a merger, consolidation, share exchange or other
reorganization, or any other transaction with another person or entity pursuant
to which the holders of Parent Common Stock receive or become entitled to
receive securities, cash or other assets or any combination thereof, each holder
of Company Common Stock shall be entitled to receive at the Effective Time for
each share of Company Common Stock, the amount of cash applicable to the
Election or deemed Election by such holder plus that amount of securities, cash
or other assets that such holder would have received or become entitled to
receive had such holder been the record holder of the number of shares of Parent
Common Stock issuable to such holder of Company Common Stock
7
pursuant to Section 2.1 (taking into account such holder's Election) had the
Effective Time occurred immediately prior to the consummation of such
transaction.
2.3 Shares Held by Parent, the Company or Subsidiaries. Each of the
shares of Company Common Stock held by Parent or any Subsidiary of Parent or the
Company or any Subsidiary of the Company shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
2.4 Dissenting Stockholders. Any holder of shares of Company Common
Stock who perfects such holder's dissenters' rights in accordance with and as
contemplated by Article 113 of the CBCA shall be entitled to receive from the
Surviving Corporation the value of such shares in cash as determined pursuant to
such provision of the CBCA; provided, that no such payment shall be made to any
dissenting stockholder unless and until such dissenting stockholder has complied
with the applicable provisions of the CBCA, including the deposit of the
Certificate or Certificates representing the shares for which payment is being
made. In the event that immediately prior to the Effective Time a dissenting
stockholder of the Company fails to perfect, or effectively withdraws or loses,
such holder's right to appraisal of and payment for such holder's shares, each
such share shall thereupon be deemed a Mixed Election Share as of the Effective
Time and shall be converted into, as of the Effective Time, the right to receive
from Parent the Mixed Consideration, without any interest thereon, upon
surrender by such holder of the Certificate or Certificates representing the
shares of Company Common Stock held by such holder in accordance with Section
2.7.
2.5 Treatment of Stock Options and Restricted Stock. Each outstanding
Company Option and share of Company Restricted Stock shall be treated as
provided in Section 5.10.
2.6 Fractional Shares.
(a) No Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of Parent
shall relate to such fractional share interests, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent.
(b) In lieu of such fractional share interests, Parent shall
either (i) pay to each former holder of Company Common Stock an amount in cash
equal to the product obtained by multiplying (A) the fractional share interest
to which such former holder (after taking into account all shares of Company
Common Stock held at the Effective Time by such holder) would otherwise be
entitled by (B) the average of the last reported sale prices for a share of
Parent Common Stock on the New York Stock Exchange (the "NYSE") (as reported in
The Wall Street Journal, or, if not reported thereby, any other authoritative
source selected by Parent) for the twenty consecutive full trading days on which
such shares are actually traded on the NYSE ending at the close of trading on
the third trading day prior to the Closing Date or (ii) instruct the Exchange
Agent to follow the procedures set forth in Section 2.6(c).
(c) If Parent shall have instructed the Exchange Agent to
follow the procedures in this Section 2.6(c):
8
(i) The Exchange Agent shall determine the excess of
(A) the aggregate number of shares of Parent Common Stock that would be
distributed to holders of the Certificates pursuant to Section 2.1 if no effect
were given to Section 2.6(a) over (B) the aggregate number of whole shares of
Parent Common Stock to be distributed to holders of the Certificates pursuant to
Section 2.1, taking into account the effect of Section 2.6(a) (such excess, the
"Excess Shares").
(ii) As soon as practicable after the Effective Time,
the Exchange Agent shall sell the Excess Shares at then-prevailing prices on the
NYSE, in the manner set forth below.
(iii) The sale of the Excess Shares by the Exchange
Agent shall be executed on the NYSE and shall be executed in round lots to the
extent practicable. Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of the Excess Shares.
Until the proceeds of such sale or sales have been distributed to the holders of
the Certificates (or paid to Parent pursuant to Section 2.7(f)), the Exchange
Agent shall hold such proceeds in trust for the holders of the Certificates (the
"Common Stock Trust"). The Exchange Agent shall determine the portion of the
Common Stock Trust to which each holder of a Certificate shall be entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Stock Trust by a fraction, the numerator of which is the amount of the
fractional share interest in the Parent Common Stock to which such holder of a
Certificate is entitled and the denominator of which is the aggregate amount of
fractional share interests in the Parent Common Stock to which all holders of
the Certificates are entitled. Parent shall comply with the provisions of Rule
236(c) under the Securities Act.
(iv) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Certificates in lieu of
any fractional share interests, the Exchange Agent shall make available such
amounts, without interest, to such holders of Certificates that have surrendered
their Certificates in accordance with Section 2.7.
(d) The provisions of Section 2.6(a), (b) and (c) shall not
apply with respect to fractional shares of Company Restricted Stock, which are
governed by Section 5.10(b).
2.7 Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit with
Parent's transfer agent or such other bank or trust company designated by Parent
and reasonably acceptable to the Company (the "Exchange Agent") (i) certificates
evidencing a number of shares of Parent Common Stock equal to the Aggregate
Stock Number and (ii) cash in the amount equal to the sum of the Aggregate Cash
Amount and the aggregate Kansas Sale Consideration (such certificates for shares
of Parent Common Stock and cash being hereinafter referred to as the "Exchange
Fund"). From time to time as necessary, Parent shall deposit with the Exchange
Agent cash to be paid in lieu of fractional shares as contemplated by Section
2.6 and any dividends or other distributions to which holders of Certificates
are entitled pursuant to Section 2.7(d). The Exchange Fund shall not be used for
any other purpose. As soon as reasonably practicable after the Effective Time
but in no event later than five business days
9
thereafter, Parent and the Surviving Corporation shall cause the Exchange Agent
to mail to each holder of record of a certificate or certificates which
represented shares of Company Common Stock immediately prior to the Effective
Time and each holder of Company Restricted Stock as to which the applicable
forfeiture restrictions lapse as of the Effective Time (the "Certificates")
(other than any holder that previously submitted a properly completed and signed
Form of Election accompanied by the Certificates as to which the Election was
made) appropriate transmittal materials and instructions (which shall specify
that delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon proper delivery of such Certificates to the Exchange
Agent). The Certificate or Certificates so delivered shall be duly endorsed as
the Exchange Agent may reasonably require. The Exchange Agent shall not accept
guarantee of delivery of Certificates in lieu of physical delivery of
Certificates. In the event of a transfer of ownership of shares of Company
Common Stock represented by Certificates that is not registered in the transfer
records of the Company, the Merger Consideration may be issued to a transferee
if the Certificates representing such shares are delivered to the Exchange
Agent, accompanied by all documents required to evidence such transfer and by
evidence reasonably satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. If any Certificate shall have been lost, stolen,
mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the
holder claiming such Certificate to be lost, mislaid, stolen or destroyed, (ii)
such bond, security or indemnity as Parent and the Exchange Agent may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate. For purposes of this Agreement,
"business day" means any day that is not a Saturday or Sunday or other day on
which banks are required or authorized by law to be closed in New York, New
York.
(b) After the Effective Time, each holder of shares of Company
Common Stock (other than shares to be canceled pursuant to Section 2.3 or as to
which statutory dissenters' rights have been perfected as provided in Section
2.4) issued and outstanding at the Effective Time shall surrender the
Certificate or Certificates representing such shares to the Exchange Agent
(unless such Certificate or Certificates were previously delivered with a Form
of Election) and shall promptly upon surrender thereof receive in exchange
therefor the Merger Consideration (without interest), together with all
undelivered dividends or distributions in respect of such shares (without
interest) pursuant to Section 2.7(d). Parent shall not be obligated to deliver
the Merger Consideration to which any former holder of Company Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
Certificate or Certificates for exchange as provided in this Section 2.7.
(c) Each of Parent, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock such amounts, if any, as it is required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local or foreign Tax law. To the extent that any amounts are so withheld by
Parent, the Surviving Corporation or the Exchange Agent, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of
10
the shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent, the Surviving Corporation or the Exchange Agent,
as the case may be.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed as to holders of Company Common Stock immediately prior
to the Effective Time and no transfer of Company Common Stock by any such holder
shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 2.7(a), each Certificate theretofore
representing shares of Company Common Stock (other than shares to be canceled
pursuant to Section 2.3 or as to which statutory dissenters' rights have been
perfected as provided in Section 2.4) shall from and after the Effective Time
represent for all purposes only the right to receive the Merger Consideration in
exchange therefor, subject, however, to the Surviving Corporation's obligation
to pay any dividends or make any other distributions with a record date prior to
the Effective Time which have been declared or made by the Company in respect of
such shares of Company Common Stock in accordance with the terms of this
Agreement and which remain unpaid at the Effective Time. Whenever a dividend or
other distribution is declared by Parent on the Parent Common Stock, the record
date for which is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares of Parent Common Stock issuable
pursuant to this Agreement, but after the Effective Time no dividend or other
distribution payable to the holders of record of Parent Common Stock as of any
time subsequent to the Effective Time shall be delivered to the holder of any
Certificate until such holder surrenders such Certificate for exchange as
provided in Section 2.7(a). If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason other than to perfect
statutory dissenters' rights, they shall be canceled and exchanged as provided
in this Section 2.7. Shares of Parent Common Stock held in the Exchange Fund,
until their issuance in the Merger upon surrender of Certificates or until such
shares are delivered to a public official or Parent as contemplated by Section
2.7(f), shall be deemed issued and outstanding shares of Parent Common Stock. In
connection with any meeting of stockholders of Parent, the Exchange Agent shall
be directed to cause such shares to be present and counted for purposes of
determining the presence of a quorum, and the Exchange Agent shall be directed
to cause such shares to be voted for, voted against, abstained and not voted in
the same proportion as the shares of Parent Common Stock outstanding and not
held in the Exchange Fund. From and after such time as any shares of Parent
Common Stock held in the Exchange Fund are returned to the Company as
contemplated by the last sentence of Section 2.7(f), such shares shall be deemed
to be held in treasury and shall not be considered issued and outstanding shares
of Parent Common Stock.
(e) Any portion of the Exchange Fund and any cash in lieu of
fractional shares of Parent Common Stock made available to the Exchange Agent
that remain undistributed to the former stockholders of the Company on the first
anniversary of the Effective Time shall be delivered to Parent, upon demand, and
any stockholders of the Company who have not theretofore received the Merger
Consideration and cash and other dividends or distributions to which they are
entitled under this Article II shall thereafter look only to Parent, as a
general creditor thereof, for payment of their claim for the Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock.
11
(f) Neither Parent nor the Surviving Corporation shall be
liable to any holder of shares of Company Common Stock for such shares (or
dividends or distributions with respect thereto) or cash in lieu of fractional
shares of Parent Common Stock delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts remaining
unclaimed by holders of any such shares at such date as is immediately prior to
the time at which 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 such
holders or their successors, assigns or personal representatives previously
entitled thereto.
2.8 Expiration of Company Rights. At the Effective Time, the rights to
purchase Company Common Stock in accordance with the Company Rights Agreement
(each, a "Company Right") shall expire as provided in the Rights Agreement
Amendment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
represents and warrants to Parent and Merger Sub as follows (such
representations and warranties being deemed to be made as of the date hereof and
as of the Closing) (in each case as qualified by matters reflected on the
disclosure schedule dated as of the date of this Agreement and delivered by the
Company to Parent on or prior to the date of this Agreement (the "Company
Disclosure Schedule") (each reference to such disclosure schedule qualifies the
referenced representation and warranty to the extent specified therein and such
other representations and warranties contained herein (regardless of whether or
not such representation or warranty contains a reference to such disclosure
schedule) to the extent a matter in such disclosure schedule is disclosed in
such a way as to make its relevance to the information called for by such other
representation or warranty readily apparent on its face)):
(a) Organization, Standing and Power. Each of the Company and
its Significant Subsidiaries is a corporation, limited liability company or
partnership duly organized or formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation, organization or formation,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified and
licensed, as may be required, and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership
or leasing of its properties, makes such qualification and licensing necessary,
other than in such jurisdictions where the failure so to be qualified and
licensed could not reasonably be expected to result in a Company Material
Adverse Effect. The Company has heretofore delivered to Parent complete and
correct copies of its Articles of Incorporation and Bylaws, each as amended to
date. All Subsidiaries of the Company and their respective jurisdictions of
incorporation, organization or formation are identified on Schedule 3.1(a) of
the Company Disclosure Schedule and all Subsidiaries of the Company that are
Significant Subsidiaries of the Company are indicated as such on such schedule.
As used in this Agreement: the term (i) "Significant Subsidiary" means any
Subsidiary of the Company or Parent, as the case may be, that would constitute a
Significant Subsidiary of such party within the meaning of Rule 1.02 of
Regulation S-X of the Securities and Exchange Commission (the "SEC"); (ii)
"Company Material Adverse Effect" means any result,
12
occurrence, condition, fact, change, violation, event or effect of any of the
foregoing (whether or not (A) foreseeable as of the date of this Agreement or
(B) covered by insurance) that, individually or in the aggregate with any such
other results, occurrences, conditions, facts, changes, violations, events or
effects (whether or not such result, occurrence, condition, fact, change,
violation, event or effect has, during the period or at any time in question,
manifested itself in the historical financial statements of the Company or any
of its Subsidiaries), (x) is materially adverse to the financial condition,
properties, business or results of operations of the Company and its
Subsidiaries taken as a whole, (y) would materially impair the ability of the
Company to perform in a timely manner its obligations under this Agreement or
(z) would prevent the consummation of the transactions contemplated by this
Agreement; provided, however, that in no event shall any of the following
constitute a Company Material Adverse Effect: (1) any change or effect resulting
from changes in general economic, regulatory or political conditions, conditions
in the United States or worldwide capital markets or any outbreak of hostilities
or war (except for any changes referred to in this subclause which, individually
or in the aggregate, disproportionately affect the business, assets, properties,
liabilities, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, as compared to other industry participants), (2)
any change or effect, including changes in laws, that affects the oil and gas
exploration and development industry or exploration and production companies of
a similar size to the Company and a majority of whose reserves are natural gas
generally (including changes in commodity prices, general market prices and
regulatory changes affecting the oil and gas industry or exploration and
production companies of a similar size to the Company and a majority of whose
reserves are natural gas generally) (except for any changes referred to in this
subclause which, individually or in the aggregate, disproportionately affect the
business, assets, properties, liabilities, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole, as compared to
other industry participants, and exploration and production companies of a
similar size to the Company and a majority of whose reserves are natural gas),
or (3) any change or effect resulting from the announcement or pendency of this
Agreement, the Merger or the other transactions contemplated hereby, and (iii)
"Subsidiary" means, with respect to the Company or Parent, as the case may be,
any entity, whether incorporated or unincorporated, of which at least a majority
of the securities or other ownership interests having by their terms voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party or
by one or more of its respective Subsidiaries.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 100,000,000 shares of Company Common
Stock and 24,900,000 shares of preferred stock, par value $1.00 per share, of
the Company ("Company Preferred Stock"). At the close of business on March 31,
2004: (i) 43,099,951 shares of Company Common Stock were issued and outstanding;
(ii) no shares of Company Preferred Stock were issued and outstanding; (iii)
100,000 shares of Company Common Stock were held by the Company in its treasury;
(iv) up to 2,639,495 shares of Company Common Stock were subject to issuance
under outstanding options or awards under the Company's Initial Stock Option
Plan, the Company's 2000 Stock Incentive Plan, the Carbon Energy Corporation
1999 Stock Option Plan, as amended, and any other stock option, stock bonus,
stock award, or stock purchase plan, program or arrangement of the Company or
any of the Company's Subsidiaries or any predecessor thereof (collectively,
"Company Stock Plans"); (v) 1,017,871 shares of Company Common Stock were
reserved for issuance pursuant to awards that may be granted (other than
currently outstanding awards)
13
pursuant to the Company Stock Plans; (vi) 4,000,000 shares of Company Common
Stock were reserved for issuance upon conversion of the Company's 4.75% Senior
Convertible Notes due 2021; and (vii) except as set forth on Schedule 3.1(b) of
the Company Disclosure Schedule, no Voting Debt was issued and outstanding
except the Company's 4.75% Senior Convertible Notes due 2021. The term "Voting
Debt" means bonds, debentures, notes, or other indebtedness having the right to
vote (or convertible into securities having the right to vote) on any matters on
which stockholders of the Company may vote. All issued shares of Company Common
Stock are validly issued, fully paid, and nonassessable and are not subject to
preemptive rights. When shares subject to or reserved for issuance pursuant to
the applicable Company Stock Plans, the Company's 4.75% Senior Convertible Notes
due 2021 are issued, such shares will be validly issued, fully paid and
nonassessable and not subject to preemptive rights. Schedule 3.1(b) of the
Company Disclosure Schedule lists all outstanding options, warrants or other
rights to subscribe for, purchase or acquire from the Company or any Subsidiary
of the Company any capital stock of the Company or securities convertible into
or exchangeable for capital stock of the Company (and (i) the exercise,
conversion, purchase, exchange or other similar price thereof and (ii) whether
such options, warrants or other rights are vested or unvested and the vesting
schedule thereof) and all outstanding shares of Company Restricted Stock (and
the schedule for lapsing of forfeiture restrictions on such shares). Except as
set forth on Schedule 3.1(b) of the Company Disclosure Schedule, all outstanding
shares of capital stock of the Subsidiaries of the Company are validly issued,
fully paid and nonassessable, are not subject to preemptive rights, and are
owned by the Company or a direct or indirect wholly owned Subsidiary of the
Company free and clear of all liens, charges, encumbrances, claims and options
of any nature. Except as set forth in this Section 3.1(b) or on Schedule 3.1(b)
of the Company Disclosure Schedule, and except for changes since March 31, 2004
resulting from the exercise of stock options granted prior to March 31, 2004
pursuant to, or from issuances or purchases under, the Company Stock Plans, or
as contemplated by this Agreement, there are outstanding: (i) no shares of
capital stock, Voting Debt or other voting securities of the Company; (ii) no
securities of the Company or any Subsidiary of the Company convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting securities
of Company or any Subsidiary of the Company; and (iii) no options, warrants,
calls, rights (including preemptive rights), commitments or agreements to which
the Company or any Subsidiary of the Company is a party or by which it is bound
in any case obligating the Company or any Subsidiary of the Company to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered,
sold, purchased, redeemed or acquired, additional shares of capital stock or any
Voting Debt or other voting securities of the Company or of any Subsidiary of
the Company, or obligating the Company or any Subsidiary of the Company to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement. There are not as of the date hereof and there will not be at the
Effective Time any stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it is bound relating
to the voting of any shares of the capital stock of the Company that will limit
in any way the solicitation of proxies by or on behalf of the Company from, or
the casting of votes by, the stockholders of the Company with respect to the
Merger. There are no restrictions on the Company to vote the stock of any of its
Subsidiaries. Except as set forth on Schedule 3.1(b) of the Company Disclosure
Schedule, there are no agreements requiring the Company or any Subsidiary of the
Company to make contributions to the capital of, or lend or advance funds to,
any Subsidiary of the Company.
14
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and the Rights Agreement Amendment and,
subject, with respect to consummation of the Merger, to approval of this
Agreement and the Merger by the stockholders of the Company in accordance with
the CBCA and Articles of Incorporation and Bylaws of the Company (each as
amended to date), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Rights Agreement Amendment and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
subject, with respect to consummation of the Merger, to approval of this
Agreement and the Merger by the stockholders of the Company in accordance with
the CBCA and the Articles of Incorporation and Bylaws of the Company (each as
amended to date). This Agreement and the Rights Agreement Amendment have been
duly executed and delivered by the Company and, subject, with respect to
consummation of the Merger, to approval of this Agreement and the Merger by the
stockholders of the Company in accordance with the CBCA and the Articles of
Incorporation and Bylaws of the Company (each as amended to date), and assuming
this Agreement constitutes the valid and binding obligation of Parent and Merger
Sub, this Agreement and the Rights Agreement Amendment constitute valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
(ii) Except as set forth on Schedule 3.1(c) of the
Company Disclosure Schedule, the execution and delivery of this Agreement and
the Rights Agreement Amendment do not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof and thereof 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 material obligation or to the loss of a
material benefit under, or give rise to a right of purchase under, result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under, or
otherwise result in a material detriment to the Company or any of its
Subsidiaries under, any provision of (A) the Articles of Incorporation or Bylaws
of the Company (each as amended to date) or any provision of the comparable
charter or organizational documents of any of its Subsidiaries, (B) 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, (C) any joint venture or other ownership arrangement
or (D) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in Section 3.1(c)(iii) are duly and timely obtained
or made and the approval of the Merger and this Agreement by the stockholders of
the Company has been obtained, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (B) or (C), any such conflicts, violations, defaults, rights,
liens, security interests, charges, encumbrances or detriments that,
individually or in the aggregate, could not reasonably be expected to result in
a Company Material Adverse Effect.
15
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, 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 or
the Rights Agreement Amendment by the Company or the consummation by the Company
of the transactions contemplated hereby, except for: (A) the filing of a
premerger notification report by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
expiration or termination of the applicable waiting period with respect thereto;
(B) the filing with the SEC of (x) a proxy statement in preliminary and
definitive form relating to the meetings of the stockholders of the Company and
Parent to be held in connection with the Merger (the "Joint Proxy Statement")
and (y) such reports under Section 13(a) of the Securities Exchange Act of 1934
(the "Exchange Act") and such other compliance with the Exchange Act and the
rules and regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of the
Articles of Merger for the Merger with the Colorado Secretary of State; (D)
filings with the NYSE; (E) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, or environmental laws;
(F) such filings and approvals as may be required by any foreign premerger
notification, securities, corporate or other law, rule or regulation; (G) such
governmental or tribal consents, qualifications or filings as are customarily
obtained or made in connection with the transfer of interests or the change of
control of ownership in oil and gas properties; and (H) any such consent,
approval, order, authorization, registration, declaration, filing, or permit
that the failure to obtain or make could not, individually or in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect.
(d) SEC Documents.
(i) The Company has made available to Parent a true
and complete copy of each report, schedule, registration statement, definitive
proxy statement and exhibit to the foregoing documents filed by the Company with
the SEC since December 31, 2001 (the "Company SEC Documents"), which are all the
documents (other than preliminary material) that the Company was required to
file with the SEC since December 31, 2001. As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Subsidiaries of the Company is required to file any forms, reports or other
documents with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act.
The financial statements of the Company included in the Company SEC Documents
were prepared from the books and records of the Company and its Subsidiaries,
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of the unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present in accordance with applicable
requirements of GAAP (subject, in the case of the unaudited
16
statements, to normal, recurring adjustments, none of which are material) the
consolidated financial position of the Company and its consolidated Subsidiaries
as of their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and its consolidated Subsidiaries for the
periods presented therein. Except as disclosed in the Company SEC Documents,
there are no agreements, arrangements or understandings between the Company and
any party who is at the date of this Agreement or was at any time prior to the
date hereof but after December 31, 2001 an Affiliate of the Company that are
required to be disclosed in the Company SEC Documents.
(ii) The Company has not received written notice from
the SEC or any other Governmental Entity that any of its accounting policies or
practices are or may be the subject of any review, inquiry, investigation or
challenge by the SEC or any other Governmental Entity. Since December 31, 2001,
the Company's independent public accounting firm has not informed the Company
that it has any material questions, challenges or disagreements regarding or
pertaining to the Company's accounting policies or practices. Since December 31,
2001, to the knowledge of the Company, no officer or director of the Company has
received, or is entitled to receive, any material compensation from any entity
that has engaged in or is engaging in any material transaction with the Company
or any Subsidiary of the Company. For purposes of this Agreement, "knowledge"
means the actual knowledge of the officers listed on Schedule 3.1(d) of the
Company Disclosure Schedule with respect to the Company, and on Schedule 3.2(d)
of the Parent Disclosure Schedule with respect to Parent, without investigation.
Set forth on Schedule 3.1(d) of the Company Disclosure Schedule is a list of all
off-balance sheet special purpose entities and financing arrangements of the
Company and Subsidiaries of the Company.
(iii) With respect to each annual report on Form
10-K, each quarterly report on Form 10-Q and each amendment of any such report
included in the Company SEC Documents, the chief executive officer and chief
financial officer of the Company have made all certifications required by the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and any related rules and
regulations promulgated by the SEC and the NYSE, and the statements contained in
any such certifications are complete and correct.
(e) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger (the
"S-4") will, at the time the S-4 is filed with the SEC, at any time it is
amended or supplemented, at the time it becomes effective under the Securities
Act or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and none of the information supplied
or to be supplied by the Company and included or incorporated by reference in
the Joint Proxy Statement will, at the date mailed to stockholders of the
Company and at the date mailed to stockholders of Parent or at the time of the
meeting of such stockholders to be held in connection with the Merger or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Joint Proxy Statement, insofar as it relates to the Company
or its Subsidiaries or other information supplied by the Company for inclusion
therein, will
17
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as set forth
on Schedule 3.1(f) in the Company Disclosure Schedule or as disclosed in, or
reflected in the financial statements included in, the Company SEC Documents, or
except as contemplated by this Agreement, since December 31, 2003, there has not
been (i) any material damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets owned or operated by the
Company and its Subsidiaries; (ii) any event, condition, action or occurrence
that, if taken during the period from the date of this Agreement through the
Effective Time, would constitute a breach of Section 4.1(a) hereof; or (iii) any
other transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that has resulted in or could reasonably be expected to result in a Company
Material Adverse Effect.
(g) No Undisclosed Material Liabilities. Except as disclosed
in the Company SEC Documents or set forth on Schedule 3.1(g) of the Company
Disclosure Schedule, as of the date hereof, there are no liabilities of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that have resulted
in or could reasonably be expected to result in a Company Material Adverse
Effect, other than: (i) liabilities adequately provided for on the balance sheet
of the Company dated as of December 31, 2003 (including the notes thereto)
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003; and (ii) liabilities under this Agreement.
(h) No Default. Neither the Company nor any of its
Subsidiaries is in default or violation (and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation) of
any term, condition or provision of (i) the Articles of Incorporation or Bylaws
of the Company (each as amended to date) 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 to which the Company or any
of its Subsidiaries is now a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound or (iii)
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company or any of its Subsidiaries, except in the case of (ii) and (iii) for
defaults or violations which in the aggregate could not reasonably be expected
to result in a Company Material Adverse Effect.
(i) Compliance with Applicable Laws. The Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits"), except where the
failure so to hold could not reasonably be expected to result in a Company
Material Adverse Effect. The Company and its Subsidiaries are in compliance with
the terms of the Company Permits, except where the failure so to comply could
not reasonably be expected to result in a Company Material Adverse Effect.
Except as disclosed in the Company SEC Documents, the businesses of the Company
and its Subsidiaries are not being conducted in violation of any law, ordinance
or regulation of any Governmental Entity, except for possible violations which
could not reasonably be expected to result in a Company Material Adverse Effect.
As of the date of this Agreement, no investigation or review by any
18
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company as of the date hereof, threatened,
other than those the outcome of which could not reasonably be expected to result
in a Company Material Adverse Effect.
(j) Litigation. Except as disclosed in the Company SEC
Documents or as set forth on Schedule 3.1(j) of the Company Disclosure Schedule,
as of the date of this Agreement there is no suit, action or proceeding pending,
or, to the knowledge of the Company, threatened against or affecting the Company
or any Subsidiary of Company ("Company Litigation"), and the Company and its
Subsidiaries have no knowledge of any facts that are likely to give rise to any
Company Litigation, that (in any case) could reasonably be expected to result in
a Company Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against the Company or any Subsidiary of the Company ("Company Order") that
could reasonably be expected to result in a Company Material Adverse Effect. The
Company has entered into a final settlement agreement, and such final settlement
agreement has received the approval of the applicable court or other
Governmental Entity, with respect to all claims arising under that certain class
action lawsuit filed in Denver District Court on December 26, 2002 against the
Company by Mountain West Exploration, Inc., ▇▇▇▇ ▇▇▇▇▇▇ and Synergy Operations
Company LLC.
(k) Taxes. Except as set forth on Schedule 3.1(k) of the
Company Disclosure Schedule:
(i) Each of the Company, each of its Subsidiaries and
any affiliated, consolidated, combined, unitary or similar group of which the
Company or any of its Subsidiaries is or was a member has (A) duly filed on a
timely basis (taking into account any extensions) all U.S. federal income Tax
Returns (as hereinafter defined), and all other material Tax Returns required to
be filed or sent by or with respect to it and all such Tax Returns are true,
correct and complete in all material respects, (B) duly paid or deposited on a
timely basis all Taxes (as hereinafter defined) that are shown to be due and
payable on or with respect to such Tax Returns, and all material Taxes that are
otherwise due and payable (except for audit adjustments not material in the
aggregate or to the extent that liability therefor is reserved for in the
Company's most recent audited financial statements) for which the Company or any
of its Subsidiaries are reasonably likely to be liable, (C) established reserves
that are adequate for the payment of all material Taxes not yet due and payable
with respect to the results of operations of the Company and its Subsidiaries
through the date hereof, and (D) complied in all material respects with all
applicable laws, rules and regulations relating to the reporting, payment and
withholding of Taxes that are required to be withheld from payments to
employees, independent contractors, creditors, stockholders or any other third
party and has in all material respects timely withheld from employee wages and
paid over to the proper governmental authorities all amounts required to be so
withheld and paid over.
(ii) Schedule 3.1(k) of the Company Disclosure
Schedule sets forth (A) the last taxable period through which the federal income
Tax Returns of the Company and any of its Subsidiaries have been examined by the
Internal Revenue Service ("IRS") or for which the statute of limitations for
assessment has otherwise closed and (B) any affiliated, consolidated, combined,
unitary or similar group or Tax Return in which the Company or any of its
Subsidiaries is or has been a member or joins or has joined in the filing.
Except to the extent
19
being contested in good faith and adequately provided for in the Company's most
recent audited financial statements, all material deficiencies asserted as a
result of any examination by any applicable taxing authority have been paid or
fully settled. As of the date hereof, no audits or other administrative
proceedings or court proceedings are pending, or to the knowledge of the
Company, threatened, with regard to any Taxes for which the Company or any of
its Subsidiaries would be liable, and no material deficiency for any Taxes has
been proposed, asserted or assessed (whether by examination report or prior to
completion of examination by means of notices of proposed adjustment or other
similar requests or notices) against the Company or any of its Subsidiaries by
any taxing authority with respect to any period. All material Hedging
transactions entered into by the Company and its Subsidiaries have been properly
identified for federal income tax purposes. No claim is pending and no claim has
ever been made that has not been resolved by an authority in a jurisdiction
where the Company or any Subsidiary of the Company does not file Tax Returns
that the Company or such Subsidiary of the Company, as the case may be, is or
may be subject to Tax in that jurisdiction.
(iii) Neither the Company nor any of its Subsidiaries
has executed or entered into (or prior to the close of business on the Closing
Date will execute or enter into) with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending the
period for assessment or collection of any income or franchise Taxes for which
the Company or any of its Subsidiaries would be liable or (B) a closing
agreement pursuant to Section 7121 of the Code or any similar provision of
state, local, foreign or other income tax law, which will require any increase
in taxable income or alternative minimum taxable income, or any reduction in tax
credits, for the Company or any of its Subsidiaries for any taxable period
ending after the Closing Date. Neither the Company nor any Subsidiary of the
Company is subject to any private letter ruling of the IRS or comparable ruling
of other tax authorities that will be binding on the Company or any Subsidiary
of the Company with respect to any period following the Closing Date. Neither
the Company nor any Subsidiary of the Company has granted any power of attorney,
which is currently in force with respect to any income, franchise, or similar
Taxes or any income, franchise or similar Tax Returns.
(iv) Neither the Company nor any of its Subsidiaries
is a party to, is bound by or has any obligation under any tax sharing,
indemnity, or allocation agreement or similar agreement, arrangement or
practice.
(v) There are no requests for rulings or outstanding
subpoenas from any taxing authority for information with respect to Taxes of the
Company or any of its Subsidiaries and, to the knowledge of the Company, no
material reassessments (for property or ad valorem Tax purposes) of any assets
or any property owned or leased by the Company or any of its Subsidiaries have
been proposed in written form.
(vi) Neither the Company nor any of its Subsidiaries
has agreed to make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of the
Company or any of its Subsidiaries, and neither the Company nor any of its
Subsidiaries has any application pending with any taxing authority requesting
permission for any changes in any accounting method of the Company or any of its
Subsidiaries. To the knowledge of the Company, neither the IRS nor any other
taxing
20
authority has proposed in writing, and neither the Company nor any of its
Subsidiaries is otherwise required to make, any such adjustment or change in
accounting method.
(vii) There are no material excess loss accounts or
deferred intercompany transactions between the Company and/or any of its
Subsidiaries within the meaning of Treas. Reg. Section 1.1502-13 or 1.1502-19,
respectively.
(viii) Neither the Company nor any Subsidiary of the
Company has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355(a) of
the Code (A) in the two years prior to the date of this Agreement, or (B) in a
distribution that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(ix) None of the Company, its Subsidiaries or any
affiliated, consolidated, combined, unitary or similar group of which any of the
Company or its Subsidiaries is or was a member has participated, directly or
indirectly, in any (A) reportable transaction within the meaning of Treasury
Regulation Section 1.6011-4(b) or (B) Tax shelter required to be registered
under Section 6111 of the Code. The Company and each Subsidiary of the Company
has disclosed on its federal income tax returns all positions taken therein that
could, if not so disclosed, give rise to a substantial understatement penalty
within the meaning of Section 6662 of the Code.
(x) Neither the Company nor any of its Subsidiaries
is a party to an agreement that provides for the payment of any amount that
would constitute a "parachute payment" within the meaning of Section 280G of the
Code or that would constitute compensation whose deductibility is limited under
Section 162(m) of the Code.
(xi) The Company's net operating loss and capital
loss carryforwards are at least $120,000,000 as measured under GAAP (excluding
any loss carryforwards absorbed as a result of receiving the Kansas Sale
Proceeds) and are not reasonably likely to expire sooner than the dates set
forth on Schedule 3.1(k)(xi) of the Company Disclosure Schedule. Except as set
forth in Schedule 3.1(k)(xi) of the Company Disclosure Schedule no such
carryforwards are subject to limitation or restriction.
For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid by the Company or any
of its Subsidiaries, payroll, employment, excise, production, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest and/or any penalty, addition to tax
or additional amount imposed by any taxing authority, (ii) any liability of the
Company or any of its Subsidiaries for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated or consolidated
group, or arrangement whereby liability of the Company or any of its
Subsidiaries for payment of such amounts was determined or taken into account
with reference to the liability of any other person for any period and (iii)
liability of the Company or any of its Subsidiaries with respect to the
21
payment of any amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other person.
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect to
the Company or any of its Subsidiaries in respect of any Taxes, including,
without limitation, (i) any consolidated federal income Tax return in which the
Company or any of its Subsidiaries is included and (ii) any state, local or
foreign income Tax returns filed on a consolidated, combined or unitary basis
(for purposes of determining tax liability) in which the Company or any of its
Subsidiaries is included.
(l) Employee Benefit Plans; ERISA. Except as set forth on
Schedule 3.1(l) of the Company Disclosure Schedule or in the Company SEC
Documents:
(i) There are no Company Employee Benefit Plans
established, maintained, contributed to or required to be contributed to, by the
Company or any entity with which the Company is considered a single employer
under Section 414(b), (c), (m) or (o) of the Code ("Company ERISA Affiliates"),
and there are no Company Employee Pension Benefit Plans which the Company or any
Company ERISA Affiliate has established, maintained, contributed to, or been
required to contribute to, within six years prior to the Effective Time. As used
in this Agreement, "Company Employee Benefit Plan" means any plan, program,
policy, practice, agreement or other arrangement providing compensation or
benefits in any form to any current or former employee, independent contractor,
officer or director of the Company or any Subsidiaries of the Company or any
beneficiary or dependent thereof, whether written or unwritten, formal or
informal, including without limitation any "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA ("Company Employee Welfare Benefit
Plan"), any "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) ("Company Employee
Pension Benefit Plan") and any other pension, profit-sharing, bonus, incentive
compensation, deferred compensation, vacation, sick pay, stock purchase, stock
option, phantom equity, equity compensation, severance, employment, consulting,
unemployment, hospitalization or other medical, life, or other insurance, long-
or short-term disability, change of control, material fringe benefit, or any
other similar plan, program or policy.
(ii) With respect to each Company Employee Benefit
Plan, the Company has provided Parent with a true, correct and complete copy of:
(A) each writing constituting a part of such Company Employee Benefit Plan
(including, but not limited to, the plan document(s), adoption agreement,
prototype or volume submitter documents, trust agreement, annuity contract,
third party administrative contracts, and insurance contracts) and all
amendments thereto; (B) the three most recent Annual Reports (Form 5500 Series)
including all applicable schedules, if required; (C) the current summary plan
description and any material modifications thereto, if required to be furnished
under ERISA, or any written summary provided to participants with respect to any
plan for which no summary plan description exists; (D) the most recent
determination letter (or if applicable, advisory or opinion letter) from the
IRS, if any, or if an application for a determination letter is pending, the
application with all attachments; and (E) all notices given to such Company
Employee Benefit Plan, the Company, or any Company ERISA Affiliate by the IRS,
Department of Labor, Pension Benefit Guaranty
22
Corporation, or other governmental agency relating to such Company Employee
Benefit Plan; and (F) a written description of each oral Company Employee
Benefit Plan.
(iii) Each Company Employee Benefit Plan that is
intended to be "qualified" within the meaning of Section 401(a) of the Code and,
to the extent applicable, Section 401(k) of the Code ("Qualified Company
Employee Benefit Plan"), has received a favorable determination letter from the
IRS that has not been revoked, and no event has occurred and no condition exists
that could reasonably be expected to adversely affect the qualified status of
any such Company Employee Benefit Plan. Any favorable determination letters
referenced in this Section 3.1(l)(iii) cover "GUST" as defined in footnote 2 of
IRS Notice 2003-49. Each Qualified Company Employee Benefit Plan has timely made
"good faith" amendments to comply with the Economic Growth and Tax
Reconciliation Relief Act of 2001 as required by IRS Notice 2001-42. The trusts
established under the Qualified Company Employee Benefit Plans are exempt from
federal income taxes under Section 501(a) of the Code and any potential excise
taxes.
(iv) The Company has (A) filed or caused to be filed
all returns and reports on the Company Employee Benefit Plans that are required
to be filed and (B) paid or made adequate provision for all fees, interest,
penalties, assessments or deficiencies that have become due pursuant to those
returns or reports or pursuant to any assessment or adjustment that has been
made relating to those returns or reports. All other material fees, interest,
penalties and assessments that are payable by or for the Company and its
Subsidiaries relating to the Company Employee Benefits Plans have been timely
reported, fully paid and discharged. There are no material unpaid fees,
penalties, interest or assessments due from the Company or, to the knowledge of
the Company, from any other person or entity, relative to any Company Employee
Benefit Plan. The Company and its Subsidiaries have collected or withheld all
amounts that are required to be collected or withheld by them to discharge their
obligations with respect to the Company Employee Benefit Plans, and all of those
amounts have been paid to the appropriate governmental authority or set aside in
appropriate accounts for future payment when due.
(v) The funding, if any, under each Company Employee
Welfare Benefit Plan does not exceed and has not exceeded the limitations under
Sections 419A(b) and 419A(c) of the Code. The Company and its Subsidiaries are
not subject to taxation on the income of any Company Employee Welfare Benefit
Plan's welfare benefit fund (as such term is defined in Section 419(e) of the
Code) under Section 419A(g) of the Code. All Company Welfare Employee Benefit
Plans required to comply with the health care continuation coverage ("COBRA")
provisions of ERISA and the Code have complied with such requirements in all
material respects.
(vi) Each Company Employee Benefit Plan has been
operated and administered in all material respects in accordance with its
provisions. All contributions required to be made to any Company Employee
Benefit Plan (or to any person pursuant to the terms thereof) have been timely
made or the amount of such payment or contribution obligation has been reflected
in the Company SEC Documents, which are publicly available prior to the date of
this Agreement. All such contributions representing participant contributions
have been made within the time required by Department of Labor regulation
section 2510.3-102.
23
(vii) The Company and its Subsidiaries have complied,
and are now in compliance, in all material respects, with all provisions of
ERISA, the Code and all laws and regulations applicable to the Company Employee
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in
any prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, as a fiduciary or party in interest with respect to any
Company Employee Benefit Plan which could reasonably be expected to result in
any material liability to the Company or any of its Subsidiaries, and, to the
knowledge of the Company or any of its Subsidiaries, (A) no prohibited
transaction has occurred with respect to any Company Employee Benefit Plan and
(B) no fiduciary has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or investment of
assets of any Company Employee Benefit Plan.
(viii) Neither the Company nor any entity that is, or
within the preceding six years has been, a Company ERISA Affiliate has ever
established, maintained, contributed to, or had an obligation to contribute to,
any employee benefit plan that is a "multiemployer plan," as that term is
defined in Section 3(37) of ERISA, or that is subject to Title IV of ERISA, and
no liability under Title IV of ERISA (including a liability to pay premiums to
the Pension Benefit Guaranty Corporation) has been or is expected to be incurred
by the Company or any of its Subsidiaries. No Company Employee Welfare Plan is a
multiple employer welfare arrangement as defined in Section 3(40) of ERISA.
(ix) The Company and its Subsidiaries have not
offered to provide life, health or medical benefits or insurance coverage to any
individual, or to the family members of any individual, for any period extending
beyond the termination of the individual's employment, except to the extent
required by the COBRA provisions in ERISA and the Code or similar provisions of
state law.
(x) The consummation of the transactions contemplated
by this Agreement will not, either alone or in connection with termination of
employment, (A) entitle any current or former employee, independent contractor,
director, or officer of the Company or its Subsidiaries to severance pay, any
change in control payment, or any other material payment, except as expressly
provided in this Agreement, (B) accelerate the time of payment or vesting,
change the form or method of payment, or increase the amount of compensation
due, any such employee, independent contractor, director, or officer, or (C)
entitle any such employee, independent contractor, director or officer to any
gross-up or similar material payment in respect of the excise tax described in
Section 4999 of the Code. Neither the Company nor any Subsidiary of the Company
has taken any action that would result in its incurring any obligation for any
payments or benefits described in subsections (A), (B) or (C) of this Section
3.1(l)(x) (without regard to whether the transactions contemplated by this
Agreement are consummated) except to the extent required in a written contract
or agreement in existence as of the date of this Agreement.
(xi) As of the date of this Agreement, there are no
suits, actions, proceedings, investigations, claims or orders pending or, to the
knowledge of the Company, threatened against the Company, any Subsidiary of the
Company or any Company Employee Benefit Plan related to any Company Employee
Benefit Plan (other than claims in the ordinary course of business). As of the
date of this Agreement, to the knowledge of the Company, no
24
Company Employee Benefit Plan is subject to any ongoing audit, investigation, or
other administrative proceeding of any governmental entity, and no Company
Employee Benefit Plan is the subject of any pending application for
administrative relief under any voluntary compliance program or closing
agreement program of the IRS or the Department of Labor.
(xii) The Company has the right to amend or terminate
each Company Employee Benefit Plan at any time without incurring any liability
other than with respect to benefits that have already accrued under a Company
Employee Pension Benefit Plan.
(xiii) Neither the Company nor any Company ERISA
Affiliate has a formal plan, commitment, or proposal, whether legally binding or
not, nor has any of them made a commitment to employees, officers, directors,
consultants or independent contractors to create any additional Company Employee
Benefit Plan or modify, change or terminate any existing Company Employee
Benefit Plan, and no such plan, commitment or proposal is under serious
consideration. To the knowledge of the Company, no events have occurred or are
expected to occur with respect to any Company Employee Benefit Plan that would
cause a material change in the cost of providing the benefits under such plan or
would cause a material change in the cost of providing for other liabilities of
such plan.
(xiv) None of the assets of any Company Employee
Pension Benefit Plan include "qualifying employer securities" or "qualifying
employer real property" within the meaning of Section 407(d) of ERISA.
(xv) As used in this Agreement, "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
(xvi) Each Company Employee Benefit Plan that is a
"group health plan," as defined in Section 607(1) of ERISA, Section 5001(b)(1)
of the Code or 45 C.F.R. 160.103, has been operated at all times in material
compliance with the provisions of COBRA, HIPAA and any applicable, similar state
law. As used in this Agreement, "HIPAA" means the provisions of ERISA and the
Code enacted by the Health Insurance Portability and Accountability Act of 1996,
including any regulations thereunder, and the regulations promulgated by the
United States Department of Health and Human Services as set forth in 45 C.F.R.
Parts 160, 162, and 164.
(xvii) Each Company Employee Pension Benefit Plan
that is not qualified under Section 401(a) of the Code is exempt from Part 2, 3
and 4 of Title I of ERISA as an unfunded plan that is maintained primarily for
the purpose of providing deferred compensation for a select group of management
or highly compensated employees pursuant to Section 201(2), 301(a)(3) and
401(a)(1) of ERISA. No assets of the Company are allocated to or held in a
"rabbi trust" or similar vehicle with respect to any such plan.
(m) Labor Matters. Except as set forth on Schedule 3.1(m) of
the Company Disclosure Schedule or in the Company SEC Documents:
(i) Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or other current labor
agreement with any labor union or
25
organization, and there is no current union representation question involving
employees of the Company or any of its Subsidiaries, nor does the Company or any
of its Subsidiaries know of any activity or proceeding of any labor organization
(or representative thereof) or employee group (or representative thereof) to
organize any such employees.
(ii) As of the date hereof, there is no unfair labor
practice charge or grievance arising out of a collective bargaining agreement or
other grievance procedure against the Company or any of its Subsidiaries
pending, or, to the knowledge or the Company, threatened, that constitutes, or
could reasonably be expected to result in, a Company Material Adverse Effect.
(iii) As of the date hereof, there is no complaint,
lawsuit or proceeding in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the foregoing alleging
breach of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship
against the Company or any of its Subsidiaries pending, or, to the knowledge of
the Company, threatened, that constitutes, or could reasonably be expected to
result in, a Company Material Adverse Effect.
(iv) There is no strike, dispute, slowdown, work
stoppage or lockout pending, or, to the knowledge of the Company, threatened,
against or involving the Company or any of its Subsidiaries that constitutes, or
could reasonably be expected to result in, a Company Material Adverse Effect.
(v) The Company and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that does not
constitute and could not reasonably be expected to result in, a Company Material
Adverse Effect.
(vi) As of the date hereof, there is no proceeding,
claim, suit, action or governmental investigation pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened, in respect to which any
current or former director, officer, employee or agent of the Company or any of
its Subsidiaries is or may be entitled to claim indemnification from the Company
or any of its Subsidiaries pursuant to (A) the Articles of Incorporation or
Bylaws of the Company (each as amended to date) or any provision of the
comparable charter or other organizational documents of any of its Subsidiaries,
(B) any indemnification agreement to which the Company or any Subsidiary of the
Company is a party or (C) applicable law, in each case under clauses (A), (B)
and (C) that constitutes, or could reasonably be expected to result in, a
Company Material Adverse Effect.
(n) Property. Except as set forth on Schedule 3.1(n) of the
Company Disclosure Schedule:
(i) The Company and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents, service
marks, brand marks, brand names,
26
computer programs, databases, industrial designs, domain names and copyrights
necessary for the operation of the businesses of each of the Company and its
Subsidiaries (collectively, the "Company Intangible Property"), except where the
failure to possess or have adequate rights to use such properties could not
reasonably be expected to result in a Company Material Adverse Effect. All of
the Company Intangible Property is owned or licensed by the Company or its
Subsidiaries free and clear of any and all liens, claims or encumbrances, except
those that could not reasonably be expected to result in a Company Material
Adverse Effect, and neither the Company nor any such Subsidiary has forfeited or
otherwise relinquished any Company Intangible Property which forfeiture could
reasonably be expected to result in a Company Material Adverse Effect. To the
knowledge of the Company, the use of the Company Intangible Property by the
Company or its Subsidiaries does not, in any respect that constitutes or could
reasonably be expected to result in a Company Material Adverse Effect, conflict
with, infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service ▇▇▇▇, brand
▇▇▇▇, brand name, computer program, database, industrial design, domain name,
copyright or any pending application therefor of any other person. There have
been no claims made and neither the Company nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that (A) any of the Company
Intangible Property is invalid or conflicts with the asserted rights of any
other person or (B) any of the Company Intangible Property has not been used or
enforced or has failed to have been used or enforced in a manner that would
result in the abandonment, cancellation or unenforceability of any of the
Company Intangible Property, except, in the case of clauses (A) and (B) of this
Section 3.1(n)(i), for any such conflict, infringement, violation, interference,
claim, invalidity, abandonment, cancellation or unenforceability that could not
reasonably be expected to result in a Company Material Adverse Effect.
(ii) All major items of operating equipment owned or
leased by the Company and its Subsidiaries (A) are, in the aggregate, in a state
of repair so as to be adequate in all material respects for reasonably prudent
operations in the areas in which they are operated and (B) are adequate,
together with all other properties of the Company and its Subsidiaries, to
comply in all material respect with the requirements of all applicable
contracts, including sales contracts. Except for goods and other property sold,
used or otherwise disposed of since January 1, 2004 in the ordinary course of
business, the Company and its Subsidiaries have good and defensible title to all
oil and gas properties forming the basis for the reserves reflected in the
Company Reserve Reports (as hereinafter defined) as attributable to interests
owned by the Company and its Subsidiaries, and to all other properties,
interests in properties and assets, real and personal, reflected in the Company
SEC Documents filed prior to the date of this Agreement as owned by the Company
and its Subsidiaries, free and clear of any liens, except: (A) liens reflected
in the Company SEC Documents filed prior to the date of this Agreement, (B)
liens for current taxes not yet due and payable, and (C) such imperfections of
title, easements, liens, government or tribal approvals or other matters and
failures of title as could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect. The leases and other
agreements pursuant to which the Company and its Subsidiaries lease or otherwise
acquire or obtain operating rights affecting any real or personal property given
value in the Company Reserve Reports are in good standing, valid and effective,
and the rentals due by the Company or any Subsidiary of the Company to any
lessor of any such oil and gas leases have
27
been properly paid, except in each case as could not reasonably be expected to
result in a Company Material Adverse Effect.
(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Laws" means all federal, state and
local laws (including common laws), rules, regulations,
ordinances, orders and decrees of any Governmental Entity now
in existence relating to pollution or the protection of human
health, safety or the environment of any jurisdiction in which
the applicable party hereto owns or operates assets or
conducts business or owned or operated assets or conducted
business (whether or not through a predecessor entity)
(including, without limitation, ambient air, surface water,
groundwater, land surface, subsurface strata, natural
resources or wildlife), including, without limitation, laws
and regulations relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of solid waste or Hazardous Materials,
and any similar laws, rules, regulations, ordinances, orders
and decrees of any foreign jurisdiction in which the
applicable party hereto owns or operates assets or conducts
business;
(B) "Hazardous Materials" means (x) any petroleum or
petroleum products, radioactive materials (including naturally
occurring radioactive materials), asbestos in any form that is
or could become friable, urea formaldehyde foam insulation,
polychlorinated biphenyls or transformers or other equipment
that contain dielectric fluid containing polychlorinated
biphenyls, (y) any chemicals, materials or substances which
are now defined as or included in the definition of "solid
wastes," "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous substances,"
"restricted hazardous wastes," "toxic substances" or "toxic
pollutants," or words of similar import, under any
Environmental Law and (z) any other chemical, material,
substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a
jurisdiction in which the Company or any of its Subsidiaries
operates (for purposes of Section 3.1(o)) or in which Parent
or any of its Subsidiaries operates (for purposes of Section
3.2(o)).
(C) "Release" means any spill, effluent, emission,
leaking, pumping, pouring, emptying, escaping, dumping,
injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, or into
or out of any property owned, operated or leased by the
applicable party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by a
Governmental Entity or required under any Environmental Law,
or voluntarily undertaken to (I) clean up, remove, treat, or
in any other way ameliorate or address any Hazardous Materials
28
or other substance in the indoor or outdoor environment; (II)
prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not
endanger or threaten to endanger the public or employee health
or welfare of the indoor or outdoor environment; (III) perform
pre-remedial studies and investigations or post-remedial
monitoring and care pertaining or relating to a Release; or
(IV) bring the applicable party into compliance with any
Environmental Law.
Except as disclosed in the Company SEC Documents or set forth on
Schedule 3.1(o) of the Company Disclosure Schedule:
(i) The operations of the Company and its
Subsidiaries have been conducted, are and, as of the
Closing Date, will be, in compliance with all
Environmental Laws, except where the failure to so
comply could not reasonably be expected to result in
a Company Material Adverse Effect.
(ii) The Company and its Subsidiaries have
obtained and will maintain all permits, licenses and
registrations, or applications relating thereto, and
have made and will make all filings, reports and
notices required under applicable Environmental Laws
for the continued operations of their respective
businesses, except such matters the lack or failure
of which could not reasonably be expected to result
in a Company Material Adverse Effect.
(iii) The Company and its Subsidiaries are
not subject to any outstanding written orders issued
by, or contracts with, any Governmental Entity or
other person respecting (A) Environmental Laws, (B)
Remedial Action, (C) any Release or threatened
Release of a Hazardous Material or (D) an assumption
of responsibility for environmental liabilities of
another person, except such orders or contracts the
compliance with which could not reasonably be
expected to result in a Company Material Adverse
Effect.
(iv) The Company and its Subsidiaries have
not received any written communication alleging, with
respect to any such party, the violation of or
liability under any Environmental Law, which
violation or liability could reasonably be expected
to result in a Company Material Adverse Effect.
(v) Neither the Company nor any of its
Subsidiaries has any contingent liability in
connection with the Release of any Hazardous Material
into the indoor or outdoor environment (whether
on-site or off-site) or employee or third party
exposure to Hazardous Materials that could reasonably
be expected to result in a Company Material Adverse
Effect.
29
(vi) The operations of the Company or its
Subsidiaries involving the generation,
transportation, treatment, storage or disposal of
hazardous or solid waste, as defined and regulated
under 40 C.F.R. Parts 260-270 (in effect as of the
date of this Agreement) or any applicable state
equivalent, are in compliance with applicable
Environmental Laws, except where the failure to so
comply could not reasonably be expected to result in
a Company Material Adverse Effect.
(vii) To the knowledge of the Company, there
is not now on or in any property of the Company or
its Subsidiaries or any property for which the
Company or its Subsidiaries is potentially liable any
of the following: (A) any underground storage tanks
or surface impoundments or (B) any on-site disposal
of Hazardous Material, any of which ((A) or (B)
preceding) could reasonably be expected to result in
a Company Material Adverse Effect.
(p) Insurance. Schedule 3.1(p) of the Company Disclosure
Schedule sets forth an insurance schedule of the Company's and each of its
Subsidiaries' directors' and officers' liability insurance, primary and excess
casualty insurance policies, providing coverage for bodily injury and property
damage to third parties, including products liability and completed operations
coverage, and worker's compensation, in effect as of the date hereof. The
Company maintains insurance in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged in businesses
similar to those of the Company and each of its Subsidiaries (taking into
account the cost and availability of such insurance). As of the date of this
Agreement, all such insurance policies are in full force and effect and all
related premiums have been paid to date. As of the Closing Date, all such
insurance policies (or comparable replacement policies) shall be in full force
and effect and all related premiums shall have been paid to date.
(q) Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of Citigroup Global Markets Inc. addressed
to such Board to the effect that, as of the date of such opinion, the Merger
Consideration to be received by the holders of Company Common Stock pursuant to
this Agreement is fair from a financial point of view to such holders. Parent
acknowledges and agrees that it may not, and is not entitled to, rely on the
opinion of Citigroup Global Markets Inc. delivered to the Company's Board of
Directors. The Company has been authorized by Citigroup Global Markets Inc. to
include such opinion in its entirety in the Joint Proxy Statement included in
the S-4 as long as such inclusion is in form and substance reasonably
satisfactory to Citigroup Global Markets Inc. and its counsel.
(r) Board Recommendation; Company Action; Vote Required. The
Board of Directors of the Company has, by resolutions duly adopted by the
directors and not subsequently rescinded or modified in any way, unanimously
(except for ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who recused himself from voting with respect to
these matters and did not participate in such meeting) (i) determined that this
Agreement, the Merger, in accordance with the terms of this Agreement, and the
other transactions contemplated hereby are advisable and in the best interests
of the Company, (ii) approved and adopted this Agreement and approved the Merger
and the other transactions contemplated hereby, (iii) directed that the Merger
and this Agreement be submitted for
30
consideration by the stockholders of the Company at a meeting of the Company's
stockholders and (iv) recommended that the stockholders of the Company approve
the Merger and this Agreement (provided that any change in or modification or
rescission of such recommendation by the Board of Directors of the Company in
accordance with Section 4.2(d) or Section 5.5(b) shall not be a breach of the
representation in this clause (iv)). The directors of the Company have advised
the Company that, as of the date hereof, they intend to vote or cause to be
voted all of the shares of Company Common Stock beneficially owned by them and
their affiliates in favor of approval of the Merger and this Agreement. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock is the only vote of the holders of any class or series of
Company capital stock necessary to approve the Merger and this Agreement and the
transactions contemplated hereby. To the knowledge of the Company, no "fair
price," "moratorium," "control share acquisition" or other antitakeover statute
or similar statute or regulation applies or purports to apply to this Agreement
or the Merger or the other transactions contemplated by this Agreement.
(s) Beneficial Ownership of Parent Common Stock. As of the
date hereof, neither the Company nor any of its Subsidiaries "beneficially owns"
(as defined in Rule 13d-3 under the Exchange Act) any of the outstanding Parent
Common Stock or any of Parent's outstanding debt securities.
(t) Brokers. Except for the fees and expenses payable to
Citigroup Global Markets Inc., which fees are reflected in its engagement letter
with the Company (a copy of which has been delivered to Parent), no broker,
investment banker, or other person is entitled to any broker's, finder'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.
(u) Amendment to Rights Agreement.
(i) The Board of Directors of the Company, by
execution of the Rights Agreement Amendment, has taken all necessary action to
amend the Company Rights Agreement (other than obtaining the signature of the
Rights Agent thereunder to the Rights Agreement Amendment) so that none of the
execution and delivery of this Agreement, the conversion of shares of Company
Common Stock into the right to receive the Merger Consideration in accordance
with Article II of this Agreement, and the consummation of the Merger or any
other transaction contemplated hereby will cause (A) the Company Rights to
become exercisable under the Company Rights Agreement, (B) Parent or any of its
Subsidiaries to be deemed an "Acquiring Person" (as defined in the Company
Rights Agreement), (C) any such event to be deemed a "Adjustment Event" (as
defined in the Company Rights Agreement) or (D) the "Share Acquisition Date" (as
defined in the Company Rights Agreement) to occur upon any such event.
(ii) The Board of Directors of the Company, by
execution of the Rights Agreement Amendment, has taken all necessary action to
amend the Company Rights Agreement (other than obtaining the signature of the
Rights Agent thereunder to the Rights Agreement Amendment) so that Section 13
thereof will not apply to the Merger.
31
(iii) As of the date of this Agreement, the Company
Rights have not separated from Company Common Stock and no distribution of Right
Certificates (as defined in the Company Rights Agreement) will occur as a result
of the execution of this Agreement or the consummation of the transactions
contemplated hereby.
(v) Controls and Procedures; Corporate Governance.
(i) Each of the Company and its Subsidiaries
maintains accurate books and records reflecting its assets and liabilities and
maintains proper and adequate internal accounting controls that provide
assurance that (A) transactions are executed with management's authorization;
(B) transactions are recorded as necessary to permit preparation of the
consolidated financial statements of the Company and to maintain accountability
for Company's consolidated assets; (C) access to the Company's assets is
permitted only in accordance with management's authorization; (D) the reporting
of the Company's assets is compared with existing assets at regular intervals;
and (E) accounts, notes and other receivables and inventory are recorded
accurately, and proper and adequate procedures are implemented to effect the
collection thereof on a current and timely basis. The Company has made available
to Parent a summary of (A) any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data, (B) any
material weaknesses in the Company's internal controls, and (C) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's internal control over financial reporting.
(ii) The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or
15d-15(e) under the Exchange Act); such disclosure controls and procedures are
designed to ensure that material information relating to the Company required to
be disclosed in the Company's Exchange Act reports is made known to the
Company's principal executive officer and its principal financial officer by
others within the Company and its Subsidiaries, particularly during the periods
in which the periodic reports required under the Exchange Act are being
prepared; and, to the knowledge of the Company, such disclosure controls and
procedures are effective in timely alerting the Company's principal executive
officer and its principal financial officer to material information required to
be included in the Company's periodic reports required under the Exchange Act.
(iii) The Company is, or will timely be, in
compliance in all material respects with all current and proposed listing and
corporate governance requirements of the NYSE, and is in compliance in all
material respects, and will continue to remain in compliance from the date
hereof until immediately after the Effective Time, with all rules, regulations
and requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the SEC.
(w) Investment Company. Neither the Company nor any of the
Subsidiaries of the Company is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940 and the rules and regulations promulgated thereunder.
(x) Reserve Reports. The Company has furnished to Parent the
Company's estimate of the Company's and the Company's Subsidiaries' oil and gas
reserves as of January 1,
32
2004, audited by Netherland, ▇▇▇▇▇▇ & Associates, Inc. (the "Company Reserve
Reports"). Except as could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect, (i) the factual,
non-interpretive data on which the Company Reserve Reports were based for
purposes of estimating the oil and gas reserves set forth in the Company Reserve
Reports was accurate and (ii) the estimates of proved reserves used by the
Company in connection with the preparation of the Company Reserve Reports and
provided by the Company to Netherland, ▇▇▇▇▇▇ & Associates, Inc. in connection
with its audit of the Company Reserve Reports are in accordance with definitions
contained in Rule 4-10(a) of Regulation S-X promulgated by the SEC.
(y) Hedging. The Company SEC Documents accurately summarize
the outstanding Hedging positions attributable to the production of the Company
and the Subsidiaries of the Company as of the date reflected therein. Schedule
3.1(g) of the Company Disclosure Schedules sets forth all Hedging positions of
the Company and its Subsidiaries in place as of the date hereof (including those
entered into in contemplation of this Agreement). "Hedge" means a derivative
transaction within the coverage of SFAS No. 133, including any swap transaction,
option, warrant, forward purchase or sale transaction, futures transaction, cap
transaction, floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest rates,
credit-related events or conditions or any indexes, or any other similar
transaction (including any option with respect to any of these transactions) or
combination or any of these transactions, including collateralized mortgage
obligations or other similar instruments or transactions, and any related credit
support, collateral, transportation or other similar arrangements related to
such transactions.
(z) Natural Gas Act. Except as set forth on Schedule 3.1(z) of
the Company Disclosure Schedule, any gas gathering system constituting a part of
the properties of the Company or its Subsidiaries has as its primary function
the provision of natural gas gathering services, as the term "gathering" is
interpreted under Section 1(b) of the Natural Gas Act (the "NGA"); none of the
properties have been or are certificated by the Federal Energy Regulatory
Commission (the "FERC") under Section 7(c) of the NGA or to the knowledge of the
Company are now subject to FERC jurisdiction under the NGA; and none of the
properties have been or are providing service pursuant to Section 311 of the
NGA.
(aa) Certain Contracts and Arrangements. Neither the Company
nor any of its Subsidiaries is a party to or bound by any agreement or other
arrangement that limits or otherwise restricts the Company or any of its
Subsidiaries or any successor thereto, or that would, after the Effective Time,
materially limit or restrict Parent, the Surviving Corporation or any of
Parent's other Subsidiaries or any successor thereto, from engaging or competing
in the oil and gas exploration and production business in any significant
geographic area, except for joint ventures, area of mutual interest agreements
entered into in connection with prospect reviews and similar arrangements
entered into the ordinary course of business. Schedule 3.1(aa) of the Company
Disclosure Schedule and the documents filed or incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003 set
forth a true and complete list of each agreement to which the Company or any
Subsidiary of the Company is subject (other than this Agreement) that is of a
type that would be required to be included as an exhibit to a Registration
Statement on Form S-1 pursuant to the rules and regulations of the SEC if such a
registration statement was filed by the Company on the date hereof
(collectively, the
33
"Company Contracts"). Except as could not reasonably be expected to result in a
Company Material Adverse Effect, neither the Company nor any Subsidiary of the
Company is in breach or default under any Company Contract nor, to the knowledge
of the Company, is any other party to any such Company Contract in breach or
default thereunder. Other than as contemplated by Section 3.1(c), no consents,
assignments, waivers, authorization or other certificates or material payments
are necessary in connection with the transactions contemplated hereby to provide
for the continuation in full force and effect of all of the Company Contracts
after the Closing, except to the extent the failure to obtain any such consent,
assignment, waiver, authorization or other certificate, individually or in the
aggregate, has not resulted in and could not reasonably be expected to result in
a Company Material Adverse Effect.
(bb) Reorganization Classification. The Company has not taken
any action that causes the Merger and the LLC Sub Merger not to qualify as a
reorganization, within the meaning of section 368(a)(1) of the Code, and has not
failed to take any action which if taken would have prevented the Merger and the
LLC Sub Merger from not qualifying as such a reorganization.
3.2 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub jointly and severally represent and warrant to the Company as follows
(such representations and warranties being deemed to be made as of the date
hereof and as of Closing) (in each case as qualified by matters reflected on the
disclosure schedule dated as of the date of this Agreement and delivered by
Parent to the Company on or prior to the date of this Agreement (the "Parent
Disclosure Schedule") (each reference contained herein to such disclosure
schedule qualifies the referenced representation and warranty to the extent
specified therein and such other representations and warranties contained herein
(regardless of whether or not such representation or warranty contains a
reference to such disclosure schedule) to the extent a matter in such disclosure
schedule is disclosed in such a way as to make its relevance to the information
called for by such other representation or warranty readily apparent on its
face)):
(a) Organization, Standing and Power. Each of Parent, Merger
Sub and its Significant Subsidiaries is a corporation, limited liability company
or partnership duly organized or formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation, organization or formation,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted, and is duly qualified and
licensed, as may be required, and in good standing to do business in each
jurisdiction in which the business it is conducting, or the operation, ownership
or leasing of its properties, makes such qualification and licensing necessary,
other than in such jurisdictions where the failure so to be qualified and
licensed could not reasonably be expected to result in a Parent Material Adverse
Effect. All Subsidiaries of Parent and their respective jurisdictions of
incorporation, organization or formation are identified on Schedule 3.2(a) of
the Parent Disclosure Schedule and all Subsidiaries of Parent that are
Significant Subsidiaries of Parent are indicated as such on such schedule.
Parent has heretofore delivered to the Company complete and correct copies of
its Amended and Restated Certificate of Incorporation and Restated Bylaws, each
as amended to date, and complete and correct copies of the Articles of
Incorporation and Bylaws of Merger Sub. "Parent Material Adverse Effect" means
any result, occurrence, condition, fact, change, violation, event or effect of
any of the foregoing (whether or not (A) foreseeable or known as of the date of
this Agreement or (B) covered by insurance) that,
34
individually or in the aggregate with such other results, occurrences,
conditions, facts, changes, violations, events or effects (whether or not such
result, occurrence, condition, fact, change, violation, event or effect has,
during the period or at any time in question, manifested itself in the
historical financial statements of Parent or any of its Subsidiaries), (x) is
materially adverse to the financial condition, properties, business or results
of operations of Parent and its Subsidiaries taken as a whole, (y) would
materially impair the ability of Parent to perform in a timely manner its
obligations under this Agreement or (z) would prevent the consummation of the
transactions contemplated by this Agreement; provided, however, that in no event
shall any of the following constitute a Parent Material Adverse Effect: (1) any
change or effect resulting from changes in general economic, regulatory or
political conditions, conditions in the United States or worldwide capital
markets or any outbreak of hostilities or war (except for any changes referred
to in this subclause which, individually or in the aggregate, disproportionately
affect the business, assets, properties, liabilities, results of operations or
financial condition of Parent and its Subsidiaries taken as a whole, as compared
to other industry participants), (2) any change or effect, including changes in
laws, that affects the oil and gas exploration and development industry or
exploration and production companies of a similar size to Parent and a majority
of whose reserves are natural gas generally (including changes in commodity
prices, general market prices and regulatory changes affecting the oil and gas
industry or exploration and production companies of a similar size to Parent and
a majority of whose reserves are natural gas generally) (except for any changes
referred to in this subclause which, individually or in the aggregate,
disproportionately affect the business, assets, properties, liabilities, results
of operations or financial condition of Parent and its Subsidiaries taken as a
whole, as compared to other industry participants, and exploration and
production companies of a similar size to Parent and a majority of whose
reserves are natural gas), or (3) any change or effect resulting from the
announcement or pendency of this Agreement, the Merger or the other transactions
contemplated hereby.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 500,000,000 shares of Parent Common Stock
and 100,000,000 shares of preferred stock, par value $.01 per share, of Parent
("Parent Preferred Stock"). At the close of business on April 30, 2004: (i)
120,174,520 shares of Parent Common Stock were issued and outstanding; (ii) no
shares of Parent Preferred Stock were issued and outstanding; (iii) 17,501
shares of Parent Common Stock were held by Parent in its treasury; (iv)
5,873,576 shares of Parent Common Stock were subject to issuance under
outstanding options or awards under the 1991 Stock Option Plan of Mesa, Inc.,
1996 Incentive Plan of Mesa, Inc., ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Long-Term Incentive Plan,
Parent's Long-Term Incentive Plan (as amended), Parent's Employee Stock Purchase
Plan (as amended) and any other stock option, stock bonus, stock award, or stock
purchase plan, program or arrangement of Parent or any of Parent's Subsidiaries
or any predecessor thereof (collectively, "Parent Stock Plans") (excluding
shares subject to issuance under Parent's Employee Stock Purchase Plan (as
amended)); (v) 6,420,865 shares of Parent Common Stock were reserved for
issuance pursuant to awards that may be granted (other than currently
outstanding awards) pursuant to the Parent Stock Plans (excluding shares subject
to issuance under Parent's Employee Stock Purchase Plan (as amended)); (vi)
500,000 shares of Series A Junior Participating Preferred Stock were reserved
for issuance upon exercise of Parent Rights; and (vii) no Voting Debt was issued
and outstanding. All issued shares of Parent capital stock are validly issued,
fully paid, and nonassessable and not subject to preemptive rights. When shares
subject to or reserved for issuance pursuant to the applicable Parent Stock
Plans or the Parent Rights are issued, such shares will be validly issued, fully
paid and nonassessable and
35
not subject to preemptive rights. Except as set forth on Schedule 3.2(b) of the
Parent Disclosure Schedule, all outstanding shares of capital stock of the
Subsidiaries of Parent are validly issued, fully paid and nonassessable, are not
subject to preemptive rights, and are owned by Parent or a direct or indirect
wholly owned Subsidiary of Parent free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except as set forth in this
Section 3.2(b) or on Schedule 3.2(b) of the Parent Disclosure Schedule, and
except for changes since April 30, 2004 resulting from the grant or exercise of
stock options granted prior to the date hereof pursuant to, or from issuances or
purchases under, Parent Stock Plans, and except for changes from the grant or
exercise of stock options under Parent's Employee Stock Purchase Plan, or as
contemplated by this Agreement, there are outstanding: (i) no shares of capital
stock, Voting Debt or other voting securities of Parent; (i) no securities of
Parent or any Subsidiary of Parent convertible into or exchangeable for shares
of capital stock, Voting Debt or other voting securities of Parent or any
Subsidiary of Parent; and (i) no options, warrants, calls, rights (including
preemptive rights), commitments or agreements to which Parent or any Subsidiary
of Parent is a party or by which it is bound in any case obligating Parent or
any Subsidiary of Parent to issue, deliver, sell, purchase, redeem or acquire,
or cause to be issued, delivered, sold, purchased, redeemed or acquired,
additional shares of capital stock or any Voting Debt or other voting securities
of Parent or of any Subsidiary of Parent or obligating Parent or any Subsidiary
of Parent to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. There are not as of the date hereof and there will not
be at the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which Parent is a party or by which it is bound
relating to the voting of any shares of the capital stock of Parent that will
limit in any way the solicitation of proxies by or on behalf of Parent from, or
the casting of votes by, the stockholders of Parent with respect to the Merger.
There are no restrictions on Parent to vote the stock of any of its
Subsidiaries. Except as set forth on Schedule 3.2(b) of the Parent Disclosure
Schedule, there are no agreements requiring Parent or any Subsidiary of Parent
to make contributions to the capital of, or lend or advance funds to, any
Subsidiary of Parent. As of the date hereof, the authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, par value $.01 per share,
all of which shares are validly issued, fully paid and nonassessable and are
owned by Parent.
(c) Authority; No Violations, Consents and Approvals.
(i) Parent has all requisite corporate power and
authority to enter into this Agreement and, subject, with respect to
consummation of the Merger, to approval of the issuance of shares of Parent
Common Stock pursuant to the Merger by the stockholders of Parent in accordance
with the rules and regulations of the NYSE, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent, subject, with respect
to the consummation of the Merger, to approval of the issuance of shares of
Parent Common Stock pursuant to the Merger by the stockholders of Parent in
accordance with the rules and regulations of the NYSE. This Agreement has been
duly executed and delivered by Parent, subject, with respect to consummation of
the Merger, to approval of the issuance of shares of Parent Common Stock
pursuant to the Merger by the stockholders of Parent in accordance with the
rules and regulations of the NYSE, and, assuming this Agreement constitutes the
valid and binding obligation of the Company, constitutes a valid and binding
obligation of Parent enforceable in accordance with its terms, subject as to
36
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting creditors' rights and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). Parent, as the owner of all of
the outstanding shares of Merger Sub, has approved this Agreement and the Merger
in its capacity as sole stockholder of Merger Sub. Merger Sub has all requisite
corporate power and authority to enter into this agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Merger Sub; and this
Agreement has been duly executed and delivered by Merger Sub.
(ii) Except as set forth on Schedule 3.2(c) of the
Parent Disclosure Schedule, the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and compliance
with the provisions hereof 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 material
obligation or to the loss of a material benefit under, or give rise to a right
of purchase under, result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, or otherwise result in a material detriment to Parent or any
of its Subsidiaries under, any provision of (A) the Amended and Restated
Certificate of Incorporation and Restated Bylaws of Parent (each as amended to
date) or any provision of the comparable charter or organizational documents of
any of its Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries, (C) any joint
venture or other ownership arrangement or (D) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in Section
3.2(c)(iii) are duly and timely obtained or made, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (B) or (C), any such conflicts, violations, defaults, rights,
liens, security interests, charges, encumbrances or detriments that,
individually or in the aggregate, could not reasonably be expected to result in
a Parent Material Adverse Effect.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, or permit from any Governmental
Entity is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent and
Merger Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except for: (A) the filing of a premerger notification
report by Parent under the HSR Act and the expiration or termination of the
applicable waiting period with respect thereto; (B) the filing with the SEC of
the Joint Proxy Statement, the S-4, such reports under Section 13(a) of the
Exchange Act and such other compliance with the Securities Act and the Exchange
Act and the rules and regulations thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby, and the obtaining
from the SEC of such orders as may be so required; (C) the filing of the
Articles of Merger for the Merger with the Colorado Secretary of State; (D)
filings with, and approval of, the NYSE; (E) such filings and approvals as may
be required by any applicable state securities, "blue sky" or takeover laws or
environmental laws; (F) such filings and approvals as may be required by any
foreign premerger notification, securities, corporate or other law, rule or
regulation; (G) such
37
governmental or tribal consents, qualifications or filings as are customarily
obtained or made following the transfer of interests or the change of control of
ownership in oil and gas properties; and (H) any such consent, approval, order,
authorization, registration, declaration, filing, or permit that the failure to
obtain or make could not, individually or in the aggregate, reasonably be
expected to result in a Parent Material Adverse Effect.
(d) SEC Documents.
(i) Parent has made available to the Company a true
and complete copy of each report, schedule, registration statement, definitive
proxy statement and exhibit to the foregoing documents filed by Parent with the
SEC since December 31, 2001 (the "Parent SEC Documents"), which are all the
documents (other than preliminary material) that Parent was required to file
with the SEC since December 31, 2001. As of their respective dates, Parent SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Parent SEC Documents, and
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the Subsidiaries of Parent is
required to file any forms, reports or other documents with the SEC pursuant to
Section 13(a) or 15(d) of the Exchange Act. The financial statements of Parent
included in the Parent SEC Documents were prepared from the books and records of
Parent and its Subsidiaries, complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
of the SEC) and fairly present in accordance with applicable requirements of
GAAP (subject, in the case of the unaudited statements, to normal, recurring
adjustments, none of which are material) the consolidated financial position of
Parent and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of Parent and
its consolidated Subsidiaries for the periods presented therein. Except as
disclosed in the Parent SEC Documents, there are no agreements, arrangements or
understandings between Parent and any party who is at the date of this Agreement
or was at any time prior to the date hereof but after December 31, 2001 an
Affiliate of Parent that are required to be disclosed in the Parent SEC
Documents.
(ii) Parent has not received written notice from the
SEC or any other Governmental Entity that any of its accounting policies or
practices are or may be the subject of any review, inquiry, investigation or
challenge by the SEC or any other Governmental Entity. Since December 31, 2001,
Parent's independent public accounting firm has not informed Parent that it has
any material questions, challenges or disagreements regarding or pertaining to
Parent's accounting policies or practices. Since December 31, 2001, to the
knowledge of Parent, no officer or director of Parent has received, or is
entitled to receive, any material compensation from any entity that has engaged
in or is engaging in any material transaction with Parent or any Subsidiary of
Parent. Set forth on Schedule 3.2(d) of the Parent Disclosure Schedule is a list
of all off-balance sheet special purpose entities and financing arrangements of
Parent and Subsidiaries of Company.
38
(iii) With respect to each annual report on Form
10-K, each quarterly report on Form 10-Q and each amendment of any such report
included in the Parent SEC Documents, the chief executive officer and chief
financial officer of Parent have made all certifications required by the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and any related rules and regulations promulgated by the SEC
and the NYSE, and the statements contained in any such certifications are
complete and correct.
(e) Information Supplied. None of the information supplied or
to be supplied by Parent or Merger Sub for inclusion or incorporation by
reference in the S-4 will, at the time the S-4 is filed with the SEC, at any
time it is amended or supplemented, at the time it becomes effective under the
Securities Act or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and none of the
information supplied or to be supplied by Parent or Merger Sub and included or
incorporated by reference in the Joint Proxy Statement will, at the date mailed
to stockholders of the Company or Parent, as the case may be, or at the time of
the meeting of such stockholders to be held in connection with the Merger or at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Joint Proxy Statement, insofar as it relates to Parent
or Merger Sub or Subsidiaries of Parent or other information supplied by Parent
or Merger Sub for inclusion therein, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.
(f) Absence of Certain Changes or Events. Except as set forth
on Schedule 3.2(f) of the Parent Disclosure Schedule or as disclosed in, or
reflected in the financial statements included in, the Parent SEC Documents, or
except as contemplated by this Agreement, since December 31, 2003 there has not
been: (i) any material damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets owned or operated by
the Parent and its Subsidiaries; (ii) any event, condition, action or occurrence
that, if taken during the period from the date of this Agreement through the
Effective Time, would constitute a breach of Section 4.1(b); or (iii) any other
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of business)
that has resulted in or could reasonably be expected to result in a Parent
Material Adverse Effect.
(g) No Undisclosed Material Liabilities. Except as set forth
in the Parent SEC Documents or set forth on Schedule 3.2(g) of the Parent
Disclosure Schedule, as of the date hereof, there are no liabilities of Parent
or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, that have resulted in or could
reasonably be expected to result in a Parent Material Adverse Effect, other
than: (i) liabilities adequately provided for on the balance sheet of Parent
dated as of December 31, 2003 (including the notes thereto) contained in
Parent's Annual Report on Form 10-K for the year ended December 31, 2003; and
(ii) liabilities under this Agreement.
(h) No Default. Neither Parent nor any of its Subsidiaries is
in default or violation (and no event has occurred which, with notice or the
lapse of time or both, would constitute a default or violation) of any term,
condition or provision of (i) the Amended and
39
Restated Certificate of Incorporation or Restated Bylaws of Parent (each as
amended to date) 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 to which Parent or any of its Subsidiaries is now a party or by which
Parent or any of its Subsidiaries or any of their respective properties or
assets is bound (except for the requirement under certain of such instruments to
file supplemental indentures as a result of the transactions contemplated
hereby) or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or any of its Subsidiaries, except in the case
of (ii) and (iii) for defaults or violations which in the aggregate could not
reasonably be expected to result in a Parent Material Adverse Effect.
(i) Compliance with Applicable Laws. Parent and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Parent Permits"), except where the
failure so to hold could not reasonably be expected to result in a Parent
Material Adverse Effect. Parent and its Subsidiaries are in compliance with the
terms of the Parent Permits, except where the failure so to comply could not
reasonably be expected to result in a Parent Material Adverse Effect. Except as
disclosed in the Parent SEC Documents, the businesses of Parent and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for possible violations which
could not reasonably be expected to result in a Parent Material Adverse Effect.
As of the date of this Agreement, no investigation or review by any Governmental
Entity with respect to Parent or any of its Subsidiaries is pending or, to the
knowledge of Parent as of the date hereof, threatened, other than those the
outcome of which could not reasonably be expected to result in a Parent Material
Adverse Effect.
(j) Litigation. Except as disclosed in the Parent SEC
Documents or as set forth on Schedule 3.2(j) of the Parent Disclosure Schedule,
as of the date of this Agreement there is no suit, action or proceeding pending,
or, to the knowledge of Parent, threatened against or affecting Parent or any
Subsidiary of Parent ("Parent Litigation"), and Parent and its Subsidiaries have
no knowledge of any facts that are likely to give rise to any Parent Litigation,
that (in any case) could reasonably be expected to result in a Parent Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Parent or any
Subsidiary of Parent ("Parent Order") that could reasonably be expected to
result in a Parent Material Adverse Effect.
(k) Taxes. Except as set forth on Schedule 3.2(k) of the
Parent Disclosure Schedule:
(i) Each of Parent, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which Parent or
any of its Subsidiaries is or was a member has (A) duly filed on a timely basis
(taking into account any extensions) all U.S. federal income Tax Returns and all
other material Tax Returns required to be filed or sent by or with respect to it
and all such Tax Returns are true, correct and complete in all material
respects, (B) duly paid or deposited on a timely basis all Taxes (as hereinafter
defined) that are shown to be due and payable on or with respect to such Tax
Returns, and all material Taxes that are otherwise due and payable (except for
audit adjustments not material in the aggregate or to the
40
extent that liability therefor is reserved for in Parent 's most recent audited
financial statements) for which Parent or any of its Subsidiaries are reasonably
likely to be liable, (C) established reserves that are adequate for the payment
of all material Taxes not yet due and payable with respect to the results of
operations of Parent and its Subsidiaries through the date hereof, and (D)
complied in all material respects with all applicable laws, rules and
regulations relating to the reporting, payment and withholding of Taxes that are
required to be withheld from payments to employees, independent contractors,
creditors, stockholders or any other third party and has in all material
respects timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over.
(ii) Schedule 3.2(k) of the Parent Disclosure
Schedule sets forth (A) the last taxable period through which the federal income
Tax Returns of Parent and any of its Subsidiaries have been examined by the IRS
or for which the statute of limitations for assessment has otherwise closed and
(B) any affiliated, consolidated, combined, unitary or similar group or Tax
Return in which Parent or any of its Subsidiaries is or has been a member or
joins or has joined in the filing. Except to the extent being contested in good
faith and adequately provided for in Parent's most recent audited financial
statements, all material deficiencies asserted as a result of any examination by
any applicable taxing authority have been paid or fully settled. As of the date
hereof, no audits or other administrative proceedings or court proceedings are
pending, or to the knowledge of Parent, threatened, with regard to any Taxes for
which Parent or any of its Subsidiaries would be liable, and no material
deficiency for any Taxes has been proposed, asserted or assessed (whether by
examination report or prior to completion of examination by means of notices of
proposed adjustment or other similar requests or notices) against Parent or any
of its Subsidiaries by any taxing authority with respect to any period. All
material Hedging transactions entered into by Parent and its Subsidiaries have
been properly identified for federal income tax purposes. No claim is pending
and no claim has ever been made that has not been resolved by an authority in a
jurisdiction where Parent or any Subsidiary of Parent does not file Tax Returns
that Parent or such Subsidiary of Parent, as the case may be, is or may be
subject to Tax in that jurisdiction.
(iii) Neither Parent nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on the Closing Date
will execute or enter into) with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending the
period for assessment or collection of any income or franchise Taxes for which
Parent or any of its Subsidiaries would be liable or (B) a closing agreement
pursuant to Section 7121 of the Code or any similar provision of state, local,
foreign or other income tax law, which will require any increase in taxable
income or alternative minimum taxable income, or any reduction in tax credits,
for Parent or any of its Subsidiaries for any taxable period ending after the
Closing Date. Neither Parent nor any Subsidiary of Parent is subject to any
private letter ruling of the IRS or comparable ruling of other tax authorities
that will be binding on Parent or any Subsidiary of Parent with respect to any
period following the Closing Date. Neither Parent nor any Subsidiary of Parent
has granted any power of attorney, which is currently in force with respect to
any income, franchise, or similar Taxes or any income, franchise or similar Tax
Returns.
41
(iv) Neither Parent nor any of its Subsidiaries is a
party to, is bound by, or has any obligation under any tax sharing, indemnity or
allocation agreement or similar agreement, arrangement or practice.
(v) There are no requests for rulings or outstanding
subpoenas from any taxing authority for information with respect to Taxes of
Parent or any of its Subsidiaries and, to the knowledge of Parent, no material
reassessments (for property or ad valorem Tax purposes) of any assets or any
property owned or leased by Parent or any of its Subsidiaries have been proposed
in written form.
(vi) Neither Parent nor any of its Subsidiaries has
agreed to make any adjustment pursuant to section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method of
Parent or any of its Subsidiaries, and neither Parent nor any of its
Subsidiaries has any application pending with any taxing authority requesting
permission for any changes in any accounting method of Parent or any of its
Subsidiaries. To the knowledge of Parent, neither the IRS nor any other taxing
authority has proposed in writing, and neither Parent nor any of its
Subsidiaries is otherwise required to make, any such adjustment or change in
accounting method.
(vii) There are no material excess loss accounts or
deferred intercompany transactions between Parent and/or any of its Subsidiaries
within the meaning of Treas. Reg. Section 1.1502-13 or 1.1502-19, respectively.
(viii) Neither Parent nor any Subsidiary of Parent
has constituted either a "distributing corporation" or a "controlled
corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under Section 355(a) of
the Code (A) in the two years prior to the date of this Agreement, or (B) in a
distribution that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(ix) None of Parent, its Subsidiaries or any
affiliated, consolidated, combined, unitary or similar group of which any of
Parent or its Subsidiaries is or was a member has participated, directly or
indirectly, in any (A) reportable transaction within the meaning of Treasury
Regulation Section 1.6011-4(b) or (B) Tax shelter required to be registered
under Section 6111 of the Code. Parent and each Subsidiary of Parent has
disclosed on its federal income tax returns all positions taken therein that
could, if not so disclosed, give rise to a substantial understatement penalty
within the meaning of Section 6662 of the Code.
(x) Parent's net operating loss and capital loss
carryforwards are at least $660,000,000 as measured under GAAP, and are not
reasonably likely to expire sooner than the dates set forth on Schedule
3.2(k)(x) of the Parent Disclosure Schedule. Except as set forth on Schedule
3.2(k)(x) of the Parent Disclosure Schedule no such carryforwards are subject to
limitation or restriction.
(l) Employee Benefit Plans; ERISA. Except as set forth on
Schedule 3.2(l) of the Parent Disclosure Schedule or in the Parent SEC
Documents:
42
(i) There are no Parent Employee Benefit Plans
established, maintained, contributed to or required to be contributed to, by
Parent or any entity with which Parent is considered a single employer under
Section 414(b), (c), (m) or (o) of the Code ("Parent ERISA Affiliates") or which
Parent or any Parent ERISA Affiliate has established, maintained, contributed
to, or been required to contribute to, within six years prior to the Effective
Time. As used in this Agreement, "Parent Employee Benefit Plan" means any plan,
program, policy, practice, agreement or other arrangement providing compensation
or benefits in any form to any current or former employee, independent
contractor, officer or director of Parent or any Subsidiaries of Parent or any
beneficiary or dependent thereof, whether written or unwritten, formal or
informal, including without limitation any "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA ("Parent Employee Welfare Benefit
Plan"), any "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (whether or not such plan is subject to ERISA) ("Parent Employee
Pension Benefit Plan") and any other pension, profit-sharing, bonus, incentive
compensation, deferred compensation, vacation, sick pay, stock purchase, stock
option, phantom equity, equity compensation, severance, employment, consulting,
unemployment, hospitalization or other medical, life, or other insurance, long-
or short-term disability, change of control, fringe benefit, or any other plan,
program or policy.
(ii) With respect to each Parent Employee Benefit
Plan, Parent has provided Company with a true, correct and complete copy of: (A)
each writing constituting a part of such Parent Employee Benefit Plan
(including, but not limited to, the plan document(s), adoption agreement,
prototype or volume submitter documents, trust agreement, annuity contract,
third party administrative contracts, and insurance contracts) and all
amendments thereto; (B) the three most recent Annual Reports (Form 5500 Series)
including all applicable schedules, if required; (C) the current summary plan
description and any material modifications thereto, if required to be furnished
under ERISA, or any written summary provided to participants with respect to any
plan for which no summary plan description exists; (D) the most recent
determination letter (or if applicable, advisory or opinion letter) from the
IRS, if any, or if an application for a determination letter is pending, the
application with all attachments; (E) all notices given to such Parent Employee
Benefit Plan, Parent, or any Parent ERISA Affiliate by the IRS, Department of
Labor, Pension Benefit Guaranty Corporation, or other governmental agency
relating to such Parent Employee Benefit Plan; and (F) a written description of
each oral Company Employee Benefit Plan.
(iii) Each Parent Employee Benefit Plan that is
intended to be "qualified" within the meaning of Section 401(a) of the Code and,
to the extent applicable, Section 401(k) of the Code ("Qualified Parent Employee
Benefit Plan"), has received a favorable determination letter from the IRS that
has not been revoked, and no event has occurred and no condition exists that
could reasonably be expected to adversely affect the qualified status of any
such Parent Employee Benefit Plan. Any favorable determination letters
referenced in this Section 3.2(l)(iii) cover "GUST" as defined in footnote 2 of
IRS Notice 2003-49. Each Qualified Parent Employee Benefit Plan has timely made
"good faith" amendments to comply with the Economic Growth and Tax
Reconciliation Relief Act of 2001 as required by IRS Notice 2001-42. The trusts
established under the Qualified Parent Employee Benefit Plans are exempt from
federal income taxes under Section 501(a) of the Code and any potential excise
taxes.
43
(iv) Parent has (A) filed or caused to be filed all
returns and reports on the Parent Employee Benefit Plans that are required to be
filed and (B) paid or made adequate provision for all fees, interest, penalties,
assessments or deficiencies that have become due pursuant to those returns or
reports or pursuant to any assessment or adjustment that has been made relating
to those returns or reports. All other material fees, interest, penalties and
assessments that are payable by or for Parent and its Subsidiaries relating to
the Company Employee Benefit Plans have been timely reported, fully paid and
discharged. There are no material unpaid fees, penalties, interest or
assessments due from Parent or, to the knowledge of Parent, from any other
person or entity, relative to any Parent Employee Benefit Plan. Parent and its
Subsidiaries have collected or withheld all amounts that are required to be
collected or withheld by them to discharge their obligations with respect to the
Parent Employee Benefit Plans, and all of those amounts have been paid to the
appropriate governmental authority or set aside in appropriate accounts for
future payment when due.
(v) The funding, if any, under each Parent Employee
Welfare Benefit Plan does not exceed and has not exceeded the limitations under
Sections 419A(b) and 419A(c) of the Code. Parent and its Subsidiaries are not
subject to taxation on the income of any Parent Employee Welfare Benefit Plan's
welfare benefit fund (as such term is defined in Section 419(e) of the Code)
under Section 419A(g) of the Code. All Parent Welfare Employee Benefit Plans
required to comply with the COBRA provisions of ERISA and the Code have complied
with such requirements in all material respects.
(vi) Each Parent Employee Benefit Plan has been
operated and administered in all material respects in accordance with its
provisions. All contributions required to be made to any Parent Employee Benefit
Plan (or to any person pursuant to the terms thereof) have been timely made or
the amount of such payment or contribution obligation has been reflected in the
Parent SEC Documents which are publicly available prior to the date of this
Agreement. All such contributions representing participant contributions have
been made within the time required by Department of Labor regulation section
2510.3-102.
(vii) Parent and its Subsidiaries have complied, and
are now in compliance, in all material respects, with all provisions of ERISA,
the Code and all laws and regulations applicable to the Parent Employee Benefit
Plans. Neither Parent nor any of its Subsidiaries has engaged in any prohibited
transaction, within the meaning of Section 4975 of the Code or Section 406 of
ERISA, as a fiduciary or party in interest with respect to any Parent Employee
Benefit Plan which could reasonably be expected to result in any material
liability to Parent or any of its Subsidiaries, and, to the knowledge of the
Parent or any of its Subsidiaries, (A) no prohibited transaction has occurred
with respect to any Parent Employee Benefit Plan and (B) no fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of assets of any Parent
Employee Benefit Plan.
(viii) Neither Parent nor any entity that is, or
within the preceding six years has been, a Parent ERISA Affiliate has ever
established, maintained, contributed to, or had an obligation to contribute to,
any employee benefit plan that is a "multiemployer plan," as that term is
defined in Section 3(37) of ERISA, or that is subject to Title IV of ERISA, and
no liability under Title IV of ERISA (including a liability to pay premiums to
the Pension Benefit
44
Guaranty Corporation) has been or is expected to be incurred by Parent or any of
its Subsidiaries. No Parent Employee Welfare Plan is a multiple employee welfare
arrangement as defined in Section 3(40) of ERISA.
(ix) Parent and its Subsidiaries have not offered to
provide life, health or medical benefits or insurance coverage to any
individual, or to the family members of any individual, for any period extending
beyond the termination of the individual's employment, except to the extent
required by the COBRA provisions in ERISA and the Code or similar provisions of
state law.
(x) The consummation of the transactions contemplated
by this Agreement will not, either alone or in connection with termination of
employment, (A) entitle any current or former employee, independent contractor,
director, or officer of Parent or its Subsidiaries to severance pay, any change
in control payment, or any other material payment, except as expressly provided
in this Agreement, (B) accelerate the time of payment or vesting, change the
form or method of payment, or increase the amount of compensation due, any such
employee, independent contractor, director, or officer, or (C) entitle any such
employee, independent contractor, director or officer to any gross-up or similar
material payment in respect of the excise tax described in Section 4999 of the
Code. Neither Parent nor any Subsidiary of Parent has taken any action that
would result in its incurring any obligation for any payments or benefits
described in subsections (A), (B) or (C) of this Section 3.2(l)(x) (without
regard to whether the transactions contemplated by this Agreement are
consummated) except to the extent required in a written contract or agreement in
existence as of the date of this Agreement.
(xi) As of the date of this Agreement, there are no
suits, actions, proceedings, investigations, claims, or orders pending or, to
the knowledge of the Parent, threatened against the Parent, any Subsidiary of
Parent, or any Parent Employee Benefit Plan related to any Parent Employee
Benefit Plan (other than claims in the ordinary course of business). As of the
date of this Agreement, to the knowledge of Parent, no Parent Employee Benefit
Plan is subject to any ongoing audit, investigation, or other administrative
proceeding of any governmental entity, and no Parent Employee Benefit Plan is
the subject of any pending application for administrative relief under any
voluntary compliance program or closing agreement program of the IRS or the
Department of Labor.
(xii) Parent has the right to amend or terminate each
Parent Employee Benefit Plan at any time without incurring any liability other
than with respect to benefits that have already accrued under a Parent Employee
Pension Benefit Plan.
(xiii) Neither Parent nor any Parent ERISA Affiliate
has a formal plan, commitment, or proposal, whether legally binding or not, nor
has any of them made a commitment to employees, officers, directors, consultants
or independent contractors to create any additional Parent Employee Benefit Plan
or modify, change or terminate any existing Parent Employee Benefit Plan, and no
such plan, commitment or proposal is under serious consideration. To the
knowledge of Parent, no events have occurred or are expected to occur with
respect to any Parent Employee Benefit Plan that would cause a material change
in the cost of providing the benefits under such plan or would cause a material
change in the cost of providing for other liabilities of such plan.
45
(xiv) None of the assets of any Parent Employee
Pension Benefit Plan include "qualifying employer securities" or "qualifying
employer real property" within the meaning of Section 407(d) of ERISA.
(xv) Each Parent Employee Benefit Plan that is a
"group health plan," as defined in Section 607(1) of ERISA, Section 5001(b)(1)
of the Code or 45 C.F.R. 160.103, has been operated at all times in material
compliance with the provisions of COBRA, HIPAA and any applicable, similar state
law.
(xvi) Each Parent Employee Pension Benefit Plan that
is not qualified under Section 401(a) of the Code is exempt from part 2, 3 and 4
of Title I of ERISA as an unfunded plan that is maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees pursuant to Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA. No assets of Parent are allocated to or held in a "rabbi
trust" or similar vehicle with respect to any such plan.
(m) Labor Matters. Except as set forth on Schedule 3.2(m) of
the Parent Disclosure Schedule or in the Parent SEC Documents:
(i) Neither Parent nor any of its Subsidiaries is a
party to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation question involving employees of Parent or any of its
Subsidiaries, nor does Parent or any of its Subsidiaries know of any activity or
proceeding of any labor organization (or representative thereof) or employee
group (or representative thereof) to organize any such employees.
(ii) As of the date hereof, there is no unfair labor
practice charge or grievance arising out of a collective bargaining agreement or
other grievance procedure against Parent or any of its Subsidiaries pending, or,
to the knowledge or Parent, threatened, that constitutes, or could reasonably be
expected to result in, a Parent Material Adverse Effect.
(iii) As of the date hereof, there is no complaint,
lawsuit or proceeding in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the foregoing alleging
breach of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship
against Parent pending, or, to the knowledge of Parent or any of its
Subsidiaries, threatened, that constitutes, or could reasonably be expected to
result in, a Parent Material Adverse Effect.
(iv) There is no strike, dispute, slowdown, work
stoppage, or lockout pending, or, to the knowledge of Parent, threatened,
against or involving Parent, or any of its Subsidiaries that constitutes, or
could reasonably be expected to result in, a Parent Material Adverse Effect.
(v) Parent and each of its Subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for
46
non-compliance that does not constitute, and could reasonably be expected to
result in, a Parent Material Adverse Effect.
(vi) As of the date hereof, there is no proceeding,
claim, suit, action or governmental investigation pending or, to the knowledge
of Parent or any of its Subsidiaries, threatened, in respect to which any
current or former director, officer, employee or agent of Parent or any of its
Subsidiaries is or may be entitled to claim indemnification from Parent or any
of its Subsidiaries pursuant to (A) the Amended and Restated Certificate of
Incorporation or Restated Bylaws (each as amended to date) of Parent or any
provision of the comparable charter or other organizational documents of any of
its Subsidiaries, (B) any indemnification agreement to which Parent or any
Subsidiary of Parent is a party or (C) applicable law, in each case under
clauses (A), (B) and (C) that constitutes, or could reasonably be expected to
result in, a Parent Material Adverse Effect.
(n) Property. Except as set forth on Schedule 3.2(n) of the
Parent Disclosure Schedule:
(i) Parent and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents, service
marks, brand marks, brand names, computer programs, databases, industrial
designs, domain names and copyrights necessary for the operation of the
businesses of each of Parent and its Subsidiaries (collectively, the "Parent
Intangible Property"), except where the failure to possess or have adequate
rights to use such properties could not reasonably be expected to result in a
Parent Material Adverse Effect. All of the Parent Intangible Property is owned
or licensed by Parent or its Subsidiaries free and clear of any and all liens,
claims or encumbrances, except those that could not reasonably be expected to
result in a Parent Material Adverse Effect and neither Parent nor any such
Subsidiary has forfeited or otherwise relinquished any Parent Intangible
Property which forfeiture could reasonably be expected to result in a Parent
Material Adverse Effect. To the knowledge of Parent, the use of the Parent
Intangible Property by Parent or its Subsidiaries does not, in any respect that
constitutes or could reasonably be expected to result in a Parent Material
Adverse Effect, conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, trademark, trade
name, patent, service ▇▇▇▇, brand ▇▇▇▇, brand name, computer program, database,
industrial design, domain name, copyright or any pending application therefor of
any other person. There have been no claims made and neither Parent nor any of
its Subsidiaries has received any notice of any claim or otherwise knows that
(A) any of the Parent Intangible Property is invalid or conflicts with the
asserted rights of any other person or (B) any of the Parent Intangible Property
has not been used or enforced or has failed to have been used or enforced in a
manner that would result in the abandonment, cancellation or unenforceability of
any of the Parent Intangible Property, except, in the case of clauses (A) and
(B) of this Section 3.2(n)(i), for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that could not reasonably be expected to result in a Parent Material Adverse
Effect.
(ii) All major items of operating equipment owned or
leased by Parent and its Subsidiaries (A) are, in the aggregate, in a state of
repair so as to be adequate in all material respects for reasonably prudent
operations in the areas in which they are operated and
47
(B) are adequate, together with all other properties of Parent and its
Subsidiaries, to comply in all material respect with the requirements of all
applicable contracts, including sales contracts. Except for goods and other
property sold, used or otherwise disposed of since January 1, 2004 in the
ordinary course of business, Parent and its Subsidiaries have good and
defensible title to all oil and gas properties forming the basis for the
reserves reflected in the Parent Reserve Reports (as hereinafter defined) as
attributable to interests owned by Parent and its Subsidiaries, and to all other
properties, interests in properties and assets, real and personal, reflected in
the Parent SEC Documents filed prior to the date of this Agreement as owned by
Parent and its Subsidiaries, free and clear of any liens, except: (A) liens
reflected in the Parent SEC Documents filed prior to the date of this Agreement,
(B) liens for current taxes not yet due and payable, and (C) such imperfections
of title, easements, liens, government or tribal approvals or other matters and
failures of title as could not, individually or in the aggregate, reasonably be
expected to result in a Parent Material Adverse Effect. The leases and other
agreements pursuant to which Parent and its Subsidiaries lease or otherwise
acquire or obtain operating rights affecting any real or personal property given
value in the Parent Reserve Reports are in good standing, valid and effective,
and the rentals due by Parent or any Subsidiary of Parent to any lessor of any
such oil and gas leases have been properly paid, except in each case as could
not reasonably be expected to result in a Parent Material Adverse Effect.
(o) Environmental Matters. Except as disclosed in the Parent
SEC Documents or set forth on Schedule 3.2(o) of the Parent Disclosure Schedule:
(i) The operations of Parent and its Subsidiaries
have been conducted, are, and, as of the Closing Date, will be, in compliance
with all Environmental Laws, except where the failure to so comply could not
reasonably be expected to result in a Parent Material Adverse Effect.
(ii) Parent and its Subsidiaries have obtained and
will maintain all permits, licenses and registrations, or applications relating
thereto, and have made and will make all filings, reports and notices required
under applicable Environmental Laws for the continued operations of their
respective businesses, except such matters the lack or failure of which could
not reasonably be expected to result in a Parent Material Adverse Effect.
(iii) Parent and its Subsidiaries are not subject to
any outstanding written orders issued by, or contracts with, any Governmental
Entity or other person respecting (A) Environmental Laws, (B) Remedial Action,
(C) any Release or threatened Release of a Hazardous Material or (D) an
assumption of responsibility for environmental liabilities of another person,
except such orders or contracts the compliance with which could not reasonably
be expected to result in a Parent Material Adverse Effect.
(iv) Parent and its Subsidiaries have not received
any written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which violation or
liability could reasonably be expected to result in a Parent Material Adverse
Effect.
(v) Neither Parent nor any of its Subsidiaries has
any contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor
48
environment (whether on-site or off-site) or employee or third party exposure to
Hazardous Materials that could reasonably be expected to result in a Parent
Material Adverse Effect.
(vi) The operations of Parent or its Subsidiaries
involving the generation, transportation, treatment, storage or disposal of
hazardous or solid waste, as defined and regulated under 40 C.F.R. Parts 260-270
(in effect as of the date of this Agreement) or any applicable state equivalent,
are in compliance with applicable Environmental Laws, except where the failure
to so comply could not reasonably be expected to result in a Parent Material
Adverse Effect.
(vii) To the knowledge of Parent, there is not now on
or in any property of Parent or its Subsidiaries or any property for which
Parent or its Subsidiaries is potentially liable any of the following: (A) any
underground storage tanks or surface impoundments or (B) any on-site disposal of
Hazardous Material, any of which ((A) or (B) preceding) could reasonably be
expected to result in a Parent Material Adverse Effect.
(p) Insurance. Schedule 3.2(p) of the Parent Disclosure
Schedule sets forth an insurance schedule of Parent's and each of its
Subsidiaries' directors' and officers' liability insurance, primary and excess
casualty insurance policies, providing coverage for bodily injury and property
damage to third parties, including products liability and completed operations
coverage, and worker's compensation, in effect as of the date hereof. Parent
maintains insurance in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
those of Parent and each of its Subsidiaries (taking into account the cost and
availability of such insurance). As of the date of this Agreement, all insurance
policies are in full force and effect and all related premiums have been paid to
date. As of the Closing Date, all such insurance policies (or comparable
replacement policies) shall be in full force and effect and all related premiums
shall have been paid to date.
(q) Opinion of Financial Advisor. The Board of Directors of
Parent has received the opinion of ▇.▇. ▇▇▇▇▇▇ Securities Inc. addressed to such
Board to the effect that, as of the date of such opinion, the Merger
Consideration is fair from a financial point of view to Parent. The Company
acknowledges and agrees that it may not, and is not entitled to, rely on the
opinion of ▇.▇. ▇▇▇▇▇▇ Securities Inc. delivered to the Parent Board of
Directors. Parent has been authorized by ▇.▇. ▇▇▇▇▇▇ Securities Inc. to include
such opinion in its entirety in the Joint Proxy Statement included in the S-4 as
long as such inclusion is in form and substance reasonably satisfactory to ▇.▇.
▇▇▇▇▇▇ Securities Inc. and its counsel.
(r) Board Recommendation; Company Action; Vote Required. The
Board of Directors of Parent has, by resolutions duly adopted by the directors
and not subsequently rescinded or modified in any way, unanimously (except for
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, who recused himself from voting with respect to these matters
and did not participate in such meeting) (i) determined that this Agreement, the
Merger, in accordance with the terms of this Agreement, the issuance of shares
of Parent Common Stock pursuant to the Merger and the other transactions
contemplated hereby are advisable and in the best interests of Parent, (ii)
approved and adopted this Agreement, approved the Merger and the other
transactions contemplated hereby and approved the issuance of shares of Parent
Common Stock pursuant to the Merger, (iii) directed that the issuance of shares
of Parent Common Stock pursuant to the Merger be submitted for
49
consideration by the stockholders of Parent at a meeting of Parent's
stockholders and (iv) recommended that Parent's stockholders vote in favor of
the issuance of shares of Parent Common Stock pursuant to the Merger at a
meeting of Parent's stockholders. The directors of Parent have advised Parent
that, as of the date of this Agreement, they intend to vote or cause to be voted
all of the shares of Parent Common Stock beneficially owned by them and their
affiliates in favor of approval of the issuance of shares of Parent Common Stock
pursuant to the Merger. The affirmative vote of a majority of votes cast by
holders of Parent Common Stock, provided that the total vote cast represents
over 50% in interest of all shares of Parent Common Stock entitled to vote, is
the only vote of the holders of any class or series of Parent capital stock
necessary to approve the issuance of shares of Parent Common stock pursuant to
the Merger.
(s) Beneficial Ownership of Company Common Stock. As of the
date hereof, neither Parent nor any of its Subsidiaries beneficially owns any of
the outstanding Company Common Stock.
(t) Brokers. Except for the fees and expenses payable to ▇.▇.
▇▇▇▇▇▇ Securities Inc., which fees are reflected in its engagement letters with
Parent (copies of which have been delivered to the Company), no broker,
investment banker or other person is entitled to any broker's, finder'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.
(u) Controls and Procedures; Corporate Governance.
(i) Each of Parent and its Subsidiaries maintains
accurate books and records reflecting its assets and liabilities and maintains
proper and adequate internal accounting controls that provide assurance that (A)
transactions are executed with management's authorization; (B) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of Parent and to maintain accountability for Parent's consolidated
assets; (C) access to Parent's assets is permitted only in accordance with
management's authorization; (D) the reporting of Parent's assets is compared
with existing assets at regular intervals; and (E) accounts, notes and other
receivables and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis. Parent has made available to the Company a summary of (A) any
significant deficiencies in the design or operation of internal controls which
could adversely affect Parent's ability to record, process, summarize and report
financial data, (B) any material weaknesses in Parent's internal controls, and
(C) any fraud, whether or not material, that involves management or other
employees who have a significant role in Parent's internal control over
financial reporting.
(ii) Parent has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) or 15d-15(e)
under the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to Parent required to be disclosed in
Parent's Exchange Act reports is made known to Parent's principal executive
officer and its principal financial officer by others within Parent and its
Subsidiaries, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared; and, to the knowledge of
Parent, such disclosure controls and procedures are effective in timely alerting
Parent's principal executive officer and its principal
50
financial officer to material information required to be included in Parent's
periodic reports required under the Exchange Act.
(iii) Parent is, or will timely be, in compliance in
all material respects with all current and proposed listing and corporate
governance requirements of the NYSE, and is in compliance in all material
respects, and will continue to remain in compliance from the date hereof until
immediately after the Effective Time, with all rules, regulations and
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the SEC.
(v) Investment Company. Neither Parent nor any of the
Subsidiaries of Parent is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of 1940
and the rules and regulations promulgated thereunder.
(w) Reserve Reports. Parent has furnished to the Company
Parent's estimate of Parent's and Parent's Subsidiaries' oil and gas reserves as
of January 1, 2004, audited by Netherland, ▇▇▇▇▇▇ & Associates, Inc. (the
"Parent Reserve Reports"). Except as could not, individually or in the
aggregate, reasonably be expected to result in a Parent Material Adverse Effect,
(i) the factual, non-interpretive data on which the Parent Reserve Reports were
based for purposes of estimating the oil and gas reserves set forth in the
Parent Reserve Reports was accurate and (ii) the estimates of proved reserves
used by Parent in connection with the preparation of the Parent Reserve Reports
and provided by Parent to Netherland, ▇▇▇▇▇▇ & Associates, Inc. in connection
with its audit of the Parent Reserve Reports are in accordance with definitions
contained in Rule 4-10(a) of Regulation S-X promulgated by the SEC.
(x) Hedging. The Parent SEC Documents accurately summarize the
outstanding Hedging positions attributable to the production of Parent and the
Subsidiaries of Parent as of the date reflected therein. Schedule 3.2(x) of the
Parent Disclosure Schedule sets forth all Hedging positions of Parent and its
Subsidiaries in place as of the date hereof (including those entered into in
contemplation of this Agreement).
(y) Natural Gas Act. Except as set forth on Schedule 3.2(y) of
the Parent Disclosure Schedule, any gas gathering system constituting a part of
the properties of Parent or its Subsidiaries has as its primary function the
provision of natural gas gathering services, as the term "gathering" is
interpreted under Section 1(b) of the NGA; none of the properties have been or
are certificated by FERC under Section 7(c) of the NGA or to the knowledge of
Parent are now subject to FERC jurisdiction under the NGA; and none of the
properties have been or are providing service pursuant to Section 311 of the
NGA.
(z) Certain Contracts and Arrangements. Neither Parent nor any
of its Subsidiaries is a party to or bound by any agreement or other arrangement
that limits or otherwise restricts Parent or any of its Subsidiaries or any
successor thereto, or that would, after the Effective Time, materially limit or
restrict Parent, the Surviving Corporation or any of Parent's other Subsidiaries
or any successor thereto, from engaging or competing in the oil and gas
exploration and production business in any significant geographic area, except
for joint ventures, area of mutual interest agreements entered into in
connection with prospect reviews and similar arrangements entered into the
ordinary course of business. Schedule 3.2(z) of the
51
Parent Disclosure Schedule and the documents filed or incorporated by reference
in Parent's Annual Report on Form 10-K for the year ended December 31, 2003 set
forth a true and complete list of each agreement to which Parent or any
Subsidiary of Parent is subject (other than this Agreement) that is of a type
that would be required to be included as an exhibit to a Registration Statement
on Form S-1 pursuant to the rules and regulations of the SEC if such a
registration statement was filed by Parent on the date hereof (collectively, the
"Parent Contracts"). Except as could not reasonably be expected to result in a
Parent Material Adverse Effect, neither Parent nor any Subsidiary of Parent is
in breach or default under any Parent Contract nor, to the knowledge of Parent,
is any other party to any such Parent Contract in breach or default thereunder.
Other than as contemplated by Section 3.2(c), no consents, assignments, waivers,
authorization or other certificates or material payments are necessary in
connection with the transactions contemplated hereby to provide for the
continuation in full force and effect of all of the Parent Contracts after the
Closing, except to the extent the failure to obtain any such consent,
assignment, waiver, authorization or other certificate, individually or in the
aggregate, has not resulted in and could not reasonably be expected to result in
a Parent Material Adverse Effect.
(aa) Reorganization Classification. Parent has not taken any
action that causes the Merger and the LLC Sub Merger not to qualify as a
reorganization, within the meaning of section 368(a)(1) of the Code, and has not
failed to take any action which if taken would have prevented the Merger and the
LLC Sub Merger from not qualifying as such a reorganization. Merger Sub has not
taken any action that causes the Merger and the LLC Sub Merger not to qualify as
such a reorganization and has not failed to take any action which if taken would
have prevented the Merger and the LLC Sub Merger from not qualifying as such a
reorganization. Notwithstanding the foregoing, under no circumstances shall
Parent or Merger Sub be required to alter or amend the Merger Consideration to
cause the Merger to qualify as a reorganization within the meaning of section
368(a) of the Code, and under no circumstances shall the failure so to alter or
amend the Merger Consideration be deemed a breach of this Section 3.2(aa).
ARTICLE IV
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by the Company and Parent Pending the Merger.
(a) Prior to the Effective Time, the Company agrees as to itself and its
Subsidiaries that (except to the extent that Parent shall otherwise consent in
writing or except as set forth or Schedule 4.1(a) of the Company Disclosure
Schedule or otherwise contemplated by this Agreement):
(i) The Company and each of its Subsidiaries shall
carry on its respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
commercially reasonable efforts to preserve intact its present business
organizations, keep available the services of its current officers and
employees, subject to Section 5.9, and endeavor to preserve its relationships
with customers, suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall not be impaired in any material
respect at the Effective Time.
52
(ii) Except for transactions solely among the Company
and its Subsidiaries, the Company shall not and it shall not permit any of its
Subsidiaries to: (A) declare or pay any dividends on or make other distributions
in respect of any of its capital stock or partnership interests; (B) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Company's capital stock or otherwise authorize,
recommend or propose any material change in its capitalization; or (C)
repurchase, redeem or otherwise acquire, or permit any of its Subsidiaries to
purchase, redeem or otherwise acquire, any shares of its capital stock, except
as required by the terms of its securities outstanding on the date hereof or as
contemplated by any existing employee benefit plan.
(iii) The Company shall not and it shall not permit
any of its Subsidiaries to issue, deliver or sell, or authorize or propose to
issue, deliver or sell, any shares of its capital stock of any class, any Voting
Debt or other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, Voting Debt, other
voting securities or convertible securities, other than (A) the issuance of
Company Common Stock upon the exercise of stock options granted under the
Company Stock Plans that are outstanding on the date hereof, or in satisfaction
of stock grants or stock based awards made prior to the date hereof pursuant to
the Company Stock Plans, or pursuant to the Company's 4.75% Senior Convertible
Notes due 2021, and (B) issuances by a wholly owned Subsidiary of the Company of
such Subsidiary's capital stock to its parent.
(iv) The Company shall not amend or propose to amend
its Articles of Incorporation or Bylaws.
(v) The Company shall not, and it shall not permit
any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof except for the
acquisition of assets in the ordinary course of business in accordance with the
Company Budget.
(vi) Other than: (A) as may be necessary or required
by law to consummate the transactions contemplated hereby, (B) sales, leases,
encumbrances or other dispositions in the ordinary course of business consistent
with past practice that are not material, individually or in the aggregate, to
the Company and its Subsidiaries taken as a whole or (C) under agreements set
forth on Schedule 4.1(a)(vi) of the Company Disclosure Schedule, the Company
shall not, and it shall not permit any of its Subsidiaries to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease (whether such lease is
an operating or capital lease), encumber or otherwise dispose of, any of its
material assets other than hydrocarbons, subject to the limitations in clause
(xv) hereof.
(vii) Except as otherwise permitted or contemplated
by this Agreement, the Company shall not authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of the Company or any of its Significant Subsidiaries.
53
(viii) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, make any changes in their accounting methods
which would be required to be disclosed under the rules and regulations of the
SEC, except as required by law, rule, regulation or GAAP.
(ix) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, enter into any agreement or arrangement with
any of their respective Affiliates (as such term is defined in Rule 405 under
the Securities Act, an "Affiliate"), other than with wholly owned Subsidiaries
of the Company, on terms less favorable to the Company or such Subsidiary, as
the case may be, than could be reasonably expected to have been obtained with an
unaffiliated third party on an arm's-length basis.
(x) The Company shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance in such amounts and
against such risks and losses as are customary for companies of similar size
engaged in their respective businesses.
(xi) The Company shall not (A) make, change or
rescind any material express or deemed election relating to Taxes unless it is
reasonably expected that such action will not materially and adversely affect
the Company or Parent, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or other
investments where the Company has the capacity to make such binding election;
(B) settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to Taxes,
except where such settlement or compromise will not materially and adversely
affect the Company or Parent; or (C) change in any material respect any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income Tax Returns that have
been filed for prior taxable years, except as may be required by applicable law
or except for changes that are reasonably expected not to materially and
adversely affect the Company or Parent.
(xii) The Company shall not and it shall not permit
any of its Subsidiaries to: (A) grant any increases in the compensation of any
of its directors, officers or employees, except increases to employees who are
not directors or officers made in the ordinary course of business and in
accordance with past practice; (B) pay or agree to pay any material pension,
retirement allowance or other employee benefit not required or contemplated by
any of the existing Company Employee Benefit Plans or pension plans, in each
case as in effect on the date hereof to any such director, officer or employee,
whether past or present; (C) amend or modify in any material respect or receive
any assets from pension plans or Company Employee Benefits Plans; (D) enter into
any new, or amend any existing, material employment or severance or termination
agreement with any director, officer or employee; (E) grant any options or other
awards under the Company Stock Plans; or (F) become obligated under any new
Company Employee Benefit Plan or pension plan, which was not in existence or
approved by the Board of Directors of the Company prior to the date hereof, or
amend any such plan or arrangement in existence on the date hereof if such
amendment would have the effect of materially enhancing any benefits thereunder.
54
(xiii) The Company shall not, nor shall the Company
permit any of its Subsidiaries to (A) modify the terms of any existing
indebtedness for borrowed money or security issued by the Company or any
Subsidiaries of the Company, (B) incur any indebtedness for borrowed money
(except (x) to finance any transactions or capital or other expenditures
permitted by this Agreement) and regular borrowings under credit facilities made
in the ordinary course of the Company's cash management practices, (y)
refinancings of existing debt and (z) immaterial borrowings that, in each such
case, permit prepayment of such debt without penalty (other than LIBOR breakage
costs)) or guarantee, assume or otherwise become liable for any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others; (C) except in the ordinary course of
business, enter into any material lease (whether such lease is an operating or
capital lease) or create any material mortgages, liens, security interests or
other encumbrances on the property of the Company or any of its Subsidiaries in
connection with any indebtedness thereof; or (D) make or commit to make
aggregate capital expenditures in excess of an amount equal to the sum of
capital expenditures budgeted by the Company for the fiscal year ending December
31, 2004 as provided in the capital expenditure budget set forth on Schedule
4.1(a)(xiii) of the Company Disclosure Schedule (the "Company Budget"), less any
budgeted capital expenditures expended prior to the date of this Agreement.
(xiv) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, settle, compromise or otherwise resolve any
litigation or other legal proceedings involving a payment of more than $200,000
in any one case by or to the Company or any of its Subsidiaries.
(xv) The Company shall not enter into new contracts
to sell hydrocarbons other than in the ordinary course of business at market
pricing, but in no event having a duration of longer than three months.
(xvi) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, write off any accounts or notes receivable,
except in the ordinary course of business consistent with past practice or as
may be required by GAAP.
(xvii) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, enter into any agreement, arrangement or
commitment that limits or otherwise restricts the Company or any Subsidiary of
the Company, or that would reasonably be expected to, after the Effective Time,
limit or restrict Parent, the Surviving Corporation or any of Parent's other
Subsidiaries or any of their respective affiliates or any successor thereto,
from engaging or competing in any line of business in which it is currently
engaged or in any geographic area material to the business or operations of (A)
the Company or any of its Subsidiaries or (B) Parent, the Surviving Corporation
or any of Parent's other Subsidiaries.
(xviii) Except in the ordinary course consistent with
past practice, the Company shall not, and shall not permit any of its
Subsidiaries to, (A) terminate any existing gas purchase, exchange or
transportation contract, or (B) enter into any new contract for the supply,
transportation, storage or exchange of gas or renew or extend or negotiate any
existing contract providing for the same where such contract is not terminable
within 30 days without penalty.
55
(xix) The Company shall not make or assume any ▇▇▇▇▇▇
except as set forth in Section 5.23.
(xx) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, agree in writing or otherwise to take any
action inconsistent with any of the foregoing.
(b) Prior to the Effective Time, Parent agrees as to itself
and its Subsidiaries that (except to the extent that the Company shall otherwise
consent in writing):
(i) Parent shall not adopt or propose to adopt any
amendments to its charter documents that would have a material adverse impact on
the consummation of the transactions contemplated by this Agreement or alter the
terms of the Parent Common Stock.
(ii) Parent shall not declare or pay any dividends or
make other distributions in respect of any of its capital stock, except for the
declaration and payment of regular cash dividends with usual record and payment
dates in accordance with past practice and dividends from a Subsidiary of Parent
to Parent or to another Subsidiary of Parent.
(iii) Parent shall not adopt a plan of complete or
partial liquidation or dissolution of Parent.
(iv) Other than any acquisition as to which the
purchase price is not in excess of $200 million, Parent shall not, and shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, limited liability company, partnership, association of other
business organization or division thereof the principal business of which is not
related to the exploration, development or production of oil or natural gas or
other minerals.
(v) Parent shall not acquire, by merging or
consolidating with, or by purchasing an equity interest in or the assets of or
by any other manner, any business or corporation, partnership or other business
organization or division thereof, or otherwise acquire any assets of any other
entity (other than the purchase of assets from suppliers, clients or vendors in
the ordinary course of business and consistent with past practice) if such
transactions would prevent or materially delay the stockholders' meeting of
Parent contemplated by this Agreement or the consummation of the transactions
contemplated by this Agreement.
(vi) Parent shall not, nor shall Parent permit any of
its Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
4.2 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall use all reasonable efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not to
(and shall not authorize any of them to), directly or indirectly: (i) solicit,
initiate, encourage, facilitate or induce
56
any inquiry with respect to, or the making, submission or announcement of, any
Acquisition Proposal with respect to itself, (ii) participate in any discussions
or negotiations regarding, or furnish to any person or entity any nonpublic
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes or may reasonably be
expected to lead to, any Acquisition Proposal with respect to itself, (iii)
engage in discussions with any person or entity with respect to any Acquisition
Proposal with respect to itself, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal with respect to
itself (except to the extent specifically permitted pursuant to Section 4.2(d)
and Section 7.1(g)), or (v) enter into any letter of intent or similar document
or any contract, agreement or commitment contemplating or otherwise relating to
any Acquisition Proposal or transaction contemplated thereby with respect to
itself (except as permitted pursuant to Section 4.2(d) and Section 7.1(g)). The
Company and its Subsidiaries shall, and the Company shall use all reasonable
efforts to cause its and its Subsidiaries' officers, directors, employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) to, immediately cease any
and all existing activities, discussions or negotiations with any third parties
conducted heretofore with respect to any Acquisition Proposal with respect to
itself. The Company shall ensure that its officers, directors and key employees
and its investment bankers, attorneys and other representatives are aware of the
provisions of this Section.
(b)
(i) As promptly as practicable after receipt of any
Acquisition Proposal or any request for nonpublic information or inquiry which
it reasonably believes could lead to an Acquisition Proposal, the Company shall
provide Parent with oral and written notice of the material terms and conditions
of such Acquisition Proposal, request or inquiry, and the identity of the
person, entity or Group making any such Acquisition Proposal, request or inquiry
and a copy of all written materials provided in connection with such Acquisition
Proposal, request or inquiry. Upon receipt of the Acquisition Proposal, request
or inquiry, the Company shall provide Parent as promptly as practicable oral and
written notice setting forth all such information as is reasonably necessary to
keep Parent informed in all material respects of the status and details
(including material amendments or proposed material amendments) of any such
Acquisition Proposal, request or inquiry and shall promptly provide to Parent
(A) a copy of all written materials subsequently provided by the person making
the Acquisition Proposal in connection with such Acquisition Proposal, request
or inquiry and (B) a copy of all material written materials subsequently
provided to the person making the Acquisition Proposal in connection with such
Acquisition Proposal, request or inquiry to the extent not previously provided
to Parent.
(ii) The Company shall provide Parent with
forty-eight (48) hours prior notice (or such lesser prior notice as is provided
to the members of its Board of Directors) of any meeting of its Board of
Directors at which its Board of Directors is reasonably expected to consider any
Acquisition Proposal.
(c) Notwithstanding anything to the contrary contained in
Section 4.2(a) and under circumstances in which the Company has complied with
all of its obligations under Section 4.2(a) and (b), in the event that, prior to
the approval of the Merger and this Agreement
57
by the stockholders of the Company as provided herein, the Company receives an
unsolicited, bona fide written Acquisition Proposal with respect to itself from
a third party that its Special Committee of Directors appointed to consider the
transaction proposal by Parent with respect to the Company or its Board of
Directors has in good faith concluded (following the receipt of the advice of
its outside legal counsel and its financial advisor) is, or is reasonably likely
to result in, a Superior Offer, it may then take the following actions: (i)
furnish nonpublic information to the third party making such Acquisition
Proposal, provided that (A) (1) concurrently with furnishing any such nonpublic
information to such party, its gives Parent written notice of its intention to
furnish nonpublic information and (2) it receives from the third party an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
third party on its behalf, the terms of which are at least as restrictive as the
terms contained in the Confidentiality Agreement (and containing additional
provisions that expressly permit the Company to comply with the provisions of
this Section 4.2) and (B) contemporaneously with furnishing any material
nonpublic information to such third party, it furnishes such material nonpublic
information to Parent (to the extent such nonpublic information has not been
previously so furnished); and (ii) engage in negotiations with the third party
with respect to the Acquisition Proposal, provided that concurrently with
entering into negotiations with such third party, it gives Parent written notice
of its intention to enter into negotiations with such third party.
(d) In response to the receipt of a Superior Offer, the Board
of Directors of the Company may withhold, withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify, its recommendation in favor of the
Merger, and, in the case of a Superior Offer that is a tender or exchange offer
made directly to its stockholders, may recommend that its stockholders accept
the tender or exchange offer (any of the foregoing actions, whether by a Board
of Directors or a committee thereof, a "Change of Recommendation"), if all of
the following conditions in clauses (i) through (iv) are met: (i) a Superior
Offer with respect to it has been made and has not been withdrawn; (ii) approval
of the Merger and this Agreement by the stockholders of the Company as provided
herein has not occurred; (iii) it shall have (A) provided to Parent written
notice which shall state expressly (1) that it has received a Superior Offer,
(2) the material terms and conditions of the Superior Offer (including the most
current version of any definitive agreement proposed to be entered into in
connection therewith) and the identity of the person, entity or Group making the
Superior Offer, and (3) that it intends to effect a Change of Recommendation and
the manner in which it intends to do so, (B) provided to Parent a copy of all
material written materials delivered to the person, entity or Group making the
Superior Offer in connection with such Superior Offer that were not previously
provided to Parent, and (C) made available to Parent all materials and
information made available to the person, entity or Group making the Superior
Offer in connection with such Superior Offer; and (iv) it shall not have
breached in any material respect any of the provisions set forth in Section 4.2.
(e) Notwithstanding anything to the contrary contained in this
Agreement, and subject to Section 5.5(b), the obligation of the Company to call,
give notice of, convene and hold its stockholders' meeting as contemplated in
Section 5.5 shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission to it of any Acquisition Proposal with
respect to it unless this Agreement is terminated. Notwithstanding anything to
the contrary contained in this Agreement, prior to the termination of this
Agreement, the Company shall not (i) submit to the vote of its stockholders any
Acquisition Proposal other than the
58
Merger, or (ii) enter into any agreement, agreement-in-principle or letter of
intent (other than the confidentiality agreement referenced in Section 4.2(c))
with respect to or accept any Acquisition Proposal other than the Merger (or
resolve to or publicly propose to do any of the foregoing).
(f) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to its stockholders
a position with respect to a tender or exchange offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act to the extent
required by applicable law; provided that the content of any such disclosure
thereunder shall be governed by the terms of this Agreement; and provided
further that the Board of Directors or the Company shall not recommend that the
stockholders of the Company tender their Company Common Stock in connection with
any such tender or exchange offer unless the Board of Directors of the Company
determines in good faith (after receiving the advice of its outside legal
counsel and its financial adviser) that such Acquisition Proposal is a Superior
Offer. Without limiting the foregoing sentence, the Company shall not make a
Change of Recommendation to recommend that its stockholders accept a tender or
exchange offer unless specifically permitted pursuant to the terms of Section
4.2(d).
(g) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Acquisition Proposal" shall mean any inquiry,
offer or proposal relating to any transaction or series of related transactions
involving: (A) any purchase from the Company or acquisition by any person,
entity or "Group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of more than a fifteen percent (15%) interest
in the total outstanding voting securities of the Company or any tender offer or
exchange offer that if consummated would result in any person, entity or Group
beneficially owning fifteen percent (15%) or more of the total outstanding
voting securities of the Company or any merger, consolidation, business
combination or similar transaction involving the Company, (B) any sale, lease
(other than in the ordinary course of business), exchange, transfer, license
(other than in the ordinary course of business), acquisition or disposition of
more than fifteen percent (15%) of the assets of the Company and its
Subsidiaries, taken as a whole, or (C) any liquidation or dissolution of the
Company or any of its Subsidiaries; and (ii) "Superior Offer" shall mean an
unsolicited, bona fide written proposal made by a third party to acquire,
directly or indirectly, pursuant to a tender offer, exchange offer, merger,
consolidation or other business combination, all or substantially all of the
assets of the Company or substantially all of the total outstanding voting
securities of the Company on terms that the Board of Directors of the Company
has in good faith concluded (following the receipt of advice of its outside
legal counsel and its financial adviser), taking into account, among other
things, all legal, financial, regulatory and other aspects of the offer and the
person, entity or Group making the offer, to be more favorable, from a financial
point of view, to the Company's stockholders (in their capacities as
stockholders) than the terms of the Merger and is reasonably capable of being
consummated.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. Parent and the
Company shall promptly prepare and file with the SEC the Joint Proxy Statement
and Parent and the Company shall prepare, and Parent will file with the SEC, the
S-4 in which the Joint Proxy Statement will be included as a prospectus. Each of
Parent and the Company shall use its commercially
59
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Joint Proxy
Statement or the S-4, Parent or the Company, as the case may be, shall promptly
inform the other of such occurrence and cooperate in filing with the SEC and its
staff, and/or mailing to stockholders of Parent and/or the Company, such
amendment or supplement. Each of Parent and the Company shall use its
commercially reasonable efforts to cause the Joint Proxy Statement to be mailed
to their respective stockholders at the earliest practicable date. Parent and
the Company each agree to use its commercially reasonable efforts, after
consultation with the other party hereto, to respond promptly to any comments
made by the SEC with respect to the Joint Proxy Statement and the S-4. Parent
shall use its commercially reasonable efforts to obtain all necessary state
securities laws or "blue sky" permits, approvals and registrations in connection
with the issuance of Parent Common Stock in the Merger, upon the exercise of the
Company Options and upon conversion of the Company's 4.75% Senior Convertible
Notes due 2021, and each of Parent and the Company shall furnish all information
concerning Parent and the Company and its respective stockholders as may be
reasonably requested in connection with obtaining such permits, approvals and
registrations.
5.2 Letter of the Company's Accountants. The Company shall use its
commercially reasonable efforts to cause to be delivered to Parent a letter of
BDO ▇▇▇▇▇▇▇, LLP, the Company's independent public accountants, dated a date
within two business days before the date on which the S-4 shall become effective
and addressed to Parent and the Company, in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.3 Letter of Parent's Accountants. Parent shall use its commercially
reasonable efforts to cause to be delivered to the Company a letter of Ernst &
Young LLP, Parent's independent public accountants, dated a date within two
business days before the date on which the S-4 shall become effective and
addressed to Parent and the Company, in form and substance reasonably
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
5.4 Access to Information.
(a) Upon reasonable notice, Parent and the Company, as the
case may be, shall (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of the others, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, as well as to its officers and employees and, during
such period, each of Parent and the Company, as the case may be, shall (and
shall cause each of their respective Subsidiaries to) furnish promptly to the
others (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to SEC requirements
and (ii) all other information concerning its business, properties and personnel
as such other party may reasonably request, including, without limitation,
information to confirm the accuracy of the representations and warranties set
forth in Section 3.1(v) and 3.2(u); provided, however, that Parent and the
Company shall not be required to disclose any
60
information that would breach the confidentiality terms of any agreement
existing on the date hereof or that would breach an attorney client privilege
(provided that (i) upon the request of Parent, the Company will use commercially
reasonable efforts to afford Parent access to such restricted information,
including by securing waivers to confidentiality restrictions, and (ii) upon the
request of the Company, Parent will use commercially reasonable efforts to
afford the Company access to such restricted information, including by securing
waivers to confidentiality restrictions). Each of Parent and the Company agrees
that it will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 5.4 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreement dated as of March 26, 2004 between Parent and the
Company (the "Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby.
(b) Each of Parent and Merger Sub, on the one hand, and the
Company, on the other, agrees that, except to the extent and as expressly
covered by a representation and warranty contained in Article III of this
Agreement, neither the other party nor any of its representatives or Affiliates
has made and shall not be deemed to have made to such party or to any of its
representatives or Affiliates any representation or warranty of any kind.
Without limiting the generality of the foregoing, each party agrees that, except
to the extent and as expressly covered by a representation and warranty
contained in Article III of this Agreement, neither the other party nor any of
its Affiliates makes or has made any representation or warranty to such party or
to any of its representatives or Affiliates with respect to:
(i) any projections, forecasts, estimates, plans or
budgets of future revenues, expenses or expenditures, future results of
operations (or any component thereof), future cash flows (or any component
thereof) or future financial condition (or any component thereof) of the other
party or any of its Subsidiaries or the future business, operations or affairs
of the other party or any of its Subsidiaries heretofore or hereafter delivered
to or made available to such party or its counsel, accountants, advisors,
lenders, representatives or Affiliates; and
(ii) any other information, statement or documents
heretofore or hereafter delivered to or made available to such party or its
counsel, accountants, advisors, lenders, representatives or Affiliates with
respect to the other party or any of its Subsidiaries or the business,
operations or affairs of the other party or any of its Subsidiaries.
5.5 Stockholders Meetings.
(a) Promptly after the S-4 is declared effective under the
Securities Act, each of Parent and the Company shall take all action necessary
in accordance with the
Delaware General Corporation Law (the "DGCL"), CBCA and
its respective organizational documents to call, hold and convene a meeting of
its respective stockholders to consider, in the case of Parent, the approval of
the issuance of shares of Parent Common Stock pursuant to the Merger and such
other matters as it deems appropriate, and, in the case of the Company, adoption
and approval of this Agreement and approval of the Merger, to be held as
promptly as practicable after the mailing of the Joint Proxy Statement to their
respective stockholders. Each of Parent and the Company shall use its
commercially reasonable efforts to hold their respective stockholders' meetings
on the same date. Subject to Section 4.2(d) and 5.5(b), each of Parent and the
61
Company shall use all reasonable efforts to solicit from its respective
stockholders proxies in favor of, in the case of Parent, the approval of the
issuance of shares of Parent Common Stock pursuant to the Merger, and, in the
case of the Company, the adoption and approval of this Agreement and the
approval of the Merger, and shall take all other action necessary or advisable
to secure the vote or consent of their respective stockholders required by the
rules of the NYSE or the CBCA to obtain such approvals. Notwithstanding anything
to the contrary contained in this Agreement, but subject to Section 7.1(c),
Parent or the Company, as the case may be, may adjourn or postpone its
stockholders' meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Joint Proxy Statement is provided to its
respective stockholders in advance of a vote on the issuance of Parent Common
Stock, the Merger and this Agreement, as applicable, or, if as of the time for
which the stockholders' meeting is originally scheduled (as set forth in the
Joint Proxy Statement) there are insufficient shares of capital stock of Parent
or the Company, as the case may be, represented (either in person or by proxy)
to constitute a quorum necessary to conduct the business of such stockholders'
meeting; provided that, in the event either the Company's or Parent's
stockholders' meeting is delayed to a date after the Initial Termination Date as
a result of the reasons set forth in this sentence, then the Initial Termination
Date shall be extended to a date no later than the fifth business day after the
Initial Termination Date. Except as set forth in the immediately preceding
sentence, the Company shall not postpone or adjourn the Company's stockholders'
meeting without the consent of Parent, and Parent shall not postpone or adjourn
Parent's stockholders' meeting without the consent of the Company. Each of
Parent and the Company shall ensure that its respective stockholders' meeting is
called, noticed, convened, held and conducted, and that all proxies solicited,
by it in connection with the stockholders' meeting are solicited in compliance
with the DGCL, CBCA, its organizational documents, the rules of the NYSE and all
other applicable laws.
(b) Except to the extent expressly permitted by Section 4.2(d)
and subject to either the Board of Directors of Parent or of the Company
determining in good faith, after consultation with its respective outside
counsel, that withdrawal, amendment or modification of its recommendation is
required by such Board of Directors to comply with its fiduciary duties imposed
by applicable law: (i) the Board of Directors of each of Parent and the Company
shall recommend that the respective stockholders of Parent and the Company vote
in favor of, in the case of Parent, the approval of the issuance of shares of
Parent Common Stock pursuant to the Merger, and, in the case of the Company,
adoption and approval of this Agreement and approval of the Merger, at their
respective stockholders' meetings, (ii) the Joint Proxy Statement shall include
a statement to the effect that the Board of Directors of Parent has recommended
that Parent's stockholders vote in favor of the approval of the issuance of
shares of Parent Common Stock pursuant to the Merger at Parent's stockholders'
meeting and the Board of Directors of the Company has recommended that the
Company's stockholders vote in favor of adoption and approval of this Agreement
and approval of the Merger at the Company's stockholders' meeting, and (iii)
neither the Board of Directors of Parent or the Company nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to the other party, the recommendation of
its respective Board of Directors that the respective stockholders of Parent and
the Company vote in favor of, in the case of Parent, the approval of the
issuance of shares of Parent Common Stock pursuant to the Merger, and, in the
case of the Company, adoption and approval of this Agreement and the Merger.
Notwithstanding the foregoing, in connection with an Acquisition Proposal, the
Company must
62
comply with its obligations set forth in Section 4.2(d) in order to have a
Change of Recommendation to recommend a Superior Offer.
5.6 HSR and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be filed
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") any notification required to be
filed under the HSR Act and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Such parties will use all
commercially reasonable efforts to make such filings promptly, to respond on a
timely basis to any requests for additional information made by either of such
agencies and to cause the waiting periods under the HSR Act to terminate or
expire at the earliest possible date after the date of filing. Parent agrees to
take all action required to obtain any consent or settlement that may be
required to obtain clearance under HSR (including the disposal or sequestration
of property) that would not cause a Parent Material Adverse Effect. Each of the
parties hereto agrees to furnish the others with copies of all correspondence,
filings and communications (and memoranda setting forth the substance thereof)
between it and its Affiliates and their respective representatives, on the one
hand, and the FTC, the Antitrust Division or any other Governmental Entity or
members or their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby, other than personal
financial information filed therewith. Each party hereto agrees to furnish the
others with such necessary information and reasonable assistance as such other
parties and their respective affiliates may reasonably request in connection
with their preparation of necessary filings, registrations or submissions of
information to any Governmental Entities, including without limitation any
filings necessary under the provisions of the HSR Act. Parent and the Company
will each pay 50% of the applicable filing fee under the HSR Act relating to the
Merger.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its commercially reasonable efforts to promptly prepare and
file all necessary documentation to effect all necessary applications, notices,
petitions, filings and other documents, and use all commercially reasonable
efforts to obtain (and will cooperate with each other in obtaining) any consent,
acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made by
Parent or the Company or any of their respective Subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement.
5.7 Agreements of Rule 145 Affiliates. As soon as practicable after the
date hereof, the Company shall cause to be prepared and delivered to Parent a
list identifying all persons who, at the time of the Company stockholders'
meeting, may be deemed to be "affiliates" of the Company, as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). The Company shall use its commercially reasonable efforts to cause
each person who is identified as a Rule 145 Affiliate in such Company list to
deliver to Parent, at least ten (10) days prior to the Closing Date, a written
agreement in the form attached hereto as Exhibit F ("Rule 145 Affiliate
Letter"). Parent shall be entitled to place restrictive legends on any shares of
Parent Common Stock issued to such Rule 145 Affiliates pursuant to the Merger.
63
5.8 Authorization for Shares and Stock Exchange Listing. Prior to the
Effective Time, Parent shall have taken all action necessary to permit Parent to
issue the number of shares of Parent Common Stock required to be issued pursuant
to Article II. Parent shall use its commercially reasonable efforts to cause the
shares of Parent Common Stock to be issued in the Merger, the shares of Parent
Common Stock to be reserved for issuance upon exercise of the Company Options
and the shares of Parent Common Stock issuable upon conversion of the Company's
4.75% Senior Convertible Notes due 2021 to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
5.9 Employee Matters.
(a) Parent and the Company agree that all employees of the
Company and its Subsidiaries immediately prior to the Effective Time other than
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (such three employees
being referred to herein as the "Company Executives"), shall be employed by the
Surviving Corporation or its Subsidiaries immediately after the Effective Time
solely on an "at will" basis, it being understood that the Surviving Corporation
shall not have any obligations to continue employing such employees for any
length of time thereafter. Parent agrees that it shall assume as of the
Effective Time the obligations of the Company under each Company Executive's
Change of Control Agreement with the Company dated as of March 1, 2002.
(b) Parent shall take such action as may be necessary so that
on and after the Effective Time employees of the Company and its Subsidiaries
immediately prior to the Effective Time who continue in the employment of the
Surviving Corporation and its Subsidiaries after the Effective Time shall be
provided employee benefits, plans and programs which, in the aggregate, are
generally comparable to those made available by Parent and its Subsidiaries to
similar situated employees of Parent and its Subsidiaries; provided that this
obligation shall be deemed satisfied if such employees of the Company and its
Subsidiaries continue after Closing to participate in those employee benefit
plans and programs (other than stock-based plans) made available by the Company
and its Subsidiaries to such employees prior to Closing. For purposes of
eligibility to participate and vesting (but not for the purpose of benefit
accrual for any purpose other than vacation pay, sick leave and severance pay)
in all benefits provided by Parent to such employees, the employees of the
Company and its Subsidiaries will be credited with their years of service with
the Company and its Subsidiaries and prior employers to the extent service with
Parent and its Subsidiaries and prior employers is taken into account under the
plans of Parent and its Subsidiaries. Notwithstanding the provisions of the
preceding sentence, the employees of the Company and its Subsidiaries shall not
be entitled to participate in Parent severance plans to the extent they become
entitled to a benefit under the Change in Control Severance Policy referred to
in Section 5.9(c). The eligibility of any employee of the Company and its
Subsidiaries to participate in any welfare benefit plan or program of Parent
shall not be subject to any exclusions for any pre-existing conditions if such
individual has met the participation requirements of similar benefit plans and
programs of the Company and its Subsidiaries. All individuals eligible to
participate in any plan or arrangement contemplated above shall be immediately
eligible to participate in the similar plan or arrangement maintained by Parent
or its Subsidiaries (or the same plan or arrangement if still maintained).
Amounts paid before the Effective Time by employees of the Company and its
Subsidiaries under any health plans of the Company or its Subsidiaries shall,
after the Effective
64
Time, be taken into account in applying deductible and out-of-pocket limits
applicable under the health plans of Parent provided as of the Effective Time to
the same extent as if such amounts had been paid under such health plans to
Parent.
(c) In the event that, within one year after the Effective
Time, any person who is an employee of the Company or any of its Subsidiaries
immediately prior to the Effective Time (an "Affected Employee") (i) voluntarily
terminates his or her employment with Parent, the Surviving Corporation or any
of their subsidiaries for Good Reason (as defined in the Change in Control and
Severance Policy attached hereto as Schedule 5.9 of the Parent Disclosure
Schedule) or (ii) is discharged other than "for cause" by Parent, the Surviving
Corporation or any of their Subsidiaries, then Parent shall pay severance to
such Affected Employee in accordance with such Change in Control Severance
Policy.
5.10 Stock Options; Restricted Stock.
(a) At the Effective Time, each then outstanding Company
Option, whether vested or unvested, shall be (i) assumed by Parent in accordance
with the terms and conditions of the applicable Company Stock Plan and option
agreement, together with amendments thereto, by which it is evidenced, except
that from and after the Effective Time, Parent and its Board of Directors or
Compensation Committee, as the case may be, shall be substituted for the Company
and its Board of Directors and Compensation Committee administering any such
Company Stock Plan, and (ii) converted into an option to acquire (A) the number
of shares of Parent Common Stock equal to the number of shares of Company Common
Stock subject to such Company Option multiplied by the Exchange Ratio, plus (B)
the amount of cash equal to the product of the number of shares of Company
Common Stock subject to such Company Option multiplied by the Kansas Sale
Consideration, which converted option shall be exercisable on the terms and
conditions as were applicable under such Company Option and the applicable
Company Stock Plan (except as described below) for the aggregate exercise price
equal to the number of shares of Company Common Stock subject to such Company
Option multiplied by the exercise price per share of Company Common Stock stated
in such Company Option (in other words, upon conversion of the Company Option
into an option for an aggregate number of shares of Parent Common Stock as
calculated in the preceding clause (A), then (1) the exercise price per whole
share of Parent Common Stock (plus related cash) for that converted option will
be equal to the quotient of the exercise price per share of Company Common Stock
stated in such Company Option divided by the Exchange Ratio, and (2) the amount
of cash to be paid to the optionholder per whole share of Parent Common Stock
acquired upon exercise of the option will be equal to the Kansas Sale
Consideration divided by the Exchange Ratio). "Company Options" means any option
granted, and not exercised, expired or terminated, to a current or former
employee, director or independent contractor of the Company or any Subsidiaries
of the Company or any predecessor thereof to purchase shares of Company Common
Stock pursuant to the Company Stock Plans or any other contract or agreement
entered into by the Company or any Subsidiaries of the Company. In the event
that the exercise of any Company Option would result in the issuance of a
fractional share of Parent Common Stock, then (i) if the Company Option is
subject to a Company Stock Plan that addresses the treatment of such fractional
share, such fractional share shall be treated in accordance with the terms of
such Company Stock Plan, or (ii) if the Company Option is subject to a Company
Stock Plan that does not address the treatment of such fractional share, such
holder shall be entitled to receive a cash payment for such fractional share
65
based upon the last reported sale price per share of Parent Common Stock on the
trading day immediately preceding the date of exercise. Notwithstanding the
foregoing, in the case of any option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422-424 of the Code, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code. Except as otherwise set forth in this
Section 5.10, the term, status as an "incentive stock option" under Section 422
of the Code, if applicable, all applicable restrictions or limitations on
transfer and vesting and all other terms and conditions of the Company Options
will, to the extent permitted by law and applicable agreements and plans and
otherwise reasonably practicable, be unchanged. Notwithstanding the foregoing,
all Company Options shall be fully exercisable as of the Effective Time. As soon
as practicable following the date of this Agreement, the Board of Directors of
the Company (or, if appropriate, any committee thereof administering the Company
Stock Plans) shall adopt such resolutions or take such other actions as may be
required to effect the provisions of this Section 5.10(a). Without limiting the
generality of the foregoing sentence, as soon as practicable following the date
of this Agreement, the Company shall cause (i) the Compensation Committee of the
Company or the Board of Directors of the Company to determine that any and all
awards granted pursuant to the Company's Initial Stock Option Plan shall not
vest or become exercisable on an accelerated basis in connection with the
Merger, except as contemplated in this Section 5.10(a), and (ii) the
Administrator under the Company's 2000 Stock Incentive Plan to determine that
any and all awards granted pursuant to such plan shall not vest or become
exercisable on an accelerated basis in connection with the Merger, except as
contemplated in this Section 5.10(a), because the Administrator shall have
determined, in accordance with Section 17 of such plan, that the assumption of
such awards by Parent pursuant to this Section 5.10 is equitable and appropriate
to protect the rights and interests of participants under such plan.
(b) At the Effective Time, each then outstanding share of
Company Restricted Stock shall be (i) assumed by Parent, in accordance with the
terms of the applicable Company Stock Plan and award agreement by which it is
evidenced, except that from and after the Effective Time, Parent and its Board
of Directors or Compensation Committee, as the case may be, shall be substituted
for the Company and its Board of Directors and Compensation Committee
administering any such Company Stock Plan, and (ii) converted into the Merger
Consideration as provided in Section 2.1. If the foregoing calculation results
in the conversion of a share of Company Restricted Stock into an award of
restricted Parent Common Stock that includes a fractional share of restricted
Parent Common Stock, then, upon lapse of applicable forfeiture restrictions with
respect to any such shares of restricted Parent Common Stock, all such
fractional shares with respect to which such restrictions have lapsed at such
time shall be aggregated, and to the extent that a fractional share of
restricted Parent Common Stock remains, the holder thereof shall receive a cash
payment for any such remaining fractional share based upon the last reported
sale price per share of Parent Common Stock on the trading day immediately
preceding the date such forfeiture restrictions lapsed. The forfeiture
restrictions applicable to grants of Company Restricted Stock issued effective
as of April 30, 2004 (the "2004 Company Restricted Stock") shall lapse in
accordance with the terms of the applicable Company Stock Plan and award
agreement by which they are evidenced, including that the forfeiture
restrictions applicable to one-third of the shares subject to any such grant
shall lapse as of the Effective Time. In addition, the forfeiture restrictions
applicable to one-third of the shares subject to the 2004 Company Restricted
Stock shall lapse with respect to any employee (i) who
66
has two years of service with the Company and/or its Affiliates as of April 30,
2004, and (ii) has a "Qualifying Termination", which shall occur if, within one
year after the Effective Time, the employee voluntarily terminates his or her
employment with Parent, the Surviving Corporation or any of their Subsidiaries
for "Good Reason" or is discharged other than "for cause" (as such terms are
defined in the Change in Control and Severance Policy attached hereto as
Schedule 5.9 of the Parent Disclosure Schedule). Company Restricted Stock
awarded prior to April 30, 2004, shall (i) have its vesting schedule accelerated
by assuming that the lapse of one additional year had occurred as of the
Effective Time, and (ii) become fully vested in the event of a Qualifying
Termination. For non-employee directors of the Company, the forfeiture
restrictions applicable to Company Restricted Stock shall lapse in their
entirety as of the Effective Time. As soon as practicable following the date of
this Agreement, the Board of Directors of the Company (or, if appropriate, any
committee thereof administering the Company Stock Plans) shall adopt such
resolutions or take such other actions as may be required to effect the
provisions of this Section 5.10(b). Without limiting the generality of the
foregoing, as soon as practicable following the date of this Agreement, the
Company shall cause the Administrator under the Company's 2000 Stock Incentive
Plan to determine that any and all awards granted pursuant to such plan shall
not vest or become exercisable on an accelerated basis in connection with the
Merger, except as contemplated in this Section 5.10(b), because the
Administrator shall have determined, in accordance with Section 17 of such plan,
that the assumption of such awards by Parent pursuant to this Section 5.10 is
equitable and appropriate to protect the rights and interests on participants
under such plan. "Company Restricted Stock" means any outstanding award of
restricted Company Common Stock with respect to which the restrictions have not
lapsed, and which award shall not have previously expired or terminated, to a
current or former employee, director or independent contractor of the Company or
any of the Subsidiaries of the Company or any predecessor thereof pursuant to
any applicable Company Stock Plan or any other contract or agreement entered
into by the Company or any of the Subsidiaries of the Company. Except as
otherwise set forth in this Section 5.10, all applicable restrictions or
limitations on transfer, vesting and forfeiture and all other terms and
conditions of the Company Restricted Stock will, to the extent permitted by law
and the applicable agreements and plans and otherwise reasonably practicable, be
unchanged.
(c) As soon as reasonably practicable following the Effective
Time, Parent shall cause the shares of Parent Common Stock issuable upon
exercise of the Company Options to be assumed under paragraph (a) above and the
shares of Company Restricted Stock to be assumed under paragraph (b) above to be
registered on Form S-8 (or any successor form), and shall use its commercially
reasonable efforts to maintain the effectiveness of such registration statement
for so long as such assumed Company Options remain outstanding or such shares of
Company Restricted Stock remain outstanding and subject to forfeiture.
(d) As soon as reasonably practicable following the Effective
Time, Parent shall deliver to each holder of an assumed Company Option or
Company Restricted Stock an appropriate notice setting forth such holder's
rights pursuant to such Company Option or Company Restricted Stock, as
applicable. The Company and Parent shall take all commercially reasonable
actions which are necessary in order to effect the foregoing provisions of this
Section 5.10 as of the Effective Time. Parent shall take all corporate actions
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of the Company Options.
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5.11 Indemnification; Directors' and Officers' Insurance.
(a) Parent agrees that all rights to indemnification by the
Company now existing in favor of each person who is now, or has been at any time
prior to the date hereof or who becomes prior to the Effective Time an officer
or director of the Company or any Subsidiary of the Company or an employee of
the Company or any Subsidiary of the Company or who acts as a fiduciary under
any of the Company Employee Benefit Plans (each a "Company Indemnified Party")
as provided in the Company's Articles of Incorporation or Bylaws, in each case
as in effect on the date of this Agreement, or pursuant to any other agreements
in effect on the date hereof, copies of which have been provided to Parent,
including provisions relating to the advancement of expenses incurred in the
defense of any action or suit, shall survive the Merger and shall remain in full
force and effect with respect to all losses, claims, damages, liabilities, fees,
expenses, judgments and fines arising in whole or in part out of actions or
omissions in such person's capacity as such occurring at or prior to the
Effective Time. From and after the Effective Time, the Surviving Corporation
shall be liable to pay and perform in a timely manner such indemnification
obligations.
(b) The obligations of the Surviving Corporation under this
Section 5.11 shall survive the consummation of the Merger and shall not be
terminated or modified in such a manner as to adversely affect any Company
Indemnified Party to whom this Section 5.11 applies without the consent of such
affected Company Indemnified Party (it being expressly agreed that the Company
Indemnified Parties to whom this Section 5.11 applies shall be third party
beneficiaries of this Section 5.11, each of whom may enforce the provisions of
this Section 5.11).
(c) The Surviving Corporation shall procure (and the Company
shall cooperate prior to the Effective Time in these efforts) a run-off
directors' and officers' liability insurance policy with respect to claims
arising from facts or events which occurred prior to the Effective Time and
covering persons who are currently covered by such insurance, which policy,
without any lapse in coverage, will provide coverage for a period of six years
after the Effective Time (or the Surviving Corporation otherwise will maintain
coverage for such period) and contain terms and conditions which are
substantially comparable to the Company's existing directors' and officers'
liability insurance policy; provided, that the Surviving Corporation shall not
be obligated to make aggregate annual premium payments for such six-year period
in respect of such policy (or coverage replacing such policy) which exceed, for
the portion related to the Company's directors and officers, 200% of the annual
premium payments on the Company's current policy in effect as of the date of
this Agreement or, if the Surviving Corporation procures a policy covering the
full six-year period, with an aggregate premium payment that exceeds 1200% of
the Company's current annual premium for its existing policy (the "Maximum
Amount"). If the amount of the premiums necessary to procure such insurance
coverage exceeds the Maximum Amount, Parent or the Surviving Corporation shall
maintain the most advantageous policies of directors' and officers' liability
insurance obtainable for a premium equal to the Maximum Amount.
(d) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or
68
substantially all of its properties and assets to any person, then, in each such
case, proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
5.11 (it being agreed that this Section 5.11(d) shall be deemed satisfied if
such obligations become the obligations of any such successor or assign by
operation of law).
5.12 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
commercially reasonable efforts to defend against and respond thereto.
5.13 Public Announcements. The parties hereto will consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public statement without the
consent of the other parties, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange or transaction reporting system so long as the other parties are
notified promptly by the disclosing party of such press release or public
statement.
5.14 Other Actions. Except as contemplated by this Agreement, neither
Parent nor the Company shall, nor shall Parent or the Company permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Merger set forth in Article VI not being satisfied. Subject to the terms of
this Agreement, each of the parties agrees to use its reasonable best efforts to
satisfy the conditions to Closing set forth in this Agreement.
5.15 Notification of Certain Matters; SEC Filings. Parent and the
Company, as the case may be, shall confer on a regular basis with each other,
report on operational matters and promptly advise each other orally and in
writing of any change or event constituting or which could reasonably be
expected to result in a Parent Material Adverse Effect or a Company Material
Adverse Effect, as the case may be. The Company agrees to give prompt notice to
Parent of, and to use its commercially reasonable efforts to prevent or promptly
remedy, (a) the occurrence or failure to occur, or the impending or threatened
occurrence or failure to occur, of any event which occurrence or failure to
occur would be reasonably likely to cause the failure of any of the conditions
set forth in Section 6.2(a) or 6.2(b); provided, however, that the delivery of
any notice pursuant to this Section 5.15 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice. Parent agrees
to give prompt notice to the Company of, and to use its commercially reasonable
efforts to prevent or promptly remedy, (i) the occurrence or failure to occur,
or the impending or threatened occurrence or failure to occur, of any event
which occurrence or failure to occur would be reasonably likely to cause the
failure of any of the conditions set forth in Section 6.3(a) or 6.3(b);
provided, however, that the delivery of any notice pursuant to this Section 5.15
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice. Parent and the Company shall promptly provide each
other (or their respective counsel) copies of all filings made by such party or
its
69
Subsidiaries with the SEC or any other state or federal Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
5.16 Conveyance Taxes. Parent and the Company will (a) cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time, (b) cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any applicable exemptions to any such
tax or fee, and (c) each pay any such tax or fee which becomes payable by it on
or before the Effective Time.
5.17 Board of Directors. Parent shall take such action as is necessary
to cause ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ to be appointed to the Board of
Directors of Parent effective as of or promptly after the Effective Time, each
to serve until the earlier of such individual's resignation or removal or until
his successor is duly elected and qualified in accordance with the Amended and
Restated Certificate of Incorporation and Restated Bylaws of Parent. ▇▇▇▇ ▇.
▇▇▇▇▇▇ shall be designated to the class of directors of Parent whose term
expires at Parent's 2007 Annual Stockholders Meeting. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall
be designated to the class of directors of Parent whose term expires at Parent's
2006 Annual Stockholders Meeting.
5.18 Indenture Matters. Parent and the Surviving Corporation shall take
all actions that are necessary or appropriate in order for Parent to assume by
supplemental indenture the indenture for the Company's 4.75% Senior Convertible
Notes due 2021 as contemplated by Section 4.11 of such indenture.
5.19 Section 16(b) Matters. Prior to the Effective Time, Parent, Merger
Sub and the Company shall take all such steps as may be required to cause any
dispositions of equity securities of the Company (including derivative
securities) or acquisitions of equity securities of Parent (including derivative
securities) in connection with this Agreement by each individual who is subject
to the reporting requirements of Section 16(a) of the Exchange Act with respect
to the Company to be exempt under Rule 16b-3 under the Exchange Act.
5.20 Plan of Reorganization. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Treas. Reg. Section 1.368-2(g)
and an integrated plan, within the meaning of Rev. Rul. 2001-46. Until the
Effective Time, each party hereto shall use its reasonable best efforts to cause
the Merger and the LLC Sub Merger to qualify, and no party hereto will knowingly
take any action or cause any action to be taken that causes the Merger and the
LLC Sub Merger not to qualify as a reorganization, within the meaning of section
368(a)(1) of the Code, or fail to take any action, or cause any action to fail
or to be taken, which if taken would prevent the Merger and the LLC Sub Merger
from not qualifying as such a reorganization. Following the Effective Time,
neither Parent, the Company, LLC Sub nor any affiliate thereof shall (a)
knowingly take any action or cause any action to be taken that causes the Merger
and the LLC Sub Merger not to qualify as such a reorganization or (b) knowingly
fail to take any action or fail to cause any action to be taken if the taking of
such action would prevent the Merger and the LLC Sub Merger from failing to
qualify as such a reorganization.
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Notwithstanding the foregoing, under no circumstances shall Parent or Merger Sub
be required to alter or amend the Merger Consideration to cause the Merger to
qualify as a reorganization within the meaning of section 368(a) of the Code,
and under no circumstances shall the failure so to alter or amend the Merger
Consideration be deemed a breach of this Section 5.20. In addition, Parent makes
the following representations and agreements:
1. LLC Sub will acquire the assets of the Company and its
Subsidiaries in the Merger and LLC Sub Merger for the purpose of using
a significant portion of those assets in the historic business or
businesses of the Company and its Subsidiaries.
2. The Merger and the LLC Sub Merger will satisfy the
continuity of business enterprise test of Treas. Reg. Section
1.368-1(d).
3. Neither Parent nor any person related to Parent, within the
meaning of Treas. Reg. Section 1.368-1 (e)(3), will in connection with
the Merger purchase, redeem or otherwise acquire any of the Parent
Common Stock that is issued in the Merger other than any fractional
share for which Parent or any such related person pays cash as part of
the Merger or other than in open market purchases of Parent Common
Stock that are described in Rev. Rul. 99-58.
4. The payment of cash in lieu of fractional shares of Parent
Common Stock in the Merger is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares and is
not separately bargained for consideration.
5. Parent will not, when the Merger occurs, be an "investment
company," within the meaning of Section 368(a)(2)(F) of the Code, and
will not at that time be under the jurisdiction of a court in a title
11 or similar case, within the meaning of Section 368(a)(3)(A) of the
Code.
5.21 Certain Hedging Activities. The Company will enter into ▇▇▇▇▇▇
within 30 days of the date hereof so that its total ▇▇▇▇▇▇ (including ▇▇▇▇▇▇
entered into prior to the date hereof) include ▇▇▇▇▇▇ relating to 25,000 mmbtu
per day with respect to November and December 2004 and 100,000 mmbtu per day for
2005.
5.22 Exchange Offer Obligation. The Company will comply with its
registration obligations under the registration rights agreement entered into in
connection with its offering of 5.875% Senior Subordinated Notes due 2012 (the
"Senior Sub Notes").
5.23 Indenture Amendment. Upon the request of Parent, and in exchange
for Parent's agreement to cause the subordination provisions of the Senior Sub
Notes to be eliminated and to cause the Senior Sub Notes to be assumed by
Parent, the Company will use its commercially reasonable efforts, at Parent's
expense, to solicit consents from the holders of the Senior Sub Notes for an
amendment to the Senior Sub Notes that either eliminates or amends the covenants
in the Senior Sub Notes identified by Parent. Each of (i) the elimination of the
subordination provisions of the Senior Sub Notes, (ii) the assumption of the
Senior Sub Notes by Parent and (iii) the elimination or amendment of the
covenants in the Senior Sub Notes identified by Parent, as contemplated by this
Section 5.23, shall be effective as of the Effective Time.
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5.24 Kansas Sale. Neither the Company nor any of its Subsidiaries shall
take any action in connection with the sale of the Company's and its
Subsidiaries' assets in Kansas that delays the Closing or otherwise delays or
prevents the satisfaction of any conditions to Closing set forth in this
Agreement. Neither the Company nor any of its Subsidiaries shall sell such
assets in exchange for consideration other than cash consideration, and neither
the Company nor any of its Subsidiaries shall sell such assets for Kansas Sale
Proceeds of less than $15 million.
5.25 Rights Agreement Amendment. As soon as practicable after the date
hereof, the Company shall obtain the signature of Computershare Trust Company,
Inc., as successor to American Securities Transfer & Trust, Inc., as Rights
Agent, to the Rights Agreement Amendment and shall furnish the fully executed
Right Agreement Amendment to Parent.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock entitled
to vote thereon.
(b) Parent Stockholder Approval. The issuance of Parent Common
Stock pursuant to the Merger shall have been approved by the affirmative vote of
a majority of votes cast by holders of Parent Common Stock and the total vote
cast shall have represented over 50% in interest of all shares of Parent Common
Stock entitled to vote thereon.
(c) NYSE Listing. The shares of Parent Common Stock issuable
to Company stockholders pursuant to this Agreement in the Merger, the shares of
Parent Common Stock to be reserved for issuance upon exercise of Company Options
and the shares of Parent Common Stock issuable upon conversion of the Company's
4.75% Senior Convertible Notes due 2021 shall have been authorized for listing
on the NYSE upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and any approvals required under Canadian laws, rules and regulations
shall have been obtained.
(e) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and all necessary approvals under state securities laws or
the Securities Act or Exchange Act relating to the issuance or trading of the
shares of Parent Common Stock issuable pursuant to the Merger shall have been
received.
(f) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental Entity having jurisdiction
over any party hereto, and no other legal restraint or
72
prohibition shall be in effect (an "Injunction") preventing or making illegal
the consummation of the Merger.
6.2 Conditions of Obligations of Parent. The obligations of Parent to
effect the Merger are subject to the satisfaction of the following conditions,
any or all of which may be waived in whole or in part by Parent:
(a) Representations and Warranties of the Company. Each of the
representations and warranties of the Company contained in this Agreement
(without giving effect to any materiality qualifications or limitations therein
or any references therein to Company Material Adverse Effect) shall be true and
correct, in each case as of the Effective Time as though made on and as of the
Effective Time, except (i) for such failures, individually or in the aggregate,
to be true and correct that would not reasonably be expected to result in a
Company Material Adverse Effect; (ii) that those representations and warranties
that address matters only as of a particular date shall remain true and correct
as of such date, subject to the qualifications in (i) above; and (iii) for
changes expressly permitted as contemplated by the terms of this Agreement, and
Parent shall have received a certificate signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to such
effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such effect.
(c) Approvals. The Company shall have delivered to Parent
certified copies of resolutions duly adopted by the Company's Board of Directors
and stockholders evidencing the approval and adoption of this Agreement and the
approval of the Merger and the other transactions contemplated hereby, all in
such reasonable detail as Parent and its counsel shall request.
(d) Material Adverse Effect. No Company Material Adverse
Effect shall have occurred since the date hereof and be continuing and Parent
shall have received a certificate signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company to such effect.
(e) Consulting and Non-Competition Agreements. The Consulting
and Non-Competition Agreements shall be and remain in full force and effect as
of and through the Closing other than as a result of death.
(f) Non-Competition Agreement. The Non-Competition Agreement
shall be and remain in full force and effect as of and through the Closing other
than as a result of death.
(g) Dissenting Stockholders. The aggregate number of shares of
Company Common Stock which are entitled to vote at the Company stockholders'
meeting and are held of record by persons or entities who exercise their
dissenters' rights under the CBCA to dissent from the proposed Merger shall not
exceed 5% of the total number of issued and outstanding
73
shares of Company Common Stock held of record as of the record date for the
Company stockholders' meeting and entitled to vote on the proposed Merger at
such meeting.
(h) Parent Tax Opinion. Parent shall have received a written
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. in form and substance reasonably satisfactory
to Parent, on the basis of certain facts, representations and assumptions set
forth in such opinion, to the effect that no gain will be recognized by Parent,
Merger Sub or the Company as a consequence of the Merger or the LLC Sub Merger.
The issuance of such tax opinion will be conditioned upon the receipt by ▇▇▇▇▇▇
& ▇▇▇▇▇▇ L.L.P. of a representation letter from the Company, Parent and Merger
Sub substantially in the form attached hereto as Schedule 6.2(h) of the Parent
Disclosure Schedule and such letter shall be dated on or before the date of such
tax opinion and shall not have been withdrawn or modified in any material
respect as of the Effective Time.
6.3 Conditions of Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties of Parent. Each of the
representations and warranties of Parent and Merger Sub contained in this
Agreement (without giving effect to any materiality qualifications or
limitations therein or any references therein to Parent Material Adverse Effect)
shall be true and correct, in each case as of the Effective Time as though made
on and as of the Effective Time, except (i) for such failures, individually or
in the aggregate, to be true and correct that would not reasonably be expected
to result in a Parent Material Adverse Effect; (ii) that those representations
and warranties that address matters only as of a particular date shall remain
true and correct as of such date, subject to the qualifications in (i) above;
and (iii) for changes expressly permitted as contemplated by the terms of this
Agreement, and the Company shall have received a certificate signed on behalf of
Parent by the Chief Executive Officer and the Chief Financial Officer of Parent
to such effect.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent to such effect.
(c) Approvals. Parent shall have delivered to the Company
certified copies of resolutions duly adopted by (i) Parent's Board of Directors
evidencing the approval and adoption of this Agreement, the approval of the
Merger, the approval of the issuance of Parent Common Stock in the Merger and
the approval of the other transactions contemplated hereby and (ii) Parent's
stockholders evidencing the approval of the issuance of Parent Common Stock in
the Merger, all in such reasonable detail as the Company and its counsel shall
request.
(d) Material Adverse Effect. No Parent Material Adverse Effect
shall have occurred since the date hereof and be continuing and the Company
shall have received a certificate signed on behalf of Parent by the Chief
Executive Officer and Chief Financial Officer of Parent to such effect.
74
(e) Company Tax Opinion. The Company shall have received a
written opinion of ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. in form and substance reasonably
satisfactory to the Company, on the basis of certain facts, representations and
assumptions set forth in such opinion, to the effect that no gain will be
recognized by Parent, Merger Sub or the Company for federal income tax purposes
as a consequence of the Merger or the LLC Sub Merger. The issuance of such tax
opinion will be conditioned upon the receipt by ▇▇▇▇▇ ▇▇▇▇▇ L.L.P. of a
representation letter from each of the Company, Parent and Merger Sub
substantially in the form attached hereto as Schedule 6.3(e) of the Company
Disclosure Schedule and such letter shall be dated on or before the date of such
tax opinion and shall not have been withdrawn or modified in any material
respect as of the Effective Time.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company and the stockholders of Parent (except with respect
to Section 7.1(g), in which case the termination must be prior to receipt of the
approval of the Company's stockholders of this Agreement and the Merger):
(a) by mutual written consent of Parent and the Company, or by
mutual action of their respective Boards of Directors;
(b) by either Parent or the Company if (i) any Governmental
Entity shall have issued any Injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the Merger
and such Injunction or other action shall have become final and nonappealable;
or (ii) any required approval of the stockholders of a party shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of stockholders, or at any adjournment thereof; provided,
however, that the right to terminate this Agreement under this Section
7.1(b)(ii) shall not be available to a party where the failure to obtain
stockholder approval of such party shall have been caused by the action or
failure to act by such party and such action or failure to act constitutes, in
the case of the Company, a breach by the Company of Section 4.2 in any respect
or a material breach by the Company of any of the other covenants or agreements
contained in this Agreement or, in the case of Parent, a material breach by
Parent of any of the covenants or agreements contained in this Agreement;
(c) by Parent or the Company if the Merger shall not have been
consummated (i) by December 31, 2004 or such other date, if any, as the Company
and Parent shall agree (the "Initial Termination Date") or (ii) if the Initial
Termination Date is extended pursuant to Section 5.5(a), by the date to which
the Initial Termination Date is extended pursuant to Section 5.5(a); provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose breach of any representation or
warranty or failure to fulfill any covenant or agreement under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on or
before such date;
75
(d) by Parent if (i) the Company shall have failed to comply
in any respect with Section 4.2 or shall have failed to comply in any material
respect with any of the other covenants or agreements contained in this
Agreement to be complied with or performed by the Company at or prior to such
date of termination (provided that (other than with respect to a breach of
Section 4.2, which breach shall not be subject to a cure right) such breach has
not been cured within 30 days following receipt by the Company of notice of such
breach and is existing at the time of termination of this Agreement); (ii) any
representation or warranty of the Company contained in this Agreement shall not
be true in all material respects (provided that any representation or warranty
of the Company contained herein that is qualified by a materiality standard or a
Company Material Adverse Effect qualification shall not be further qualified
hereby) when made on or at the time of termination as if made on such date of
termination (except to the extent it relates to a particular date), provided
such breach has not been cured within 30 days following receipt by the Company
of notice of such breach and is existing at the time of termination of this
Agreement or (iii) after the date hereof there has been any Company Material
Adverse Effect;
(e) by the Company if (i) Parent shall have failed to comply
in any material respect with any of the covenants or agreements contained in
this Agreement to be complied with or performed by it at or prior to such date
of termination (provided such breach has not been cured within 30 days following
receipt by Parent of notice of such breach and is existing at the time of
termination of this Agreement); (ii) any representation or warranty of Parent
contained in this Agreement shall not be true in all material respects (provided
that any representation or warranty of Parent contained herein that is qualified
by a materiality standard or a Parent Material Adverse Effect qualification
shall not be further qualified hereby) when made or on or at the time of
termination as if made on such date of termination (except to the extent it
relates to a particular date), provided such breach has not been cured within 30
days following receipt by Parent of notice of such breach and is existing at the
time of termination of this Agreement; or (iii) after the date hereof there has
been any Parent Material Adverse Effect;
(f) by Parent in the event that (i) the Board of Directors of
the Company shall have failed to reaffirm publicly its approval, as soon as
reasonably practicable, and in no event later than three business days, after
Parent's request for such reaffirmation, of the Merger and the transactions
contemplated by this Agreement, or shall have resolved not to reaffirm the
Merger, or (ii) the Board of Directors of the Company shall have failed to
include in the Joint Proxy Statement its recommendation, without modification or
qualification, that the Company stockholders approve and adopt this Agreement
and approve the Merger, or (iii) the Board of Directors of the Company shall
have withheld, withdrawn, amended or modified, or proposed publicly to withdraw,
amend or modify, in a manner adverse to Parent, the recommendation of such Board
of Directors to the Company stockholders that they approve and adopt this
Agreement and approve the Merger, or (iv) the Board of Directors of the Company
shall have a Change of Recommendation, or (v) the Board of Directors of the
Company, within ten business days after commencement of any tender or exchange
offer for any shares of Company Common Stock, shall have failed to recommend
against acceptance of such tender or exchange offer by its stockholders or takes
no position with respect to the acceptance of such tender or exchange offer by
its stockholders;
76
(g) by the Company if the Board of Directors of the Company
has made a Change of Recommendation in order to approve and permit the Company
to accept a Superior Offer; provided, however, that (i) the Company is not then
in breach of Section 4.2 or material breach of any other covenant or other
agreement contained in this Agreement and has not breached any of its
representations and warranties contained in this Agreement in any material
respect, (ii) Parent does not make, within three business days after receipt of
the Company's written notice pursuant to Section 4.2(d), an offer that the Board
of Directors of the Company shall have concluded in good faith (following
consultation with its financial advisor and outside legal counsel) is at least
as favorable, from a financial point of view, to the Company stockholders as
such Superior Offer, (iii) the Board of Directors of the Company authorizes the
Company, subject to complying with the terms of Section 4.2 and this clause (g),
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Offer and the Company notifies Parent in writing that it
intends to enter into such an agreement, attaching the most current version of
such agreement to such notice, and (iv) the Company shall have tendered to
Parent payment in full of the amount specified in Section 7.2 concurrently with
delivery of notice of termination pursuant to this Section 7.1(g);
(h) by Parent in the event that the condition set forth in
Section 6.2(g) is not satisfied; or
(i) By the Company, in the event that (i) the Board of
Directors of Parent shall have failed to reaffirm publicly its approval, as soon
as reasonably practicable, and in no event later than three business days, after
the Company's request for such reaffirmation, of the Merger and the transactions
contemplated by this Agreement, or shall have resolved not to reaffirm the
Merger, or (ii) the Board of Directors of Parent shall have failed to include in
the Joint Proxy Statement its recommendation, without modification or
qualification, that the Parent stockholders approve the issuance of shares of
Parent Common Stock pursuant to the Merger or (iii) the Board of Directors of
Parent shall have withheld, withdrawn, amended or modified, or proposed publicly
to withdraw, amend or modify, in a manner adverse to the Company, the
recommendation of such Board of Directors to the Parent stockholders that they
approve the issuance of shares of Parent Common Stock pursuant to the Merger.
A terminating party shall provide written notice of termination to the other
party specifying the reason for such termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party
hereto as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of any party hereto
except (i) with respect to this Section 7.2, the second and third sentences of
Section 5.4, the last sentence of Section 5.6(a) and Section 8.1, and (ii) to
the extent that such termination results from the breach (except as provided in
Section 8.8) by a party hereto of any of its representations or warranties or of
any of its covenants or agreements contained in this Agreement, in which case
such party shall remain liable for its breach notwithstanding the termination.
77
(b) (i) If (x) this Agreement is terminated by Parent or the
Company pursuant to Section 7.1(b)(ii) (as it relates to failure to obtain
approval of the Company stockholders), (y) Parent or the Company terminates this
Agreement pursuant to Section 7.1(c), or (z) Parent terminates this Agreement
pursuant to Section 7.1(d)(i); and
as to any of clauses (x), (y) or (z) above, prior to the termination of this
Agreement, there has been publicly announced an Acquisition Proposal (other than
the Merger) and within twelve months of such termination the Company shall
either (1) consummate an Acquisition Proposal (whether or not such Acquisition
Proposal is the same Acquisition Proposal that had been publicly announced prior
to termination of this Agreement) or (2) enter into an agreement with respect to
an Acquisition Proposal or recommend approval of an Acquisition Proposal
(whether or not such Acquisition Proposal is the same Acquisition Proposal that
had been publicly announced prior to termination of this Agreement), which
Acquisition Proposal is subsequently consummated (whether or not such
consummation occurs within such twelve-month period); or
(i) If Parent shall terminate this Agreement pursuant
to Section 7.1(f); or
(ii) If the Company shall terminate this Agreement
pursuant to Section 7.1(g);
then the Company shall pay to Parent an amount equal to $35 million (the
"Company Termination Fee"). The Company hereby waives its right to set-off or
counterclaim against such amount. If the Company Termination Fee shall be
payable pursuant to subsection (b)(i) of this Section 7.2, the Company
Termination Fee shall be paid in same-day funds at or prior to the date of
consummation of such Acquisition Proposal. If the Company Termination Fee shall
be payable pursuant to subsection (b)(ii) of this Section 7.2, the Company
Termination Fee shall be paid in same-day funds no later than one business day
after the date of termination of this Agreement. If the Company Termination Fee
shall be payable pursuant to subsection (b)(iii) of this Section 7.2, the
Company Termination Fee shall be paid in same-day funds concurrently with the
delivery of the notice of termination of this Agreement pursuant to Section
7.1(g).
(c) If this Agreement is terminated by the Company pursuant to
Section 7.1(i), then Parent shall pay to the Company an amount equal to $35
million (the "Parent Termination Fee") in same-day funds no later than one
business day after the date of termination of this Agreement.
(d) The parties hereto acknowledge that the agreements
contained in paragraphs (b) and (c) of this Section 7.2 are an integral part of
the transactions contemplated by this Agreement, and that without these
agreements, they would not enter into this Agreement. Accordingly, if either the
Company or Parent fails to pay promptly any fee payable by it pursuant to this
Section 7.2, then such party shall pay to the other party such other party's
costs and expenses (including attorneys' fees) in connection with collecting
such fee, together with interest on the amount of the fee at the rate of 5% from
the date such payment was due under this Agreement until the date of payment.
78
(e) Nothing contained in this Section 7.2 shall constitute or
shall be deemed to constitute liquidated damages for the breach by the Company
of the terms of this Agreement or otherwise limit the rights of Parent;
provided, however, that in the event that Parent is entitled to receive a
Company Termination Fee pursuant to Section (b)(i)(z) above, Parent must elect
to either (i) receive such Company Termination Fee and, upon receipt of such
Company Termination Fee, dismiss with prejudice any pending litigation against
the Company, and release the Company from any liability relating to a breach by
the Company of its covenants and agreements under this Agreement or (ii) waive
its right to receive such Company Termination Fee.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company and the stockholders of Parent, but, after
any such approval, no amendment shall be made which by law requires further
approval by such stockholders without first obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Merger
shall be consummated, except (i) as otherwise contemplated by the last sentence
of Section 5.6(a) and the last sentence of Section 7.2(b) and (ii) that Parent
and the Company shall share equally the expenses incurred by Parent and the
Company in connection with the printing and mailing of the Joint Proxy Statement
and all filing fees paid in connection with the S-4 to the SEC.
8.2 Nonsurvival of Representations, Warranties and Agreements. Subject
to the remaining provisions of this Section 8.2, the representations, warranties
and agreements in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the execution of
this Agreement. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time and any liability for breach or violation thereof
shall terminate absolutely and be of no further force and effect at and as of
the Effective Time, except for the agreements contained in Article II and
79
Sections 1.4, 5.9, 5.10, 5.11, 5.17, 5.18, 5.20, 5.21, 5.22, 5.23 and Article
VIII, and the agreements delivered pursuant to Section 5.7. The Confidentiality
Agreement shall survive the execution and delivery of this Agreement, and the
provisions of the Confidentiality Agreement shall apply to all information and
material delivered hereunder.
8.3 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received (i) when so delivered personally, (ii)
upon receipt of an appropriate electronic answerback or confirmation when so
delivered by telegraph or telecopy (to such number specified below or another
number or numbers as such person may subsequently designate by notice given
hereunder), or (iii) five business days after the date of mailing to the
following address or to such other address or addresses as such person may
subsequently designate by notice given hereunder, if so delivered by mail:
(a) if to Parent or Merger Sub, to:
Pioneer National Resources Company
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
3700 ▇▇▇▇▇▇▇▇ ▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
and (b) if to the Company, to:
Evergreen Resources, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
80
with a copy to:
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Jr.
R. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
8.4 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, glossary of defined terms 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 word "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." Unless the
context otherwise requires, "or" is disjunctive but not necessarily exclusive,
and words in the singular include the plural and in the plural include the
singular. When reference is made herein to a matter or item of information set
forth in either the Company SEC Documents or the Parent SEC Documents, such
references shall constitute disclosure of a matter or item of information set
forth in such Company SEC Documents or Parent SEC Documents for purposes of this
Agreement only if (a) such matter or item of information is not included only in
a "Risk Factors" section or similar section of the applicable SEC Document, (b)
such matter or item of information is specifically described in the applicable
SEC Document, and (c) such matter or item of information relates to an event or
fact in existence at the time of the filing of the applicable SEC Document with
the SEC.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Sections 5.7, 5.9, 5.10 and 5.11, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of
Delaware, without giving effect to the
principles of conflicts of law thereof, except to the extent the CBCA is
required to govern the Merger.
8.8 No Remedy in Certain Circumstances. Each party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any party to take any
action inconsistent herewith or not to take an action
81
consistent herewith or required hereby, the validity, legality and
enforceability of the remaining provisions and obligations contained or set
forth herein shall not in any way be affected or impaired thereby, unless the
foregoing inconsistent action or the failure to take an action constitutes a
material breach of this Agreement or makes this Agreement impossible to perform,
in which case this Agreement shall terminate pursuant to Article VII hereof.
Except as otherwise contemplated by this Agreement, to the extent that a party
hereto took an action inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a court or other
competent authority, such party shall not incur any liability or obligation
unless such party breached its obligations under Confidentiality Agreement or
did not in good faith seek to resist or object to the imposition or entering of
such order or judgment.
8.9 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
8.10 Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to this Agreement to perform its obligations
hereunder in accordance with their specific terms or to otherwise comply with
such obligations, including its failure to take all actions as are necessary on
its part to the consummation of the Merger, will cause irreparable injury to the
other parties to this Agreement for which damages, even if available, will not
be an adequate remedy. Accordingly, each of the parties hereto hereby consents
to the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of any party's obligations, including an injunction to
prevent breaches, and to the granting by any such court of the remedy of
specific performance of the terms and conditions hereof.
8.11 Schedule Definitions. All capitalized terms in the Company
Disclosure Schedule or Parent Disclosure Schedule shall have the meanings
ascribed to them herein, unless the context otherwise requires or as otherwise
defined.
[Remainder of page is intentionally blank.]
82
IN WITNESS WHEREOF, each party has caused this Agreement to be signed
by its respective officers thereunto duly authorized, all as of the date first
written above.
PIONEER NATURAL RESOURCES COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: Executive Vice President
-----------------------------------
BC MERGER SUB, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: Executive Vice President
-----------------------------------
EVERGREEN RESOURCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Title: President and CEO
-----------------------------------
EXHIBIT A
FORM OF CARLTON CONSULTING AND NON-COMPETITION AGREEMENT
CONSULTING AND NON-COMPETITION AGREEMENT
This CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement") is
entered into as of the 3rd day of May, 2004, between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an
individual (the "Consultant"), and
Pioneer Natural Resources Company, a
Delaware
corporation ("Parent").
RECITALS:
WHEREAS, contemporaneously herewith, Parent, Evergreen Resources, Inc.
a Colorado corporation ("Evergreen"), and BC Merger Sub, Inc., a Colorado
corporation ("Merger Sub"), are entering into an Agreement and Plan of Merger
that provides for the merger (the "Merger") of Merger Sub with and into
Evergreen (the "
Merger Agreement");
WHEREAS, the Consultant is an executive officer of Evergreen and a
stockholder of Evergreen with special expertise in the oil and gas business and
knowledge of the Confidential Information to be acquired by Parent under the
Merger Agreement, and, as a result, the obligation of Parent and Merger Sub to
enter into the
Merger Agreement is expressly conditioned upon the execution and
delivery of this Agreement by the Consultant;
WHEREAS, the Board of Directors of Parent has determined that it is in
the best interests of Parent to retain the Consultant on the terms and
conditions set forth herein effective as of the closing of the transactions
contemplated by the
Merger Agreement (the "Closing"), and the Consultant has
agreed to serve as a consultant of Parent on the terms and conditions set forth
herein; and
WHEREAS, the Consultant has agreed to execute, deliver and perform its
obligations under this Agreement (i) in connection with the sale of Evergreen by
means of the Merger; (ii) to protect the goodwill and Confidential Information
to be acquired by Parent under the
Merger Agreement; (iii) in connection with
the Parent's agreement to retain Consultant to provide consulting services to
Parent; and (iv) to induce Parent to enter into the
Merger Agreement and
consummate the transactions contemplated thereby, pursuant to which the
Consultant will receive consideration for his Equity Interest in Evergreen and
in connection with which the Consultant will receive payments under the Change
in Control Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. When used in this Agreement, the following terms will
have the following meanings:
"Affiliate" means, with respect to any Person, each other
Person that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control
with such Person. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the actual power to direct or cause the direction of the
management policies of a Person, whether through the ownership of
stock, by contract, credit arrangement or otherwise;
"Evergreen Companies" means Evergreen and each of its
Subsidiaries;
"Evergreen Oil and Gas Interests" means all Oil and Gas
Interests in which any Evergreen Company has any ownership, working,
income and/or net profits interest (including without limitation fee or
leasehold interest);
"Business Enterprise" means any corporation, partnership,
limited liability company, sole proprietorship, joint venture, joint
stock company, bank, association, trust, trust company, land trust,
business trust or other business association or entity;
"Change in Control Agreement" means that certain Change in
Control Agreement dated as of March 1, 2002 between Evergreen and the
Consultant as amended to provide that the area with respect to which
the non-compete provisions apply is the Territory;
"Closing Date" means the date on which the Closing shall
occur;
"Competing Business" means any Oil and Gas Business on or with
respect to the Territory;
"Confidential Information" means all information relating to
the Evergreen Companies and/or the Evergreen Oil and Gas Interests,
including without limitation information relating to title matters,
environmental matters, financial statements and other financial
matters, the engineering reports reflecting the Evergreen Oil and Gas
Interests, estimates of reserves, quality of reserves, geological
matters, asset listings, production and operating costs, production
capabilities, marketing, tax, forecasts and projections, in whatever
form (whether documentary, computer storage or other), in all cases
pertaining to the Territory;
"Consulting Period" means a period from the Closing Date until
6 months after the Closing Date; provided that, at Parent's option,
such period may be extended by an additional 6 months;
"Derivative Information" means any notes, summaries,
evaluations, analyses and other material derived by the Restricted
Group from any of the Confidential Information;
"Equity Interest" means the equity ownership rights in a
Business Enterprise, whether in the form of capital stock, ownership
unit, limited liability company interest, limited or general
partnership interest or any other form of ownership, or any right,
option, warrant, convertible security or indebtedness or other
instrument enabling any Person to acquire any of the same;
"Hydrocarbons" means oil, condensate, gas, casinghead gas and
other liquid or gaseous hydrocarbons;
"Oil and Gas Business" means owning, managing, acquiring,
attempting to acquire, soliciting the acquisition of, operating,
controlling or developing Oil and Gas Interests or engaging in or being
connected with, as a principal, owner, officer, director, employee,
shareholder, promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner or in any other capacity whatsoever, any
of the foregoing activities or the oil and gas exploration and
production business;
"Oil and Gas Interests" means (a) direct and indirect
interests in and rights with respect to oil, gas, mineral and related
properties (including revenues therefrom) and assets of any kind and
nature, direct or indirect, including without limitation working,
royalty and overriding
2
royalty interests, mineral interests, leasehold interests, production
payments, operating rights, net profits interests, other non-working
interests and non-operating interests; (b) interests in and rights with
respect to Hydrocarbons and other minerals or revenues therefrom and
contracts or agreements in connection therewith and claims and rights
thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders,
transfer orders, mineral deeds, royalty deeds, oil and gas sales,
exchange and processing contracts and agreements and, in each case,
interests thereunder), surface interests, fee interests, reversionary
interests, reservations and concessions; (c) easements, rights of way,
licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing;
and (d) interests in equipment and machinery (including well equipment
and machinery), oil and gas production, gathering, transmission,
compression, treating, processing and storage facilities (including
tanks, tank batteries, pipelines and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries
and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing,
regardless of location;
"Parent Companies" means Parent and each of its Subsidiaries,
including, after the Closing, the Evergreen Companies;
"Person" means any natural person, Business Enterprise or
governmental authority;
"Restricted Group" means the Consultant together with (a) each
member of the Consultant's immediate family that lives in his household
and (b) any Business Enterprise in which the Consultant, any one or
more members of the Consultant's immediate family or the Consultant and
one or more members of the Consultant's immediately family collectively
own or have the right to acquire an Equity Interest in excess of 5% or
otherwise have any right, through the ownership of a voting interest or
otherwise, to direct the activities of such Business Enterprise;
"Subsidiary" means, with respect to any party, any entity,
whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms voting
power to elect a majority of the board of directors or other persons
performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective
Subsidiaries; and
"Territory" means the Raton Basin in southern Colorado.
2. Consideration. The Consultant has entered into this Agreement and made
the covenants hereinafter set forth (i) in connection with the sale of Evergreen
by means of the Merger; (ii) to protect the goodwill and Confidential
Information to be acquired by Parent under the
Merger Agreement; (iii) in
connection with the Parent's agreement to retain Consultant to provide
consulting services to Parent; and (iv) to induce Parent to enter into the
Merger Agreement and consummate the transactions contemplated thereby, pursuant
to which the Consultant will receive consideration for his Equity Interest in
Evergreen and in connection with which the Consultant will receive payments
under the Change in Control Agreement.
3. Consulting Arrangement.
(a) Consulting Services. Parent hereby retains the Consultant
effective as of the Closing to render such consulting and advisory
services (the "Consulting Services") as Parent
3
may reasonably request from time to time during the Consulting Period.
The Consultant hereby accepts such engagement and agrees to perform
such services for Parent upon the terms and conditions set forth in
this Agreement. Consultant shall perform the Consulting Services at
such times and places as an officer designated by Parent or the Board
of Directors of Parent shall from time to time reasonably request.
Consultant shall work on a full time basis during the Consulting
Period.
(b) Office Space. During the Consulting Period, Parent shall
provide the Consultant the use of office space and office equipment
including desk, computer, and telephone, solely to the extent that such
use is incurred by the Consultant in rendering the Consulting Services.
Any such use that is not incurred by the Consultant in rendering the
Consulting Services shall be prohibited
(c) Consulting Fee. As compensation for the Consulting
Services to be rendered by the Consultant, the Consultant shall receive
a consulting fee of $64,000.00 per calendar month during the Consulting
Period for Consulting Services provided to Parent hereunder (the
"Consulting Fee"), which shall be paid in accordance with the customary
payroll practices of Parent. During the initial 6 month period,
Consultant shall be paid such Consulting Fee regardless of Parent's
early termination of this Agreement. Any Consulting Fee payment payable
to Consultant hereunder in respect of any calendar month during which
the Consulting Period ends prior to the end of such calendar month
shall be prorated based on the ratio of the number of days in such
calendar month during which Consultant is retained as a consultant
hereunder to the number of days in such calendar month.
(d) Expense Reimbursement. The Consultant shall be entitled to
receive prompt reimbursement for all reasonable out of pocket expenses
incurred by the Consultant in rendering the Consulting Services during
the Consulting Period in accordance with the policies, practices and
procedures of Parent. Advance approval by Parent for expenses in excess
of $1000.00 per month during the Consulting Period shall be required.
Expenses subject to reimbursement shall include, but shall not be
limited to, travel, lodging, meals, and car rentals or taxi fares when
out of town, long distance telephone calls to or for Parent, facsimile
transmissions charges, and mailing expenses reasonably incurred by the
Consultant in rendering the Consulting Services. The Consultant shall
invoice Parent on a monthly basis for any such out of pocket expenses,
with reasonable supporting documentation of such expenses accompanying
each invoice, and any amounts owed by Parent shall be paid within 30
days after receipt of such invoices.
(e) Terms of Engagement. Notwithstanding anything in this
Agreement, the Consultant is an independent contractor with authority
to select the means and method of performing the Consulting Services.
The Consultant is not an employee or agent of Parent and any action
taken by the Consultant that is not authorized by this Agreement or any
other agreement between Parent and the Consultant will not bind or
create any claim against Parent. Unless otherwise specifically
authorized by this Agreement or any other agreement between Parent and
the Consultant, the Consultant has no authority to transact any
business or make any representations or promises in the name of Parent.
(f) Termination of Consulting Arrangement. Notwithstanding
anything in this Agreement, this Section 3 and the consulting
arrangement created by this Section 3 between Parent and the Consultant
(i) may be terminated prior to the expiration of the Consulting Period
4
by Parent for any reason or no reason at all; (ii) shall terminate
automatically upon the death of the Consultant and (iii) shall
terminate automatically at the expiration of the Consulting Period
unless Parent shall exercise its option to extend such Consulting
Period. Termination of this consulting arrangement by Parent shall be
evidenced by a written notice given to the Consultant in accordance
with Section 8 hereof, which notice shall specify the termination date
(which date shall not be less than 30 days after such notice is given
to the Consultant). The Consultant may terminate the consulting
arrangement in the event of a breach by Parent of its obligations under
this Agreement that remains uncured 30 days after written notice
thereof is given to Parent in accordance with Section 8 hereof. Upon a
termination of the consulting arrangement set forth in this Section 3,
neither of the parties hereto shall have any further duty or obligation
under this Section 3; provided, however, that termination of the
consulting arrangement shall not affect the duties and obligations set
forth in the other sections of this Agreement.
4. Restriction on Activities.
(a) From the Closing Date through the first anniversary
thereof (the "Restricted Period"), no member of the Restricted Group
shall, without the prior written consent of Parent, directly or
indirectly:
(i) engage in, carry on or assist, individually or as
a principal, owner, officer, director, employee, shareholder,
promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner, lender or in any other capacity
whatsoever, directly or indirectly, any (A) Competing Business
or (B) Business Enterprise that is otherwise directly
competitive with any Parent Company or any Affiliate of any
Parent Company on or with respect to the Territory and which
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
(ii) perform for any Business Enterprise engaged in a
Competing Business any duty such member of the Restricted
Group performed for the Evergreen Companies or their
Affiliates that involved such member's access to, or knowledge
or application of, Confidential Information;
(iii) advise, request, induce or attempt to induce
any customer, supplier, licensee or other business relation of
any Parent Company or any Affiliate of any Parent Company to
curtail, limit or cease doing business with any Parent Company
or any Affiliate of any Parent Company, or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and any Parent Company
or any Affiliate of any Parent Company;
(iv) other than for the benefit of Parent pursuant to
the Consultant's arrangement with Parent set forth in Section
3 hereof, individually or as a principal, owner, officer,
director, employee, shareholder, promoter, consultant,
contractor, partner, member, joint venturer, agent, equity
owner of more than 2% of the equity or in any other capacity
whatsoever with or in any Business Enterprise, own, acquire,
attempt to acquire or solicit the acquisition of (or assist
any person or Business Enterprise to own, acquire, attempt to
acquire or solicit the acquisition of) (A) any Oil and Gas
Interest on or with respect to the Territory or (B) any Equity
Interest in any Business Enterprise with any Oil and Gas
Interests on or with respect to the Territory and which
5
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
(v) hire, attempt to hire or contact or solicit with
respect to hiring (A) any person who is an employee of any
Parent Company, or (B) any person who was an employee of any
Parent Company within 180 days after such person ceased to be
so employed; or
(vi) interfere with any of the Evergreen Oil and Gas
Interests or in any way attempt to do any of the foregoing or
assist any other Person to do or attempt to do any of the
foregoing.
(b) The Consultant, on behalf of the Restricted Group,
acknowledges that each of the covenants of Sections 4(a)(i) through
4(a)(vi) are in addition to, and shall not be construed as a limitation
upon, any other covenant provided in Section 4(a). The Consultant, on
behalf of the Restricted Group, agrees that the geographic boundaries,
scope of prohibited activities and time duration of each of the
covenants set forth in Sections 4(a)(i) through 4(a)(vi) are reasonable
in nature and are no broader than are necessary to protect the goodwill
and Confidential Information of the Evergreen Companies, the assets or
Equity Interests of which are being acquired by Parent indirectly
through the merger of Merger Sub with and into Evergreen], and to
protect the other legitimate business interests of the Evergreen
Companies, including without limitation any goodwill developed by the
Consultant with the Evergreen] Companies' customers, suppliers,
licensees and business partners.
(c) The parties hereto intend that the covenants contained in
each of Sections 4(a)(i) through 4(a)(vi) be construed as a series of
separate covenants, one for each county in the Territory. Except for
geographic coverage, each such separate covenant shall be deemed
identical in terms to the applicable covenant contained in Sections
4(a)(i) through 4(a)(vi). Furthermore, each of the covenants in
Sections 4(a)(i) through 4(a)(vi) hereof shall be deemed a separate and
independent covenant, each being enforceable irrespective of the
enforceability (with or without reformation) of the other covenants
contained in Sections 4(a)(i) through 4(a)(vi) hereof. The Restricted
Party admits, acknowledges, and agrees that the restrictions set forth
in this Section 4 are (i) made in connection with a contract for the
purchase and sale of a business as contemplated by C.R.S 8-2-113(2)(a)
and (ii) designed and intended to protect the Parent's trade secrets as
contemplated by C.R.S. 8-2-113(2)(b). As such, the Restricted Party and
the Parent agree that the restriction set forth in this Section 4 are
valid and enforceable pursuant to Colorado law.
5. Confidentiality. The Consultant hereby acknowledges that, during the
term of the Consultant's relationship with the Evergreen Companies, the
Restricted Group has developed and had access to Confidential Information and
Derivative Information. The Consultant hereby agrees as follows with respect to
all Confidential Information and Derivative Information:
(a) Upon the Closing, the Consultant will, and will cause each
member of the Restricted Group to, immediately deliver to Parent all
Confidential Information and Derivative Information in the possession
of the Restricted Group.
(b) During the Restricted Period, the Consultant will, and
will cause each member of the Restricted Group to, keep all
Confidential Information and Derivative Information
6
strictly confidential and will not, and will cause each member of the
Restricted Group not to, use (other than in the performance of duties
for or on behalf of the Parent Companies) any of such data, information
or results or disclose any such data, information or results to any
Person unless otherwise required by law or regulation, and then only
after written notice to Parent of the Consultant's determination of the
need for disclosure.
(c) In the event that the Consultant or any member of the
Restricted Group becomes legally compelled to disclose any Confidential
Information and/or Derivative Information, the Consultant will provide
Parent with prompt notice so that Parent may seek a protective order or
other appropriate remedy and/or waive the Consultant's compliance with
the confidentiality and non-disclosure provisions of this Agreement,
and the Consultant will cooperate with Parent to obtain such protective
order or other remedy. In the event that such protective order or other
remedy is not obtained, the Restricted Group will furnish only that
portion of the Confidential Information and/or Derivative Information
which it is advised by counsel is legally required.
6. Termination. In the event the Merger Agreement shall terminate prior to
Closing, this Agreement shall likewise, and thereupon without any action of any
party hereto, terminate, become void ab initio, and have no force or effect.
7. Responsibility for Restricted Group. The Consultant will be responsible
for any violation of the provisions hereof by any member of the Restricted
Group.
8. Miscellaneous. It is further agreed as follows:
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
by telecopy, by facsimile, or mailed by registered or certified mail
(return receipt requested), or sent by Federal Express or other
recognized overnight courier, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
To Parent: With a copy to:
Pioneer Natural Resources USA, Inc. Pioneer Natural Resources USA, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Consultant:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
7
(b) Severability. In the event that any provision of this
Agreement, or the application thereof to any Person or circumstance, is
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalid, illegal or unenforceable
provision shall be fully severable, this Agreement shall then be
construed and enforced as if such provision had not been contained in
this Agreement, and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by provision
or by its severance from this Agreement. Furthermore, in lieu of each
such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms
to such provision as may be possible and be legal, valid and
enforceable. Notwithstanding the above, in the event any such
invalidity, illegality or unenforceability of any portion of Section
4(a) hereof is caused by such provision being held to be excessively
broad as to time, duration, geographical scope, activity or subject in
any jurisdiction, then such provision shall, at the option of Parent,
remain a part of this Agreement and shall be reformed and construed
within such jurisdiction by limiting and reducing it so as to be
enforceable to the extent compatible with then applicable law.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof. Neither this Agreement nor any of the provisions hereof can be
changed, waived, discharged or terminated except by an instrument
signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
(d) Waiver. Waiver of performance of any obligation or term
contained in this Agreement by any party, or waiver by one party of the
other's default hereunder, will not operate as a waiver of performance
of any other obligation or term of this Agreement or a future waiver of
the same obligation or a waiver of any future default.
(e) Governing Law. This Agreement will be interpreted,
construed and enforced in accordance with the laws of the State of
Colorado (excluding Colorado choice-of-law principles that might call
for the application of some other state's law).
(f) Specific Enforcement. The Consultant acknowledges on
behalf of the Restricted Group that the covenants of the Consultant
contained in Sections 4(a), 5 and 7 of this Agreement are special and
unique, that a breach by any member of the Restricted Group of any term
or provision of any of such Sections may cause irreparable injury to
Parent and that remedies at law for the breach of any terms or
provisions of Sections 4(a), 5 and 7 hereof may be inadequate.
Accordingly, in addition to any other remedies they may have in the
event of breach, Parent shall be entitled to enforce specific
performance of the terms and provisions of Sections 4(a), 5 and 7
hereof, to obtain temporary and permanent injunctive relief to prevent
the continued breach of such terms and provisions without the necessity
of posting a bond or of proving actual damage, and to obtain attorneys'
fees in respect of the foregoing if Parent prevails in such action or
proceeding.
(g) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
other party; provided, that nothing in this Agreement shall preclude
the consolidation or merger of Parent or any of its Subsidiaries with
another Person in which Parent or any of its Subsidiaries is not the
continuing Person or the transfer of all or substantially all of the
assets of Parent or any of its Subsidiaries if the successor assumes
(by operation of law or otherwise) the rights and obligations of Parent
or any of its Subsidiaries under this Agreement.
[SIGNATURE PAGE FOLLOWS]
8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PIONEER NATURAL RESOURCES COMPANY
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
--------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual
EXHIBIT B
FORM OF ▇▇▇▇▇▇▇ CONSULTING AND NON-COMPETITION AGREEMENT
CONSULTING AND NON-COMPETITION AGREEMENT
This CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement") is
entered into as of the 3rd day of May, 2004, between ▇▇▇▇▇ ▇▇▇▇▇▇▇, an
individual (the "Consultant"), and
Pioneer Natural Resources Company, a
Delaware
corporation ("Parent").
RECITALS:
WHEREAS, contemporaneously herewith, Parent, Evergreen Resources, Inc.,
a Colorado corporation ("Evergreen"), and BC Merger Sub, Inc., a Colorado
corporation ("Merger Sub"), are entering into an Agreement and Plan of Merger
that provides for the merger (the "Merger") of Merger Sub with and into
Evergreen (the "Merger Agreement");
WHEREAS, the Consultant is an executive officer of Evergreen and a
stockholder of Evergreen with special expertise in the oil and gas business and
knowledge of the Confidential Information to be acquired by Parent under the
Merger Agreement, and, as a result, the obligation of Parent and Merger Sub to
enter into the Merger Agreement is expressly conditioned upon the execution and
delivery of this Agreement by the Consultant;
WHEREAS, the Board of Directors of Parent has determined that it is in
the best interests of Parent to retain the Consultant on the terms and
conditions set forth herein effective as of the closing of the transactions
contemplated by the Merger Agreement (the "Closing"), and the Consultant has
agreed to serve as a consultant of Parent on the terms and conditions set forth
herein; and
WHEREAS, the Consultant has agreed to execute, deliver and perform its
obligations under this Agreement (i) in connection with the sale of Evergreen by
means of the Merger; (ii) to protect the goodwill and Confidential Information
to be acquired by Parent under the Merger Agreement; (iii) in connection with
the Parent's agreement to retain Consultant to provide consulting services to
Parent; and (iv) to induce Parent to enter into the Merger Agreement and
consummate the transactions contemplated thereby, pursuant to which the
Consultant will receive consideration for his Equity Interest in Evergreen and
in connection with which the Consultant will receive payments under the Change
in Control Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. When used in this Agreement, the following terms will have the
following meanings:
"Affiliate" means, with respect to any Person, each other
Person that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control
with such Person. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the actual power to direct or cause the direction of the
management policies of a Person, whether through the ownership of
stock, by contract, credit arrangement or otherwise;
"Evergreen Companies" means Evergreen and each of its
Subsidiaries;
"Evergreen Oil and Gas Interests" means all Oil and Gas
Interests in which any Evergreen Company has any ownership, working,
income and/or net profits interest (including without limitation fee or
leasehold interest);
"Business Enterprise" means any corporation, partnership,
limited liability company, sole proprietorship, joint venture, joint
stock company, bank, association, trust, trust company, land trust,
business trust or other business association or entity;
"Change in Control Agreement" means that certain Change in
Control Agreement dated as of March 1, 2002 between Evergreen and the
Consultant as amended to provide that the area with respect to which
the non-compete provisions apply is the Territory;
"Closing Date" means the date on which the Closing shall
occur;
"Competing Business" means any Oil and Gas Business on or with
respect to the Territory;
"Confidential Information" means all information relating to
the Evergreen Companies and/or the Evergreen Oil and Gas Interests,
including without limitation information relating to title matters,
environmental matters, financial statements and other financial
matters, the engineering reports reflecting the Evergreen Oil and Gas
Interests, estimates of reserves, quality of reserves, geological
matters, asset listings, production and operating costs, production
capabilities, marketing, tax, forecasts and projections, in whatever
form (whether documentary, computer storage or other), in all cases
pertaining to the Territory;
"Consulting Period" means a period from the Closing Date until
3 months after the Closing Date; provided that, at Parent's option,
such period may be extended by an additional 3 months;
"Derivative Information" means any notes, summaries,
evaluations, analyses and other material derived by the Restricted
Group from any of the Confidential Information;
"Equity Interest" means the equity ownership rights in a
Business Enterprise, whether in the form of capital stock, ownership
unit, limited liability company interest, limited or general
partnership interest or any other form of ownership, or any right,
option, warrant, convertible security or indebtedness or other
instrument enabling any Person to acquire any of the same;
"Hydrocarbons" means oil, condensate, gas, casinghead gas and
other liquid or gaseous hydrocarbons;
"Oil and Gas Business" means owning, managing, acquiring,
attempting to acquire, soliciting the acquisition of, operating,
controlling or developing Oil and Gas Interests or engaging in or being
connected with, as a principal, owner, officer, director, employee,
shareholder, promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner or in any other capacity whatsoever, any
of the foregoing activities or the oil and gas exploration and
production business;
"Oil and Gas Interests" means (a) direct and indirect
interests in and rights with respect to oil, gas, mineral and related
properties (including revenues therefrom) and assets of any kind and
nature, direct or indirect, including without limitation working,
royalty and overriding
2
royalty interests, mineral interests, leasehold interests, production
payments, operating rights, net profits interests, other non-working
interests and non-operating interests; (b) interests in and rights with
respect to Hydrocarbons and other minerals or revenues therefrom and
contracts or agreements in connection therewith and claims and rights
thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders,
transfer orders, mineral deeds, royalty deeds, oil and gas sales,
exchange and processing contracts and agreements and, in each case,
interests thereunder), surface interests, fee interests, reversionary
interests, reservations and concessions; (c) easements, rights of way,
licenses, permits, leases, and other interests associated with,
appurtenant to, or necessary for the operation of any of the foregoing;
and (d) interests in equipment and machinery (including well equipment
and machinery), oil and gas production, gathering, transmission,
compression, treating, processing and storage facilities (including
tanks, tank batteries, pipelines and gathering systems), pumps, water
plants, electric plants, gasoline and gas processing plants, refineries
and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing,
regardless of location;
"Parent Companies" means Parent and each of its Subsidiaries,
including, after the Closing, the Evergreen Companies;
"Person" means any natural person, Business Enterprise or
governmental authority;
"Restricted Group" means the Consultant together with (a) each
member of the Consultant's immediate family that lives in his household
and (b) any Business Enterprise in which the Consultant, any one or
more members of the Consultant's immediate family or the Consultant and
one or more members of the Consultant's immediately family collectively
own or have the right to acquire an Equity Interest in excess of 5% or
otherwise have any right, through the ownership of a voting interest or
otherwise, to direct the activities of such Business Enterprise;
"Subsidiary" means, with respect to any party, any entity,
whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms voting
power to elect a majority of the board of directors or other persons
performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective
Subsidiaries; and
"Territory" means the Raton Basin in southern Colorado.
2. Consideration. The Consultant has entered into this Agreement and made the
covenants hereinafter set forth (i) in connection with the sale of Evergreen by
means of the Merger; (ii) to protect the goodwill and Confidential Information
to be acquired by Parent under the Merger Agreement; (iii) in connection with
the Parent's agreement to retain Consultant to provide consulting services to
Parent; and (iv) to induce Parent to enter into the Merger Agreement and
consummate the transactions contemplated thereby, pursuant to which the
Consultant will receive consideration for his Equity Interest in Evergreen and
in connection with which the Consultant will receive payments under the Change
in Control Agreement.
3. Consulting Arrangement.
(a) Consulting Services. Parent hereby retains the Consultant
effective as of the Closing to render such consulting and advisory
services (the "Consulting Services") as Parent
3
may reasonably request from time to time during the Consulting Period.
The Consultant hereby accepts such engagement and agrees to perform
such services for Parent upon the terms and conditions set forth in
this Agreement. Consultant shall perform the Consulting Services at
such times and places as an officer designated by Parent or the Board
of Directors of Parent shall from time to time reasonably request.
Consultant shall work on a full time basis during the Consulting
Period.
(b) Office Space. During the Consulting Period, Parent shall
provide the Consultant the use of office space and office equipment
including desk, computer, and telephone, solely to the extent that such
use is incurred by the Consultant in rendering the Consulting Services.
Any such use that is not incurred by the Consultant in rendering the
Consulting Services shall be prohibited
(c) Consulting Fee. As compensation for the Consulting
Services to be rendered by the Consultant, the Consultant shall receive
a consulting fee of $59,416.00 per calendar month during the Consulting
Period for Consulting Services provided to Parent hereunder (the
"Consulting Fee"), which shall be paid in accordance with the customary
payroll practices of Parent. During the initial 3 month period,
Consultant shall be paid such Consulting Fee regardless of Parent's
early termination of this Agreement. Any Consulting Fee payment payable
to Consultant hereunder in respect of any calendar month during which
the Consulting Period ends prior to the end of such calendar month
shall be prorated based on the ratio of the number of days in such
calendar month during which Consultant is retained as a consultant
hereunder to the number of days in such calendar month.
(d) Expense Reimbursement. The Consultant shall be entitled to
receive prompt reimbursement for all reasonable out of pocket expenses
incurred by the Consultant in rendering the Consulting Services during
the Consulting Period in accordance with the policies, practices and
procedures of Parent. Advance approval by Parent for expenses in excess
of $1000.00 per month during the Consulting Period shall be required.
Expenses subject to reimbursement shall include, but shall not be
limited to, travel, lodging, meals, and car rentals or taxi fares when
out of town, long distance telephone calls to or for Parent, facsimile
transmissions charges, and mailing expenses reasonably incurred by the
Consultant in rendering the Consulting Services. The Consultant shall
invoice Parent on a monthly basis for any such out of pocket expenses,
with reasonable supporting documentation of such expenses accompanying
each invoice, and any amounts owed by Parent shall be paid within 30
days after receipt of such invoices.
(e) Terms of Engagement. Notwithstanding anything in this
Agreement, the Consultant is an independent contractor with authority
to select the means and method of performing the Consulting Services.
The Consultant is not an employee or agent of Parent and any action
taken by the Consultant that is not authorized by this Agreement or any
other agreement between Parent and the Consultant will not bind or
create any claim against Parent. Unless otherwise specifically
authorized by this Agreement or any other agreement between Parent and
the Consultant, the Consultant has no authority to transact any
business or make any representations or promises in the name of Parent.
(f) Termination of Consulting Arrangement. Notwithstanding
anything in this Agreement, this Section 3 and the consulting
arrangement created by this Section 3 between Parent and the Consultant
(i) may be terminated prior to the expiration of the Consulting Period
4
by Parent for any reason or no reason at all (ii) shall terminate
automatically upon the death of the Consultant and (iii) shall
terminate automatically at the expiration of the Consulting Period
unless Parent shall exercise its option to extend such Consulting
Period. Termination of this consulting arrangement by Parent shall be
evidenced by a written notice given to the Consultant in accordance
with Section 8 hereof, which notice shall specify the termination date
(which date shall not be less than 30 days after such notice is given
to the Consultant). The Consultant may terminate the consulting
arrangement in the event of a breach by Parent of its obligations under
this Agreement that remains uncured 30 days after written notice
thereof is given to Parent in accordance with Section 8 hereof. Upon a
termination of the consulting arrangement set forth in this Section 3,
neither of the parties hereto shall have any further duty or obligation
under this Section 3; provided, however, that termination of the
consulting arrangement shall not affect the duties and obligations set
forth in the other sections of this Agreement.
4. Restriction on Activities.
(a) From the Closing Date through the first anniversary
thereof (the "Restricted Period"), no member of the Restricted Group
shall, without the prior written consent of Parent, directly or
indirectly:
(i) engage in, carry on or assist, individually or as
a principal, owner, officer, director, employee, shareholder,
promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner, lender or in any other capacity
whatsoever, directly or indirectly, any (A) Competing Business
or (B) Business Enterprise that is otherwise directly
competitive with any Parent Company or any Affiliate of any
Parent Company on or with respect to the Territory and which
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
(ii) perform for any Business Enterprise engaged in a
Competing Business any duty such member of the Restricted
Group performed for the Evergreen Companies or their
Affiliates that involved such member's access to, or knowledge
or application of, Confidential Information;
(iii) advise, request, induce or attempt to induce
any customer, supplier, licensee or other business relation of
any Parent Company or any Affiliate of any Parent Company to
curtail, limit or cease doing business with any Parent Company
or any Affiliate of any Parent Company, or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and any Parent Company
or any Affiliate of any Parent Company;
(iv) other than for the benefit of Parent pursuant to
the Consultant's arrangement with Parent set forth in Section
3 hereof, individually or as a principal, owner, officer,
director, employee, shareholder, promoter, consultant,
contractor, partner, member, joint venturer, agent, equity
owner of more than 2% of the equity or in any other capacity
whatsoever with or in any Business Enterprise, own, acquire,
attempt to acquire or solicit the acquisition of (or assist
any person or Business Enterprise to own, acquire, attempt to
acquire or solicit the acquisition of) (A) any Oil and Gas
Interest on or with respect to the Territory or (B) any Equity
Interest in any Business Enterprise with any Oil and Gas
Interests on or with respect to the Territory and which
5
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
(v) hire, attempt to hire or contact or solicit with
respect to hiring (A) any person who is an employee of any
Parent Company, or (B) any person who was an employee of any
Parent Company within 180 days after such person ceased to be
so employed; or
(vi) interfere with any of the Evergreen Oil and Gas
Interests or in any way attempt to do any of the foregoing or
assist any other Person to do or attempt to do any of the
foregoing.
(b) The Consultant, on behalf of the Restricted Group,
acknowledges that each of the covenants of Sections 4(a)(i) through
4(a)(vi) are in addition to, and shall not be construed as a limitation
upon, any other covenant provided in Section 4(a). The Consultant, on
behalf of the Restricted Group, agrees that the geographic boundaries,
scope of prohibited activities and time duration of each of the
covenants set forth in Sections 4(a)(i) through 4(a)(vi) are reasonable
in nature and are no broader than are necessary to protect the goodwill
and Confidential Information of the Evergreen Companies, the assets or
Equity Interests of which are being acquired by Parent indirectly
through the merger of Merger Sub with and into Evergreen, and to
protect the other legitimate business interests of the Evergreen
Companies, including without limitation any goodwill developed by the
Consultant with the Evergreen Companies' customers, suppliers,
licensees and business partners.
(c) The parties hereto intend that the covenants contained in
each of Sections 4(a)(i) through 4(a)(vi) be construed as a series of
separate covenants, one for each county in the Territory. Except for
geographic coverage, each such separate covenant shall be deemed
identical in terms to the applicable covenant contained in Sections
4(a)(i) through 4(a)(vi). Furthermore, each of the covenants in
Sections 4(a)(i) through 4(a)(vi) hereof shall be deemed a separate and
independent covenant, each being enforceable irrespective of the
enforceability (with or without reformation) of the other covenants
contained in Sections 4(a)(i) through 4(a)(vi) hereof. The Restricted
Party admits, acknowledges, and agrees that the restrictions set forth
in this Section 4 are (i) made in connection with a contract for the
purchase and sale of a business as contemplated by C.R.S 8-2-113(2)(a)
and (ii) designed and intended to protect the Parent's trade secrets as
contemplated by C.R.S. 8-2-113(2)(b). As such, the Restricted Party and
the Parent agree that the restriction set forth in this Section 4 are
valid and enforceable pursuant to Colorado law.
5. Confidentiality. The Consultant hereby acknowledges that, during the term of
the Consultant's relationship with the Evergreen Companies, the Restricted Group
has developed and had access to Confidential Information and Derivative
Information. The Consultant hereby agrees as follows with respect to all
Confidential Information and Derivative Information:
(a) Upon the Closing, the Consultant will, and will cause each
member of the Restricted Group to, immediately deliver to Parent all
Confidential Information and Derivative Information in the possession
of the Restricted Group.
(b) During the Restricted Period, the Consultant will, and
will cause each member of the Restricted Group to, keep all
Confidential Information and Derivative Information
6
strictly confidential and will not, and will cause each member of the
Restricted Group not to, use (other than in the performance of duties
for or on behalf of the Parent Companies) any of such data, information
or results or disclose any such data, information or results to any
Person unless otherwise required by law or regulation, and then only
after written notice to Parent of the Consultant's determination of the
need for disclosure.
(c) In the event that the Consultant or any member of the
Restricted Group becomes legally compelled to disclose any Confidential
Information and/or Derivative Information, the Consultant will provide
Parent with prompt notice so that Parent may seek a protective order or
other appropriate remedy and/or waive the Consultant's compliance with
the confidentiality and non-disclosure provisions of this Agreement,
and the Consultant will cooperate with Parent to obtain such protective
order or other remedy. In the event that such protective order or other
remedy is not obtained, the Restricted Group will furnish only that
portion of the Confidential Information and/or Derivative Information
which it is advised by counsel is legally required.
6. Termination. In the event the Merger Agreement shall terminate prior to
Closing, this Agreement shall likewise, and thereupon without any action of any
party hereto, terminate, become void ab initio, and have no force or effect.
7. Responsibility for Restricted Group. The Consultant will be responsible for
any violation of the provisions hereof by any member of the Restricted Group.
8. Miscellaneous. It is further agreed as follows:
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
by telecopy, by facsimile, or mailed by registered or certified mail
(return receipt requested), or sent by Federal Express or other
recognized overnight courier, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
To Parent: With a copy to:
Pioneer Natural Resources USA, Inc. Pioneer Natural Resources USA, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Consultant:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Severability. In the event that any provision of this
Agreement, or the application thereof to any Person or circumstance, is
held by a court of competent jurisdiction
7
to be invalid, illegal or unenforceable in any respect, such invalid,
illegal or unenforceable provision shall be fully severable, this
Agreement shall then be construed and enforced as if such provision had
not been contained in this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be
affected by provision or by its severance from this Agreement.
Furthermore, in lieu of each such illegal, invalid, or unenforceable
provision, there shall be added automatically as part of this Agreement
a provision as similar in terms to such provision as may be possible
and be legal, valid and enforceable. Notwithstanding the above, in the
event any such invalidity, illegality or unenforceability of any
portion of Section 4(a) hereof is caused by such provision being held
to be excessively broad as to time, duration, geographical scope,
activity or subject in any jurisdiction, then such provision shall, at
the option of Parent, remain a part of this Agreement and shall be
reformed and construed within such jurisdiction by limiting and
reducing it so as to be enforceable to the extent compatible with then
applicable law.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof. Neither this Agreement nor any of the provisions hereof can be
changed, waived, discharged or terminated except by an instrument
signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
(d) Waiver. Waiver of performance of any obligation or term
contained in this Agreement by any party, or waiver by one party of the
other's default hereunder, will not operate as a waiver of performance
of any other obligation or term of this Agreement or a future waiver of
the same obligation or a waiver of any future default.
(e) Governing Law. This Agreement will be interpreted,
construed and enforced in accordance with the laws of the State of
Colorado (excluding Colorado choice-of-law principles that might call
for the application of some other state's law).
(f) Specific Enforcement. The Consultant acknowledges on
behalf of the Restricted Group that the covenants of the Consultant
contained in Sections 4(a), 5 and 7 of this Agreement are special and
unique, that a breach by any member of the Restricted Group of any term
or provision of any of such Sections may cause irreparable injury to
Parent and that remedies at law for the breach of any terms or
provisions of Sections 4(a), 5 and 7 hereof may be inadequate.
Accordingly, in addition to any other remedies they may have in the
event of breach, Parent shall be entitled to enforce specific
performance of the terms and provisions of Sections 4(a), 5 and 7
hereof, to obtain temporary and permanent injunctive relief to prevent
the continued breach of such terms and provisions without the necessity
of posting a bond or of proving actual damage, and to obtain attorneys'
fees in respect of the foregoing if Parent prevails in such action or
proceeding.
(g) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
other party; provided, that nothing in this Agreement shall preclude
the consolidation or merger of Parent or any of its Subsidiaries with
another Person in which Parent or any of its Subsidiaries is not the
continuing Person or the transfer of all or substantially all of the
assets of Parent or any of its Subsidiaries if the successor assumes
(by operation of law or otherwise) the rights and obligations of Parent
or any of its Subsidiaries under this Agreement.
[SIGNATURE PAGE FOLLOWS]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PIONEER NATURAL RESOURCES COMPANY
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
EXHIBIT C
FORM OF NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "Agreement") is entered into as of
the 3rd day of May, 2004, between ▇▇▇▇ ▇▇▇▇▇▇, an individual (the "Restricted
Party"), and
Pioneer Natural Resources Company, a
Delaware corporation
("Parent")
RECITALS:
WHEREAS, contemporaneously herewith, Parent, Evergreen Resources, Inc.,
a Colorado corporation ("Evergreen"), and BC Merger Sub, Inc., a Colorado
corporation ("Merger Sub"), are entering into an Agreement and Plan of Merger
that provides for the merger (the "Merger") of Merger Sub with and into
Evergreen (the "Merger Agreement");
WHEREAS, the Restricted Party is Chairman of the Board and Chief
Executive Officer of Evergreen and a stockholder of Evergreen with special
expertise in the oil and gas business and knowledge of the Confidential
Information to be acquired by Parent under the Merger Agreement, and, as a
result, the obligation of Parent and Merger Sub to enter into the Merger
Agreement is expressly conditioned upon the execution and delivery of this
Agreement by the Restricted Party; and
WHEREAS, the Restricted Party has agreed to execute, deliver and
perform its obligations under this Agreement (i) in connection with the sale of
Evergreen by means of the Merger; (ii) to protect the goodwill and Confidential
Information to be acquired by Parent under the Merger Agreement; (iii) in
connection with the Restricted Party's agreement to provide services to Parent
as a member of Parent's Board of Directors; and (iv) to induce Parent to enter
into the Merger Agreement and consummate the transactions contemplated thereby,
pursuant to which the Restricted Party will receive consideration for his Equity
Interest in Evergreen and in connection with which the Restricted Party will
receive payments under the Change in Control Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Defined Terms. When used in this Agreement, the following terms will have the
following meanings:
"Affiliate" means, with respect to any Person, each other
Person that directly or indirectly (through one or more intermediaries
or otherwise) controls, is controlled by, or is under common control
with such Person. The term "control" (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the actual power to direct or cause the direction of the
management policies of a Person, whether through the ownership of
stock, by contract, credit arrangement or otherwise;
"Evergreen Companies" means Evergreen and each of its
Subsidiaries;
"Evergreen Oil and Gas Interests" means all Oil and Gas
Interests in which any Evergreen Company has any ownership, working,
income and/or net profits interest (including without limitation fee or
leasehold interest);
"Business Enterprise" means any corporation, partnership,
limited liability company, sole proprietorship, joint venture, joint
stock company, bank, association, trust, trust company, land trust,
business trust or other business association or entity;
"Closing" means the closing of the transactions contemplated
by the Merger Agreement;
"Change in Control Agreement" means that certain Change in
Control Agreement dated as of March 1, 2002 between Evergreen and the
Restricted Party as amended to provide that the area with respect to
which the non-compete provisions apply is the Territory;
"Closing Date" means the date on which the Closing shall
occur;
"Competing Business" means any Oil and Gas Business on or with
respect to the Territory;
"Confidential Information" means all information relating to
the Evergreen Companies and/or the Evergreen Oil and Gas Interests,
including without limitation information relating to title matters,
environmental matters, financial statements and other financial
matters, the engineering reports reflecting the Evergreen Oil and Gas
Interests, estimates of reserves, quality of reserves, geological
matters, asset listings, production and operating costs, production
capabilities, marketing, tax, forecasts and projections, in whatever
form (whether documentary, computer storage or other), in all cases
pertaining to the Territory;
"Derivative Information" means any notes, summaries,
evaluations, analyses and other material derived by the Restricted
Party Group from any of the Confidential Information;
"Equity Interest" means the equity ownership rights in a
Business Enterprise, whether in the form of capital stock, ownership
unit, limited liability company interest, limited or general
partnership interest or any other form of ownership, or any right,
option, warrant, convertible security or indebtedness or other
instrument enabling any Person to acquire any of the same;
"Hydrocarbons" means oil, condensate, gas, casinghead gas and
other liquid or gaseous hydrocarbons;
"Oil and Gas Business" means owning, managing, acquiring,
attempting to acquire, soliciting the acquisition of, operating,
controlling or developing Oil and Gas Interests or engaging in or being
connected with, as a principal, owner, officer, director, employee,
shareholder, promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner or in any other capacity whatsoever, any
of the foregoing activities or the oil and gas exploration and
production business;
"Oil and Gas Interests" means (a) direct and indirect
interests in and rights with respect to oil, gas, mineral and related
properties (including revenues therefrom) and assets of any kind and
nature, direct or indirect, including without limitation working,
royalty and overriding royalty interests, mineral interests, leasehold
interests, production payments, operating rights, net profits
interests, other non-working interests and non-operating interests; (b)
interests in and rights with respect to Hydrocarbons and other minerals
or revenues therefrom and contracts or agreements in connection
therewith and claims and rights thereto (including oil and gas leases,
operating agreements, unitization and pooling agreements and orders,
division orders, transfer orders, mineral deeds, royalty deeds, oil and
gas sales, exchange and processing contracts and agreements and, in
each case, interests thereunder), surface interests, fee interests,
reversionary interests, reservations and concessions; (c) easements,
rights of way, licenses, permits, leases, and other interests
associated with, appurtenant to, or necessary for the operation of any
of the
2
foregoing; and (d) interests in equipment and machinery (including well
equipment and machinery), oil and gas production, gathering,
transmission, compression, treating, processing and storage facilities
(including tanks, tank batteries, pipelines and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing
plants, refineries and other tangible personal property and fixtures
associated with, appurtenant to, or necessary for the operation of any
of the foregoing, regardless of location;
"Parent Companies" means Parent and each of its Subsidiaries,
including, after the Closing, the Evergreen Companies;
"Person" means any natural person, Business Enterprise or
governmental authority;
"Restricted Party Group" means the Restricted Party together
with (a) each member of the Restricted Party's immediate family that
lives in his household and (b) any Business Enterprise in which the
Restricted Party, any one or more members of the Restricted Party's
immediate family or the Restricted Party and one or more members of the
Restricted Party's immediately family collectively own or have the
right to acquire an Equity Interest in excess of 5% or otherwise have
any right, through the ownership of a voting interest or otherwise, to
direct the activities of such Business Enterprise;
"Subsidiary" means, with respect to any party, any entity,
whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms voting
power to elect a majority of the board of directors or other persons
performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective
Subsidiaries; and
"Territory" means the Raton Basin in southern Colorado.
2. Consideration. The Restricted Party has entered into this Agreement and made
the covenants hereinafter set forth (i) in connection with the sale of Evergreen
by means of the Merger; (ii) to protect the goodwill and Confidential
Information to be acquired by Parent under the Merger Agreement; (iii) in
connection with the Restricted Party's agreement to provide services to Parent
as a member of Parent's Board of Directors; and (iv) to induce Parent to enter
into the Merger Agreement and consummate the transactions contemplated thereby,
pursuant to which the Restricted Party will receive consideration for his Equity
Interest in Evergreen and in connection with which the Restricted Party will
receive payments under the Change in Control Agreement.
3. Restriction on Activities.
(a) From the Closing Date through the first anniversary
thereof (the "Restricted Period"), no member of the Restricted Party
Group shall, without the prior written consent of Parent, directly or
indirectly:
(i) engage in, carry on or assist, individually or as
a principal, owner, officer, director, employee, shareholder,
promoter, consultant, contractor, partner, member, joint
venturer, agent, equity owner, lender or in any other capacity
whatsoever, directly or indirectly, any (A) Competing Business
or (B) Business Enterprise that is otherwise directly
competitive with any Parent Company or any Affiliate of any
Parent Company on or with respect to the Territory and which
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
3
(ii) perform for any Business Enterprise engaged in a
Competing Business any duty such member of the Restricted
Party Group performed for the Evergreen Companies or their
Affiliates that involved such member's access to, or knowledge
or application of, Confidential Information;
(iii) advise, request, induce or attempt to induce
any customer, supplier, licensee or other business relation of
any Parent Company or any Affiliate of any Parent Company to
curtail, limit or cease doing business with any Parent Company
or any Affiliate of any Parent Company, or in any way
interfere with the relationship between any such customer,
supplier, licensee or business relation and any Parent Company
or any Affiliate of any Parent Company;
(iv) individually or as a principal, owner, officer,
director, employee, shareholder, promoter, consultant,
contractor, partner, member, joint venturer, agent, equity
owner of more than 2% of the equity or in any other capacity
whatsoever with or in any Business Enterprise, own, acquire,
attempt to acquire or solicit the acquisition of (or assist
any person or Business Enterprise to own, acquire, attempt to
acquire or solicit the acquisition of) (A) any Oil and Gas
Interest on or with respect to the Territory or (B) any Equity
Interest in any Business Enterprise with any Oil and Gas
Interests on or with respect to the Territory and which
derives more than 5% of its revenues from or has more than 5%
of its book value of assets located in the Territory;
(v) hire, attempt to hire or contact or solicit with
respect to hiring (A) any person who is an employee of any
Parent Company, or (B) any person who was an employee of any
Parent Company within 180 days after such person ceased to be
so employed; or
(vi) interfere with any of the Evergreen Oil and Gas
Interests or in any way attempt to do any of the foregoing or
assist any other Person to do or attempt to do any of the
foregoing.
(b) The Restricted Party, on behalf of the Restricted Party
Group, acknowledges that each of the covenants of Sections 3(a)(i)
through 3(a)(vi) are in addition to, and shall not be construed as a
limitation upon, any other covenant provided in Section 3(a). The
Restricted Party, on behalf of the Restricted Party Group, agrees that
the geographic boundaries, scope of prohibited activities and time
duration of each of the covenants set forth in Sections 3(a)(i) through
3(a)(vi) are reasonable in nature and are no broader than are necessary
to protect the goodwill and Confidential Information of the Evergreen
Companies, the assets or Equity Interests of which are being acquired
by Parent indirectly through the merger of Merger Sub with and into
Evergreen, and to protect the other legitimate business interests of
the Evergreen Companies, including without limitation any goodwill
developed by the Restricted Party with the Evergreen Companies'
customers, suppliers, licensees and business partners.
(c) The parties hereto intend that the covenants contained in
each of Sections 3(a)(i) through 3(a)(vi) be construed as a series of
separate covenants, one for each county in the Territory. Except for
geographic coverage, each such separate covenant shall be deemed
identical in terms to the applicable covenant contained in Sections
3(a)(i) through 3(a)(vi). Furthermore, each of the covenants in
Sections 3(a)(i) through 3(a)(vi) hereof shall be deemed a separate and
independent covenant, each being enforceable irrespective of the
enforceability
4
(with or without reformation) of the other covenants contained in
Sections 3(a)(i) through 3(a)(vi) hereof. The Restricted Party admits,
acknowledges, and agrees that the restrictions set forth in this
Section 3 are (i) made in connection with a contract for the purchase
and sale of a business as contemplated by C.R.S 8-2-113(2)(a) and (ii)
designed and intended to protect the Parent's trade secrets as
contemplated by C.R.S. 8-2-113(2)(b). As such, the Restricted Party and
the Parent agree that the restriction set forth in this Section 3 are
valid and enforceable pursuant to Colorado law.
4. Confidentiality. The Restricted Party hereby acknowledges that, during the
term of the Restricted Party's relationship with the Evergreen Companies, the
Restricted Party Group has developed and had access to Confidential Information
and Derivative Information. The Restricted Party hereby agrees as follows with
respect to all Confidential Information and Derivative Information:
(a) Upon the Closing, the Restricted Party will, and will
cause each member of the Restricted Party Group to, immediately deliver
to Parent all Confidential Information and Derivative Information in
the possession of the Restricted Party Group.
(b) During the Restricted Period, the Restricted Party will,
and will cause each member of the Restricted Party Group to, keep all
Confidential Information and Derivative Information strictly
confidential and will not, and will cause each member of the Restricted
Party Group not to, use (other than in the performance of duties for or
on behalf of the Parent Companies) any of such data, information or
results or disclose any such data, information or results to any Person
unless otherwise required by law or regulation, and then only after
written notice to Parent of the Restricted Party's determination of the
need for disclosure.
(c) In the event that the Restricted Party or any member of
the Restricted Party Group becomes legally compelled to disclose any
Confidential Information and/or Derivative Information, the Restricted
Party will provide Parent with prompt notice so that Parent may seek a
protective order or other appropriate remedy and/or waive the
Restricted Party's compliance with the confidentiality and
non-disclosure provisions of this Agreement, and the Restricted Party
will cooperate with Parent to obtain such protective order or other
remedy. In the event that such protective order or other remedy is not
obtained, the Restricted Party Group will furnish only that portion of
the Confidential Information and/or Derivative Information which it is
advised by counsel is legally required.
5. Termination. In the event the Merger Agreement shall terminate prior to
Closing, this Agreement shall likewise, and thereupon without any action of any
party hereto, terminate, become void ab initio, and have no force or effect.
6. Responsibility for Restricted Party Group. The Restricted Party will be
responsible for any violation of the provisions hereof by any member of the
Restricted Party Group.
7. Miscellaneous. It is further agreed as follows:
(a) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
by telecopy, by facsimile, or mailed by registered or certified mail
(return receipt requested), or sent by Federal Express or other
recognized overnight courier, to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice):
5
To Parent: With a copy to:
Pioneer Natural Resources USA, Inc. Pioneer Natural Resources USA, Inc.
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇ Telephone: (▇▇▇ )▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Restricted Party:
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Severability. In the event that any provision of this
Agreement, or the application thereof to any Person or circumstance, is
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, such invalid, illegal or unenforceable
provision shall be fully severable, this Agreement shall then be
construed and enforced as if such provision had not been contained in
this Agreement, and the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by such
provision or by its severance from this Agreement. Furthermore, in lieu
of each such illegal, invalid, or unenforceable provision, there shall
be added automatically as part of this Agreement a provision as similar
in terms to such provision as may be possible and be legal, valid and
enforceable. Notwithstanding the above, in the event any such
invalidity, illegality or unenforceability of any portion of Section
3(a) hereof is caused by such provision being held to be excessively
broad as to time, duration, geographical scope, activity or subject in
any jurisdiction, then such provision shall, at the option of Parent,
remain a part of this Agreement and shall be reformed and construed
within such jurisdiction by limiting and reducing it so as to be
enforceable to the extent compatible with then applicable law.
(c) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
hereof. Neither this Agreement nor any of the provisions hereof can be
changed, waived, discharged or terminated except by an instrument
signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
(d) Waiver. Waiver of performance of any obligation or term
contained in this Agreement by any party, or waiver by one party of the
other's default hereunder, will not operate as a waiver of performance
of any other obligation or term of this Agreement or a future waiver of
the same obligation or a waiver of any future default.
(e) Governing Law. This Agreement will be interpreted,
construed and enforced in accordance with the laws of the State of
Colorado (excluding Colorado choice-of-law principles that might call
for the application of some other state's law).
6
(f) Specific Enforcement. The Restricted Party acknowledges on
behalf of the Restricted Party Group that the covenants of the
Restricted Party contained in Sections 3(a), 4 and 6 of this Agreement
are special and unique, that a breach by any member of the Restricted
Party Group of any term or provision of any of such Sections may cause
irreparable injury to Parent, and that remedies at law for the breach
of any terms or provisions of Sections 3(a), 4 and 6 hereof may be
inadequate. Accordingly, in addition to any other remedies they may
have in the event of breach, Parent shall be entitled to enforce
specific performance of the terms and provisions of Sections 3(a), 4
and 6 hereof, to obtain temporary and permanent injunctive relief to
prevent the continued breach of such terms and provisions without the
necessity of posting a bond or of proving actual damage, and to obtain
attorneys' fees in respect of the foregoing if Parent prevails in such
action or proceeding.
[SIGNATURE PAGE FOLLOWS]
7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PIONEER NATURAL RESOURCES COMPANY
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
--------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
EXHIBIT D
FORM OF RIGHTS AGREEMENT AMENDMENT
AMENDMENT NO. 1 TO SHAREHOLDER RIGHTS AGREEMENT
This Amendment No. 1 to Shareholder Rights Agreement (this "Rights
Agreement Amendment"), dated as of May 3, 2004, is between Evergreen Resources,
Inc., a Colorado corporation (the "Company"), and Computershare Trust Company,
Inc., as successor to American Securities Transfer & Trust, Inc., as Rights
Agent (the "Rights Agent").
RECITALS
WHEREAS, the Company and the Rights Agent are parties to a Shareholder
Rights Agreement, dated as of July 7, 1997 (the "Rights Agreement"); and
WHEREAS, concurrently herewith, the Company,
Pioneer Natural Resources
Company, a
Delaware corporation ("Parent"), and BC Merger Sub, Inc., a Colorado
corporation ("Merger Sub"), are entering into an Agreement and Plan of Merger of
even date herewith (the "Merger Agreement"), pursuant to which Merger Sub will
merge with and into the Company (the "Merger"); and
WHEREAS, the Distribution Date (as defined in the Rights Agreement) has
not occurred; and
WHEREAS, Parent and Merger Sub are entering into the Merger Agreement
in reliance on and in consideration of the terms of this Rights Agreement
Amendment; and
WHEREAS, pursuant to Sections 27 and 29 of the Rights Agreement, the
Board of Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable in connection with the
foregoing, and the Company and the Rights Agent desire to evidence such
amendment in writing.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, and intending to be
legally bound hereby, the Company hereby amends the Rights Agreement as follows:
1. AMENDMENT OF SECTION 1(a). Section 1(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary,
neither Parent nor Merger Sub shall be deemed to be an Acquiring Person
solely by virtue of (i) the execution of the Merger Agreement or (ii)
the consummation of the Merger."
2. AMENDMENT OF SECTION 1(b). Section 1(b) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary,
an Adjustment Event shall not be deemed to have occurred solely as the
result of (i) the execution of the Merger Agreement or (ii) the
consummation of the Merger."
3. AMENDMENT OF SECTION 1(z). Section 1(z) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, a
Section 11(a)(ii) Event shall not be deemed to have occurred solely as
the result of (i) the execution of the Merger Agreement or (ii) the
consummation of the Merger."
4. AMENDMENT OF SECTION 1(aa). Section 1(aa) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, a
Section 13 Event shall not be deemed to have occurred solely as the
result of (i) the execution of the Merger Agreement or (ii) the
consummation of the Merger."
5. AMENDMENT OF SECTION 1(bb). Section 1(bb) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, a
Share Acquisition Date shall not be deemed to have occurred solely as
the result of (i) the execution of the Merger Agreement or (ii) the
consummation of the Merger."
6. AMENDMENT OF SECTION 1. Section 1 of the Rights Agreement is amended
to add the following at the end thereof:
(hh) "MERGER" shall mean the merger of the Company and
Merger Sub pursuant to the Merger Agreement.
(ii) "MERGER AGREEMENT" shall mean that certain Agreement
and Plan of Merger, dated as of May 3, 2004, by and
among the Company, Parent and Merger Sub.
(jj) "MERGER SUB" shall mean BC Merger Sub, Inc. a
Colorado corporation.
(kk) "PARENT" shall mean Pioneer Natural Resources
Company, a
Delaware corporation.
7. AMENDMENT OF SECTION 3(a). Section 3(a) of the Rights Agreement is
amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as the
result of (i) the execution of the Merger Agreement or (ii) the
consummation of the Merger."
8. AMENDMENT OF SECTION 13. Section 13 of the Rights Agreement is
amended to add the following sentence at the end thereof:
"The provisions of this Section 13 shall not apply to (i) the
execution of the Merger Agreement or (ii) the consummation of the
Merger."
2
9. ADDITION OF SECTION 35. The Rights Agreement is amended to add the
following Section 35 to the Rights Agreement:
"Section 35. TERMINATION. Immediately prior to the effective
time of the Merger, (i) this Agreement shall be terminated and be
without any further force or effect, (ii) none of the parties to this
Agreement will have any rights, obligations or liabilities hereunder,
(iii) the Rights shall expire and become null and void and (iv) the
holders of the Rights shall not be entitled to any benefits, rights or
other interests under this Agreement, including without limitation the
right to purchase or otherwise acquire shares of the Common Stock or
any other securities of the Company."
10. EFFECTIVENESS. This Rights Agreement Amendment shall be deemed
effective as of the date first written above. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
11. SEVERABILITY. If any term, provision, covenant or restriction of
this Rights Agreement Amendment is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Rights Agreement Amendment
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
12. GOVERNING LAW. This Rights Agreement Amendment shall be deemed to
be a contract made under the laws of the State of Colorado and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts made and to be performed entirely within Colorado.
13. COUNTERPARTS. This Rights Agreement Amendment may be executed in
any number of counterparts, each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK]
3
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement Amendment to be duly executed by their respective authorized officers,
all as of the day and year first above written.
EVERGREEN RESOURCES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
COMPUTERSHARE TRUST COMPANY, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EXHIBIT E
LLC SUB MERGER AGREEMENT
AGREEMENT AND PLAN OF MERGER
BETWEEN
[LLC SUB]
AND
EVERGREEN RESOURCES, INC.
_______________, 2004
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated as of _______________, 2004
(this "Agreement"), is between [LLC SUB], a Texas limited liability company (the
"Company"), and Evergreen Resources, Inc., a Colorado corporation ("Colorado
Corp.," and together with the Company, the "Parties").
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as
of May 3, 2004 by and among Pioneer Natural Resources Company, a
Delaware
corporation, BC Merger Sub, Inc., a Colorado corporation ("Merger Sub"), and
Colorado Corp. (the "First Merger Agreement"), Merger Sub merged with and into
Colorado Corp. (the "First Merger");
WHEREAS, pursuant to Section 1.4 the First Merger Agreement,
immediately after the effective time of the First Merger, Colorado Corp. will
merge with and into the Company;
WHEREAS, for federal income tax purposes, it is intended that the First
Merger and the Merger constitute an integrated plan described in Rev. Rul.
2001-46, 2001-2 C.B. 321;
WHEREAS, the Board of Directors of Colorado Corp. deems it advisable
and in the best interest of Colorado Corp. to merge with and into the Company
upon the terms and conditions provided herein; and
WHEREAS, the Board of Directors of the Company deems it advisable and
in the best interest of the Company that Colorado Corp. merge with and into the
Company upon the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the foregoing and the agreements
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1 THE MERGER. At the Effective Time (as hereafter defined), Colorado
Corp. shall merge with and into the Company (the "Merger"), and the Company
shall be the surviving entity (the "Surviving Entity"), and the separate
existence of Colorado Corp. shall cease.
1.2 SUCCESSION. At the Effective Time, the Surviving Entity shall
possess all the rights, privileges, powers, immunities and franchises, and shall
be subject to all the restrictions, disabilities and duties of Colorado Corp.,
and all the property, real, personal and mixed of Colorado Corp., and all debts
due to Colorado Corp. shall be vested in the Company without the necessity for
any separate transfer. The Company shall thereafter be responsible and liable
for all debts, liabilities and duties of Colorado Corp., and neither the rights
of creditors nor any liens on the property of Colorado Corp. shall be impaired
by the Merger.
ARTICLE II.
EFFECTIVE TIME
2.1 STOCKHOLDER AND MEMBER APPROVAL. At or about the time of the
execution of this Agreement, the Company shall submit this Agreement to its sole
member for approval pursuant to the applicable provisions of the Texas Limited
Liability Company Act (the "TLLCA"). At or about the time of the execution of
this Agreement, Colorado Corp. shall submit this Agreement to its shareholder
for approval pursuant to the applicable provisions of the Colorado Corporations
and Associations Act (the "CCAA").
2.2 FILING ARTICLES OF MERGER. Following approval of this Agreement in
accordance with Section 2.1 above, the Company shall cause (i) the Articles of
Merger to be executed, acknowledged and filed with the Secretary of State of the
State of Texas in accordance with the TLLCA and (ii) the Articles of Merger to
be executed, acknowledged and filed with the Secretary of State the State of
Colorado in accordance with the CCAA.
2.3 EFFECTIVE TIME. The Merger shall become effective upon the later to
occur of (i) the day and at the time the Articles of Merger are filed with the
Secretary of State of the State of Texas and (ii) the day and at the time the
Articles of Merger are filed with the Secretary of State of the State of
Colorado (the time of such effectiveness is herein called the "Effective Time").
ARTICLE III.
EFFECT ON OUTSTANDING SECURITIES
3.1 CONVERSION OF COLORADO CORP. SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of the Company or
Colorado Corp., each issued and outstanding share of common stock, par value
$.01 per share, of Colorado Corp. shall be cancelled and retired and cease to
exist.
3.2 TREASURY SHARES OF COLORADO CORP. Each share of capital stock of
Colorado Corp. which is held as a treasury share by Colorado Corp. immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and retired and cease to
exist at the Effective Time.
3.3 LLC MEMBERSHIP INTERESTS. The membership interests of the Company
immediately prior to the Effective Time shall continue unchanged as a result of
the Merger as the membership interests of the Surviving Entity from and after
the Effective Time.
ARTICLE IV.
COVENANTS AND AGREEMENTS
4.1 ASSUMPTION BY THE COMPANY. The Company covenants and agrees that as
the Surviving Entity, it shall be liable for all the obligations of Colorado
Corp. outstanding as of the Effective Time and hereby expressly assumes all such
obligations as of the Effective Time.
- 2 -
ARTICLE V.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
5.1 ARTICLES OF ORGANIZATION. The Articles of Organization of the
Company as constituted at the Effective time shall thereafter be the Articles of
Organization of the Surviving Entity until such time as they shall be amended as
provided by law.
5.2 REGULATIONS. The Regulations of the Company as constituted at the
Effective Time shall thereafter be the Regulations of the Surviving Entity until
such time as it shall be amended as provided by law.
5.3 MEMBER AND OFFICERS. From and after the Effective Time, the member
of the Surviving Entity will be the member of the Company immediately prior to
the Merger. From and after the Effective Time, individuals serving as officers
of the Company immediately prior to the Merger will serve as officers of the
Surviving Entity, holding the same titles and positions which such officers held
with the Company upon the effectiveness of the Merger.
ARTICLE VI.
MISCELLANEOUS
6.1 PRINCIPAL OFFICE OF SURVIVING ENTITY. The address of the principal
office of the Surviving Entity is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇.
6.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Entity or by its successors and assigns, there shall be executed and
delivered on behalf of Colorado Corp. such deed and other instruments, including
a form of blanket conveyance and ▇▇▇▇ of sale and assignment, and there shall be
taken or caused to be taken by it such further and other action, as shall be
appropriate and necessary in order to vest or perfect, or to confirm of record
or otherwise, in the Surviving Entity the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Colorado Corp. and otherwise to carry out the purposes of this
Agreement, and the directors, officers, managers and members, as applicable, of
the Surviving Entity and Colorado Corp. shall otherwise take any and all such
action and execute and deliver any and all such deeds and other instruments.
6.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
6.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
[Remainder of page is intentionally blank]
- 3 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the day and
year first above written.
[LLC SUB]
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
EVERGREEN RESOURCES, INC.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
EXHIBIT F
RULE 145 AFFILIATE LETTER
RULE 145 AFFILIATE LETTER
Pioneer Natural Resources Company
▇▇▇▇ ▇. ▇'▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger (the "Merger
Agreement") dated as of May 3, 2004 by and among Pioneer Natural Resources
Company, a
Delaware corporation ("Parent"), BC Merger Sub, Inc., a Colorado
corporation ("Merger Sub"), and Evergreen Resources, Inc., a Colorado
corporation (the "Company"), pursuant to which Merger Sub will be merged with
and into the Company (the "Merger").
The undersigned understands that for purposes of Rule 145 promulgated
under the Securities Act of 1933 (the "Act") he may be deemed to be an
underwriter with respect to the Shares (as defined below). The undersigned is
delivering this letter of undertaking and commitment pursuant to Section 5.7 of
the Merger Agreement.
With respect to such securities of Parent as may be received by the
undersigned pursuant to the Merger Agreement (the "Shares"), the undersigned
represents to and agrees with Parent that:
A. The undersigned will not make any offer to sell or any
sale, transfer or other disposition of all or any part of the Shares in
violation of the Act or the rules and regulations thereunder, including
Rule 145, and will hold all the Shares subject to all applicable
provisions of the Act and the rules and regulations thereunder.
B. The undersigned has been advised that the offering, sale
and delivery of the Shares to the undersigned pursuant to the Merger
Agreement will be registered under the Act on a Registration Statement
on Form S-4. The undersigned has also been advised and agrees, however,
that, since the undersigned may be deemed an underwriter of the Shares,
the undersigned may not offer, sell, pledge, hypothecate, transfer or
otherwise dispose of any of the Shares except (i) in a transaction
permitted by Rule 145 under the Act, or (ii) pursuant to an effective
registration statement under the Act or (iii) in a transaction that, in
the opinion of counsel, reasonably satisfactory to Parent, is not
required to be registered under the Act.
C. The undersigned understands and agrees that neither Parent
nor any of its current or future affiliates is under any obligation to
register the sale, transfer or other disposition of any Shares by the
undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to make compliance with an exemption
from such registration available.
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D. The undersigned also understands that Parent will give stop
transfer instructions to its transfer agents with respect to the Shares
and that there will be placed on the certificates for the Shares, or
any substitutions therefor, a legend stating in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED TO OR TRANSFERRED TO THE REGISTERED HOLDER AS A RESULT
OF A TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), MAY APPLY AND SUCH SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
(i) IN A TRANSACTION PERMITTED BY RULE 145 UNDER THE ACT, AND
AS TO WHICH THE ISSUER HAS RECEIVED REASONABLE SATISFACTORY
EVIDENCE OF COMPLIANCE WITH RULE 145, OR (ii) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (iii) IN A
TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, IS NOT REQUIRED TO BE REGISTERED
UNDER THE ACT."
It is understood and agreed that the legend set forth in
paragraph (D) above shall be removed by delivery of substitute
certificates without such legend at such time as Parent receives an
opinion of counsel reasonably satisfactory to Parent that the
undersigned (i) is not an affiliate of Parent and (ii) otherwise may
transfer the Shares without restriction under Rule 145(d)(3) of the
Act.
If any of the undersigned's Shares are initially issued to the
undersigned in the Merger in other than certificated form, the
undersigned agrees that following the Merger the undersigned will have
such Shares issued in certificated form so that the legend provided for
above may be placed on the certificates.
E. The undersigned also understands that unless the transfer
by the undersigned of any Shares has been registered under the Act or
is a sale made in conformity with the provisions of Rule 145 under the
Act, Parent reserves the right to place the following legend on the
certificates issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SECURITIES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, MAY APPLY. THE SECURITIES HAVE NOT BEEN ACQUIRED
BY THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF SUCH
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ACT AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT.
It is understood and agreed that the legend set forth in paragraph (E)
above shall be removed by delivery of substitute certificates without such
legend at such time as Parent receives an opinion of counsel reasonably
satisfactory to Parent that the holder (i) is not an affiliate of Parent and
(ii) otherwise may transfer the Shares without restriction under Rule 145(d)(3)
of the Act.
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and the Merger Agreement and discussed the requirements of such
documents and other applicable limitations upon the undersigned's ability to
sell, transfer or otherwise dispose of the Shares, to the extent the undersigned
felt necessary, with the undersigned's counsel or counsel for the Company and
(ii) the receipt by Parent of this letter is an inducement and a condition to
Parent's obligation to consummate the Merger.
Execution of this letter shall not be considered an admission on the
part of the undersigned that the undersigned is an underwriter of the Shares for
purposes of Rule 145 under the Act or as a waiver of any rights the undersigned
may have to any claim that the undersigned is not such an underwriter on or
after the date of this letter.
Very truly yours,
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