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AGREEMENT AND PLAN OF MERGER
Dated as of December 22, 2000
among
MARATHON OIL COMPANY,
MARATHON OIL ACQUISITION 1, LTD.
and
PENNACO ENERGY, INC.
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TABLE OF CONTENTS
ARTICLE I
The Offer and the Merger
Section 1.01. The Offer........................................... 1
Section 1.02. Company Actions..................................... 3
Section 1.03. The Merger.......................................... 4
Section 1.04. Closing............................................. 4
Section 1.05. Effective Time...................................... 4
Section 1.06. Effects............................................. 5
Section 1.07. Certificate of Incorporation and Bylaws............. 5
Section 1.08. Directors........................................... 5
Section 1.09. Officers............................................ 5
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES
Section 2.01. Effect on Capital Stock............................. 5
Section 2.02. Exchange of Certificates............................ 6
ARTICLE III
Representations and Warranties of the
Company
Section 3.01. Organization, Standing and Power.................... 9
Section 3.02. Subsidiaries; Equity Interests...................... 9
Section 3.03. Capital Structure................................... 9
Section 3.04. Authority; Execution and Delivery; Enforceability... 10
Section 3.05. No Conflicts; Consents.............................. 11
Section 3.06. SEC Documents; Undisclosed Liabilities.............. 12
Section 3.07. Information Supplied................................ 13
Section 3.08. Absence of Certain Changes or Events................ 14
Section 3.09. Taxes............................................... 15
Section 3.10. Absence of Changes in Benefit Plans................. 17
Section 3.11. ERISA Compliance; Excess Parachute Payments......... 17
Section 3.12. Litigation.......................................... 19
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Section 3.13. Compliance with Applicable Laws...................... 19
Section 3.14. Environmental Matters................................ 20
Section 3.15. Contracts............................................ 21
Section 3.16. Labor Matters........................................ 22
Section 3.17. Brokers; Fees and Expenses........................... 22
Section 3.18. Opinion of Financial Advisor......................... 22
Section 3.19. Potential Conflicts of Interest...................... 22
Section 3.20. Reserve Information.................................. 22
ARTICLE IV
Representations and Warranties of Parent and Sub
Section 4.01. Organization, Standing and Power..................... 23
Section 4.02. Sub.................................................. 23
Section 4.03. Authority; Execution and Delivery; Enforceability.... 23
Section 4.04. No Conflicts; Consents............................... 23
Section 4.05. Information Supplied................................. 24
Section 4.06. Brokers.............................................. 25
Section 4.07. Financing............................................ 25
Section 4.08. Litigation........................................... 25
Section 4.09. Ownership of Company Common Stock.................... 25
ARTICLE V
Covenants Relating to Conduct of Business
Section 5.01. Conduct of Business.................................. 25
Section 5.02. No Solicitation...................................... 28
ARTICLE VI
Additional Agreements
Section 6.01. Preparation of Proxy Statement; Stockholders Meeting. 29
Section 6.02. Access to Information; Confidentiality............... 30
Section 6.03. Reasonable Best Efforts; Notification................ 31
Section 6.04. Stock Options........................................ 32
Section 6.05. Indemnification...................................... 33
Section 6.06. Fees and Expenses.................................... 34
Section 6.07. Public Announcements................................. 34
Section 6.08. Transfer Taxes....................................... 34
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Section 6.09. Directors.................................................. 35
Section 6.10. CMS Operating Agreement.................................... 36
Section 6.11. Further Assurances......................................... 36
ARTICLE VII
Conditions Precedent
Section 7.01. Conditions to Each Party's Obligation to Effect the Merger. 36
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.01. Termination................................................ 37
Section 8.02. Effect of Termination...................................... 39
Section 8.03. Amendment.................................................. 39
Section 8.04. Extension; Waiver.......................................... 39
Section 8.05. Procedure for Termination, Amendment, Extension or Waiver.. 40
ARTICLE IX
General Provisions
Section 9.01. Nonsurvival of Representations and Warranties.............. 40
Section 9.02. Notices.................................................... 40
Section 9.03. Definitions................................................ 41
Section 9.04. Interpretation............................................. 42
Section 9.05. Severability............................................... 42
Section 9.06. Counterparts............................................... 43
Section 9.07. Entire Agreement; No Third-Party Beneficiaries............. 43
Section 9.08. Governing Law.............................................. 43
Section 9.09. Assignment................................................. 43
Section 9.10. Limitations on Warranties.................................. 43
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INDEX OF DEFINED TERMS
Term Section
---- -------
affiliate...................................................... 9.03
Agreement...................................................... Preamble
Appraisal Statute.............................................. 2.01(d)
business day................................................... 9.03
Certificate of Merger.......................................... 1.05
Certificates................................................... 2.02(b)
Closing........................................................ 1.04
Closing Date................................................... 1.04
CMS............................................................ 6.10
Code........................................................... 2.02(g)
Company........................................................ Preamble
Company Benefit Agreements..................................... 3.10
Company Benefit Plans.......................................... 3.10
Company Board.................................................. 1.02(a)
Company Bylaws................................................. 3.01
Company Charter................................................ 3.01
Company Common Stock........................................... Recitals
Company Disclosure Letter...................................... 3.05(a)
Company Material Adverse Effect................................ 9.03
Company Multiemployer Pension Plan............................. 3.11(c)
Company Pension Plans.......................................... 3.11(a)
Company Right.................................................. 3.03(a)
Company Rights Agreement....................................... 3.03(a)
Company SEC Documents.......................................... 3.06(a)
Company Stock Option........................................... 6.04(d)
Company Stock Plan............................................. 6.04(d)
Company Stockholder Approval................................... 3.04(a)
Company Stockholders Meeting................................... 6.01(b)
Company Takeover Proposal...................................... 5.02(c)
Confidentiality Agreement...................................... 6.02(b)
Consent........................................................ 3.05(b)
Contract....................................................... 3.03(a)
DGCL........................................................... 1.03
Dissent Shares................................................. 2.01(d)
Effective Time................................................. 1.05
Environmental Claim............................................ 3.14(a)
Environmental Laws............................................. 3.14(a)
ERISA.......................................................... 3.11(a)
ERISA Affiliate................................................ 3.11(c)
Exchange Act................................................... 3.05(b)
Exchange Fund.................................................. 2.02(a)
Expiration Date................................................ 1.01(a)
Filed Company SEC Documents.................................... 3.08
Fully Diluted Shares........................................... Annex I
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Term Section
---- -------
GAAP............................................................. 3.06(a)
Governmental Entity.............................................. 3.05(b)
Hazardous Substance.............................................. 3.14(a)
in the ordinary course of business............................... 9.03
Indemnified Liabilities.......................................... 6.05(a)
Indemnified Parties.............................................. 6.05(a)
Indemnified Party................................................ 6.05(a)
Independent Directors............................................ 6.09
Information Statement............................................ 1.02(b)
Judgment......................................................... 3.05(a)
Law.............................................................. 3.05(a)
Liens............................................................ 3.05(a)
Material Contracts............................................... 3.15
Merger........................................................... Recitals
Merger Consideration............................................. 2.01(c)(ii)
Minimum Tender Condition......................................... Annex I
Offer............................................................ Recitals
Offer Documents.................................................. 1.01(b)
Offer Price...................................................... Recitals
Parent........................................................... Preamble
Parent Material Adverse Effect................................... 4.04(a)
Paying Agent..................................................... 2.02(a)
Permits.......................................................... 3.13(b)
person........................................................... 9.03
Primary Company Executives....................................... 3.11(f)
Proxy Statement.................................................. 3.05(b)
Representatives.................................................. 5.02(a)
Rights Agent..................................................... 3.03(a)
Royalty.......................................................... 3.09(g)
Royalty Return................................................... 3.09(g)
▇▇▇▇▇ ▇▇▇▇▇...................................................... 3.20
Schedule 14D-9................................................... 1.02(b)
SEC.............................................................. 1.01(a)
Securities Act................................................... 3.06(a)
Sub.............................................................. Preamble
subsidiary....................................................... 9.03
Superior Company Proposal........................................ 5.02(c)
Surviving Corporation............................................ 1.03
Tax Return....................................................... 3.09(g)
Taxes............................................................ 3.09(g)
Termination Fee.................................................. 6.06(b)
Transactions..................................................... 1.02(a)
Transfer Taxes................................................... 6.08
USX.............................................................. 3.04(b)
Warrants......................................................... 3.03(a)
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AGREEMENT AND PLAN OF MERGER dated as of December 22, 2000 (this
"Agreement") among MARATHON OIL COMPANY, an Ohio corporation ("Parent"),
MARATHON OIL ACQUISITION 1, LTD., a Delaware corporation and a direct wholly
owned subsidiary of Parent ("Sub"), and PENNACO ENERGY, INC., a Delaware
corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement; and
WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase all the outstanding shares of
common stock, par value $0.001 per share, of the Company, including the
associated Company Rights (the "Company Common Stock"), at a price per share of
$19.00, net to the seller in cash (such amount, or any greater amount per share
paid pursuant to the Offer, the "Offer Price"), without interest thereon, on the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS the respective Boards of Directors of Parent and Sub have approved
the merger (the "Merger") of Sub into the Company on the terms and subject to
the conditions set forth in this Agreement, whereby each issued share of Company
Common Stock not owned directly or indirectly by Parent or the Company shall be
converted into the right to receive an amount in cash equal to the Offer Price;
and
WHEREAS, the Board of Directors of the Company has approved the Offer and
the Merger and resolved to recommend that holders of shares of Company Common
Stock tender their shares pursuant to the Offer and approve and adopt this
Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and other terms contained in this Agreement, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
The Offer and the Merger
Section 1.01. The Offer.
(a) Subject to the conditions of this Agreement, no earlier than
January 8, 2001 and no later than January 12, 2001, Sub shall, and Parent shall
cause Sub to, commence the Offer within the meaning of the applicable rules and
regulations of the Securities and Exchange Commission (the "SEC"); provided,
however, that the obligation of Sub to, and of Parent to cause Sub to, commence
the Offer and accept for payment, and pay for, any shares of Company Common
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Stock tendered pursuant to the Offer is subject to the Minimum Tender Condition
and the satisfaction or waiver of the other conditions set forth in Annex I. The
initial expiration date of the Offer (the "Expiration Date") shall be the 20th
business day following the commencement of the Offer (determined pursuant to
Rule 14d-2 promulgated by the SEC). Sub expressly reserves the right to modify
the terms and conditions of the Offer and to waive any condition set forth in
Annex I (other than the Minimum Tender Condition), except that, without the
prior written consent of the Company, Sub shall not (i) reduce the number of
shares of Company Common Stock subject to the Offer, (ii) reduce the price per
share of Company Common Stock to be paid pursuant to the Offer, (iii) reduce or
modify the Minimum Tender Condition, (iv) modify or add to the conditions set
forth in Annex I in any manner adverse to the holders of Company Common Stock
(other than Parent and its subsidiaries), (v) except as provided in the next
sentence, extend the Offer or (vi) change the form of consideration payable in
the Offer. Notwithstanding the foregoing, Sub may, without the consent of the
Company, (i) extend the Offer in increments of not more than five business days
each, if at the scheduled Expiration Date of the Offer any of the conditions to
Sub's obligation to purchase shares of Company Common Stock are not satisfied,
until such time as such conditions are satisfied or waived, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer and (iii) make
available a subsequent offering period (within the meaning of Rule 14d-11
promulgated by the SEC). Without limiting the right of Sub to extend the Offer,
in the event that the Minimum Tender Condition is not satisfied at the scheduled
Expiration Date of the Offer, at the request of the Company, Sub shall, and
Parent shall cause Sub to, extend the Expiration Date of the Offer in increments
of five business days each until the earliest to occur of (v) the date that is
60 days after the initial Expiration Date, (w) the satisfaction of the Minimum
Tender Condition, (x) the reasonable determination by Parent that the Minimum
Tender Condition is not capable of being satisfied on or prior to the date that
is 60 days after the initial Expiration Date, (y) the termination of this
Agreement in accordance with its terms and (z) April 30, 2001. On the terms and
subject to the conditions of the Offer and this Agreement, Sub shall, and Parent
shall cause Sub to, accept for payment and pay for all shares of Company Common
Stock validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the expiration of the Offer and in any event not later than
three business days after such expiration.
(b) As soon as practicable on the date of commencement of the Offer,
Sub shall, and Parent shall cause Sub to, file with the SEC a Tender Offer
Statement on Schedule TO with respect to the Offer, which shall contain or
incorporate by reference an offer to purchase and a related letter of
transmittal and any related documents (such Schedule TO and the documents
included or incorporated by reference therein pursuant to which the Offer will
be made, together with any supplements or amendments thereto, the "Offer
Documents"). The Company shall cooperate in the preparation of the Offer
Documents, and the Company and its counsel will be given a reasonable
opportunity to review and comment on the Offer Documents before they are filed
with the SEC. Each of Parent, Sub and the Company shall promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and each of Parent and Sub shall take all steps necessary to amend or
supplement the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. Parent and Sub shall provide the Company and its counsel with
any comments Parent, Sub or their counsel may receive
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from the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments and shall consult with the Company and its counsel
prior to responding to any such comments.
Section 1.02. Company Actions.
(a) The Company hereby approves of and consents to the Offer, the
Merger and the other transactions contemplated by this Agreement (collectively,
the "Transactions"). The Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Board of Directors of the Company (the
"Company Board") described in Section 3.04(b)(iii); provided, however, that
prior to the consummation of the Offer, the Company Board reserves the right to
modify or withdraw such recommendation in a manner adverse to Parent and Sub if
(and only if) a majority of the entire Company Board shall have determined in
good faith, based on (among other things) the advice of its independent
financial advisors and outside counsel, that this Agreement or the Merger is no
longer in the best interests of the Company's stockholders and that such
modification or withdrawal is, therefore, required in order to satisfy the
Company Board's fiduciary duties to the Company's stockholders under applicable
Law. The Company has been advised by each of its directors and executive
officers that he intends either to tender all shares of Company Common Stock
beneficially owned by him to Sub pursuant to the Offer or to vote such shares in
favor of the approval and adoption by the stockholders of the Company of this
Agreement and the Transactions; provided, however, that such directors and
executive officers shall have no obligation under this Agreement to so tender or
vote their shares if this Agreement is terminated in accordance with its terms.
(b) As soon as practicable on the date of commencement of the Offer,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9, including an Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder (the "Information Statement"), with respect to the Offer (such
Schedule 14D-9 and Information Statement, as amended or supplemented from time
to time, the "Schedule 14D-9") containing the recommendation of the Company
Board described in Section 3.04(b)(iii) and shall disseminate the Schedule 14D-9
to the holders of Company Common Stock as and to the extent required by
applicable federal securities laws. Each of Parent, Sub and their counsel shall
be given a reasonable opportunity to review and comment on the Schedule 14D-9
before it is filed with the SEC. Each of the Company, Parent and Sub shall
promptly correct any information provided by it for use in the Schedule 14D-9 if
and to the extent that such information shall have become false or misleading in
any material respect, and the Company shall take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by applicable federal
securities laws. The Company shall provide Parent and its counsel with any
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments and
shall consult with Parent, Sub and their counsel prior to responding to any such
comments.
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(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Sub promptly with mailing labels containing the names and
addresses of the record holders of Company Common Stock as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Company Common Stock, and shall furnish to Sub such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as Parent or Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable Law, until the Effective Time, Parent and Sub shall
use such information only in connection with the Offer and the Merger and, if
this Agreement shall be terminated in accordance with Section 8.01, shall, upon
written request, deliver, and shall use their reasonable efforts to cause their
affiliates, agents and advisors to deliver, to the Company all copies of such
information then in their possession.
Section 1.03. The Merger.
On the terms and subject to the conditions set forth in this Agreement, and
in accordance with the Delaware General Corporation Law (the "DGCL"), Sub shall
be merged with and into the Company at the Effective Time. At the Effective
Time, the separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation (as such, the "Surviving Corporation") and
a wholly owned subsidiary of Parent.
Section 1.04. Closing.
Unless this Agreement shall have been terminated and the transactions
contemplated hereby shall have been abandoned pursuant to Article VIII, and
subject to the satisfaction or waiver of all of the conditions set forth in
Article VII, the closing (the "Closing") of the Merger shall take place at the
offices of ▇▇▇▇▇ ▇▇▇▇▇ L.L.P., One Shell Plaza, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. on the second business day following the satisfaction
(or, to the extent permitted by Law, waiver) of the conditions set forth in
Section 7.01 (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or, to the extent
permitted by Law, waiver of those conditions), or at such other place, time and
date as shall be agreed in writing between Parent and the Company. The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
Section 1.05. Effective Time.
Prior to the Closing, the Company shall prepare, and on the Closing Date
the Company shall file with the Secretary of State of the State of Delaware, a
certificate of merger (or a certificate of ownership and merger) (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger is
duly filed with such Secretary of State or at such other time as Parent and the
Company shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
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Section 1.06. Effects.
The Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.07. Certificate of Incorporation and Bylaws.
(a) The Certificate of Incorporation of Sub, as in effect immediately
prior to the Effective Time, shall be amended at the Effective Time to change
the corporate name set forth therein to "Pennaco Energy, Inc." and, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter changed or amended in accordance with the provisions thereof
and applicable Law.
(b) The Bylaws of Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until thereafter changed
or amended in accordance with the provisions thereof and the provisions of the
Certificate of Incorporation of the Surviving Corporation and applicable Law.
Section 1.08. Directors.
The directors of Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
Section 1.09. Officers.
The officers of the Company immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.01. Effect on Capital Stock.
At the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any shares of Company Common Stock or any shares of
capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of common stock, par value $0.001 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time that is owned by the Company, Parent or Sub shall no longer be
outstanding and shall automatically be
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canceled and retired and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock.
(i) Subject to Sections 2.01(b) and 2.01(d), each issued and
outstanding share of Company Common Stock shall be converted into the right
to receive an amount in cash equal to the Offer Price, without interest,
less any required withholding taxes, upon surrender and exchange of the
Certificate representing such share.
(ii) The cash payable upon the conversion of a share of
Company Common Stock pursuant to this Section 2.01(c) is referred to as the
"Merger Consideration." As of the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
Certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive
the Merger Consideration, without interest, less any required withholding
taxes, upon surrender of such Certificate in accordance with Section 2.02.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares ("Dissent Shares") of Company Common Stock that are outstanding
immediately prior to the Effective Time and that are held by any person who is
entitled to dissent from and properly dissents from this Agreement pursuant to,
and who complies in all respects with, Section 262 of the DGCL, in each case to
the extent applicable (the "Appraisal Statute"), shall not be converted into a
right to receive the Merger Consideration as provided in Section 2.01(c), but
rather the holders of Dissent Shares shall be entitled to the right to receive
payment of the appraised value of such Dissent Shares in accordance with the
Appraisal Statute; provided, however, that if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to receive payment
of the appraised value under the Appraisal Statute, then the right of such
holder to be paid the appraised value of such holder's Dissent Shares shall
cease and such Dissent Shares shall be deemed to have been converted as of the
Effective Time into, and to have become exchangeable solely for, the right to
receive the Merger Consideration, without interest, as provided in Section
2.01(c). The Company shall give prompt notice to Parent of any objections or
demands received by the Company for appraisal of Company Common Stock pursuant
to the Appraisal Statute, and Parent shall have the right to direct all
negotiations and proceedings with respect to such objections or demands. Neither
the Company nor the Surviving Corporation shall, without the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such objections or demands, or agree to do any of the foregoing.
Section 2.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration upon
surrender of Certificates. The Surviving Corporation shall, and Parent shall
cause the Surviving Corporation to, provide to the Paying Agent on a timely
basis, as and when needed after the Effective Time, cash necessary to pay for
the shares of Company
6
Common Stock converted into the right to receive the Merger Consideration
pursuant to Section 2.01(c) (such cash being hereinafter referred to as the
"Exchange Fund"). The expenses of the Paying Agent shall not be paid from the
Exchange Fund, but shall be paid directly by the Surviving Corporation.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") that immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.01(c), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor cash in an amount equal to the product of (A) the
number of shares of Company Common Stock theretofore represented by such
Certificate and (B) the Merger Consideration, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of the Company,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax has been paid or is not
applicable. No interest shall be paid or shall accrue on the cash payable upon
surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock; Transfer
Books. The Merger Consideration paid in accordance with the terms of this
Article II upon conversion of any shares of Company Common Stock shall be deemed
to have been paid in full satisfaction of all rights pertaining to such shares
of Company Common Stock, 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 that may have been declared or made by the
Company on such shares of Company Common Stock in accordance with the terms of
this Agreement and which remain unpaid at the Effective Time, and after the
Effective Time there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, any Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest or other income received by the Paying Agent in respect
thereof that has not previously been distributed pursuant to Section 2.02(f))
that remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Surviving
7
Corporation, upon demand, and any holder of Company Common Stock who has not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation for payment of such holder's claim for the Merger
Consideration.
(e) No Liability. None of Parent, Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
payments or distributions payable from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
If any Certificate has not been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which the Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity), any amounts payable in respect
of such Certificate shall, to the extent permitted by applicable Law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund, as directed by the Surviving Corporation, on a
daily basis. Any interest and other income resulting from such investments shall
be payable to the Surviving Corporation on demand.
(g) Withholding Rights. Parent, Sub or the Surviving Corporation shall
be entitled to deduct and withhold, or cause the Paying Agent to deduct and
withhold, from the consideration otherwise payable to any holder of Company
Common Stock pursuant to this Agreement, whether the Offer Price or the Merger
Consideration, such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or under any provision of state, local or foreign tax
Law. To the extent that amounts are so deducted and withheld by Parent, Sub or
the Surviving Corporation, such deducted and withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent, Sub or the Surviving Corporation.
(h) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against Parent or the Surviving Corporation with
respect to such Certificate, the Paying Agent will pay, in exchange for such
lost, stolen or destroyed Certificate, the Merger Consideration to be paid in
respect of the shares of Company Common Stock represented by such Certificate,
as contemplated by this Article II.
8
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub as follows:
Section 3.01. Organization, Standing and Power.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority necessary to enable it to own, lease or otherwise hold its
properties and assets and to conduct its business as currently conducted. The
Company is duly qualified to do business in each jurisdiction where (a) the
nature of its business or its ownership or leasing of its properties make such
qualification necessary or (b) the failure to so qualify, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect. The Company has delivered to Parent true, correct and complete
copies of the certificate of incorporation of the Company, as amended to the
date of this Agreement (as so amended, the "Company Charter"), and the Bylaws of
the Company, as amended to the date of this Agreement (as so amended, the
"Company Bylaws"). The Company Charter and the Company Bylaws are in full force
and effect, and no other organizational documents are applicable to or binding
upon the Company. The Company is not in violation of any provision of the
Company Charter or the Company Bylaws.
Section 3.02. Subsidiaries; Equity Interests.
The Company has no subsidiaries and does not own, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture
interest or other equity or ownership interest in any person.
Section 3.03. Capital Structure.
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock and 10,000,000 shares of preferred stock, par
value $0.001 per share. At the close of business on December 21, 2000, (i)
19,641,286 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were held by the Company in its treasury, (iii)
3,931,536 shares of Company Common Stock were subject to issuance upon exercise
of outstanding Company Stock Options under the Company Stock Plan at a weighted
average exercise price of $5.89 per share, (iv) 90,000 shares of Company Common
Stock were subject to issuance upon exercise of outstanding warrants at a
weighted average exercise price of $4.72 per share (the "Warrants"), (v) 447,772
additional shares of Company Common Stock were reserved for issuance pursuant to
the Company Stock Plan and (vi) one common share purchase right (a "Company
Right") for each share of Common Stock outstanding was issued and outstanding in
accordance with that certain Rights Agreement (the "Company Rights Agreement"),
dated as of February 24, 1999, between the Company and ▇▇▇▇▇▇ Trust and Savings
Bank, as Rights Agent (the "Rights Agent"), and one-half of a share of Company
Common Stock was reserved for issuance pursuant to the exercise of each Company
Right. Except as set forth above, at the close of business on the date of this
Agreement, no shares of capital stock or other voting securities of the Company
9
were issued, reserved for issuance or outstanding. All outstanding shares of
Company capital stock are, and all such shares that may be issued prior to the
Effective Time will be when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, the Company Charter,
the Company Bylaws or any contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a "Contract") to
which the Company is a party or otherwise bound. Except as set forth above, as
of the date of this Agreement, there are not any options, warrants, calls,
rights, convertible or exchangeable securities, units, commitments, Contracts,
arrangements or undertakings to which the Company is a party or by which it is
bound (x) obligating the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, the Company or (y)
obligating the Company to issue, grant, extend or enter into any such option,
warrant, call, right, security, unit, commitment, Contract, arrangement or
undertaking. As of the date of this Agreement, there are not any outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company. Except as contemplated in
connection with the execution of this Agreement, there are no shareholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or to which it is bound relating to the holding, voting or
disposition of any shares of capital stock of the Company.
(b) The Company Board or a committee administering the Company Stock
Plan has the power and authority to adjust the terms of all outstanding Company
Stock Options granted under the Company Stock Plan, by resolution or other
action, to provide that each such Company Stock Option outstanding immediately
prior to the acceptance for payment of shares of Company Common Stock pursuant
to the Offer shall be canceled in accordance with Section 6.04, with the holder
thereof becoming entitled to receive the amount of cash referred to in Section
6.04. Such cancellation of a Company Stock Option in exchange for the cash
payment described in Section 6.04 will constitute a release of any and all
rights the holder of such Company Stock Option had or may have had in respect
thereof. No consents of the holders of the Company Stock Options are necessary
to effectuate the foregoing. The Company Board or a committee administering the
Company Stock Plan has the power and authority to cause (i) the Company Stock
Plan to terminate as of the Effective Time and (ii) the provisions in any other
Company Benefit Plan providing for the issuance, transfer or grant of any
capital stock of the Company or any interest in respect of any capital stock of
the Company to be deleted as of the Effective Time. Following the Effective
Time, no holder of a Company Stock Option or any participant in the Company
Stock Plan or other Company Benefit Plan will have any right thereunder to
acquire any capital stock of the Company or the Surviving Corporation.
Section 3.04. Authority; Execution and Delivery; Enforceability.
(a) The Company has all requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the Transactions.
The execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the Transactions have been duly authorized by all
necessary corporate and stockholder action on the part
10
of the Company, subject, in the case of the Merger, to receipt of the Company
Stockholder Approval required by applicable Law. The Company has duly executed
and delivered this Agreement, and this Agreement constitutes its legal, valid
and binding obligation, enforceable against the Company in accordance with its
terms, except as that enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting the
enforcement of creditor's rights generally and the application of general
principles of equity (regardless of whether that enforceability is considered in
a proceeding at law or in equity). Subject to the applicability of Section 253
of the DGCL, the affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock voting as a single class (the
"Company Stockholder Approval") is the only vote of any class or series of the
Company's capital stock required to approve the Merger and adopt this Agreement.
(b) The Company Board has duly adopted resolutions, in each case by a
unanimous vote of all members of the Company Board, (i) approving and declaring
the advisability of this Agreement, the Offer, the Merger and the other
Transactions in accordance with the applicable provisions of the DGCL, (ii)
determining that the terms of the Offer, the Merger and the other Transactions
are fair to and in the best interests of the Company and its stockholders and
(iii) recommending that the holders of Company Common Stock accept the Offer,
tender their shares of Company Common Stock pursuant to the Offer and, if
approval is required by applicable Law, approve and adopt this Agreement and the
Merger. Such resolutions are sufficient to render inapplicable to Parent, Sub
and USX Corporation, a Delaware corporation of which Parent is a wholly owned
subsidiary ("USX"), and this Agreement, the Offer, the Merger and the other
Transactions the provisions of Section 203 of the DGCL. No other state takeover
statute or similar statute or regulation applies or purports to apply to the
Company with respect to this Agreement, the Offer, the Merger or any other
Transaction.
Section 3.05. No Conflicts; Consents.
(a) Except as set forth in Section 3.05(a) of the letter dated as of
the date of this Agreement from the Company to Parent and Sub (the "Company
Disclosure Letter"), the execution, delivery and performance by the Company of
this Agreement do not, and the consummation of the Offer, the Merger and the
other Transactions and compliance with the terms of this Agreement will not, (i)
conflict with or result in any violation of any provision of the Company Charter
or the Company Bylaws, (ii) subject to the filings and other matters referred to
in Section 3.05(b), conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any person under, or result in the creation
of any pledge, lien, charge, mortgage, encumbrance or security interest of any
kind or nature whatsoever (collectively, "Liens") upon any of the properties or
assets of the Company under, or require the consent of any person under, any
provision of any Contract to which the Company is a party or by which any of its
properties or assets is bound or affected or (iii) subject to the filings and
other matters referred to in Section 3.05(b), conflict with or result in any
violation of any domestic or foreign judgment, verdict, jury award, injunction,
order or decree ("Judgment") or domestic or foreign statute, law (including
common law), ordinance, rule or regulation ("Law") applicable to the Company or
its properties or assets, except in the case of
11
clauses (ii) and (iii) above, for such matters as, individually or in the
aggregate, could not reasonably be expected to have a Company Material Adverse
Effect.
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or notice to, or
Permit from, any federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity") is required to be obtained or made by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement or the
consummation of the Transactions, other than (i) the filing with the SEC of (A)
the Schedule 14D-9, (B) a proxy or information statement relating to the Company
Stockholder Approval (the "Proxy Statement"), if such approval is required by
applicable Law, and (C) such reports under Section 13 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as may be required in connection
with this Agreement, the Offer, the Merger and the other Transactions, (ii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of the other
jurisdictions in which the Company is qualified to do business, (iii) such
filings as may be required in connection with the Taxes described in Section
6.08, (iv) filings under state securities Laws, and (v) such other items as,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect.
(c) The Company Board, by a unanimous vote of all its members, has
taken all action necessary, subject only to obtaining the countersignature of
the Rights Agent to an amendment to the Company Rights Agreement (which
countersignature the Company will have obtained prior to the commencement of the
Offer), to (i) render the Company Rights inapplicable to this Agreement, the
Offer, the Merger and the other Transactions, (ii) ensure that (A) neither
Parent nor Sub nor any of its "Affiliates" or "Associates" is or will become an
"Acquiring Person" (each as defined in the Company Rights Agreement) by reason
of this Agreement, the Offer, the Merger or any other Transaction, and (B) a
"Distribution Date" (as defined in the Company Rights Agreement) will not occur
by reason of this Agreement, the Offer, the Merger or any of the other
Transactions and (iii) cause the Company Rights to expire concurrently with the
consummation of the Offer.
Section 3.06. SEC Documents; Undisclosed Liabilities.
(a) The Company has timely filed all required reports, schedules,
forms, statements and other documents with the SEC relating to periods
commencing on or after September 1, 1998 (such reports, schedules, forms,
statements and other documents being hereinafter referred to as the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended (the "Securities Act"), as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Documents, and none of the Company SEC Documents as of such
dates contained any untrue statement of a material fact or omitted 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 were made,
not misleading. The consolidated financial statements of the Company included in
the Company SEC Documents
12
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except, in the case of unaudited
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may otherwise be
indicated in the notes thereto) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end audit adjustments).
(b) Except as set forth in the most recent financial statements
included in the Filed Company SEC Documents, the Company has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected in the Company's financial statements,
and there is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability or obligation (including
any claims, whether or not asserted, for royalty payments), that, individually
or in the aggregate, could reasonably be expected to have a Company Material
Adverse Effect.
Section 3.07. Information Supplied.
Subject to Parent's and Sub's fulfillment of their obligations with respect
thereto, the Schedule 14D-9 and the Proxy Statement will contain (or will be
amended in a timely manner so as to contain) all information which is required
to be included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable Law and will conform in all
material respects with the requirements of the Exchange Act and any other
applicable Law; and neither the Schedule 14D-9 nor the Proxy Statement (or any
amendment or supplement thereto) will, at the respective times they are filed
with the SEC or published, sent or given to the Company's stockholders, 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
or, in the case of the Proxy Statement, will, at the time of the Company
Stockholders Meeting, omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Meeting which shall have become false or
misleading in any material respect. Notwithstanding the foregoing, no
representation or warranty is hereby made by the Company with respect to any
information supplied by USX, Parent or Sub in writing for inclusion in, or with
respect to USX, Parent or Sub information derived from USX's public SEC filings
which is included or incorporated by reference in, the Schedule 14D-9 or the
Proxy Statement. None of the information supplied or to be supplied by the
Company in writing for inclusion or incorporation by reference in, or which may
be deemed to be incorporated by reference in, any of the Offer Documents will,
at the respective times the Offer Documents are filed with the SEC or published,
sent or given to the Company's stockholders, 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, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective Time
any event with respect to the Company, or with respect to any information
supplied by the Company in writing for inclusion in any of the Offer Documents,
shall occur which is
13
required to be described in an amendment of, or a supplement to, any of the
Offer Documents, the Company shall so describe the event to Parent.
Section 3.08. Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed Company SEC
Documents") or in Section 3.08 of the Company Disclosure Letter, since December
31, 1999, the Company has conducted its business only in the ordinary course of
business, and there has not been:
(a) any event, change, occurrence, effect or development that,
individually or in the aggregate, has had or could reasonably be expected to
have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock, property or otherwise) with respect to any
Company capital stock or any repurchase, redemption or other acquisition by the
Company of any capital stock or other equity securities of, or other ownership
interests in, the Company;
(c) any split, combination or reclassification of any Company capital
stock or any issuance of or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of Company
capital stock;
(d) (i) any grant by the Company to any director or officer of the
Company of any increase in compensation, bonus or other benefits, (ii) any grant
by the Company to any such director or officer of any increase in severance,
change of control or termination pay benefits, or (iii) any entry by the Company
into, or any amendment of, any employment, consulting, deferred compensation,
indemnification, severance, change of control or termination agreement or
arrangement with any such director or officer;
(e) any change in accounting methods, principles or practices by the
Company, except for such changes as may have been required by a change in GAAP;
(f) any (i) material elections with respect to Taxes by the Company,
(ii) settlement or compromise by the Company of any material Tax liability or
refund or (iii) assessment of a material Tax or Royalty against the Company by
any Governmental Entity;
(g) any amendment of any term of any outstanding security of the
Company that would materially increase the obligations of the Company under such
security;
(h) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money;
(i) any creation or assumption by the Company of any Lien on any asset
of the Company;
(j) any making of any loan, advance or capital contribution to or
investment in any person by the Company other than (i) in connection with any
acquisition or capital expenditure
14
permitted by Section 5.01, or (ii) loans or advances to employees of the Company
made in the ordinary course of business;
(k) (i) any acquisition by the Company 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,
partnership, joint venture, association or other business organization or
division thereof or any acquisition by the Company of any assets (other than
inventory) that are material to the Company, (ii) any sale, lease, license,
encumbrance or other disposition of material assets of the Company, other than
sales of products to customers in the ordinary course of business, (iii) any
incurrence of capital expenditures by the Company other than in the ordinary
course of business, or (iv) any modification, amendment, assignment, termination
or relinquishment by the Company of any Contract, license or other right that,
individually or in the aggregate with all such modifications, amendments,
assignments, terminations and relinquishments, has had or could reasonably be
expected to have a Company Material Adverse Effect;
(l) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Company that, individually or in
the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect;
(m) any entry by the Company into any commitment or transaction
material to the Company (other than commitments or transactions entered into in
the ordinary course of business);
(n) as of the date hereof, any revaluation by the Company of any of its
material assets, including but not limited to writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business; or
(o) any agreement, commitment or undertaking to take any action
referred to in Sections 3.08(a) through 3.08(n).
Section 3.09. Taxes.
(a) The Company has timely filed, or has caused to be timely filed on
its behalf, all Tax Returns (including those returns requiring estimates of Tax
payments) required to be filed by it, and all such Tax Returns are true,
complete and accurate in all material respects. The Tax Returns have been
prepared in accordance with all applicable Laws. All Taxes shown to be due on
such Tax Returns, or otherwise owed, have been timely paid. Section 3.09(a) of
the Company Disclosure Letter contains a list of all jurisdictions (whether
foreign or domestic) in which the Company currently files Tax Returns.
(b) Except as set forth in Section 3.09(b) of the Company Disclosure
Letter, (i) the Company has not requested any extension of time in which to file
any Tax Return, which Tax Return has not since been filed, and (ii) no audits,
investigations or other proceedings by a Governmental Entity are presently
pending against the Company that could materially affect the liability of the
Company for Taxes, and no notification has been received by the Company that any
such audit, investigation or proceeding is threatened. Section 3.09(b) of the
Company Disclosure
15
Letter includes a list of all issues in dispute in any audit, investigation or
proceeding against the Company and an estimate of the amount of Tax in dispute
as to each issue.
(c) The most recent financial statements contained in the Filed Company
SEC Documents reflect an adequate reserve for all Taxes payable by the Company
for all Taxable periods and portions thereof through the date of such financial
statements. No material deficiency with respect to any Taxes has been
threatened, proposed, asserted or assessed against the Company, and no waivers
or extensions of the statute of limitations with respect to any Taxes are
pending.
(d) There are no material Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of the Company. The Company is not bound
by any agreement with respect to Taxes.
(e) The Company has never been a member of an affiliated, consolidated,
combined or unitary group and has no liability for the payment of Taxes of any
other entity as a result of being a member of such a group or as a result of any
express or implied obligation to indemnify any other person with respect to the
payment of any Taxes.
(f) The Company has timely filed, or has caused to be timely filed on
its behalf, all Royalty Returns required to be filed by it, and all such Royalty
Returns are true, complete and accurate in all material respects as provided for
under contract or by statute. All Royalties shown to be due on such Royalty
Returns, or otherwise owed, have been timely paid. Section 3.09(f) of the
Company Disclosure Letter contains a list of all jurisdictions in which the
Company currently files Royalty Returns, a list of all scheduled royalty audits
or planned audits by the relevant authorities, and a list of disputed matters as
described above along with an estimated dollar amount attributable to the
disputed matter. No material deficiency with respect to any Royalty has been
threatened, proposed, asserted or assessed against the Company.
(g) For purposes of this Agreement:
"Royalty" includes any payments required under any contractual arrangement
or by any applicable statute attributable to the production of natural resources
whether owed to a local, state or federal Governmental Entity and shall include
all interest, penalties and additions imposed with respect to such amounts.
"Royalty Return" means any federal, state, or local Royalty return,
declaration, statement, report, schedule, form or information return or any
amended Royalty return relating to Royalties.
"Taxes" includes all forms of taxation, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Return" means any federal, state, local, provincial or foreign Tax
return, declaration, statement, report, schedule, form or information return or
any amended Tax return relating to Taxes.
16
Section 3.10. Absence of Changes in Benefit Plans.
Except as disclosed in the Filed Company SEC Documents or in Section 3.10
of the Company Disclosure Letter, since December 31, 1999, there has not been
any adoption or amendment in any material respect by the Company of any
collective bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, thrift, savings, stock bonus, restricted
stock, cafeteria, severance, disability, medical or other plan, providing
benefits to any current or former employee, officer or director of the Company
(collectively, "Company Benefit Plans"). Except as disclosed in the Filed
Company SEC Documents or in Section 3.10 of the Company Disclosure Letter, there
are not any employment, consulting, deferred compensation, indemnification,
severance or termination agreements or arrangements, non-compete agreements,
confidentiality agreements, nonsolicitation and business diversion agreements or
tax gross-up agreements between the Company and any current or former employee,
officer or director of the Company (collectively, "Company Benefit Agreements").
Section 3.11. ERISA Compliance; Excess Parachute Payments.
(a) Section 3.11(a) of the Company Disclosure Letter contains a list
and brief description of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Company Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other
Company Benefit Plans and Company Benefit Agreements maintained, or contributed
to, by the Company or to which the Company is a party, for the benefit of any
current or former employees, officers or directors of the Company. The Company
has made available to Parent true, complete and correct copies of (i) each
Company Benefit Plan and Company Benefit Agreement (or, in the case of any
unwritten Company Benefit Plan or Company Benefit Agreement, a description
thereof), (ii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Company Benefit Plan (if any such
report was required), (iii) the most recent summary plan description for each
Company Benefit Plan for which such summary plan description is required, (iv)
each trust agreement and group annuity contract relating to any Company Benefit
Plan and (v) each employment agreement to which the Company is a party or is
bound.
(b) All Company Pension Plans have received favorable determination
letters from the Internal Revenue Service with respect to "TRA" (as defined in
Section 1 of Rev. Proc. 93-39), to the effect that such Company Pension Plans
are qualified and exempt from federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter has been
revoked nor, to the knowledge of the Company, has revocation been threatened,
nor has any such Company Pension Plan been amended since the date of its most
recent determination letter or application therefor in any respect that would
materially adversely affect its qualification or materially increase its costs.
There is no material pending or, to the knowledge of the Company, threatened
litigation relating to the Company Benefit Plans.
(c) No Company Pension Plan, other than any Company Pension Plan that
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"Company
17
Multiemployer Pension Plan"), had, as of the respective last annual valuation
date for each such Company Pension Plan, any "unfunded benefit liabilities" (as
such term is defined in Section 4001(a)(18) of ERISA), based on actuarial
assumptions that have been furnished to Parent, and there has been no material
adverse change in the financial condition of any Company Pension Plan since its
last such annual valuation date. No liability under Subtitle C or D of Title IV
of ERISA has been or is expected to be incurred by the Company with respect to
any ongoing, frozen or terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by it, or the
single-employer plan of any entity which is considered one employer with the
Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). None of the Company, any officer of the Company or any of the
Company Benefit Plans which are subject to ERISA, including the Company Pension
Plans, any trusts created thereunder or any trustee or administrator thereof,
has engaged in a "prohibited transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company or any officer of the Company to
the tax or penalty on prohibited transactions imposed by such Section 4975 or to
any liability under Section 502(i) or 502(l) of ERISA. None of such Company
Benefit Plans and trusts has been terminated, nor has there been any "reportable
event" (as that term is defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived with respect to any Company Benefit
Plan during the last five years, and no notice of a reportable event will be
required to be filed in connection with the Transactions. The Company has not
incurred a "complete withdrawal" or a "partial withdrawal" (as such terms are
defined in Sections 4203 and 4205, respectively, of ERISA) since the effective
date of such Sections 4203 and 4205 with respect to any Company Multiemployer
Pension Plan. All contributions and premiums required to be made under the terms
of any Company Benefit Plan as of the date hereof have been timely made or have
been reflected on the most recent balance sheet filed or incorporated by
reference in the Filed Company SEC Documents. Neither any Company Pension Plan
nor any single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived.
(d) With respect to any Company Benefit Plan that is an employee
welfare benefit plan, (i) no such Company Benefit Plan is unfunded or funded
through a "welfare benefit fund" (as such term is defined in Section 419(e) of
the Code), (ii) each such Company Benefit Plan that is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code) complies with the
applicable requirements of Section 4980B(f) of the Code and (iii) each such
Company Benefit Plan (including any such Company Benefit Plan covering retirees
or other former employees) may be amended or terminated without material
liability to the Company on or at any time after the Effective Time. The Company
has no obligations for retiree health and life benefits under any Company
Benefit Plan or Company Benefit Agreement.
(e) Except as disclosed in Section 3.11(e) of the Company Disclosure
Letter, the consummation of the Offer, the Merger or any other Transaction will
not (x) entitle any employee, officer or director of the Company to severance
pay or an election to terminate and receive severance pay, (y) accelerate the
time of payment or vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the Company
Benefit Plans or Company Benefit
18
Agreements or (z) result in any breach or violation of, or a default under, any
of the Company Benefit Plans or Company Benefit Agreements.
(f) Other than payments that may be made to the persons listed in
Section 3.11(f) of the Company Disclosure Letter (the "Primary Company
Executives"), (i) any amount or economic benefit that could be received (whether
in cash or property or the vesting of property) under any Company Benefit Plan
or Company Benefit Agreement or otherwise as a result of the Offer, the Merger,
any Transaction or any other event (including upon, as a result of or in
connection with a termination of employment on or following the Effective Time)
by any employee, officer or director of the Company or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) would not be characterized as an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code), and (ii) no
disqualified individual is entitled to receive any additional payment from the
Company or any other person in the event that the excise tax under Section 4999
of the Code is imposed on such disqualified individual.
Section 3.12. Litigation.
There is no suit, action, proceeding or investigation pending against, or
to the knowledge of the Company threatened against or affecting, the Company or
any of its properties before any arbitrator, court or other Governmental Entity
(and the Company is not aware of any basis for any such suit, action, proceeding
or investigation) that, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect. As of the date hereof,
there are no suits, claims, actions, proceedings or investigations pending or,
to the knowledge of the Company, threatened, seeking to prevent, hinder, modify
or challenge the transactions contemplated by this Agreement. The Company is
not subject to any outstanding Judgment against the Company or naming the
Company as a party that, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect.
Section 3.13. Compliance with Applicable Laws.
(a) Except as disclosed in the Filed Company SEC Documents, the Company
is, and its operations are being conducted, in compliance with all applicable
Laws, except for such failures to comply as, individually or in the aggregate,
could not reasonably be expected to have a Company Material Adverse Effect.
Except as set forth in the Filed Company SEC Documents, the Company has not
received any written notice: (i) of any administrative, civil or criminal
investigation or audit (other than Tax audits) by any Governmental Entity
relating to the Company or (ii) during the past two years, from any Governmental
Entity alleging that the Company is not in compliance in any material respect
with any applicable Law.
(b) The Company has in effect all approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of or
with all Governmental Entities ("Permits") necessary for it to own, lease or
otherwise hold and to operate its properties and assets and to carry on its
business and operations as now conducted, except for the failure to have such
Permits that, individually or in the aggregate, has not had and could not
reasonably be expected to have a Company Material Adverse Effect. There have
occurred no defaults under, or violations of, any such Permit, except for such
defaults and violations that, individually and in the aggregate, have not had
19
and could not reasonably be expected to have a Company Material Adverse Effect.
Neither the Offer nor the Merger, in and of itself, would cause the revocation
or cancellation of any such Permit that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect.
(c) This Section 3.13 does not relate to matters with respect to Taxes,
which are the subject of Section 3.09, or to environmental matters, which are
the subject of Section 3.14.
Section 3.14. Environmental Matters.
(a) Except as disclosed in the Filed Company SEC Documents or in
Section 3.14(a) of the Company Disclosure Letter and except for such matters as,
individually or in the aggregate, have not had and could not reasonably be
expected to have a Company Material Adverse Effect, (i) the Company is, and
within the period of all applicable statutes of limitation has been, in
compliance with all applicable Environmental Laws, (ii) the Company holds and
is, and within the period of all applicable statutes of limitation has been, in
compliance with all Permits required to conduct its business and operations
under all applicable Environmental Laws, (iii) the Company has not received any
Environmental Claim against it, and the Company has no knowledge of any such
Environmental Claim being threatened, (iv) to the knowledge of the Company, no
Hazardous Substance or other conditions are present on any property owned,
leased or operated by the Company, or at any other location, that are reasonably
likely to form the basis of any Environmental Claim against the Company or
against any person (including any predecessor of the Company) whose liability
the Company retained or assumed either contractually or by operation of law, (v)
the Company has not entered into or agreed to any Governmental Entity decree,
order or agreement and is not subject to any judgment relating to compliance
with, or to investigation or cleanup, or to liability, under any Environmental
Law, and (vi) the Company has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any Hazardous
Substance, or owned or operated any property or facility in a manner that has
given or would reasonably be expected to give rise to any liability, including
any liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to any
Environmental Laws. "Environmental Claim" means any claim, demand, action, suit,
complaint, proceeding, directive, investigation, Lien, demand letter or notice
(written or oral) of noncompliance, violation or liability by any person
asserting liability or potential liability (including liability or potential
liability for enforcement, investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of, based on or resulting from (i) the presence,
discharge, emission, release or threatened release of any Hazardous Substance at
any location, (ii) circumstances forming the basis of any violation or alleged
violation of any Environmental Law or any Permit issued under any Environmental
Law, or (iii) otherwise relating to obligations or liabilities under any
Environmental Law. "Environmental Laws" means any and all applicable federal,
state or local statutes, regulations, ordinances, guidelines, codes, decrees, or
other legally enforceable requirement (including common law) of any foreign
government, the United States, or any state, local, municipal or other
Governmental Entity, regulating, relating to or imposing liability or standards
of conduct concerning protection of the environment (including indoor air,
ambient air, surface water, groundwater, land surface, subsurface strata, or
plant or animal species) or human health as affected
20
by the environment or Hazardous Substances (including employee health and
safety). "Hazardous Substance" means all explosive or radioactive substances,
materials or wastes, hazardous or toxic substances, materials or wastes,
asbestos, asbestos-containing materials, pollutants and contaminants (including
petroleum or any fraction thereof) and all other substances, materials or
wastes, whether or not defined as such, that are regulated pursuant to or that
could result in liability under any applicable Environmental Law.
(b) No Environmental Law imposes any obligation upon the Company
arising out of or as a condition to the Offer, the Merger or any other
Transaction, including any requirement to modify or to transfer any permit or
license, any requirement to file any notice or other submission with any
Governmental Entity, the placement of any notice, acknowledgment or covenant in
any land records, or the modification of or provision of notice under any
agreement, consent order or consent decree, except for such obligations as,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect. No material Lien has been placed upon any of
the Company's properties under any Environmental Law.
Section 3.15. Contracts.
Except as disclosed as an exhibit to the Filed Company SEC Documents or as
set forth in Section 3.15 of the Company Disclosure Letter, the Company is not a
party to or bound by or otherwise subject to any Contracts of the following
nature (collectively, the "Material Contracts"): (i) any Contract which
restricts the Company or any of its affiliates from competing in any line of
business or with any person in any geographical area; (ii) any Contract
involving (A) the acquisition, merger or purchase of all or substantially all
the assets or business of a third party involving aggregate consideration of
$10.0 million, (B) the purchase or sale of assets, or a series of purchases and
sales of assets, involving aggregate consideration of $10.0 million or more or
(C) the grant to any person of any preferential right to purchase any material
asset or assets of the Company; (iii) any Contract which contains a "change in
control" or similar provision pursuant to which the execution and delivery of
this Agreement, the commencement of the Offer or the consummation of the Offer,
the Merger or any of the other Transactions would give rise to any right
(including any right of termination, cancellation, acceleration or vesting) or
benefit that could reasonably be expected to have a Company Material Adverse
Effect; (iv) any Contract, including any mortgage or other grant of security
interests, guarantee or note, relating to the borrowing of money in an amount in
excess of $10.0 million in the aggregate; (v) any Contract to indemnify for any
Environmental Claim or any other liability or cost with respect to any
Environmental Law; (vi) any Contract which would prohibit or materially delay
the consummation of the Merger or any of the other Transactions; or (vii) any
other Contract that is material to the business, assets, condition (financial or
otherwise), prospects or results of operations of the Company. Except as,
individually or in the aggregate, could not reasonably be expected to have a
Company Material Adverse Effect, the Company is not in breach or default under
any Material Contract nor, to the knowledge of the Company, is any other party
to any Material Contract in breach or default thereunder.
21
Section 3.16. Labor Matters.
There are no collective bargaining or other labor union agreements to which
the Company is a party or by which it is bound. To the knowledge of the
Company, there have been no labor union organizing activities involving the
Company, and the Company has not had any actual or threatened employee strike,
work stoppage, slowdown or lockout.
Section 3.17. Brokers; Fees and Expenses.
No broker, investment banker, financial advisor or other person, other than
▇▇▇▇▇▇ Brothers Inc., the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Offer, the Merger and the other
Transactions based upon arrangements made by or on behalf of the Company. The
Company has furnished to Parent a true and complete copy of all agreements
between the Company and ▇▇▇▇▇▇ Brothers Inc. relating to the Offer, the Merger
and the other Transactions.
Section 3.18. Opinion of Financial Advisor.
The Company has received the opinion of ▇▇▇▇▇▇ Brothers Inc., dated the
date of this Agreement, to the effect that, as of such date, the consideration
to be received in the Offer and the Merger by the holders of Company Common
Stock is fair to the holders of Company Common Stock from a financial point of
view.
Section 3.19. Potential Conflicts of Interest.
Except as disclosed in the Filed Company SEC Documents or set forth in
Section 3.19 of the Company Disclosure Letter, there have been no transactions,
agreements, arrangements or understandings between the Company, on the one hand,
and its affiliates, on the other hand, that would be required to be disclosed
under Item 404 of Regulation S-K under the Securities Act.
Section 3.20. Reserve Information.
The underlying factual information provided to ▇▇▇▇▇ ▇▇▇▇▇ Company, L.P.
("▇▇▇▇▇ ▇▇▇▇▇"), to the extent that it was relied upon by ▇▇▇▇▇ ▇▇▇▇▇ in the
preparation of its report on the Company's proved reserves as of January 1,
2000, was, at the time of delivery, true and correct in all material respects,
except for such errors as, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect. The Company
has no present knowledge of any material errors in such underlying factual
information supplied to ▇▇▇▇▇ ▇▇▇▇▇ for purposes of preparing such report and
the conclusions in such report are not in any material way unreasonable when
compared with the Company's own evaluation of the properties included in such
report as of January 1, 2000 taken as a whole.
22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant to the Company
as follows:
Section 4.01. Organization, Standing and Power.
Each of Parent and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is organized
and has full corporate power and authority necessary to enable it to own, lease
or otherwise hold its properties and assets and to conduct its businesses as
presently conducted.
Section 4.02. Sub.
Since the date of its incorporation, Sub has not carried on any business or
conducted any operations other than the execution of this Agreement, the
performance of its obligations hereunder and matters ancillary thereto. Sub is
a wholly owned subsidiary of Parent.
Section 4.03. Authority; Execution and Delivery; Enforceability.
Each of Parent and Sub has all requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the Transactions.
The execution, delivery and performance by each of Parent and Sub of this
Agreement and the consummation by it of the Transactions have been duly
authorized by all necessary corporate and stockholder action on the part of
Parent and Sub. USX has recommended that Parent enter into this Agreement.
Parent, as sole stockholder of Sub, has adopted this Agreement. Each of Parent
and Sub has duly executed and delivered this Agreement, and this Agreement
constitutes its legal, valid and binding obligations, enforceable against it in
accordance with its terms, except as that enforceability may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
affecting the enforcement of creditor's rights generally and the application of
general principles of equity (regardless of whether that enforceability is
considered in a proceeding at law or in equity). Subject to the applicability
of Section 253 of the DGCL, the affirmative vote of the holders of a majority of
the outstanding shares of common stock of Sub voting as a single class is the
only vote of any class or series of Sub's capital stock required to approve the
Merger and adopt this Agreement.
Section 4.04. No Conflicts; Consents.
(a) The execution, delivery and performance by each of Parent and Sub
of this Agreement do not, and the consummation of the Offer, the Merger and the
other Transactions and compliance with the terms of this Agreement will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, any provision of (i) the charter or
organizational documents of Parent or any of its subsidiaries, (ii) any Contract
to which Parent or any of its subsidiaries is a party or by which any of their
respective properties or assets is bound or (iii) subject to the filings and
other matters referred to in Section 4.04(b), any Judgment or Law applicable to
Parent or any of its subsidiaries or their respective properties or assets,
subject in the
23
case of clauses (ii) and (iii) above, for such matters as, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on (a) the ability of Parent or Sub to perform its obligations under this
Agreement or (b) the ability of Parent or Sub to consummate the Offer, the
Merger and the other Transactions (any of the foregoing, a "Parent Material
Adverse Effect").
(b) No Consent of, or registration, declaration or filing with, or
notice to, or Permit from any Governmental Entity is required to be obtained or
made by or with respect to Parent or any of its subsidiaries in connection with
the execution, delivery and performance of this Agreement or the consummation of
the Transactions, other than (i) the filing with the SEC of (A) the Offer
Documents and (B) such reports under the Exchange Act as may be required in
connection with this Agreement, the Offer, the Merger and the other
Transactions, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, (iii) such filings as may be required in
connection with the Taxes described in Section 6.08, (iv) filings under state
securities Laws, and (v) such other items as, individually or in the aggregate,
could not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.05. Information Supplied.
Subject to the Company's fulfillment of its obligations hereunder with
respect thereto, the Offer Documents will contain (or will be amended in a
timely manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and any other applicable Law and will conform in all material
respects with the requirements of the Exchange Act and any other applicable Law;
and the Offer Documents will not, at the respective times they are filed with
the SEC or published, sent or given to the Company's stockholders, 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.
Notwithstanding the foregoing, no representation or warranty is hereby made by
Parent or Sub with respect to any information supplied by the Company in writing
for inclusion in, or with respect to the Company information derived from the
Company's public SEC filings which is included or incorporated by reference in,
the Offer Documents. None of the information supplied or to be supplied by USX,
Parent or Sub for inclusion or incorporation by reference in, or which may be
deemed to be incorporated by reference in, the Schedule 14D-9 or the Proxy
Statement will, at the respective times the Schedule 14D-9 and the Proxy
Statement are filed with the SEC or published, sent or given to the Company's
stockholders, 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, in light of the circumstances under which they are made, not
misleading. If any time prior to the Effective Time any event with respect to
Parent or Sub, or with respect to any information supplied by USX, Parent or Sub
for inclusion in the Schedule 14D-9 or the Proxy Statement, shall occur which is
required to be described in an amendment of, or a supplement to, such document,
Parent or Sub shall so describe the event to the Company.
24
Section 4.06. Brokers.
No broker, investment banker, financial advisor or other person is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the Offer, the Merger and the other Transactions
based upon arrangements made by or on behalf of Parent.
Section 4.07. Financing.
Parent and Sub now have and will have available (through cash on hand and
existing credit arrangements or otherwise) all of the funds necessary for the
acquisition of all shares of Common Stock pursuant to the Offer and the Merger,
as and when needed, and to perform their respective obligations under this
Agreement.
Section 4.08. Litigation.
There is no suit, action, proceeding or investigation pending against, or
to the knowledge of Parent threatened against or affecting, Parent or any of its
subsidiaries before any Governmental Entity that questions the validity of this
Agreement or any action to be taken by Parent or Sub in connection with the
consummation of the Transactions or would otherwise prevent or delay the
consummation of the Transactions.
Section 4.09. Ownership of Company Common Stock.
As of the date hereof, neither Parent nor any of its subsidiaries
beneficially owns any shares of Company Common Stock.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.01. Conduct of Business.
(a) Conduct of Business by the Company. Except for matters set forth in
Section 5.01(a) of the Company Disclosure Letter or otherwise expressly
permitted by this Agreement, from the date of this Agreement to the Effective
Time, the Company shall conduct its business in the usual, regular and ordinary
course of business and in substantially the same manner as previously conducted
and use its reasonable best efforts to preserve intact its current business
organization, keep available the services of its current officers and employees
and keep its relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. The
Company shall maintain its assets and all parts thereof in as good working order
and condition as at present, ordinary wear and tear excepted, consistent with
past practice, and shall maintain in full force and effect current insurance
policies or other comparable insurance coverage with respect to the assets and
potential liabilities thereof. In addition, and without limiting the generality
of the foregoing, except for matters set forth in Section 5.01(a) of the Company
Disclosure Letter or conduct otherwise expressly permitted by this Agreement,
from the date of this Agreement
25
to the Effective Time, the Company shall not do any of the following without the
prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock, property or otherwise) in
respect of, any of its capital stock, (B) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, grant, pledge, transfer or
otherwise encumber or dispose of or subject to any Lien (A) any shares of
its capital stock, (B) any securities convertible into or exchangeable for,
or any options, warrants, commitments or rights of any kind to acquire, any
such shares, voting securities or convertible or exchangeable securities or
(C) any "phantom" stock, "phantom" stock rights, stock appreciation rights
or stock-based performance units, other than the issuance of Company Common
Stock upon the exercise of Company Stock Options and Warrants outstanding
on the date of this Agreement and in accordance with their terms as in
effect on the date of this Agreement;
(iii) amend the Company Charter or the Company Bylaws;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in or
all or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, company, limited liability
company, joint venture, association or other business organization or
division thereof or (B) any assets that, individually or in the aggregate,
are in excess of $10 million, except purchases of inventory in the ordinary
course of business;
(v) (A) grant to any employee, officer or director of the
Company any increase in compensation or pay any bonus, except to the extent
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Filed Company SEC
Documents, (B) grant to any employee, officer or director of the Company
any increase in severance, change of control or termination pay, except to
the extent required under any agreement in effect as of the date of the
most recent audited financial statements included in the Filed Company SEC
Documents, (C) establish, adopt, enter into or amend any Company Benefit
Agreement, any collective bargaining agreement, other labor union agreement
or Company Benefit Plan, or (D) take any action to accelerate any rights or
benefits, take any action to fund or in any other way secure the payment of
compensation or benefits under any Company Benefit Agreement or Company
Benefit Plan, or make any material determinations not in the ordinary
course of business, under any collective bargaining agreement, labor union
agreement or Company Benefit Plan or Company Benefit Agreement;
26
(vi) make any change in accounting methods, principles or
practices affecting the reported assets, liabilities or results of
operations of the Company, except as required by a change in GAAP;
(vii) sell, lease (as lessor), license, encumber or otherwise
dispose of or subject to any Lien any properties or assets that,
individually or in the aggregate, are in excess of $1 million, except sales
of commodity production, inventory and excess or obsolete assets in the
ordinary course of business;
(viii) (A) incur, assume or prepay any indebtedness for
borrowed money or guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for any
indebtedness or obligation of another person or issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company, except for short-term borrowings incurred in the ordinary
course of business and additional borrowings under its credit facility not
to exceed $10 million at any time outstanding, or (B) make or forgive any
loans, advances or capital contributions to, or investments in, any other
person;
(ix) make or agree to make any new capital expenditure or
expenditures that, individually or in the aggregate, are in excess of $2.0
million in any calendar quarter;
(x) make or change any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) (A) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation, other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business or in
accordance with their terms, of liabilities reflected or reserved against
in the most recent financial statements (or the notes thereto) of the
Company included in the Filed Company SEC Documents or incurred since the
date of such financial statements in the ordinary course of business or (B)
cancel any indebtedness that is material, individually or in the aggregate,
to the Company, or waive any claims or rights of substantial value;
(xii) adopt a plan or agreement of, or resolutions providing
for or authorizing, complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
(xiii) make, enter into or renew, extend, amend, modify, or
waive any provisions of any Material Contract or relinquish or waive any
rights under, or agree to the termination of, any Material Contract, except
in the ordinary course of business;
(xiv) permit any material insurance policy naming it as a
beneficiary or a loss payable payee to lapse, be cancelled or expire unless
a new policy with substantially identical coverage is in effect as of the
date of lapse, cancellation or expiration; or
27
(xv) authorize, or commit or agree to take, any of the
foregoing actions or take any action that would (y) make any representation
or warranty in Article III hereof untrue or incorrect in any material
respect, or (z) result in any of the conditions to the Offer set forth in
Annex I hereto or any of the conditions to the Merger set forth in Article
VII hereof not being satisfied.
(b) Advice of Changes. The Company shall promptly advise Parent of any
change or event that has had or could reasonably be expected to have a Company
Material Adverse Effect.
Section 5.02. No Solicitation.
(a) From the date hereof, the Company shall not (whether directly or
indirectly through advisors, agents, representatives or other intermediaries),
and the Company shall use its reasonable best efforts to cause its officers,
directors, advisors, representatives and other agents (collectively, its
"Representatives") not to, directly or indirectly, (i) continue any discussions
or negotiations, if any, with any parties, other than Parent and Sub, conducted
heretofore with respect to any Company Takeover Proposal (as hereinafter
defined) or which could reasonably be expected to lead to a Company Takeover
Proposal, (ii) solicit, initiate or knowingly encourage any inquiries relating
to, or the submission of, any Company Takeover Proposal, (iii) participate in
any discussions or negotiations regarding any Company Takeover Proposal, or, in
connection with any Company Takeover Proposal, furnish to any person any
information or data with respect to or access to the properties of the Company,
or take any other action to facilitate the making of any proposal that
constitutes or may reasonably be expected to lead to any Company Takeover
Proposal or (iv) enter into any agreement with respect to any Company Takeover
Proposal. Notwithstanding the foregoing, the Company or the Company Board shall
be permitted to furnish information with respect to the Company and participate
in discussions or negotiations regarding an unsolicited bona fide Company
Takeover Proposal if, and only to the extent that, a majority of the entire
Company Board determines in good faith that such Company Takeover Proposal could
reasonably be expected to result in a Superior Company Proposal, in which case
the Company will not disclose any information to such person without entering
into a customary confidentiality agreement containing confidentiality provisions
substantially identical to those contained in the Confidentiality Agreement (as
hereinafter defined); provided, however, that such confidentiality agreement
shall not prohibit the presentation of a Company Takeover Proposal to Parent.
The Company shall promptly (but in no case later than 48 hours after actual
receipt by an officer of the Company) provide Parent with a copy of any written
Company Takeover Proposal received and a written statement with respect to any
non-written Company Takeover Proposal received, which statement shall include
the material terms thereof (but may omit the identity of the person making the
Company Takeover Proposal). The Company shall keep Parent informed on a
reasonably current basis of any material developments with respect to any
discussions regarding any Company Takeover Proposal.
(b) Nothing contained in Section 5.02(a) shall prohibit the Company or
the Company Board from (i) taking and disclosing to the Company's stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act (or
any similar communications) in connection with the making or amendment of a
tender offer or exchange offer
28
or (ii) making any disclosure to the Company's stockholders required by
applicable Law, provided that the Company Board shall not recommend that the
stockholders of the Company tender their shares of Company Common Stock in
connection with any such tender or exchange offer unless the Company Board, by
majority vote of the entire Company Board, shall have determined in good faith,
based upon (among other things) the advice of its independent financial advisors
and outside counsel, that the relevant Company Takeover Proposal constitutes a
Superior Company Proposal.
(c) For purposes of this Agreement:
"Company Takeover Proposal" means any inquiry, proposal or offer (other
than by Parent, Sub or any of their affiliates) for (i) a merger,
consolidation, share exchange, dissolution, recapitalization, liquidation
or other business combination involving the Company, (ii) the acquisition
by any person in any manner, directly or indirectly, of a number of shares
of any class of equity securities of the Company equal to or greater than
15% of the number of such shares outstanding before such acquisition or
(iii) the acquisition by any person in any manner, directly or indirectly,
of assets that generate or constitute a substantial part of the net
revenues, net income or assets of the Company, in each case other than the
Transactions.
"Superior Company Proposal" means any bona fide written Company Takeover
Proposal made by a third party (other than by Parent, Sub or any of their
affiliates) to acquire directly or indirectly (i) all the equity securities
or (ii) the assets of the Company substantially as an entirety, which the
Company Board determines in good faith (based on, among other things, the
advice of its independent financial advisors and outside counsel), taking
into account all legal, financial, regulatory and other aspects of the
proposal and the person making such proposal, (x) would, if consummated, be
more favorable, from a financial point of view, to the holders of Company
Common Stock than the Transactions and (y) is reasonably likely to be
consummated without undue delay.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01. Preparation of Proxy Statement; Stockholders Meeting.
(a) If the Company Stockholder Approval is required by applicable Law,
the Company shall, as soon as practicable following the acceptance of shares of
Company Common Stock pursuant to the Offer, prepare and file with the SEC the
Proxy Statement in preliminary form, and each of the Company and Parent shall
use its reasonable best efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. If at any time prior to receipt of the Company Stockholder Approval
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the
29
Company shall promptly prepare and mail to its stockholders such an amendment or
supplement. No filing of, or amendment to, the Proxy Statement will be made by
the Company without providing Parent the opportunity to review and comment
thereon. The Company shall not mail any Proxy Statement, or any amendment or
supplement thereto, to which Parent reasonably objects. The Company shall use
its reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after filing with the SEC.
(b) If the Company Stockholder Approval is required by applicable Law,
the Company shall, as soon as practicable following the acceptance of shares of
Company Common Stock pursuant to the Offer, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Company Stockholders Meeting") for
the purpose of seeking the Company Stockholder Approval. The Company shall,
through the Company Board, recommend to its stockholders that they give the
Company Stockholder Approval.
(c) If the Company Stockholders Meeting is held, Parent shall cause all
shares of Company Common Stock purchased pursuant to the Offer and all other
shares of Company Common Stock owned by Sub or any other subsidiary of Parent to
be voted at the Company Stockholders Meeting in favor of the adoption of this
Agreement and shall, after acceptance of shares of Company Common Stock pursuant
to the Offer, otherwise use its reasonable best efforts to cause the Merger to
be completed as soon as practicable.
(d) Notwithstanding the foregoing clauses (a), (b) and (c), if Sub or
any other subsidiary of Parent shall acquire at least 90% of the outstanding
shares of Company Common Stock, the parties shall, as soon as possible following
the acceptance of shares of Company Common Stock pursuant to the Offer, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer without a stockholders meeting
in accordance with Section 253 of the DGCL.
Section 6.02. Access to Information; Confidentiality.
(a) The Company shall afford to Parent, and to Parent's officers,
employees, accountants, counsel, financial advisors and other representatives,
access during reasonable business hours during the period prior to the Effective
Time to (i) all of the Company's properties, books, contracts, commitments,
personnel and records and other information and business documents, (ii) by
appointment, the Company's independent reserve engineers and accountants and
(iii) the premises of the Company for the purpose of inspecting the books and
records of the Company, provided that access to the premises shall be permitted
only with the prior consent of the Company (which consent shall not be
unreasonably withheld or delayed). During the period prior to the Effective
Time, Parent will have the full cooperation of the Company in confirming the
nature of the relationships between the Company and its customers, working
interest owners, contractors and suppliers, including whether or not such
relationships are satisfactory and whether or not such relationships are
expected to continue after the Merger. The Company shall have the right to have
a representative present at all times of any such inspections, interviews and
communications conducted by Parent or its representatives.
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(b) Neither any investigation conducted by Parent or its
representatives pursuant to this Section 6.02 nor the results thereof shall
affect any representation or warranty of the Company contained in this Agreement
or the ability of Parent to rely thereon. All information exchanged pursuant to
this Section 6.02 shall be subject to the confidentiality agreement dated
November 15, 2000, between the Company and Parent (the "Confidentiality
Agreement").
Section 6.03. Reasonable Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties shall use all reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other Transactions, including (i)
determining whether any action by or in respect of or filing with any
Governmental Entities is required or any actions, consents, approvals or waivers
are required to be obtained from third parties in connection with the
Transactions, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of this Agreement. Nothing in this Agreement shall be deemed to require
Parent to waive any rights or agree to any limitation on its operations or to
dispose of any asset or collection of assets of the Company, Parent or any of
their respective subsidiaries or affiliates.
(b) The Company shall give prompt notice to Parent, and Parent or Sub
shall give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement becoming untrue or inaccurate in any
material respect, (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, (iii) any notice or other communication it
receives from any person alleging that the consent of such person is or may be
required in connection with the Transactions, (iv) any notice or other
communication it receives from any Governmental Entity in connection with the
Transactions or (v) any action, suit, claim, investigation or proceeding
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting it that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 3.12 or 4.08, as
applicable, or that relate to the consummation of the Transactions; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
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Section 6.04. Stock Options.
(a) As soon as practicable following the date of this Agreement, the
Company Board (or, if appropriate, any committee administering the Company Stock
Plan) shall adopt such resolutions or take such other actions as are required to
provide that each Company Stock Option outstanding immediately prior to the
acceptance for payment of shares of Company Common Stock pursuant to the Offer
shall be canceled, with the holder thereof becoming entitled to receive (i) in
the case of each holder listed in Section 6.04(a) of the Company Disclosure
Letter, an amount of cash in respect of such Company Stock Option equal to the
product of (A) the excess, if any, of (x) the Merger Consideration over (y) the
exercise price per share of Company Common Stock subject to such Company Stock
Option and (B) the number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to its cancellation or (ii) in the case
of each other holder, the amount of cash in respect of such Company Stock Option
as provided in the Company Stock Plan upon a change of control.
(b) All amounts payable pursuant to this Section 6.04 shall be subject
to any required withholding of Taxes and shall be paid at or as soon as
practicable following the Effective Time, but in any event within seven days
following the Effective Time, without interest. The Company shall use its
reasonable best efforts to obtain all consents of the holders of the Company
Stock Options as shall be necessary to effectuate the foregoing. The
cancellation of a Company Stock Option in exchange for the cash payment
described in this Section 6.04 shall be deemed a release of any and all rights
the holder of such Company Stock Option had or may have had in respect thereof,
and any required consents from all such holders shall so provide.
Notwithstanding anything to the contrary contained in this Agreement, payment
shall, at Parent's request, be withheld in respect of any Company Stock Option
until all consents, approvals and tax certifications which Parent reasonably
determines to be necessary are obtained.
(c) As soon as practicable following the date of this Agreement, the
Company Board (or, if appropriate, any committee administering the Company Stock
Plan) shall take or cause to be taken such actions as are required to cause (i)
the Company Stock Plan to terminate as of the Effective Time and (ii) the
provisions in any other Company Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company to be deleted as of the Effective Time. The
Company shall ensure that following the Effective Time no holder of a Company
Stock Option or any participant in the Company Stock Plan or other Company
Benefit Plan shall have any right thereunder to acquire any capital stock of the
Company or the Surviving Corporation.
(d) In this Agreement:
"Company Stock Option" means any option to purchase Company Common Stock
granted under any Company Stock Plan.
"Company Stock Plan" means the Company's 1998 Stock Option and Incentive
Plan as amended from time to time.
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Section 6.05. Indemnification.
(a) After the Effective Time, Parent will cause the Surviving
Corporation to indemnify each person who is now, or has been at any time prior
to the date hereof, a director or officer of the Company (individually, an
"Indemnified Party" and, collectively, the "Indemnified Parties"), to the
fullest extent permitted by law, with respect to any liability, loss, damage,
judgment, fine, penalty, amount paid in settlement or compromise with the
approval of the Company (which approval shall not be unreasonably withheld or
delayed), cost or expense (including reasonable fees and expenses of legal
counsel) incurred in connection with any threatened or actual action, suit or
proceeding based on, or arising out of, the fact that such person is or was a
director or officer of the Company ("Indemnified Liabilities"), in each case, to
the full extent that Parent or the Company is permitted under applicable Law to
so indemnify. Any Indemnified Party desiring to claim indemnification under this
Section 6.05(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Parent and the Surviving Corporation (but
the failure so to notify shall not relieve the indemnifying party from any
liability which it may have under this Section 6.05(a) except to the extent such
failure materially prejudices such indemnifying party), and shall deliver to
Parent and the Surviving Corporation all undertakings required under applicable
Law. After Parent's receipt of such notice with respect to any such claim,
action, suit, proceeding or investigation, Parent shall have the right to assume
and direct, or cause the Surviving Corporation to assume and direct, all aspects
of the defense thereof, including settlement, and the Indemnified Party shall
cooperate in the vigorous defense of any such matter. In no event shall Parent
or the Surviving Corporation be liable for any settlement effected without its
prior written consent. The rights to indemnification under this Section 6.05(a)
shall continue in full force and effect for a period of six years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any Indemnified Liabilities asserted or made within such period shall
continue until the disposition of such Indemnified Liabilities.
(b) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect policies of directors' and officers' insurance,
for the benefit of those persons who are covered by the Company's directors' and
officers' liability insurance at the Effective Time, providing coverage with
respect to matters occurring prior to the Effective Time that is at least equal
to the coverage provided under the Company's current directors' and officers'
liability insurance policies, to the extent that such liability insurance can be
maintained at an annual cost to Parent not greater than 150 percent of the
premium for the current Company directors' and officers' liability insurance
(which the Company represents and warrants to be not more than $150,000);
provided, however, that if such insurance cannot be so maintained at or below
such cost, Parent shall maintain as much of such insurance as can be so
maintained at a cost equal to 150 percent of the current annual premiums of the
Company for such insurance. The foregoing provisions shall not in any way
restrict or preclude any sale, liquidation or dissolution of any subsidiary of
Parent at any time after the Effective Time. Parent agrees to pay all expenses
(including fees and expenses of counsel) that may be incurred by any Indemnified
Party in successfully enforcing the indemnity or other obligations under this
Section 6.05.
(c) In the event Parent or the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving
33
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made so that the
successors and assigns of Parent or the Surviving Corporation shall assume the
obligations set forth in this Section 6.05.
(d) The provisions of this Section 6.05 are (i) intended to be for the
benefit of, and to be enforceable by, each Indemnified Party, his or her heirs
and his or her representatives and (ii) in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
Section 6.06. Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred in
connection with the Merger and the other Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) In the event that this Agreement is terminated by (i) the Company
pursuant to Section 8.01(d) or (ii) by Parent or Sub pursuant to Section
8.01(c)(i), (iii) or (iv), then the Company shall promptly, but in no event
later than the date of such event, pay to Parent a fee equal to $15 million (the
"Termination Fee"), payable by wire transfer of same day funds, which shall be
deemed to be sole and exclusive liquidated damages for such termination. In
addition, if: (A)(x) this Agreement is terminated by the Company pursuant to
Section 8.01(b)(ii) or by Parent or Sub pursuant to Section 8.01(c)(v) (where
the breach by the Company is willful), (y) prior to such termination a Company
Takeover Proposal has been publicly announced, disclosed or communicated and (z)
on the date of such termination, neither Parent nor Sub is in material breach of
this Agreement and the Minimum Tender Condition has not been satisfied and (B)
within nine months after such termination pursuant to clause (A), the Company
shall consummate or enter into an agreement with respect to any Company Takeover
Proposal, then the Company shall pay the Termination Fee concurrently with the
earlier of entering into any such agreement or consummating such transaction.
Section 6.07. Public Announcements.
Parent and Sub, on the one hand, and the Company, on the other hand, shall
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the Offer, the Merger and the other Transactions and shall not issue
any such press release or make any such public statement prior to such
consultation, except after reasonable attempts to provide notice have been
undertaken and such release or statement is required by applicable Law.
Section 6.08. Transfer Taxes.
All stock transfer, real estate transfer, documentary, stamp, recording and
other similar Taxes (including interest, penalties and additions to any such
Taxes) ("Transfer Taxes") incurred in connection with the Transactions shall be
paid by the party upon whom the primary burden is placed by the applicable Law.
Each party shall cooperate with the other in preparing, executing and filing
34
any Tax Returns with respect to such Transfer Taxes, including supplying in a
timely manner a complete list of all real property interests held by the Company
and any information with respect to such property that is reasonably necessary
to complete such Tax Returns.
Section 6.09. Directors.
Promptly upon the acceptance for payment of, and payment by Sub for, any
shares of Company Common Stock pursuant to the Offer, Sub shall be entitled to
designate such number of directors on the Company Board as will give Sub,
subject to compliance with Section 14(f) of the Exchange Act, representation on
the Company Board equal to at least that number of directors, rounded up to the
next whole number, that equals the product of (a) the total number of directors
on the Company Board (giving effect to the directors elected pursuant to this
sentence) multiplied by (b) the percentage that (i) such number of shares of
Company Common Stock so accepted for payment and paid for by Sub plus the number
of shares of Company Common Stock otherwise owned by Sub or any other subsidiary
of Parent bears to (ii) the number of such shares then outstanding, and the
Company shall, at such time, cause Sub's designees to be so elected or appointed
to the Company Board; provided, that in the event that Sub's designees are
appointed or elected to the Company Board, until the Effective Time the Company
Board shall have at least two directors who are directors on the date of this
Agreement and who are not officers of the Company (the "Independent Directors");
and provided further that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the remaining Independent
Director shall be entitled to designate a person to fill such vacancy who shall
be deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Directors then remain, the other directors shall designate two
persons to fill such vacancies who are not officers, stockholders or affiliates
of the Company, Parent or Sub, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. After acceptance by Sub
of shares of Company Common Stock pursuant to the Offer and prior to the
Effective Time, any (i) amendment or termination of this Agreement by the
Company, (ii) extension of time for the performance, or waiver, of the
obligations or other acts of Parent or Sub or (iii) waiver of the Company's
rights hereunder, shall require the approval of all of the Independent Directors
(and, in any event, at least two Independent Directors) in addition to any
required approval thereof by the full Company Board. Subject to applicable Law,
the Company shall take all action requested by Parent necessary to effect any
such election or appointment, including mailing to its stockholders the
Information Statement, and the Company shall make such mailing with the mailing
of the Schedule 14D-9 (provided that Sub shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Sub's designees). In connection with the foregoing,
the Company shall promptly, at the option of Sub, either increase the size of
the Company Board or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or appointed
to the Company Board as provided above. The Company will also use its
reasonable efforts to cause Sub's designees to be proportionately represented on
each committee of the Company Board (other than any committee of the Company
Board established to take action under this Agreement). The provisions of this
Section 6.09 are in addition to and, except as specifically contemplated by this
Section 6.09, shall not limit any rights which Sub, Parent or any of their
affiliates may have as a holder or beneficial owner of shares of Company Common
Stock as a matter of applicable Law with respect to the election of directors or
otherwise.
35
Section 6.10. CMS Operating Agreement.
The Company has had discussions with CMS Oil & Gas Company ("CMS")
regarding the elimination of Section D of Article XVI of the Operating Agreement
dated November 20, 1998 between CMS and the Company, and the Company will use
its reasonable best efforts to effect an amendment to that agreement prior to
the Effective Time so that such Section D will be eliminated or modified to
remove any effective impediment to drilling proposals consistent with aggressive
development.
Section 6.11. Further Assurances.
At and after the Effective Time, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of the Company or Sub, any deeds, bills of sale, assignments or
assurances and to take and do, in the name and on behalf of the Company or Sub,
any other actions and things to vest, perfect or confirm of record or otherwise
in the Surviving Corporation any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to
the satisfaction or, if permitted by applicable Law, waiver on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. If required by applicable Law, the Company
shall have obtained the Company Stockholder Approval.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect; provided, however, that
prior to asserting this condition, subject to Section 6.03, the party
asserting such condition shall have used its reasonable best efforts to
prevent the entry of any such injunction or other order and to appeal as
promptly as possible any such injunction or other order that may be
entered.
(c) Statutory Restraints. No statute, code or regulation shall have
been enacted or promulgated by any Governmental Entity that prohibits
consummation of the Merger.
(d) Purchase of Common Stock. Sub shall have previously accepted for
payment and paid for shares of Company Common Stock pursuant to the Offer.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.01. Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the stockholders of Sub or, subject
to the terms hereof, the Company:
(a) by mutual written consent of Parent and the Company; provided,
however, that if Parent shall have nominated a majority of the directors
pursuant to Section 6.09, such consent of the Company may only be given if
approved by the Independent Directors in accordance with Section 6.09;
(b) by either Parent or the Company:
(i) if a statute, rule or executive order shall have been
enacted, entered or promulgated prohibiting the transactions contemplated
hereby on the terms contemplated by this Agreement or if any Governmental
Entity shall have issued an order, decree or ruling or takes any other
action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, shares of Company Common Stock
pursuant to the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(ii) if (A) as the result of the failure of any of the
conditions set forth in Annex I to this Agreement, (1) Sub shall have
failed to commence the Offer within 30 days following the date of this
Agreement or (2) the Offer shall have terminated or expired in accordance
with its terms without Sub having purchased any shares of Company Common
Stock pursuant to the Offer or (B) Sub shall not have accepted for payment
any shares of Company Common Stock pursuant to the Offer prior to April 30,
2001; provided, however, that the right to terminate this Agreement
pursuant to this clause (ii) shall not be available to any party whose
willful failure to fulfill any of its obligations under this Agreement
results in the failure of any such condition or if the failure of such
condition results from facts or circumstances that constitute a willful
breach of any representation or warranty of such party contained in this
Agreement;
(c) by Parent or Sub:
(i) if, prior to the acceptance for payment of shares of
Company Common Stock pursuant to the Offer, the Company Board shall have
withdrawn, or modified or changed in a manner adverse to Parent or Sub, its
approval or recommendation of the Offer (including by amendment to the
Schedule 14D-9), this Agreement or the Merger or shall have recommended or
approved a Company Takeover Proposal; or
37
(ii) if any Person or "group" (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent, Sub or their affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (as determined pursuant to Rule 13d-3 under the Exchange Act) of
15% or more of the outstanding shares of Company Common Stock;
(iii) if there shall have been a material breach by the
Company of any provision of Section 5.02;
(iv) if the Company shall have (i) exempted for purposes of
Section 203 of the DGCL any acquisition of shares of Company Common Stock
by any person or "group" (as defined in Section 13(d)(3) of the Exchange
Act), other than USX, Parent, Sub or their affiliates, or (ii) amended (or
agreed to amend) the Company Rights Agreement or redeemed (or agreed to
redeem) the outstanding Company Rights thereunder for the purpose of
exempting an acquisition of shares of Company Common Stock (other than
pursuant to this Agreement) from the Company Rights Agreement and the
Company Rights; or
(v) if, prior to the acceptance for payment of shares of
Company Common Stock pursuant to the Offer, (i) there shall be a breach of
any representation or warranty of the Company in this Agreement that is
qualified as to materiality or Company Material Adverse Effect, (ii) there
shall be a breach of any representation or warranty of the Company in this
Agreement that is not so qualified other than any such breaches which, in
the aggregate, have not had or could not reasonably be expected to have a
Company Material Adverse Effect, or (iii) there shall be a material breach
by the Company of any of its covenants or agreements contained in this
Agreement, which breach, in the case of clause (i), (ii) or (iii), either
is not capable of being cured or, if it is capable of being cured, has not
been cured by the earlier of (x) 10 business days following written notice
to the Company from Parent or Sub of such breach and (y) the expiration of
the Offer; provided, however, that neither Parent nor Sub may terminate
this Agreement pursuant to this Section 8.01(c)(v) if Parent or Sub is then
in material breach of any representation, warranty or covenant contained in
this Agreement;
(d) by the Company if, prior to the acceptance for payment of shares of
Company Common Stock pursuant to the Offer, (A) the Company Board, by majority
vote of the entire Company Board, determines in good faith, based upon (among
other things) the advice of outside financial advisors and outside counsel to
the Company, that a Company Takeover Proposal constitutes a Superior Company
Proposal, (B) the Company, at the direction of the Company Board, notifies
Parent in writing that it intends to enter into an agreement with respect to
such Superior Company Proposal, which notification identifies the person making
the Superior Company Proposal and attaches the most current version of such
agreement (or a complete and accurate description of all material terms and
conditions thereof), (C) Parent does not make, within three business days of
receipt of the Company's written notification of its intention to enter into a
binding agreement for a Superior Company Proposal, an offer that the Company
Board determines, in good faith after consultation with its financial advisors,
is at least as favorable to the stockholders of the Company as such Superior
Company Proposal, it being understood that the Company shall not enter into any
38
such binding agreement during such three-business day period and (D) the Company
concurrently with such termination pursuant to this clause (e)(i) pays to Parent
in immediately available funds the Termination Fee (as provided in Section
6.06). The Company agrees to notify Parent promptly if its intention to enter
into a written agreement referred to in its notification shall change at any
time after giving effect to such notification; or
(e) by the Company prior to the consummation of the Offer, if (A) there
shall be a breach of any representation or warranty of Parent or Sub in this
Agreement that is qualified as to materiality or Parent Material Adverse Effect,
(B) there shall be a breach of any representation or warranty of Parent or Sub
in this Agreement that is not so qualified, other than any such breaches which,
in the aggregate, have not had or could not reasonably be expected to have a
Parent Material Adverse Effect or (C) there shall be a material breach by Parent
or Sub of any of its covenants or agreements contained in this Agreement, which
breach, in the case of clause (A), (B) or (C), either is not capable or being
cured or, if it is capable of being cured, has not been cured by the earlier of
(x) 10 business days following written notice to Parent from the Company of such
breach and (y) the expiration of the Offer; provided that the Company may not
terminate this Agreement pursuant to this Section 8.01(f) if the Company is then
in material breach of any representation, warranty or covenant contained in this
Agreement.
Section 8.02. Effect of Termination.
In the event of termination of this Agreement by either the Company or
Parent or Sub as provided in Section 8.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on the part of
Parent, Sub or the Company, other than Section 6.06, this Section 8.02 and
Article IX, which provisions shall survive such termination, and except that
nothing in this Section 8.02 shall relieve a party from liability for fraud or
liability for the willful breach by a party of any representation, warranty or
covenant set forth in this Agreement and such party shall be fully liable for
any and all liabilities and damages incurred or suffered by the other party as a
result of any such breach.
Section 8.03. Amendment.
Subject to Section 6.09, this Agreement may be amended, supplemented or
modified by the parties at any time before or after receipt of the Company
Stockholder Approval only by an instrument in writing signed on behalf of each
of the parties; provided, however, that after receipt of the Company Stockholder
Approval, there shall be made no amendment, supplement or modification that by
Law requires further approval by the stockholders of the Company without the
further approval of such stockholders.
Section 8.04. Extension; Waiver.
Subject to Section 6.09, at any time prior to the Effective Time, (a) the
parties may extend the time for the performance of any of the obligations or
other acts of the other parties, (b) each party may waive any inaccuracies in
the representations and warranties of another party contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, each party may waive compliance with any of the
agreements or conditions of another
39
party contained in this Agreement. Subject to Section 6.09, any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
Section 8.05. Procedure for Termination, Amendment, Extension or Waiver.
Subject to Section 6.09, a termination of this Agreement pursuant to
Section 8.01, an amendment, modification or supplement of this Agreement
pursuant to Section 8.03 or an extension or waiver pursuant to Section 8.04
shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
Section 9.02. Notices.
All notices, requests, claims, demands and other communications under this
Agreement shall be in writing and shall be deemed given upon receipt (or upon
the next succeeding business day if received after 5 p.m. local time on a
business day or if received on a Saturday, Sunday or United States holiday) by
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to:
Marathon Oil Company
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: President
General Counsel
40
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇ L.L.P.
3000 One Shell Plaza
▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: R. ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
(b) if to the Company, to:
Pennaco Energy, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
2300 First City Tower
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Section 9.03. Definitions.
For purposes of this Agreement:
An "affiliate," when used with reference to any person, shall have the
meaning ascribed to such term in Rule 12b-2 of the Exchange Act, as in effect on
the date of this Agreement.
A "business day" means any day other than Saturday, Sunday or any other day
on which banks in the City of New York are required or permitted by applicable
Law to close.
A "Company Material Adverse Effect" means a material adverse effect on (i)
the business, operations, assets, condition (financial or otherwise), or results
of operations of the Company, (ii) the ability of the Company to perform its
obligations under this Agreement or (iii) the ability of the Company to
consummate the Offer, the Merger and the other Transactions; provided, however,
that effects relating to (a) the economy in general, (b) changes in oil, gas or
other hydrocarbon commodity prices or other changes affecting the oil and gas
industry generally or (c) the announcement of the transactions contemplated
hereby, shall not be deemed to constitute a Company Material Adverse Effect or
be considered in determining whether a Company Material Adverse Effect has
occurred.
41
"in the ordinary course of business," with respect to any action, means
such action is:
(a) consistent with the past custom and practices of such person
(including with respect to quantity and frequency) and is taken in the
ordinary course of the normal day-to-day operations of such person;
(b) not required to be authorized by the Board of Directors of such
person; and
(c) similar in nature and magnitude to actions customarily taken,
without any authorization by the Board of Directors, in the ordinary course
of the normal day-to-day operations of other persons that are in the same
line of business as such person.
A "person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity of any kind.
A "subsidiary" of any person means any other person of which (i) such
person or any subsidiary thereof is a general partner, (ii) such person and/or
one or more of its subsidiaries holds voting power to elect a majority of the
board of directors or others performing similar functions or (iii) such person,
directly or indirectly, owns or controls more than 50% of the equity interests
of such other person.
Words and terms used in this Agreement which are defined in other Sections
of this Agreement are used throughout this Agreement as therein defined.
Section 9.04. Interpretation.
When a reference is made in this Agreement to a Section or an Article, such
reference shall be to a Section or Article of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 9.05. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule or Law, or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic and legal substance of the Transactions is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties
42
as closely as possible in an acceptable manner to the end that the Transactions
are fulfilled to the extent possible.
Section 9.06. Counterparts.
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
Section 9.07. Entire Agreement; No Third-Party Beneficiaries.
This Agreement, taken together with the Company Disclosure Letter, (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
Transactions and (b) except for the provisions of Article II, Section 6.05 and
Section 6.09, is not intended to confer upon any person other than the parties
hereto any rights, remedies, obligations or liabilities.
Section 9.08. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
Section 9.09. Assignment.
Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise by any of the parties without the prior written consent of the
other parties. Any purported assignment without such consent shall be void.
Subject to the preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Section 9.10. Limitations on Warranties.
(a) Except for the representations and warranties contained in Article
III of this Agreement and in the Company Disclosure Letter, the Company makes no
other express or implied representation or warranty to Parent or Sub. Parent and
Sub each acknowledge that, in entering into this Agreement, it has not relied on
any representations or warranties of the Company other than the representations
and warranties of the Company set forth in Article III of this Agreement or the
Company Disclosure Letter.
(b) Except for the representations and warranties contained in Article
IV of this Agreement, Parent and Sub make no other express or implied
representation or warranty to the Company. The Company acknowledges that, in
entering into this Agreement, it has not relied on any representations or
warranties of Parent and Sub other than the representations and warranties of
Parent and Sub set forth in Article IV of this Agreement.
43
IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed this
Agreement, all as of the date first written above.
MARATHON OIL COMPANY
By: __________________________
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
President
MARATHON OIL ACQUISITION 1, LTD.
By: __________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
PENNACO ENERGY, INC.
By: __________________________
▇▇▇▇ ▇. ▇▇▇▇
President
44
ANNEX I
CONDITIONS OF THE OFFER
The capitalized terms used in this Annex I have the meanings set forth in
the attached Agreement and Plan of Merger (the "Agreement"). Notwithstanding
any other term of the Offer or this Agreement, Sub shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-l(c) under the Exchange Act (relating to Sub's
obligation to pay for or return tendered shares of Company Common Stock promptly
after the termination or withdrawal of the Offer), to pay for, and may postpone
the acceptance for payment of and payment for, shares of Company Common Stock
tendered, and, except as set forth in the Agreement, terminate the Offer as to
any shares of Company Common Stock not then paid for if there shall not have
been validly tendered and not withdrawn prior to the expiration of the Offer
that number of shares of Company Common Stock which would represent at least a
majority of the Fully Diluted Shares on the date of purchase (the "Minimum
Tender Condition"). The term "Fully Diluted Shares" means all outstanding
securities entitled generally to vote in the election of directors of the
Company on a fully diluted basis, after giving effect to the exercise or
conversion of all options, rights and securities exercisable or convertible into
such voting securities. Furthermore, notwithstanding any other term of the
Offer or this Agreement, Sub shall not be required to commence the Offer, accept
for payment or, subject as aforesaid, to pay for any shares of Company Common
Stock not theretofore accepted for payment or paid for, and may terminate or
amend the Offer, with the consent of the Company or if, at any time on or after
the date of this Agreement and before the acceptance of such shares for payment
or the payment therefor, any of the following conditions exists:
(a) there shall be pending any suit, action or proceeding by any
Governmental Entity, or pending any suit, action or proceeding that has a
reasonable likelihood of success by any other person, (i) seeking to restrain,
prohibit or make illegal or materially more costly the making or consummation of
the Offer or the Merger or any other Transaction, (ii) seeking to prohibit or
limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries or affiliates, or to
compel the Company, Parent or any of their respective subsidiaries or affiliates
to dispose of or hold separate any material portion of the business or assets of
the Company, Parent or any of their respective subsidiaries or affiliates, as a
result of the Offer, the Merger or any other Transaction, (iii) seeking to
impose limitations on the ability of Parent or Sub to acquire or hold, or
exercise full rights of ownership of, any shares of Company Common Stock,
including the right to vote the Company Common Stock purchased by it on all
matters properly presented to the stockholders of the Company, (iv) seeking to
prohibit Parent or any of its subsidiaries from effectively controlling in any
material respect the business or operations of the Company or (v) that otherwise
could reasonably be expected to have a Company Material Adverse Effect;
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction shall be enacted, entered, enforced, promulgated,
amended or issued with respect to, or
I-1
deemed applicable to, or any consent or approval withheld with respect to, (i)
Parent, the Company or any of their respective subsidiaries or affiliates or
(ii) the Offer, the Merger or any other Transaction, in either case by any
Governmental Entity that is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in paragraph (a) above;
(c) (i) it shall have been publicly disclosed or Parent shall have
otherwise learned that beneficial ownership (determined for the purposes of this
paragraph as set forth in Rule 13d-3 promulgated under the Exchange Act) of more
than 15% of the outstanding shares of the Company Common Stock has been acquired
by another person or (ii) the Company Board or any committee thereof shall have
(1) withdrawn or modified the approval or recommendation of the Company Board of
the Offer (including by amendment of the Schedule 14D-9) in a manner adverse to
Parent or Sub, (2) approved or recommended to the stockholders of the Company a
Company Takeover Proposal or announced its intention to enter into an agreement
with respect to a Company Takeover Proposal, (3) approved or recommended that
the stockholders of the Company tender their shares of Company Common Stock into
any tender offer or exchange offer that is a Company Takeover Proposal or is
related thereto or (4) resolved to do any of the foregoing;
(d) the representations or warranties of the Company set forth in the
Agreement that are qualified by materiality or Company Material Adverse Effect
shall not be true and correct, or the representations and warranties of the
Company set forth in the Agreement that are not so qualified shall not be true
and correct in all material respects, in each case, as if such representations
or warranties were made as of such time (except to the extent such
representations and warranties speak as of a specific date or as of the date
hereof, in which case such representations and warranties shall not be so true
and correct or true and correct in all material respects, as the case may be, as
of such specific date or as of the date hereof, respectively);
(e) there shall have occurred any changes, conditions, events or
developments that, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect;
(f) the Company shall have breached in any material respect any
material agreement or covenant of the Company under this Agreement; or
(g) this Agreement shall have been terminated in accordance with its
terms;
in each case which, and regardless of the circumstances giving rise to any such
condition (including any action or inaction by Parent or any of its affiliates),
makes it inadvisable, in the sole and absolute discretion of Parent, to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Sub and Parent and may
be asserted by Sub or Parent regardless of the circumstances giving rise to such
condition or may be waived by Sub and Parent in whole or in part at any time and
from time to time in their sole discretion; provided, however, that the Minimum
Tender Condition may not be waived. The failure by Parent, Sub or any other
affiliate of Parent at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and
I-2
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time. Any determination by Parent with
respect to the foregoing conditions shall be final and binding on the parties.
I-3