EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July, 1997 (this
"Agreement"), by and among The Meridian Resource Corporation, a corporation
formed under the laws of the State of Texas ("Parent"), C Acquisition Corp, a
corporation formed under the laws of the State of Delaware and a wholly-owned
subsidiary of Parent ("Sub"), and Cairn Energy USA, Inc., a corporation formed
under the laws of the State of Delaware (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved, and the Company has declared advisable and in the best
interests of its stockholders, the merger of Sub with and into the Company (the
"Merger"), pursuant to the terms and conditions set forth in this Agreement;
WHEREAS, pursuant to the Merger, each issued and outstanding share of
common stock, par value $0.01 per share, of the Company ("Company Common Stock")
not owned directly or indirectly by Parent or the Company, will be converted
into the right to receive 1.08 shares of common stock, par value $0.01 per
share, of Parent ("Parent Common Stock");
WHEREAS, for federal income or tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the parties intend to cause the Merger to be accounted for as
a pooling of interests pursuant to APB Opinion No. 16, Staff Accounting Series
Releases 130, 135 and 146 and Staff Accounting Bulletins Topic Two; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained in this
Agreement, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Certificate of Merger" shall have the meaning set forth in Section
2.2.
"Certificates" shall have the meaning set forth in Section 3.2(b).
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"Closing" and "Closing Date" shall have the meaning set forth in
Section 4.1.
"Company Benefit Plan" shall have the meaning set forth in Section
6.10(a).
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company DISCLOSURE SCHEDULE" shall have the meaning set forth in the
introductory sentence of Article VI.
"Company Financial Statements" shall have the meaning set forth in
Section 6.5(d).
"Company Material Adverse Change" or "Company Material Adverse Effect"
shall mean any change or effect that is or, so far as can reasonably determined,
is likely to be materially adverse to the business, operations, properties,
assets, condition (financial or otherwise), or results of operations of the
Company and its Subsidiaries taken as a whole or on the consummation of the
transactions contemplated by this Agreement; provided, however, that the terms
"Company Material Adverse Change" and "Company Material Adverse Effect" shall
not include economic, political or legal changes affecting the oil and gas
industry as a whole, general changes in oil or gas prices or results of drilling
of any undeveloped or unevaluated leaseholds or horizons now owned or hereafter
acquired.
"Company Preferred Stock" shall mean the preferred stock, par value
$0.01 per share, of the Company.
"Company Required Consents" shall mean all required third-party
consents or other approvals set forth in the Company DISCLOSURE SCHEDULE.
"Company Required Statutory Approvals" shall have the meaning set forth
in Section 6.4(c).
"Company SEC Reports" shall have the meaning set forth in Section
6.5(b).
"Company Special Committee" shall mean the Special Committee of the
Board of Directors of the Company appointed by the Board of Directors of the
Company.
"Company Special Meeting" shall have the meaning set forth in Section
9.4(b)(i).
"Company Stockholders' Approval" shall have the meaning set forth in
Section 6.13.
"Confidentiality Agreements" shall have the meaning set forth in
Section 9.1(b).
"Conversion Ratio" shall have the meaning set forth in Section 3.1(b).
"Converted Shares" shall have the meaning set forth in Section 3.2(b).
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"Defensible Title" shall mean such good and indefeasible title to the
Major Oil and Gas Interests which (a) entitles or will entitle the Company or
Parent, as the case may be, to receive and retain, without suspension, reduction
or termination not less than the Net Revenue Interests set forth in Exhibit A-1
or A-2 (as the case may be), through plugging, abandonment and salvage of all
▇▇▇▇▇ comprising or included in such Major Oil and Gas Interests and all ▇▇▇▇▇
now or hereafter producing from or attributable to such Major Oil and Gas
Interests, of all Hydrocarbons produced from or attributable to the parties'
respective Major Oil and Gas Interests, (b) obligates or will obligate the
parties, as the case may be, to bear costs and expenses relating to the
maintenance, development, and operations of their respective Major Oil and Gas
Interests, through plugging, abandonment and salvage of all ▇▇▇▇▇ comprising or
included in such Major Oil and Gas Interests and all ▇▇▇▇▇ now or hereafter
producing from or attributable to such Major Oil and Gas Interests, not greater
than the Working Interests set forth in Exhibit A-1 or A-2 (as the case may be),
and (c) except for Permitted Encumbrances, is free and clear of all liens,
security interests, pledges, collateral assignments, charges, Hydrocarbon sales
or processing contracts or options, options or calls on production, preferential
purchase rights or options, restrictions, conditions, reservations,
encumbrances, encroachments, defaults, irregularities, deficiencies and defects.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"DISCLOSURE SCHEDULEs" shall mean the Parent DISCLOSURE SCHEDULE and
the Company, collectively.
"DLJ" shall have the meaning set forth in Section 6.14.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Claims" shall mean, with respect to any person, (A) any
and all administrative, regulatory, or judicial actions, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation in writing by or from any person or entity,
(including any Governmental Authority), or (B) any oral information provided by
a Governmental Authority that written action of the type described in the
foregoing clause is in process, which (in case of either (A) or (B)) alleges
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Materials at any location, whether or not owned, operated, leased or
managed by Parent or any of its Subsidiaries or Joint Ventures (for purposes of
Section 5.11) or by the Company or any of its Subsidiaries or Joint Ventures
(for purposes of Section 6.11), (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law or (c) any and all
claims by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
"Environmental Laws" shall mean all federal, state and local laws,
rules, regulations and guidances relating to pollution or protection of human
health or the environment (including,
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without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws and regulations relating
to Releases or threatened Releases of Hazardous Materials or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"Environmental Permits" shall have the meaning set forth in Section
5.11.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 3.2(a).
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" shall mean any court, governmental or
regulatory body (including a stock exchange or other self-regulatory body) or
authority, domestic or foreign.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls, (b) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any Environmental Law and
(c) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which Parent or any of its Subsidiaries or Joint Ventures operates (for
purposes of Section 5.11) or in which the Company or any of its Subsidiaries or
Joint Ventures operates (for purposes of Section 6.11).
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"Hydrocarbons" shall have the meaning set forth in Section 5.12.
"Joint Proxy Statement" shall have the meaning set forth in Section
5.8(a)(ii).
"Joint Proxy/Registration Statement" shall have the meaning set forth
in Section 9.2(a)(i).
"Joint Venture" shall mean, with respect to any person, any corporation
or other entity (including partnerships and other business associations and
joint ventures) in which such person or one or more of its Subsidiaries owns an
equity interest that is less than a majority of any class of the outstanding
voting securities or equity, other than equity interests held for passive
investment purposes that are less than 5% of any class of the outstanding voting
securities or equity; provided, however, that the term "Joint Venture" shall not
include operating agreements,
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exploration alliances or other similar arrangements relating to or associated
with exploration and development of Oil and Gas Interests not involving the
sharing of equity in a legal entity.
"Major Oil and Gas Interests" shall mean those Oil and Gas Interests
owned by the Company and its Subsidiaries or Parent and its Subsidiaries, as the
case may be, which are set out and described in Exhibit A-1 or A-2,
respectively, hereto.
"Net Revenue Interest" shall mean the decimal interest in and to all
Hydrocarbons produced, saved and sold from or attributable to any Oil and Gas
Interest after giving effect to all valid lessors' royalties, overriding
royalties and/or other non-expense bearing burdens against production.
"Oil and Gas Interests" shall have the meaning set forth in Section
5.12.
"Out-of-Pocket Expenses" shall have the meaning set forth in Section
11.3(a).
"Parent Benefit Plan" shall have the meaning set forth in Section
5.10(a).
"Parent Common Stock" shall mean the common stock, par value $0.01 per
share, of Parent.
"Parent DISCLOSURE SCHEDULE" shall have the meaning set forth in the
introductory sentence of Article V.
"Parent Financial Statements" shall have the meaning set forth in
Section 5.5(d).
"Parent Material Adverse Change" or "Parent Material Adverse Effect"
shall mean any change or effect that is or, so far as can reasonably determined,
is likely to be materially adverse to the business, operations, properties,
assets, condition (financial or otherwise), or results of operations of Parent
and its Subsidiaries taken as a whole or on the consummation of the transactions
contemplated by this Agreement; provided, however, that the terms "Parent
Material Adverse Change" and "Parent Material Adverse Effect" shall not include
economic, political or legal changes affecting the oil and gas industry as a
whole, general changes in oil or gas prices or results of drilling of any
undeveloped or unevaluated leaseholds or horizons now owned or hereafter
acquired.
"Parent Preferred Stock" shall have the meaning set forth in Section
5.3(a).
"Parent Required Consents" shall mean all required third-party consents
or other approvals set forth in the Parent DISCLOSURE SCHEDULE.
"Parent SEC Reports" shall have the meaning set forth in Section
5.5(b).
"Parent Special Meeting" shall have the meaning set forth in Section
9.4(a)(i).
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"Parent Stockholders' Approval" shall have the meaning set forth in
Section 5.13.
"Permitted Encumbrances" shall mean: with respect to the Company, the
Parent or any of their respective Subsidiaries, as the case may be, (a) liens
arising under operating agreements securing payments of amounts not yet
delinquent and of a type and nature customary in the oil and gas industry; (b)
liens arising as a result of pooling and unitization agreements, declarations,
orders or laws securing payments of amounts not yet delinquent; (c) liens
securing payments to mechanics and materialmen, not yet delinquent, and liens
securing payment of taxes and assessments not yet delinquent or, if delinquent,
that are being contested in good faith in the normal course of business; (d)
conventional rights of reassignment obligating the Company or the Parent, as the
case may be, to reassign its interest in any portion of the Major Oil and Gas
Interests to a third party in the event it intends to release or abandon such
interest prior to the expiration of the primary term or other termination of
such interest; (e) easements, rights-of-way, servitudes, permits, surface
leases, surface use restrictions, shipping fairways, and other rights in respect
of surface operations, and pipelines, grazing, logging, canals, ditches,
reservoirs, streets, alleys, highways, telephone lines, power lines, railways
and other surface uses and impediments on, over or in respect of any of the
Major Oil and Gas Interests that are not such as to interfere materially with
the operation, value or use of any of such Major Oil and Gas Interests; (f)
calls on or preferential rights to purchase production at not less than
prevailing prices; (g) covenants, conditions and other terms which the Major Oil
and Gas Interests were subject to when acquired by the Company, the Parent, or
any of their respective Subsidiaries, as the case may be, that are not such as
to interfere materially with the operation, value, or use of such Major Oil and
Gas Interests; (h) such title defects as the Company or the Parent, as the case
may be, has expressly waived in writing; (i) liens, encumbrances and claims to
be released at the Closing or which are described in the DISCLOSURE SCHEDULEs;
(j) rights reserved to or vested in any federal, municipality or governmental,
tribal, statutory or public authority to control or regulate any of the Major
Oil and Gas Interests in any manner, and all applicable laws, rules and orders
of any federal, municipality or governmental or tribal authority; (k) existing
terms and provisions of Leases; (l) all other liens, charges, encumbrances,
limitations, obligations, defects and irregularities affecting any portion of
the Major Oil and Gas Interests ("Encumbrances") which would not have a material
adverse effect on the operation, value or use of such Major Oil and Gas
Interests and (m) lessors' royalties or net profit shares, overriding royalties,
and division orders and sales contracts covering the Hydrocarbons, reversionary
interests and similar burdens which do not operate to reduce the Net Revenue
Interest of any Major Oil and Gas Interest below the net revenue interest set
out in Exhibit A-1 or A-2 (as the case may be), and which do not have a Company
Material Adverse Effect or a Parent Material Adverse Effect, as the case may be,
on the operation, value, or use of any such Major Oil and Gas Interest.
"Registration Statement" shall have the meaning set forth in Section
5.8(a)(i).
"Release" shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or mitigation into the
atmosphere, soil, subsurface, surface water, groundwater or property.
"Representatives" shall have the meaning set forth in Section 9.1.
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"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Plan" shall have the meaning set forth in Section 9.10.
"Sub Material Adverse Effect" shall mean any change or effect that is
or, so far as can reasonably determined, is likely to be materially adverse to
the business, operations, properties, assets, condition (financial or
otherwise), or results of operations of Sub taken as a whole or on the
consummation of the transactions contemplated by this Agreement; provided,
however, that the term "Sub Material Adverse Effect" shall not include economic,
political or legal changes affecting the oil and gas industry as a whole,
changes in oil or gas prices or results of drilling of any undeveloped or
unevaluated leaseholds or horizons now owned or hereafter acquired.
"Subsidiary" shall mean, with respect to any person, any corporation or
other entity (including partnerships and other business associations) in which a
person directly or indirectly owns at least a majority of the outstanding voting
securities or other equity interests having the power, under ordinary
circumstances, to elect a majority of the directors, or otherwise to direct the
management and policies, of such corporation or other entity; provided, however,
that the term "subsidiary" shall not include any corporation or other entity the
assets of which have a book or fair value less than $100,000.
"Superior Takeover Proposal" with respect to a party means any bona
fide Takeover Proposal to acquire, directly or indirectly, for consideration
consisting of cash, securities or a combination thereof, all of the common stock
of that party then outstanding or all or substantially all of the assets of that
party on terms that the Board of Directors of that party determines in its good
faith reasonable judgment (after consultation with a financial advisor of
nationally recognized reputation) to be more favorable to that party's
stockholders than the Merger.
"Surviving Corporation" shall have the meaning set forth in Section
2.1.
"Takeover Proposal," with respect to a party, shall mean (i) any tender
or exchange offer, proposal for a merger, consolidation or other business
combination involving such party or any of its material Subsidiaries, (ii) any
proposal or offer to acquire from a party in any manner, directly or indirectly,
any equity or voting securities of that party in excess of 15% of the equity
voting securities of that party or any Subsidiary thereof or a material amount
of the assets of that party and its Subsidiaries, taken as a whole, or (iii) any
proposal or offer to acquire from the stockholders of that party by tender
offer, exchange offer or otherwise more than 15% of the outstanding common stock
of that party; provided, however, that a "Takeover Proposal" shall not mean the
Merger or any alternative transaction between the Company and Parent that may be
proposed as contemplated hereby.
"Taxes" shall mean any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, sales and use, ad valorem, transfer, gains, profits,
excise, franchise, real and personal property, gross receipts,
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capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any governmental entity, and includes any interest
and penalties (civil or criminal) on or additions to any such taxes, charges,
fees, levies or other assessments, and any expenses incurred in connection with
the determination, settlement or litigation of any liability for any of the
foregoing.
"Tax Return" shall mean any report, return or other information
required to be supplied to a governmental entity with respect to Taxes,
including, where permitted or required, combined or consolidated returns for any
group of entities that includes Parent or any of its Subsidiaries on the one
hand, or the Company or any of its Subsidiaries on the other hand.
"Violation" shall have the meaning set forth in Section 5.4(b).
"Working Interest" shall mean the decimal interest in the full and
entire leasehold estate in any Oil and Gas Interest and all rights and
obligations of every kind and character pertinent thereto or arising therefrom,
without regard to any valid lessor royalties, overriding royalties and/or other
burdens against production, insofar as the interest in said leasehold is
burdened with the obligation to bear and pay the cost of exploration,
development and operation.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, Sub shall be
merged with and into the Company at the Effective Time (as hereinafter defined).
Following the Merger, the separate corporate existence of Sub shall thereupon
cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
SECTION 2.2 Effective Time of the Merger. The parties acknowledge that
it is their mutual desire and intent to consummate the Merger as soon as
practicable after the date hereof. Accordingly, the parties shall use all
reasonable efforts to bring about the satisfaction as soon as practicable of all
the conditions specified in Article X and otherwise to effect the consummation
of the Merger as soon as practicable. Subject to the terms hereof, as soon as
practicable after all of the conditions set forth in Article X shall have been
satisfied or waived, the parties hereto will (i) file a certificate of merger
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and (ii) 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 the Secretary of State of Delaware or
at such other time as Parent and the Company shall agree shall be specified in
the Certificate of Merger (the "Effective Time").
SECTION 2.3 Certificate of Incorporation. The Certificate of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of the
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Surviving Corporation following the Effective Time, until duly amended, except
that Article I of such Certificate shall be deemed to be amended at the
Effective Time to read as follows: "The name of the Corporation is Cairn Energy
USA, Inc."
SECTION 2.4 Bylaws. The Bylaws of Sub as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation following
the Effective Time, until duly amended.
SECTION 2.5 Directors of the Surviving Corporation. The individuals
listed as such in Exhibit B attached hereto 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 2.6 Officers of the Surviving Corporation. The individuals
listed as such in Exhibit C 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.
SECTION 2.7 Effects of Merger. The Merger shall have the effects set
forth in the DGCL, including Section 259 thereof.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Effect Of Merger on Capital Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of any
capital stock of the Company, Parent or Sub:
(a) Cancellation of Certain Company Common Stock. Each share of Company
Common Stock, if any, that is owned by Parent or Sub or any Subsidiary of Parent
or held in the treasury of the Company shall be canceled and cease to exist and
no capital stock of Parent or other consideration shall be delivered in exchange
therefor.
(b) Conversion of Company Common Stock. Each issued and outstanding
share of Company Common Stock (other than shares of Company Common Stock
canceled pursuant to Section 3.1(a)) shall be converted into 1.08 shares (the
"Conversion Ratio") of duly authorized, validly issued, fully paid and
nonassessable common stock, par value $.01 per share, of the Parent ("Parent
Common Stock"). Upon such conversion, all such shares of Company Common Stock
shall be canceled and cease to exist, and the holder of a certificate
representing such shares shall cease to have any rights with respect thereto,
except the right to receive the number of whole shares of Parent Common Stock to
be issued in consideration therefor and any cash in lieu of fractional shares of
Parent Common Stock upon the surrender of such certificate in accordance with
Section 3.2.
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(c) Treatment of Common Stock of Sub. Each issued and outstanding share
of common stock, par value $.01 per share, of Sub shall be converted into one
fully paid and nonassessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
SECTION 3.2 Exchange of Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, Parent shall deposit with a bank or trust company mutually
agreeable to Parent and the Company (the "Exchange Agent") certificates
representing shares of Parent Common Stock required to effect the conversions
referred to in Section 3.1(b).
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates that, immediately prior to the Effective Time, represented
outstanding shares of Company Common Stock (the "Certificates") that were
converted (collectively, the "Converted Shares") into shares of Parent Common
Stock pursuant to Section 3.1(b), (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to any
Certificate shall pass, only upon actual delivery of such Certificate to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of a Certificate to the Exchange Agent (or to such other
agent or agents as may be appointed by agreement of Parent and the Company),
together with a duly executed letter of transmittal and such other documents as
the Exchange Agent shall require, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing the number
of whole shares of Parent Common Stock that such holder has the right to receive
pursuant to the provisions of this Article III. In the event of a transfer of
ownership of Converted Shares that is not registered in the transfer records of
the Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to the transferee if the Certificate representing
such Converted Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock transfer taxes have
been paid. If any Certificate shall have been lost, stolen, mislaid or
destroyed, then upon receipt of (x) an affidavit of that fact from the holder
claiming such Certificate to be lost, mislaid, stolen or destroyed, (y) such
bond, security or indemnity, as Parent or the Exchange Agent may reasonably
require, and (z) any other documentation necessary to evidence and effect the
bona fide exchange thereof, the Exchange Agent shall issue to such holder a
certificate representing the number of shares of Parent Common Stock into which
the shares represented by such lost, stolen, mislaid or destroyed Certificate
shall have been converted. Until surrendered as contemplated by this Section
3.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender a certificate
representing shares of Parent Common Stock and cash in lieu of any fractional
shares of Parent Common Stock as contemplated by this Section 3.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, and no cash payment in
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lieu of fractional shares shall be made to any such holder pursuant to Section
3.2(d), until the holder of record of such Certificate shall surrender such
Certificate as contemplated by Section 3.2(b). Subject to the effect of
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender or as soon thereafter as may
be practicable, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled pursuant to Section 3.2(d)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole number of shares of
Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole number of shares of Parent Common Stock.
(d) No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a stockholder of Parent. In lieu
of any such fractional shares, each holder of shares of Company Common Stock who
would otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all shares of Company Common Stock then
held of record by such holder) shall receive cash (without interest) in an
amount equal to the product of such fractional part multiplied by the average of
the daily closing price of Parent Common Stock, rounded to four decimal places,
as reported under New York Stock Exchange in The Wall Street Journal for each of
the first 20 consecutive days on which the New York Stock Exchange is open for
trading in the period commencing 20 trading days prior to the Closing Date.
(e) Closing of Transfer Books. From and after the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of any
Company Common Stock shall thereafter be made. If after the Effective Time any
certificates evidencing shares of Company Common Stock are presented to the
Parent's transfer agent for registration of transfer, they shall be canceled and
exchanged for certificates representing the number of whole shares of Parent
Common Stock and the cash amount, if any, determined in accordance with this
Article III.
(f) Termination of Duties of Exchange Agent. Any certificates
representing Parent Common Stock deposited with the Exchange Agent pursuant to
Section 3.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 3.2 shall be returned by the Exchange Agent to Parent,
which shall thereafter act as Exchange Agent. All funds held by the Exchange
Agent for payment to the holders of unsurrendered Certificates and unclaimed at
the end of one year from the Effective Time shall be returned to Parent
whereupon any holder of unsurrendered Certificates shall look as a general
unsecured creditor only to Parent for payment of any funds to which such holder
may be entitled, subject to applicable law. None of Parent, the Company or the
Surviving Corporation shall be liable to any person for such shares or funds
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
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SECTION 3.3 Adjustments to Prevent Dilution. Subject to the
requirements of Article VIII hereof, in the event that prior to the Effective
Time there is a change in the number of issued and outstanding shares of Parent
Common Stock or Company Common Stock, as the case may be, as a result of a
reclassification, subdivision, recapitalization, combination, exchange, stock
split (including reverse stock split), stock dividend or distribution or other
similar transaction, the Conversion Ratio shall be equitably adjusted to
eliminate the effects of such event, and all references to the Conversion Ratio
in this Agreement shall be deemed to be to the Conversion Ratio as so adjusted.
SECTION 3.4 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or 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
conform 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
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
ARTICLE IV
THE CLOSING
SECTION 4.1 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on
the second business day immediately following the date on which the last of the
conditions set forth in Article X is fulfilled or waived, or at such other time
and date and place as Parent and the Company shall mutually agree (the "Closing
Date").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the Parent DISCLOSURE SCHEDULE attached hereto
as Exhibit D (the "Parent DISCLOSURE SCHEDULE"), Parent represents and warrants
to the Company as follows:
SECTION 5.1 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and each of Parent's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and its Subsidiaries has all
requisite corporate power and authority, and is duly authorized by all necessary
regulatory approvals and orders, to own, lease and operate its assets and
Properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its assets and
properties makes such
12
qualification necessary, other than such failures which, individually or in the
aggregate, will not have a Parent Material Adverse Effect.
SECTION 5.2 Subsidiaries.
(a) Section 5.2 of the Parent DISCLOSURE SCHEDULE sets forth a list as
of the date hereof of all Subsidiaries and Joint Ventures of Parent, including
the name of each such entity and the state or jurisdiction of its incorporation.
(b) All of the issued and outstanding shares of capital stock of each
Subsidiary of Parent are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned directly or indirectly by Parent free and clear
of any liens, claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever, and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating any such Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
SECTION 5.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 25,000,000 shares of
preferred stock, par value $1.00 per share ("Parent Preferred Stock").
(b) As of the close of business on June 30, 1997, 14,393,308 shares of
Parent Common Stock and no shares of Parent Preferred Stock were issued and
outstanding. As of the close of business on June 30, 1997, 60,000 shares of
Parent Common Stock were held by Parent in its treasury.
(c) All of the issued and outstanding shares of the capital stock of
Parent are validly issued, fully paid, nonassessable and free of preemptive
rights.
(d) At the close of business on June 30, 1997, (i) 1,187,867 shares of
Parent Common Stock were reserved for issuance pursuant to outstanding options
and awards under Parent's employee and director stock plans as described in the
Parent Disclosure Schedule, (ii) 1,769,522 shares of Parent Common Stock were
reserved for issuance upon exercise of Parent's outstanding warrants as
described in the Parent Disclosure Schedule and (iii) 961,158 shares of Parent
Common Stock were reserved for future awards under Parent's 1995 Long Term
Incentive Plan and 1997 Long Term Incentive Plan.
(e) There are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, to which Parent
or any of its Subsidiaries is a party or by which any of them is bound
13
obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of the capital stock of
Parent or any of its Subsidiaries or other voting securities of Parent or any of
its Subsidiaries obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such agreement or commitment.
SECTION 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority.
(i) The Board of Directors of Parent has approved the Merger
Agreement. Parent has all requisite power and authority to enter into
this Agreement and, subject to the approval of the issuance of shares
of Parent Common Stock pursuant to the Merger (the "Share Issuance") by
the stockholders of Parent and Parent Required Statutory Approvals, to
consummate the Merger and the other transactions contemplated hereby.
(ii) The execution and delivery of this Agreement and the
consummation by Parent of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Parent, subject to approval of the Share Issuance by the Stockholders
of Parent.
(iii) This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due authorization, execution and
delivery hereof by the Company, constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws affecting
the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, may
be subject to the discretion of any court before which any proceedings
may be brought.
(b) Non-Contravention. The execution and delivery of this Agreement by
Parent do not, and the consummation of the transactions contemplated hereby and
thereby will not, violate, conflict with or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of time or both)
under, or result in the termination of, or accelerate the performance required
by, or result in a right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets (any such violation, conflict, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") of, Parent or any
of its Subsidiaries or, to the knowledge of Parent, its Joint Ventures, under
any provisions of:
(i) the articles of incorporation, bylaws or similar
governing documents of Parent or any of its Subsidiaries or Joint
Ventures;
(ii) subject to obtaining the Parent Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order or injunction of any
14
Governmental Authority applicable to Parent or any of its Subsidiaries
or Joint Ventures or any of their respective properties or assets or
business as presently conducted;
(iii) any Major Oil and Gas Interest of Parent and its
Subsidiaries; or
(iv) subject to obtaining the Parent Required Consents, any
note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind to which Parent or any of its Subsidiaries or
Joint Ventures is now a party or by which it or any of its properties
or assets may be bound or affected;
excluding from the foregoing clauses (ii), (iii) and (iv) such Violations as
would not, in the aggregate, have a Parent Material Adverse Effect.
(c) Statutory Approvals. Except for (i) filing by Parent of a
pre-merger notification report form under the HSR Act, (ii) the filing with the
SEC of (A) the Joint Proxy Statement, (B) the Registration Statement and (C)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby and
(iii) the filing of the Certificate of Merger with the Delaware Secretary of
State with respect to the Merger as provided in the DGCL and appropriate
documents with the relevant authorities in other states in which Parent is
qualified to do business, no declaration, filing, or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, the failure to
obtain, make or give which would have a Parent Material Adverse Effect (the
"Parent Required Statutory Approvals"), it being understood that references in
this Agreement to "obtaining" such Parent Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such notice,
obtaining such consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law.
(d) Compliance.
(i) Except as disclosed in the Parent SEC Reports, neither
Parent nor any of its Subsidiaries nor, to the knowledge of Parent, any
of its Joint Ventures is in violation of or under investigation with
respect to, or has been given notice or been charged with any violation
of any law, statute, order, rule, regulation, ordinance or judgment
(including without limitation, any applicable environmental law,
ordinance or regulation) of any Governmental Authority, except for
violations that do not have, and would not have, a Parent Material
Adverse Effect.
(ii) The Parent, its Subsidiaries and, to the knowledge of
Parent, its Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to
conduct their respective businesses as currently conducted, except
those the failure to obtain which would not have a Parent Material
Adverse Effect.
15
SECTION 5.5 Reports and Financial Statements.
(a) Since December 31, 1993, the filings required to be made by Parent
and its Subsidiaries under the Securities Act or the Exchange Act have been
filed with the SEC as required by each such law or regulation, including all
forms, statements, reports, agreements and all documents, exhibits, amendments
and supplements appertaining thereto, and Parent and its Subsidiaries have
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder.
(b) Parent has made available to the Company a true and complete copy
of each report, schedule, registration statement and definitive proxy statement
filed by Parent or any of its Subsidiaries with the SEC since December 31, 1993
(such documents as filed, and any and all amendments thereto, the "Parent SEC
Reports").
(c) The Parent SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed, and all forms,
reports or other documents filed by Parent with the SEC after the date hereof,
did not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were or will
be made, not misleading.
(d) The audited consolidated financial statements and unaudited interim
financial statements of Parent included in the Parent SEC Reports (collectively,
the "Parent Financial Statements") have been prepared, and the audited
consolidated financial statements and unaudited interim financial statements of
Parent included in all forms, reports, or other documents filed by Parent with
the SEC after the date hereof will be prepared, in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q) and fairly present in all material respects the financial position of
Parent as of the respective dates thereof or the results of operations and cash
flows for the respective periods then ended, as the case may be, subject, in the
case of the unaudited interim financial statements, to normal, recurring audit
adjustments.
(e) True, accurate and complete copies of the Articles of Incorporation
and Bylaws of Parent, as in effect on the date hereof, have been delivered to
the Company.
SECTION 5.6 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.
(a) Except as set forth in the Parent SEC Reports, from December 31,
1996 through the date hereof Parent and each of its Subsidiaries has conducted
its business only in the ordinary course of business consistent with past
practice and there has not been (i) any declaration, setting aside or payment of
any dividend (whether in cash, stock or property) with respect to any of
Parent's capital stock, (ii) (A) any granting by Parent or any of its
Subsidiaries to any executive officer of Parent or any of its Subsidiaries of
any increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment agreements in
effect as of December 31, 1996, (B) any granting by Parent or any of its
Subsidiaries to any
16
such executive officer of any increase in severance or termination pay, except
as was required under employment, severance or termination agreements in effect
as of December 31, 1996, or (C) any entry by Parent or any of its Subsidiaries
into any employment, severance or termination agreement with any such executive
officer, (iii) any damage, destruction or loss, whether or not covered by
insurance, that would have a Parent Material Adverse Effect or (iv) the
occurrence or existence of any other fact or condition that would have a Parent
Material Adverse Effect.
(b) Neither Parent nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies (i) that are accrued or
reserved against in the consolidated financial statements of Parent or reflected
in the notes thereto for the year ended December 31, 1996, or (ii) that were
incurred after December 31, 1996 in the ordinary course of business and would
not have a Parent Material Adverse Effect.
SECTION 5.7 Litigation. Except as set forth in the Parent SEC Reports,
there are no claims, suits, actions or proceedings, pending or, to the knowledge
of Parent, threatened, nor are there, to the knowledge of Parent, any
investigations or reviews pending or threatened against, relating to or
affecting Parent or any of its Subsidiaries or Joint Ventures, or judgments,
decrees, injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator applicable to
Parent or any of its Subsidiaries or Joint Ventures, that would have a Parent
Material Adverse Effect.
SECTION 5.8 Registration Statement and Joint Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the
SEC by Parent in connection with the issuance of shares of capital
stock of Parent in the Merger (the "Registration Statement") will, at
the time the Registration Statement becomes effective under the
Securities Act and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact with respect to
Parent or its Subsidiaries required to be stated therein or necessary
to make the statements therein with respect to Parent or its
Subsidiaries not misleading, and
(ii) the joint proxy statement, at the date mailed to such
stockholders and, as the same may be amended or supplemented, at the
time of such meetings, in definitive form relating to the meetings of
the stockholders of the Company and Parent, respectively, to be held in
connection with the Merger and the prospectus relating to the Parent
Common Stock to be issued in the Merger (the "Joint Proxy Statement"),
will contain any untrue statement of a material fact or omit to state
any material fact with respect to Parent and its Subsidiaries necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
17
(b) Each of the Registration Statement and the Joint Proxy Statement,
as of such respective dates, will comply (with respect to Parent and its
Subsidiaries) as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
SECTION 5.9 Tax Matters.
(a) Parent and each of its Subsidiaries has filed (i) within the time
and in the manner prescribed by law, all required Tax Returns calculated on or
with reference to income, profits, earnings or gross receipts and all other Tax
Returns required to be filed that would report a material amount of Tax, and
(ii) paid all Taxes that are shown on such Tax Returns as due and payable within
the time and in the manner prescribed by law except for those being contested in
good faith and for which adequate reserves have been established.
(b) As of the date hereof there are no claims, assessments, audits or
administrative or court proceedings pending against Parent or any of its
Subsidiaries for any alleged deficiency in Tax, and none of Parent or any of its
Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(c) Parent has established adequate accruals for Taxes and for any
liability for deferred Taxes in the Parent Financial Statements in accordance
with GAAP.
SECTION 5.10 Employee Matters.
(a) Benefit Plans. With respect to all the employee benefit plans and
arrangements maintained for the benefit of any current or former employee,
officer or director of Parent or any of its Subsidiaries (collectively, the
"Parent Benefit Plans"), except as set forth in the Parent SEC Reports and
except, in the case of clauses (iii), (iv) and (v), as would not, individually
or in the aggregate, have a Parent Material Adverse Effect: (i) none of the
Parent Benefit Plans is a "multi-employer plan" within the meaning of ERISA;
(ii) none of the Parent Benefit Plans promises or provides retiree medical or
life insurance benefits to any person, except as otherwise required by law;
(iii) each Parent Benefit Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service that it is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
Parent Benefit Plan; (iv) each Parent Benefit Plan has been operated in all
respects in accordance with its terms and the requirements of applicable law;
and (v) neither Parent nor any of its Subsidiaries has incurred any direct or
indirect liability under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or withdrawal from, any Parent Benefit Plan
or other retirement plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any such liability. The aggregate
accumulated benefit obligations of any Parent Benefit Plan subject to Title IV
of ERISA do not exceed the fair market value of the assets of such Parent
Benefit Plan. Except as set forth in Schedule 5.10(a) of the Parent DISCLOSURE
SCHEDULE, neither Parent nor any of its Subsidiaries has any Parent Benefit Plan
or any employment or severance agreement with any of its employees.
18
(b) Labor Matters. (i) Neither Parent nor any of its Subsidiaries is a
party to any collective bargaining agreement or other material contract or
agreement with any labor organization or other representative of employees nor
is any such contract being negotiated; (ii) there is no material unfair labor
practice charge or complaint pending nor, to the knowledge of the executive
officers of Parent, threatened, with regard to employees of Parent or any of its
Subsidiaries; (iii) there is no labor strike, slowdown, work stoppage or other
labor controversy in effect, or, to the knowledge of the executive officers of
Parent, threatened against or involving Parent or any of its Subsidiaries that
has, or would be reasonably likely to have, a Parent Material Adverse Effect;
(iv) as of the date hereof, no representation question exists, nor to the
knowledge of the executive officers of Parent, are there any campaigns being
conducted to solicit cards from the employees of Parent or any of its
Subsidiaries to authorize representation by any labor organization; (v) neither
Parent nor any of its Subsidiaries is a party to, or is otherwise bound by, any
consent decree with any governmental authority relating to employees or
employment practices of Parent or any of its Subsidiaries; (vi) Parent and its
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act, and no fact or
event exists that could give rise to liability under such Act; and (vii) Parent
and its Subsidiaries are in compliance with all applicable agreements, contracts
and policies relating to employment, employment practices, wages, hours and
terms and conditions of employment of the employees, except where the failure to
be in compliance with each such agreement, contract and policy would not, either
individually or in the aggregate, have a Parent Material Adverse Effect.
SECTION 5.11 Environmental Protection. Except as disclosed in the
Parent SEC Reports and except as would not, individually or in the aggregate, be
reasonably expected to result in a Parent Material Adverse Effect, (i) Parent
and each of its Subsidiaries is in compliance with all applicable Environmental
Laws and the terms and conditions of all applicable environmental, health and
safety permits and authorizations (collectively, "Environmental Permits"); (ii)
there are no Environmental Claims against Parent or any of its Subsidiaries; and
(iii) no Hazardous Materials have been released, discharged or disposed of on
any of the properties owned or occupied by Parent or its Subsidiaries in any
manner or quantity which requires investigation, assessment, monitoring,
remediation or cleanup under currently applicable Environmental Laws.
SECTION 5.12 Engineering Reports. All information supplied to ▇▇▇▇▇
▇▇▇▇▇ Petroleum Engineers, an independent petroleum engineer, by or on behalf of
Parent and its Subsidiaries that was material to such engineer's review of
Parent's estimates of oil and gas reserves attributable to the Oil and Gas
Interests (as hereinafter defined) of Parent and its Subsidiaries in connection
with the preparation of the oil and gas reserve engineering report concerning
the Oil and Gas Interests of Parent and its Subsidiaries as of December 31, 1996
reviewed by ▇▇▇▇▇ ▇▇▇▇▇ Petroleum Engineers (the "Parent Engineering Report")
was (at the time supplied or as modified or amended prior to the issuance of the
Parent Engineering Report) true and correct in all material respects. For
purposes of this Agreement "Oil and Gas Interests" means, when used with respect
to Parent and each of its Subsidiaries or the Company, as the case may be,
direct and indirect interests in and rights with respect to oil, gas, helium,
carbon dioxide, mineral, and related properties and assets of any kind and
nature, direct or indirect, including leasehold, working, royalty and overriding
royalty interests, production payments, operating rights, net profit interests,
19
other nonworking interests, and nonoperating interests; all interests in and
rights with respect to oil, condensate, gas, casinghead gas, helium, carbon
dioxide and other liquid or gaseous hydrocarbons (collectively, "Hydrocarbons")
and other minerals or revenues therefrom and all contracts in connection
therewith and claims and rights thereto (including all oil and gas leases,
operating agreements, unitization and pooling agreements and orders, division
orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales,
exchange and processing contracts and agreements, and in each case, interests
thereunder), surface interests, fee interests, revisionary interests,
reservations, and concessions; all easements, rights of way, licenses, permits,
leases, and other interests associated with, appurtenant to, or necessary for
the operation of any of the foregoing; and all interests in equipment and
machinery (including well equipment and machinery), oil and gas production,
gathering, transmissions, treating, processing, and storage facilities
(including tanks, tank batteries, pipelines, and gathering systems), pumps,
water plants, electric plants, gasoline and gas processing plants, refineries,
and other tangible personal property and fixtures associated with, appurtenant
to, or necessary for the operation of any of the foregoing. Except for changes
in classification or values of oil and gas reserve or property interests that
occurred in the ordinary course of business since December 31, 1996, and except
for changes (including changes in commodity prices) generally affecting the oil
and gas industry on a nationwide basis, there has been no Parent Material
Adverse Change regarding the matters addressed in the Parent Engineering Report.
SECTION 5.13 No Vote Required. The approval of the Share Issuance by
the affirmative vote of holders of a majority of the shares of Parent Common
Stock entitled to vote on such matter at the Parent Special Meeting (the "Parent
Stockholders' Approval") is the only vote of the holders of any class or series
of the capital stock of Parent required to approve this Agreement, the Merger
and the other transactions contemplated hereby.
SECTION 5.14 Insurance. Parent and each of its Subsidiaries is, and has
been continuously since December 31, 1995, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by Parent and its Subsidiaries during such time period.
Neither Parent nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy
thereof. All material insurance policies of Parent and its Subsidiaries are
valid and enforceable policies.
SECTION 5.15 Ownership of Company Common Stock. Parent does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of Company Common Stock.
SECTION 5.16 No Loss of Title to Interests. No suit, action or other
proceeding (including, without limitation, tax, environmental or development
demands proceedings) is pending, or to the best of Parent's knowledge
threatened, which might result in loss of title to any of Parent's Major Oil and
Gas Interests. Parent shall promptly notify the Company of any such proceeding
which may arise or be threatened prior to the Closing. No action, suit or
proceeding is currently pending to which Parent is a party or to which any of
Parent's assets are subject which relates to the ownership or operations of
Parent's Major Oil and Gas Interests.
20
SECTION 5.17 Title to Major Oil and Gas Interests.
(a) Parent has, or will have as of the Closing Date, Defensible Title
to all of Parent's and Parent's Subsidiaries will have as of The Closing Date,
Defensible Title to all of Parent's Subsidiaries', Major Oil and Gas Interests
except for such defects in Parent's and its Subsidiaries' Defensible Title that
will not, individually or in the aggregate, affect the aggregate value of such
Major Oil and Gas Interests by an amount in excess of $1 million.
(b) All royalties, rentals, ▇▇▇▇ clause payments, shut-in gas payments
and other payments due with respect to Parent's and its Subsidiaries' Major Oil
and Gas Interests have been properly and timely paid, except (i) for payments
held in suspense for title or other reasons which are customary in the industry
and which will not result in grounds for cancellation of Parent's or its
Subsidiaries' rights in such Major Oil and Gas Interests and (ii) such failures
as would not have a Parent Material Adverse Effect.
(c) Except for such defaults that would not result in a Parent Material
Adverse Effect, neither Parent nor any of its Subsidiaries is in default (and
there exists no event or circumstance which with notice or the passage of time
or both could constitute a default by Parent or its Subsidiaries) under the
terms of any leases, farmout agreements or other contracts or agreements
respecting Parent's or its Subsidiaries' Major Oil and Gas Interests which could
(i) interfere in any material respect with the operation or use thereof, (ii)
prevent Parent or its Subsidiaries from receiving the proceeds of production
attributable to their interest therein, (iii) result in a cancellation of
Parent's or Subsidiaries' interest therein, or (iv) impair the value of parent's
or Subsidiaries' interest therein.
SECTION 5.18 Material Contracts and Agreements.
(a) All material contracts of Parent or its Subsidiaries have been
included in the Parent SEC Reports, except for those contracts not required to
be filed pursuant to the rules and regulations of the SEC.
(b) Section 5.18 of the Parent Disclosure Schedule sets forth a list of
all written or oral contracts, agreements or arrangements to which Parent or any
of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or
any of their respective assets is bound which would be required to be filed as
exhibits to Parent's Annual Report on Form 10-K for the year ending December 31,
1997 and which have not previously been included as exhibits in the Parent SEC
Reports.
SECTION 5.19 Opinion of Financial Advisor. Parent has received the
written opinion (the "▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion") of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. ("▇▇▇▇▇▇▇
▇▇▇▇▇"), on the date hereof, to the effect that, as of the date hereof, the
Conversion Ratio is fair from a financial point of view to the Parent.
21
SECTION 5.20 Accounting Matters. To the best of Parent's knowledge,
neither the Parent nor any of its Affiliates has through the date of this
Agreement taken or agreed to take any action that (without giving effect to any
action taken or agreed to be taken by the Company or any of its affiliates)
would prevent the Parent from accounting for the business combination to be
effected by the Merger as a pooling of interest.
SECTION 5.21 State Takeover Statutes; Absence of Supermajority
Provision. Parent has taken all action to assure that no state takeover statute
or similar statute or regulation, shall apply to the Merger or any of the other
transactions contemplated hereby. Except for Parent Stockholders' Approval, no
other stockholder action on the part of Parent is required for approval of the
Merger, this Agreement and the transactions contemplated hereby. No provisions
of Parent's Articles of Incorporation or By-laws or other governing instruments
of its subsidiaries or the terms of any rights plan or other takeover defense
mechanism of Parent would, directly or indirectly, restrict or impair the
ability of the Parent or the Company to consummate the Merger nor will any such
provisions restrict or impair the ability of the stockholders of the Company to
exercise the same rights to vote or otherwise exercise the same rights as the
other stockholders of Parent in the event that the stockholders of the Company
were to acquire securities of Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company DISCLOSURE SCHEDULE attached hereto
as Exhibit E (the "Company DISCLOSURE SCHEDULE"), the Company represents and
warrants to Parent as follows:
SECTION 6.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing, under the
laws of the State of Delaware, and each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing, under the
laws of its jurisdiction of incorporation. Each of the Company and its
Subsidiaries has all requisite corporate power and authority, and is duly
authorized by all necessary regulators approvals and orders, to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary, other
than such failure which, individually or in the aggregate, will not have a
Company Material Adverse Effect.
SECTION 6.2 Subsidiaries.
(a) Section 6.2 of the Company DISCLOSURE SCHEDULE sets forth a
description as of the date hereof of all Subsidiaries and Joint Ventures of the
Company, including the name of each such entity, the state or jurisdiction of
its incorporation, a brief description of the principal line or lines of
business conducted by each such entity and the Company's interest therein.
(b) All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company are validly issued, fully paid, nonassessable and free
of preemptive rights and are owned
22
directly or indirectly by the Company free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such Subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
SECTION 6.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and 5,000,000 shares of
Company Preferred Stock.
(b) As of the close of business on June 30, 1997, 17,566,356 shares of
Company Common Stock were issued and outstanding and no shares of Company
Preferred Stock were issued and outstanding. As of the close of business on June
30, 1997, no shares of Company Common Stock or Company Preferred Stock are held
by the Company in its treasury or owned by any of the Company's Subsidiaries.
(c) All of the issued and outstanding shares of the capital stock of
the Company are validly issued, fully paid, nonassessable and free of preemptive
rights.
(d) At the close of business on June 30, 1997, (i) 908,167 shares of
Company Common Stock were reserved for issuance pursuant to outstanding options
under the employee and director stock plans as described in the Company
Disclosure Schedule, and (ii) 484,833 shares of Company Common Stock were
reserved for future awards under the Company's employee and director stock
option plans as described in the Company Disclosure Schedule.
(e) There are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company to grant,
extend or enter into any such agreement or commitment.
SECTION 6.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority.
(i) The Board of Directors of the Company has declared the
Merger fair to and advisable and in the best interests of the
stockholders of the Company. The Company has all requisite power and
authority to enter into this Agreement and, subject to Company
Stockholders' Approval and the Company Required Statutory Approvals, to
consummate the transactions contemplated hereby.
23
(ii) The execution and delivery of this Agreement and, subject
to obtaining the Company Stockholders' Approval, the consummation by
the Company of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company.
(iii) This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution
and delivery hereof by Parent and Sub, constitutes the valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as would be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other
similar laws affecting the enforcement of creditors' rights generally
and except that the availability of equitable remedies, including
specific performance, may be subject to the discretion of any court
before which any proceeding therefor may be brought.
(b) Non-Contravention. The execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
and thereby will not, result in any Violation by the Company or any of its
Subsidiaries or, to the knowledge of the Company, any of its Joint Ventures,
under any provisions of
(i) the certificate of incorporation, bylaws or similar
governing documents of the Company or any of its Subsidiaries or Joint
Ventures;
(ii) subject to obtaining the Company Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order or injunction of any Governmental Authority applicable to
the Company or any of its Subsidiaries or Joint Ventures or any of
their respective properties or assets;
(iii) any Major Oil and Gas Interest of the Company or its
Subsidiaries; or
(iv) subject to obtaining the Company Required Consents, any
note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or
agreement of any kind to which the Company or any of its Subsidiaries
or Joint Ventures is now a party or by which it or any of its
properties or assets may be bound or affected;
excluding from the foregoing clauses (ii), (iii) and (iv) such Violations as
would not, in the aggregate, reasonably likely have a Company Material Adverse
Effect.
(c) Statutory Approvals. Except for (i) filing by the Company of a
pre-merger Notification Report form under the HSR Act, (ii) the filing with the
SEC of (A) the Joint Proxy Statement and (B) such reports under Section 13(a) of
the Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby and (iii) the filing of the Certificate of
Merger with the Delaware Secretary of State with respect to the Merger as
provided in the DGCL and appropriate documents with the relevant authorities in
other states in which the Company is qualified to do business, no declaration,
filing or registration with, or notice to or
24
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, the failure
to obtain, make or give which would reasonably likely have a Company Material
Adverse Effect (the "Company Required Statutory Approvals"), it being understood
that references in this Agreement to "obtaining" such Company Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notice; obtaining such consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law.
(d) Compliance.
(i) Except as disclosed in the Company SEC Reports, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the
Company, any of its Joint Ventures, is in violation of or under
investigation with respect to, or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental
Authority, except for violations that do not have, and, would not
reasonably likely have, a Company Material Adverse Effect.
(ii) The Company, its Subsidiaries and, to the knowledge of the
Company, its Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary, to
conduct their respective businesses as currently conducted, except
those the failure to obtain which would not reasonably likely have a
Company Material Adverse Effect.
SECTION 6.5 Reports and Financial Statements.
(a) Since December 31, 1993, the filings required to be made by the
Company and its Subsidiaries under the Securities Act or the Exchange Act have
been filed with the SEC as required by each such law or regulation, including
all forms, statements, reports, agreements and all documents, exhibits,
amendments and supplements appertaining thereto, and the Company and its
Subsidiaries have complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
(b) The Company has made available to Parent a true and complete copy
of each report, schedule, registration statement and definitive proxy statement
filed by the Company with the SEC since December 31, 1993, (such documents as
filed, and any and all amendments thereto, the "Company SEC Reports").
(c) The Company SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed, and all forms,
reports or other documents filed by the Company with the SEC after the date
hereof, did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
25
(d) The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the Company SEC Reports
(collectively, the "Company Financial Statements") have been prepared, and the
audited consolidated financial statements and unaudited interim financial
statements of the Company as included in all forms, reports or other documents
filed with the SEC after the date hereof will be prepared in accordance with
GAAP applied on a consistent basis (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted by
Form 10-Q) and fairly present in all material respects the financial position of
the Company as of the respective dates thereof or the results of operations and
cash flows for the respective periods then ended, as the case may be, subject,
in the case of the unaudited interim financial statements, to normal, recurring
audit adjustments.
(e) True, accurate and complete copies of the Certificate of
Incorporation and Bylaws of the Company, as in effect on the date hereof, have
been delivered to Parent.
SECTION 6.6 Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities.
(a) Except as set forth in the Company SEC Reports, from December 31,
1996 through the date hereof the Company and each of its Subsidiaries has
conducted its business only in the ordinary course of business consistent with
past practice and there has not been (i) any declaration, setting aside or
payment of any dividend (whether in cash, stock or property) with respect to any
of the Company's capital stock, (ii) (A) any granting by the Company or any of
its Subsidiaries to any executive officer of the Company or any of its
Subsidiaries of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of December 31, 1996, (B) any granting by the Company or
any of its Subsidiaries to any such executive officer of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of December 31, 1996, or (C) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer, (iii) any damage,
destruction or loss, whether or not covered by insurance, that would have a
Company Material Adverse Effect or (iv) any other fact or condition exists that
would reasonably likely have a Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has any liabilities
or obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies (i) that are accrued or
reserved against in the consolidated financial statements of the Company or
reflected in the notes thereto for the year ended December 31, 1996, or (ii)
that were incurred after December 31, 1996 in the ordinary course of business
and would not reasonably likely have a Company Material Adverse Effect.
SECTION 6.7 Litigation. Except as set forth in the Company SEC Reports,
there are no claims, suits, actions or proceedings, pending or, to the knowledge
of the Company, threatened, nor are there, to the knowledge of the Company, any
investigations or reviews pending or threatened against, relating to or
affecting the Company or any of its Subsidiaries or Joint Ventures, or
judgments, decrees, injunctions, rules or orders of any court, governmental
26
department, commission, agency, instrumentality or authority or any arbitrator
applicable to the Company or any of its Subsidiaries or Joint Ventures, that
would have, or would reasonable likely have, a Company Material Adverse Effect.
SECTION 6.8 Registration Statement and Joint Proxy Statement.
(a) None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities Act and
at the Effective Time, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and
(ii) the Joint Proxy Statement will, at the date the Joint
Proxy Statement is mailed to the stockholders of the Company and Parent
and, as the same may be amended or supplemented, at the time of the
meetings of such stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any
material fact with respect to the Company or its Subsidiaries necessary
in order to make the statements therein with respect to the Company or
its Subsidiaries, in light of the circumstances under which they are
made, not misleading.
(b) Each of the Registration Statement and the Joint Proxy Statement,
as of such respective dates, will comply (with respect to the Company and its
Subsidiaries) as to form in all material respects with the applicable provisions
of the Securities Act and the Exchange Act and the rules and regulations
thereunder.
SECTION 6.9 Tax Matters.
(a) The Company and each of its Subsidiaries has filed (i) within the
time and in the manner prescribed by law, all required Tax Returns calculated on
or with reference to income, profits, earnings or gross receipts and all other
Tax Returns required to be filed that would report a material amount of Tax, and
(ii) paid all Taxes that are shown on such Tax Returns as due and payable within
the time and in the manner prescribed by law except for those being contested in
good faith and for which adequate reserves have been established.
(b) As of the date hereof there are no claims, assessments, audits or
administrative or court proceedings pending against the Company or any of its
Subsidiaries for any alleged deficiency in Tax, and none of the Company or any
of its Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(c) The Company has established adequate accruals for Taxes and for any
liability for deferred Taxes in the Company Financial Statements in accordance
with GAAP.
27
SECTION 6.10 Employee Matters.
(a) Benefit Plans. With respect to all the employee benefit plans and
arrangements maintained for the benefit of any current or former employee,
officer or director of the Company or any of its Subsidiaries (collectively, the
"Company Benefit Plans"), except as set forth in the Company SEC Reports and
except, in the case of clauses (iii), (iv) and (v), as would not, individually
or in the aggregate, have a Company Material Adverse Effect: (i) none of the
Company Benefit Plans is a "multi-employer plan" within the meaning of ERISA;
(ii) none of the Company Benefit Plans promises or provides retiree medical or
life insurance benefits to any person, except as otherwise required by law;
(iii) each Company Benefit Plan intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal Revenue
Service that it is so qualified and nothing has occurred since the date of such
letter that could reasonably be expected to affect the qualified status of such
Company Benefit Plan; (iv) each Company Benefit Plan has been operated in all
respects in accordance with its terms and the requirements of applicable law;
and (v) neither the Company nor any of its Subsidiaries has incurred any direct
or indirect liability under, arising out of or by operation of Title IV of ERISA
in connection with the termination of, or withdrawal from, any Company Benefit
Plan or other retirement plan or arrangement, and no fact or event exists that
could reasonably be expected to give rise to any such liability. The aggregate
accumulated benefit obligations of any Company Benefit Plan subject to Title IV
of ERISA do not exceed the fair market value of the assets of such Company
Benefit Plan. Except as set forth in Schedule 6.10(a) of the Company DISCLOSURE
SCHEDULE, neither the Company nor any of its Subsidiaries has any Company
Benefit Plan or any employment or severance agreement with any of its employees.
(b) Labor Matters. (i) Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or other material contract or
agreement with any labor organization or other representative of employees nor
is any such contract being negotiated; (ii) there is no material unfair labor
practice charge or complaint pending nor, to the knowledge of the executive
officers of the Company, threatened, with regard to employees of the Company or
any of its Subsidiaries; (iii) there is no labor strike, slowdown, work stoppage
or other labor controversy in effect, or, to the knowledge of the executive
officers of the Company, threatened against or involving the Company or any of
its Subsidiaries that has, or would be reasonably likely to have, a Company
Material Adverse Effect; (iv) as of the date hereof, no representation question
exists, nor to the knowledge of the executive officers of the Company, are there
any campaigns being conducted to solicit cards from the employees of the Company
or any of its Subsidiaries to authorize representation by any labor
organization; (v) neither the Company nor any of its Subsidiaries is a party to,
or is otherwise bound by, any consent decree with any governmental authority
relating to employees or employment practices of the Company or any of its
Subsidiaries; (vi) the Company and its Subsidiaries have not incurred any
liability under, and have complied in all respects with, the Worker Adjustment
Retraining Notification Act, and no fact or event exists that could give rise to
liability under such Act; and (vii) the Company and its Subsidiaries are in
compliance with all applicable agreements, contracts and policies relating to
employment, employment practices, wages, hours and terms and conditions of
employment of the employees, except where the failure to be in compliance with
each such agreement, contract and
28
policy would not, either individually or in the aggregate, have a Company
Material Adverse Effect.
SECTION 6.11 Environmental Matters. Except as disclosed in the Company
SEC Reports and except as would not, individually or in the aggregate, be
reasonably expected to result in a Company Material Adverse Effect, (i) the
Company and each of its Subsidiaries are in compliance with all applicable
Environmental Laws and the terms and conditions of all applicable Environmental
Permits, (ii) there are no Environmental Claims against the Company or any of
its Subsidiaries, and (iii) no Hazardous Materials have been released,
discharged or disposed of on any of the properties owned or occupied by the
Company or its Subsidiaries in any manner or quantity which requires
investigation, assessment, monitoring, remediation or cleanup under currently
applicable Environmental Laws.
SECTION 6.12 Engineering Reports. All information supplied to ▇▇▇▇▇
▇▇▇▇▇ Company, an independent petroleum engineering firm, by or on behalf of the
Company that was material to such firm's review of the Company's estimates of
oil and gas reserves attributable to the Oil and Gas Interests of the Company in
connection with the preparation of the oil and gas reserve engineering report
concerning the Oil and Gas Interests of the Company as of December 31, 1996 (the
"Company Engineering Report"), was (at the time supplied or as modified or
amended prior to the issuance of the Company Engineering Report) true and
correct in all material respects. Except for changes in classification or values
of oil and gas reserve or property interests that occurred in the ordinary
course of business since December 31, 1996, and except for changes (including
changes in commodity prices) generally affecting the oil and gas industry on a
nationwide basis, there has been no Company Material Adverse Change regarding
the matters addressed in the Company Engineering Report.
SECTION 6.13 Vote Required. The approval of this Agreement by the
holders of at least a majority of the outstanding shares of Company Common Stock
(the "Company Stockholders' Approval") is the only vote of holders of any class
or series of the capital stock of the Company required to approve this
Agreement, the Merger and the other transactions contemplated hereby.
SECTION 6.14 Opinion of Financial Advisor. The Company has received the
written opinion (the "DLJ Opinion") of ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities
Corporation ("DLJ"), on the date hereof, to the effect that, as of the date
hereof, the Conversion Ratio is fair from a financial point of view to the
holders of Company Common Stock.
SECTION 6.15 Insurance. The Company and each of its Subsidiaries is,
and has been continuously since December 31, 1995, insured in such amounts and
against such risks and losses as are customary for companies conducting the
respective businesses conducted by the Company and its Subsidiaries during such
time period. Neither the Company nor any of its Subsidiaries has received any
notice of cancellation or termination with respect to any material insurance
policy thereof. All material insurance policies of the Company and its
Subsidiaries are valid and enforceable policies.
29
SECTION 6.16 Ownership of Parent Common Stock. The Company does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of Parent Common Stock.
SECTION 6.17 No Loss of Title to Interests. No suit, action or other
proceeding (including, without limitation, tax, environmental or development
demands proceedings) is pending, or to the best of the Company's knowledge
threatened, which might result in loss of title to any of the Company's Major
Oil and Gas Interests. The Company shall promptly notify Parent of any such
proceeding which may arise or be threatened prior to the Closing. No action,
suit or proceeding is currently pending to which the Company is a party or to
which any of the Company's assets are subject which relates to the ownership or
operations of the Company's Major Oil and Gas Interests.
SECTION 6.18 Title to Major Oil and Gas Interests.
(a) The Company has, or will have as of the Closing Date, Defensible
Title to all of the Company's and its Subsidiaries' Major Oil and Gas Interests,
except for such defects in the Company's and its Subsidiaries' Defensible Title
that will not individually or in the aggregate, affect the value of such Major
Oil and Gas Interests by an amount in excess of $1 million.
(b) All royalties, rentals, ▇▇▇▇ clause payments, shut-in gas payments
and other payments due with respect to Company's and its Subsidiaries' Major Oil
and Gas Interests have been properly and timely paid, except (i) for payments
held in suspense for title or other reasons which are customary in the industry
and which will not result in grounds for cancellation of Company's or its
Subsidiaries' rights in such Major Oil and Gas Interests and (ii) such failures
as would not have a Company Material Adverse Effect.
(c) Except for such defaults that would not result in a Company
Material Adverse Effect, neither the Company nor any of its Subsidiaries is in
default (and there exists no event or circumstance which with notice or the
passage of time or both could constitute a default by the Company or its
Subsidiaries) under the terms of any lease, farmout agreements or other
contracts or agreements respecting the Company's or its Subsidiaries' Major Oil
and Gas Interests which could (i) interfere in any material respect with the
operation or use thereof, (ii) prevent the Company or its Subsidiaries from
receiving the proceeds of production attributable to their interest therein,
(iii) result in cancellation of the Company's interest therein, or (iv) impair
the value of the Company's or its Subsidiaries' interest therein.
SECTION 6.19 Material Contracts and Agreements.
(a) All material contracts of the Company or its Subsidiaries have been
included in the Company SEC Reports, except for those contracts not required to
be filed pursuant to the rules and regulations of the SEC.
(b) Section 6.19 of the Company Disclosure Schedule sets forth a
list of all written or oral contracts, agreements or arrangements to which the
Company or any of its Subsidiaries is a
30
party or by which the Company or any of its Subsidiaries or any of their
respective assets is bound which would be required to be filed as exhibits to
the Company's Annual Report on Form 10-K for the year ending December 31, 1997,
and which have not previously been included as exhibits in the Company SEC
Reports.
SECTION 6.20 Accounting Matters. To the best of its knowledge, neither
the Company nor any of its affiliates, has through the date of this Agreement
taken or agreed to take any action that (without giving effect to any action
taken or agreed to be taken by Parent or any of its affiliates) would present
Parent from accounting for the business combination to be effected by the Merger
as a pooling of interests.
SECTION 6.21 State Takeover Statutes; Absence of Supermajority
Provision. The Company has taken all action to assure that no state takeover
statute or similar statute or regulation, including, without limitation Section
203 of the DGCL, shall apply to the Merger or any of the other transactions
contemplated hereby. Except for Company Stockholders' Approval, no other
stockholder action on the part of the Company is required for approval of the
Merger, this Agreement and the transactions contemplated hereby. No provisions
of the Company's Certificate of Incorporation or By-laws or other governing
instruments of its subsidiaries or the terms of any rights plan or other
takeover defense mechanism of the Company would, directly or indirectly,
restrict or impair the ability of Parent to vote, or otherwise to exercise the
rights of a stockholder with respect to, securities of the Company and its
subsidiaries that may be acquired or controlled by Parent or permit any
stockholder to acquire securities of the Company on a basis not available to
Parent in the event that Parent were to acquire securities of the Company.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 7.1 Organization and Standing. Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Sub was organized solely for the purpose of acquiring the Company and
engaging in the transactions contemplated by this Agreement and has not engaged
in any business since it was incorporated which is not in connection with the
Merger and this Agreement.
SECTION 7.2 Capital Structure. The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $0.01 per share, all of
which are validly issued and outstanding, fully paid and nonassessable, free of
preemptive rights and are owned by Parent free and clear of all liens, claims
and encumbrances.
SECTION 7.3 Authority; Non-Contravention. Sub has all requisite power
and authority to enter into this Agreement and to consummate the Merger and the
other transactions contemplated hereby. The execution and delivery of this
Agreement by Sub, the performance by Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby
31
have been duly authorized by its Board of Directors and Parent as its sole
stockholder, and, except for the corporate filings required by state law, no
other corporate proceedings on the part of Sub are necessary to authorize this
Agreement and the Merger and the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Sub and, assuming
the due authorization, execution and delivery hereof by the Company, constitutes
a valid and binding obligation of Sub enforceable against Sub in accordance with
its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceedings may be
brought. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, violate, conflict with or result in a breach of any
provision of, or constitute a default (with or without notice or lapse of time,
or both) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation or acceleration
of any obligation or the loss of a material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Sub under, any provisions of (i) the Certificate of
Incorporation or Bylaws (true and complete copies of which as of the date hereof
have been delivered to the Company) of Sub, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Sub or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Sub or any of
its properties or assets, other than, in the case of clauses (ii) or (iii), any
such conflicts, violations, defaults, rights, losses, liens, security interests,
charges or encumbrance that, individually or in the aggregate, would not have a
Sub Material Adverse Effect, materially impair the ability of Sub to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
ARTICLE VIII
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, Parent shall, and shall cause its Subsidiaries
to, and the Company shall, and shall cause its Subsidiaries to, comply with the
provisions of this Article VIII.
SECTION 8.1 Ordinary Course of Business. Parent shall, and shall cause
its Subsidiaries to, and the Company shall, and shall cause its Subsidiaries to,
conduct their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all commercially
reasonable efforts to preserve their respective business organizations and
goodwill, preserve the goodwill and relationships with customers, suppliers,
distributors and others having business dealings with them and, subject to
prudent management of workforce needs and ongoing programs currently in force,
keep available the services of their present officers and employees.
32
SECTION 8.2 Dividends. Parent shall not, nor shall it permit any of its
Subsidiaries to, and the Company shall not, nor shall it permit any of its
Subsidiaries to:
(a) declare or pay any dividends or make other distributions in respect
of any of their capital stock other than to Parent or its Subsidiaries or to the
Company or its Subsidiaries, as the case may be, and other than (i) the
declaration and payment, if desirable by Parent, of Parent Common Stock purchase
rights having terms substantially similar to those previously described to the
Company and provided further that in all events the Parent Common Stock issued
in the merger shall provide the holders thereof with the same rights and
benefits as the holders of Parent Common Stock as of the date hereof.
(b) split, combine or reclassify any of their capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of, or in substitution for, shares of their capital stock; or
(c) redeem, repurchase or otherwise acquire any shares of their
capital stock, other than
(i) intercompany acquisitions of capital stock, or
(ii) in connection with the administration of employee benefit
and dividend reinvestment plans as in effect on the date hereof in the
ordinary course of the operation of such plans.
SECTION 8.3 Issuance of Securities. Parent shall not, and shall not
permit any of its Subsidiaries to, and the Company shall not, and shall not
permit any of its Subsidiaries to, issue, agree to issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of their
capital stock or any class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities except for:
(a) the issuance of common stock or other securities by Parent or the
Company pursuant to the plans and arrangements listed in their respective
DISCLOSURE SCHEDULEs, in each case in the ordinary course of the operation of
such plans and arrangements in accordance with their current terms,
(b) existing outstanding securities and rights to acquire
securities of Parent and those permitted by Section 8.2, or
(c) issuances by a wholly owned Subsidiary of its capital stock to
Parent or the Company, as the case may be.
SECTION 8.4 Charter Documents. Parent and the Company shall not amend
or propose to amend their respective articles of incorporation or bylaws in any
way adverse to the other, except to the extent that any document setting forth
the terms of a series of preferred stock
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permitted to be issued in accordance with this Article VIII constitutes an
amendment to their respective articles of incorporation.
SECTION 8.5 No Acquisitions. Parent shall not, nor shall it permit any
of its Subsidiaries to, and the Company shall not, nor shall it permit any of
its Subsidiaries to, acquire, or publicly propose to acquire, or agree to
acquire, by merger or consolidation, by purchase or otherwise, any assets of any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets, in each case that involves a transaction exceeding $15,000,000 in the
aggregate, except with the prior written consent of the other party, which
consent shall not be unreasonably withheld; provided, however, that Parent and
the Company may acquire Oil and Gas Interests in the ordinary course of business
consistent with prior practice. Notwithstanding the foregoing, except for
acquisitions of Oil and Gas Interests in the ordinary course of business
consistent with prior practice, in no event shall any acquisition, merger,
consolidation or purchase of any assets or business from an Affiliate of Parent
or its subsidiaries, or the Company or the subsidiaries (as applicable) be
permitted without the consent of the other party hereto.
SECTION 8.6 Capital Expenditures. Except as required by law, Parent
shall not, nor shall it permit any of its Subsidiaries to, and the Company shall
not, nor shall it permit any of its Subsidiaries to, make any capital
expenditures, except for normal extensions to or replacements of properties and
drilling of exploratory and development ▇▇▇▇▇ in the ordinary course of business
consistent with prior practice and the acquisition of seismic data and
processing and interpretation equipment in the ordinary course of business
consistent with prior practice.
SECTION 8.7 No Dispositions. Parent shall not, nor shall it permit any
of its Subsidiaries to, and the Company shall not, nor shall it permit any of
its Subsidiaries to, sell, lease, license, encumber or otherwise dispose of any
assets that are material, except for normal extensions to or replacements of
properties in the ordinary course of business consistent with prior practice;
provided, however, this Section shall not prohibit ordinary course of business
transfers of properties in connection with the establishment of exploration
arrangements, including farmouts and similar arrangements.
SECTION 8.8 Indebtedness. Parent shall not, nor shall it permit any of
its Subsidiaries to, and the Company shall not, nor shall it permit any of its
Subsidiaries to, incur or guarantee any indebtedness (including any debt
borrowed or guaranteed or otherwise assumed, including, without limitation, the
issuance of debt securities), except for:
(a) short-term indebtedness in the ordinary course of business
consistent with past practice,
(b) long-term indebtedness in connection with the refinancing of
existing indebtedness either at its stated maturity or at a lower cost of
funds, or
(c) borrowings under existing credit facilities.
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SECTION 8.9 Compensation, Benefits. Except as described in Section 8.9
of the Parent Disclosure Schedule except as may be required by applicable law or
as contemplated by this Agreement, Parent shall not, nor shall it permit any of
its Subsidiaries to, and the Company shall not, nor shall it permit any of its
Subsidiaries to, enter into, adopt or amend or increase the amount of or
accelerate the payment or vesting of any benefit or amount payable under any
employee benefit plan or any other contract, agreement, commitment, arrangement,
plan or policy maintained by, contributed to or entered into by Parent or the
Company, as the case may be, or their respective Subsidiaries, or increase, or
enter into any contract, agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to extend, expand or
enhance the engagement, employment or any related rights of any director,
officer or other employee of Parent or the Company, as the case may be, or their
respective Subsidiaries, except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to Parent or the
Company, as the case may be, or their respective Subsidiaries, or enter into or
amend any employment, severance, or special pay arrangement with respect to the
termination of employment or other similar contract, agreement or arrangement
with any director or officer or other employee other than in the ordinary course
of business consistent with past practice.
SECTION 8.10 Accounting. No party shall, nor shall any party permit any
of its Subsidiaries to make any changes in its or their accounting methods,
except as required by law, rule, regulation or GAAP or that would adversely
affect the ability of Parent to account for the Merger as a pooling of
interests.
SECTION 8.11 Tax-Free Status. No party shall knowingly, nor shall any
party knowingly permit any of its Subsidiaries to, take or fail to take any
action which action or failure to act would jeopardize the qualification of the
Merger as a reorganization within the meaning of Section 368 of the Code.
SECTION 8.12 Insurance. Parent shall, and shall cause its Subsidiaries
to, and the Company shall, and shall cause its Subsidiaries to, maintain with
financially responsible insurance companies (or through self-insurance not
inconsistent with such party's past practice) insurance in such amounts and
against such risks and losses as are customary for companies engaged in the same
industry and such other businesses as conducted by such party and its
Subsidiaries.
SECTION 8.13 Cooperation, Notification. Each of Parent and the Company
shall and shall cause its Subsidiaries (directly or acting through its parent
company representative) to:
(a) confer on a regular and frequent basis with one or more
representatives of the other party to discuss material operational matters and
the general status of its ongoing operations,
(b) promptly notify the other party of any significant changes in
its business, properties, assets, condition (financial or otherwise), prospects
or results of operations,
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(c) advise the other party of any change or event that has had or, to
the knowledge of such party, would reasonably likely have a Parent Material
Adverse Effect, a Sub Material Adverse Effect or a Company Material Adverse
Effect, and
(d) consult with each other prior to making any filings with any state
or federal court, administrative agency, commission or other Governmental
Authority in connection with this Agreement and the transactions contemplated
hereby, and promptly after each such filing provide the other with a copy
thereof.
SECTION 8.14 Third-Party Consents. Each of Parent and the Company
shall, and shall cause its Subsidiaries to, use all commercially reasonable
efforts to obtain all Parent Required Consents or Company Required Consents, as
the case may be. Each party shall promptly notify the other party of any failure
or prospective failure to obtain any such consents and, if requested by the
other party, shall provide to the other party copies of all Parent Required
Consents or Company Required Consents, as the case may be, obtained by such
party.
SECTION 8.15 Permits. Each of Parent and the Company shall use
commercially reasonable efforts to maintain in effect all existing material
permits pursuant to which such party operates.
ARTICLE IX
ADDITIONAL AGREEMENTS
SECTION 9.1 Access to Information.
(a) Upon reasonable notice, each of Parent and the Company shall, and
shall cause its Subsidiaries to, afford to the officers, directors, employees,
accountants, counsel, investment bankers, financial advisors, consultants and
other representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records, including, but not limited to, Tax Returns, but excluding (i) that
information that is restricted by applicable confidentiality and secrecy
agreements, (ii) that information that a party may be restricted from disclosing
under applicable law, (iii) the corporate proceedings of Parent or the Company
(as the case may be) in considering the Merger, and (iv) minutes of meetings of
the Company's Special Committee, and, during such period, each shall, and shall
cause its Subsidiaries to, furnish promptly to the other:
(i) a copy of each report, schedule and other document filed by
it or any of its Subsidiaries with the SEC and any other document
pertaining to the transactions contemplated hereby filed with any
Governmental Authority that is not filed as an exhibit to an SEC filing
or described in an SEC filing, and
(ii) all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such matters as may be
reasonably requested by the other party in
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connection with any filings, applications or approvals required or
contemplated by this Agreement.
(b) Without limiting the application of the Confidentiality Agreement,
dated June 24, 1997, between Parent and the Company (the "Company
Confidentiality Agreement") and the Confidentiality Agreement between Parent and
the Company (the "Parent Confidentiality Agreement" and together with the
Company Confidentiality Agreement, the "Confidentiality Agreements"), all
documents and information furnished pursuant to Section 9.1(a) (ii) shall be
subject to the Confidentiality Agreements.
SECTION 9.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing.
(i) As promptly as reasonably practicable after the date
hereof, the parties shall prepare and file with the SEC the
Registration Statement and the Joint Proxy Statement (together the
"Joint Proxy/Registration Statement").
(ii) The parties shall take such actions as may be reasonably
required to cause the Registration Statement to be declared effective
under the Securities Act as promptly as practicable after such filing.
(iii) The parties shall also take such action as may be
reasonably required to cause the shares of Parent Common Stock issuable
in connection with the Merger to be registered or to obtain an
exemption from registration under applicable state "blue sky," or
securities laws; provided, however, that none of the Company, Parent or
Sub shall be required to resister or qualify as a foreign corporation
or to take any other action that would subject it to general service of
process in any jurisdiction in which it will not, following the Merger,
be so subject.
(iv) Each of the parties shall furnish all information
concerning itself that is required or customary for inclusion in the
Joint Proxy/Registration Statement.
(v) No representation, warranty, covenant or agreement
contained in this Agreement is made by any party hereto with respect to
information supplied by any other party hereto for inclusion in the
Joint Proxy/Registration Statement.
(vi) The Joint Proxy/Registration Statement shall comply as to
form in all material respects with the Securities Act, the Exchange Act
and the rules and regulations thereunder.
(vii) The parties shall take such action as may be reasonably
required to cause the shares of Parent Common Stock issuable in the
Merger to be approved for listing on the New York Stock Exchange.
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(b) Letter of the Company's Accountants. Following receipt by ▇▇▇▇▇▇ &
▇▇▇▇▇, LLP, the Company's independent auditors, of an appropriate request from
Parent pursuant to SAS No. 72, the Company shall use its best efforts to cause
to be delivered to Parent a letter of Ernst & Young, LLP, dated a date within
two business days before the effective date of the Registration Statement, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements and
proxy statements similar to the Joint Proxy/Registration Statement.
(c) Letter of Parent's Accountants. Following receipt by Ernst & Young,
LLP, Parent's independent auditors, of an appropriate request from the Company
pursuant to SAS No. 72, Parent shall use its best efforts to cause to be
delivered to the Company a letter of Ernst & Young, LLP, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Joint Proxy/Registration
Statement.
SECTION 9.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall, in cooperation with the
other, file or cause to be filed with the Federal Trade Commission and the
Department of Justice any notifications required to be filed by their respective
"ultimate parent" companies under the HSR Act, and the rules and regulations
promulgated thereunder with respect to the transactions contemplated hereby.
Each party hereto shall notify the other immediately upon receiving any request
for additional information from either of such agencies with respect to such
filings and shall respond promptly to any such requests.
(b) Other Regulatory Approvals.
(i) Each party hereto shall cooperate and use its reasonable
best efforts promptly to prepare and file all necessary permits,
consents, approvals and authorizations of all Governmental Authorities
and all other persons necessary or advisable to consummate the
transactions contemplated by this Agreement, including, without
limitation, the Company Required Statutory Approvals and the Parent
Required Statutory Approvals.
(ii) Parent shall have the right to review and approve in
advance all characterizations of the information relating to Parent, on
the one hand, and the Company shall have the right to review and
approve in advance all characterizations of the information relating to
the Company, on the other hand, in either case, which appear in any
filing made in connection with the transactions contemplated by this
Agreement or the Merger.
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(iii) The Company and Parent shall each consult with the other
with respect to the obtaining of all such necessary or advisable
permits, consents, approvals and authorizations of Governmental
Authorities.
SECTION 9.4 Stockholder Approval.
(a) Approval of Parent Stockholders. Parent shall, as promptly as
reasonably practicable after the date hereof
(i) take all steps reasonably necessary to duly call, give
notice of, convene and hold a special meeting of its stockholders (the
"Parent Special Meeting") for the purpose of securing the Parent
Stockholders' Approval,
(ii) distribute to its stockholders the Joint Proxy
Statement in accordance with applicable federal and state law, and its
Articles of Incorporation and Bylaws,
(iii) recommend to its stockholders the approval of the
Share Issuance, and
(iv) cooperate and consult with the Company with respect to
each of the foregoing matters, provided that nothing contained in this
Section 9.4(a) shall require the Board of Directors of Parent to take
any action or refrain from taking any action that such Board determines
in good faith after consultation with and based on the advice of
outside counsel could reasonably be expected to result in a breach of
its fiduciary duties under applicable law.
(b) Approval of the Company Stockholders. The Company shall, as
promptly as reasonably practicable after the date hereof,
(i) take all steps reasonably necessary to duly call, give
notice of, convene and hold a special meeting of its stockholders (the
"Company Special Meeting") for the purpose of securing the Company
Stockholders' Approval,
(ii) distribute to its stockholders the Joint Proxy
Statement in accordance with applicable federal and state laws, and
its Certificate of Incorporation and Bylaws,
(iii) recommend to its stockholders the approval of the
Merger, this Agreement and the transactions contemplated hereby, and
(iv) cooperate and consult with Parent with respect to each of
the foregoing matters, provided that nothing contained in this Section
9.4(b) shall require the Board of Directors of the Company to take any
action or refrain from taking any action that such Board determines in
good faith after consultation with and based on the advice of outside
counsel could reasonably be expected to result in a breach of its
fiduciary duties under applicable law.
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SECTION 9.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the fullest extent not prohibited by law,
Parent agrees that for a period of six (6) years after the Effective Time, all
rights to indemnification existing as of the Effective Time in favor of the
current and former directors, officers and employees of the Company and its
Subsidiaries (at the Effective Time) (each an "Indemnified Party") as provided
for in their respective certificate of incorporation or bylaws shall continue in
full force and effect. After the Effective Time, Parent will consent to the
establishment by the Surviving Corporation and its Subsidiaries of such
additional indemnification arrangements in favor of the Surviving Corporation
and its Subsidiaries' directors and officers as may be necessary so that they
will have the benefit of the maximum indemnification arrangements available to
the directors and officers of Parent for all events or actions occurring
subsequent to the Effective Time.
(b) Successors. In the event that the Parent or any of its
successors or assigns
(i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or
(ii) transfers all or substantially all of its properties
and assets to any person,
then and in each such case, proper provision shall be made so that such
successors and assigns shall assume the obligations set forth in this Section
9.5.
(c) The provisions of this Section 9.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
SECTION 9.6 DISCLOSURE SCHEDULEs.
(a) On or prior to the date of this Agreement, the Company shall have
delivered to Parent the Company DISCLOSURE SCHEDULE and Parent shall have
delivered to the Company the Parent DISCLOSURE SCHEDULE.
(b) The DISCLOSURE SCHEDULEs, when so delivered, shall constitute an
integral part of this Agreement and shall modify or otherwise affect the
respective representations, warranties, covenants or agreements of the parties
hereto contained herein.
(c) Any and all statements, representations, warranties or disclosures
set forth in the DISCLOSURE SCHEDULEs shall be deemed to have been made on and
as of the date of this Agreement.
(d) Without limiting the application of the Confidentiality Agreements,
the parties shall use their best efforts to keep the DISCLOSURE SCHEDULEs
confidential.
SECTION 9.7 Public Announcements. The Company, on the one hand, and
Parent and Sub, on the other hand, shall cooperate with each other in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or any of
40
the transactions contemplated hereby and shall not issue any public announcement
or statement prior to consultation with the other party, except that each party
may respond to questions from stockholders and may respond to inquiries from
financial analysts and media representatives in a manner consistent with its
past practice and each party may make such disclosure as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or NASDAQ without prior consultation to the extent
such consultation is not reasonably practicable. The parties agree that the
initial press release or releases to be issued in connection with the execution
of this Agreement shall be mutually agreed upon prior to the issuance thereof.
SECTION 9.8 Rule 145 Affiliates. Parent shall have received from the
Company a list of such Persons, if any, that Parent, after discussions with
counsel for the Company, believes may be "affiliates" of the Company, within the
meaning of Rule 145 of the SEC pursuant to the Securities Act ("Affiliates").
The Company shall use its reasonable efforts to deliver or cause to be delivered
to Parent on or prior to the Closing Date an undertaking by each Affiliate in
form satisfactory to Parent ("Affiliate Letters") that (i) such Affiliate has no
current plan or intention to sell, exchange or otherwise dispose of the Parent
Common Stock to be received by such Affiliate pursuant to the Merger, (ii) no
disposition will be made by such Affiliate of any Parent Common Stock received
or to be received pursuant to the Merger until such time as final results of
operations of Parent covering at least 30 days of combined operations of Parent
and the Company have been published, (iii) no Parent Common Stock received or to
be received by such Affiliate pursuant to the Merger will be sold or disposed of
except pursuant to an effective registration statement under the Securities Act
or in accordance with the provisions of paragraph (d) of Rule 145 under the
Securities Act or another exemption from registration under the Securities Act
and (iv) such Affiliate agrees that appropriate legends shall be placed upon the
certificates evidencing ownership of Parent Common Stock that such person
receives as a result of the merger.
SECTION 9.9 Employment Agreement Consultation. Parent and the Company
shall consult with each other prior to entering into, or amending, any
individual employment or severance agreements after the date hereof as
contemplated or permitted in accordance with Section 8.9. Each of Parent and the
Company shall promptly furnish to the other, upon reasonable request by the
other, detailed information, together with underlying documentation with respect
to all such existing or proposed individual employment or severance agreements
or amendments thereto.
SECTION 9.10 Stock Option and Bonus Plans.
The following provisions shall apply to each stock option plan, stock
bonus plan and similar plans of the Company under which the delivery of Company
Common Stock is required to be used for purposes of the payment of benefits,
grant of awards or exercise of options (each a "Stock Plan", and all of which
are described in Section 9.10 of the Company DISCLOSURE SCHEDULE):
(a) The Company shall take such action as may be necessary so that from
and after the date hereof, except as set forth in the Company DISCLOSURE
SCHEDULE, no further grants of stock,
41
options, or other rights shall be made under any Stock Plan, and after the
Effective Time, outstanding options to purchase shares of Company Common Stock
shall be exercisable to purchase a number of shares of Parent Common Stock as
may be determined by applying the Conversion Ratio set forth in Article III
hereof.
(b) In the event after the Effective Time outstanding options are
exercisable in shares of Parent Common Stock as described in 9.10(a), Parent
shall
(i) to the extent required under applicable SEC rules, take all
corporate action necessary or appropriate to obtain stockholder
approval at an annual meeting selected by Parent with respect to such
Stock Plan to the extent such approval is required to enable such Stock
Plan to comply with Rule 16b-3 promulgated under the Exchange Act,
(ii) reserve for issuance under such Stock Plan or otherwise
provide a sufficient number of shares of Parent Common Stock for
delivery upon exercise of options under such Stock Plan which are
outstanding on the date hereof,
(iii) as soon as practicable after the Effective Time, file one
or more registration statements under the Securities Act with respect
to the shares of Parent Common Stock issuable upon the exercise of
currently outstanding options under such Stock Plan to the extent such
filing is required under applicable law, and use its reasonable best
efforts to maintain the effectiveness of such registration statement(s)
(and the current status of the prospectuses contained therein or
related thereto) so long as such options remain outstanding, and
(iv) take such action as may be reasonably required to cause
the shares of Parent Common Stock issuable upon the exercise of
currently outstanding options under such Stock Plan to be approved for
listing on the New York Stock Exchange.
SECTION 9.11 No Solicitations.
(a) No party hereto shall, and each such party shall cause its
Subsidiaries not to, permit any of its Representatives to, and shall use its
best efforts to cause such persons not to, directly or indirectly, initiate,
solicit or encourage, or take any action to facilitate the making of any offer
or proposal that constitutes or is reasonably likely to lead to any Takeover
Proposal, or, in the event of any unsolicited Takeover Proposal, engage in
negotiations or provide any confidential information or data to any person
relating to any Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any Representative of a party, whether or not such Person is
purporting to act on behalf of the Party or otherwise, shall be deemed to be a
material breach of this Agreement by that party.
(b) Parent and the Company shall notify the other orally and in writing
of any such inquiries, offers or Takeover Proposals (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it) within 24 hours of the receipt thereof.
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(c) Each party hereto shall immediately cease and cause to be
terminated all existing discussions and negotiations, if any, with any other
persons conducted heretofore with respect to any Takeover Proposal.
(d) Notwithstanding anything in this Section 9.11 to the contrary:
(i) The Company may, prior to the vote of the stockholders of
the Company for approval of the Merger (and not thereafter if the
Merger is approved thereby) in response to an unsolicited request
therefor, furnish information, including non-public information, to any
person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) pursuant to a confidentiality agreement on substantially
the same terms as provided in Section 9.1(b) hereof to the extent that
the Board of Directors of the Company determines in good faith after
consultation with and based on the advice of outside counsel that such
action could reasonably be required by their fiduciary duties under
applicable law.
(ii) Parent may, prior to the vote of shareholders of the
Parent for the approval of the Merger (and not thereafter if the Merger
is approved thereby), in response to an unsolicited request therefor,
furnish information, including non-public information, to any person or
"group" (within the meaning of Section 13(d)(8) of the Exchange Act)
pursuant to a confidentiality agreement on substantially the same terms
as provided in Section 9.1(b) hereof to the extent that the Board of
Directors of Parent determines in good faith after consultation with
and based on the advice of outside counsel that such action could
reasonably be required by their fiduciary duties under applicable law.
(iii) The Company may engage in discussions and negotiations
(but may not enter into any binding agreement regarding a Takeover
Proposal other than the confidentiality agreement referenced in
9.11(d)(i) above) with any Person or group that has made an unsolicited
Takeover Proposal, among other things, to determine whether such
proposal (as opposed to any further negotiated proposal) is a Superior
Takeover Proposal and (ii) the Company may take and disclose to its
stockholders a position contemplated by Rule 14e-2(a) following the
Company's receipt of a Takeover Proposal that is in the form of a
tender offer under Section 14(e) of the Exchange Act.
(iv) Parent may engage in discussions and negotiations (but may
not enter into any binding agreement regarding a takeover Proposal
other than the confidentiality agreement referenced in 9.11(d)(ii)
above) with any Person or group that has made an unsolicited Takeover
Proposal, among other things, to determine whether such proposal (as
opposed to any further negotiated proposal) is a Superior Takeover
Proposal and (ii) Parent may take and disclose to its shareholders a
position contemplated by Rule 14e-2(a) following Parent's receipt of a
Takeover Proposal that is in the form of a tender offer under Section
14(e) of the Exchange Act.
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SECTION 9.12 No Withdrawal of Recommendation.
(a) Neither the Board of Directors of the Company nor any committee
thereof shall, except in connection with the termination of this Agreement
pursuant to Sections 11.1(a), (b), (c), (d), or (h), (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Sub the approval
or recommendation by the Board of Directors of the Company or any such committee
of this Agreement or the Merger or take any action having such effect or (ii)
approve or recommend, or propose to approve or recommend, any Takeover Proposal.
Notwithstanding the foregoing, in the event the Board of Directors of the
Company receives a Takeover Proposal that, in the exercise of its fiduciary
obligations (as determined in good faith by the Board of Directors after
consultation with and based on the advice of outside counsel), it determines to
be a Superior Takeover Proposal, the Board of Directors of the Company may
withdraw or modify its approval or Recommendation of this Agreement or the
Merger.
(b) Neither the Board of Directors of Parent nor any committee thereof
shall, except in connection with the termination of this Agreement pursuant to
Sections 11.1(a), (b), (c), (d), or (g), (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Company the approval or
recommendation by the Board of Directors of Parent or any such committee of this
Agreement or the Merger or take any action having such effect or (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal.
Notwithstanding the foregoing, in the event the Board of Directors of Parent
receives a Takeover proposal that, in the exercise of its fiduciary obligations
(as determined in good faith by the Board of Directors after consultation with
and based on the advice of outside counsel), it determines to be a Superior
Takeover Proposal, the Board of Directors of Parent may withdraw or modify its
approval or recommendation of this Agreement or the Merger.
SECTION 9.13 Expenses. Subject to Section 11.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Joint Proxy/Registration
Statement, as well as the filing fee relating thereto, shall be shared equally,
by the Company and Parent.
SECTION 9.14 Employee Benefit Matters. Following the Closing, Parent
shall maintain the level of benefits provided to the employees and all former
employees of the Company and its Subsidiaries that is in effect as of the date
hereof (other than benefits under any Stock Plans) until Parent shall provide
benefits to such employees and former employees on a basis consistent with the
provision of benefits provided otherwise to other employees and former employees
within the Parent system.
SECTION 9.15 Covenant to Satisfy Conditions.
(a) Each of Parent, Sub and the Company shall take all reasonable
actions necessary, to comply promptly with all legal requirements that may be
imposed on it with respect to this Agreement.
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(b) Subject to the terms and conditions hereof, and taking into account
the circumstances and giving due weight to the materiality of the matter
involved or the action required, Parent, Sub and the Company shall each use
their reasonable best efforts to take or cause to be taken all actions, and to
do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the other transactions contemplated hereby (subject to Parent Stockholders'
Approval and the Company Stockholders' Approval), including fully cooperating
with the other in obtaining the Parent Required Statutory Approvals, the Company
Required Statutory Approvals and all other approvals and authorizations of any
Governmental Authorities necessary or advisable to consummate the transactions
contemplated hereby.
SECTION 9.16 Accounting Matters. Neither the Company nor Parent shall
take or agree to take, nor shall they permit any of their respective affiliates
to take or agree to take, any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests.
SECTION 9.17 Independent Director. Parent agrees that on or before the
ninetieth (90th) day after the Effective Time (the "Election Date") it shall
either (i) elect to its Board of Directors an independent director who is not an
Affiliate of the Parent nor a person whose business relationship with the Parent
during the preceding three years would require disclosure during any year
pursuant to Item 404 of Regulation S-K under the Securities Act of 1933 (an
"Independent Director") or (ii) elect as a director of Parent a person to be
agreed upon by Company and Parent for a term from the Election Date until the
Parent's annual meeting to be held in 1998, and at such annual meeting elect an
Independent Director.
SECTION 9.18 Additional Agreements. Parent shall terminate (or cause
the Company to terminate) the employment contract by and between the Company and
each person listed on Schedule 9.18 (individually, an "Employee") pursuant to
section 5.3 of each such contract (termination without due cause), and as a
result of such termination, each Employee shall have the rights provided in his
contract, including without limitation section 6.3 and section 7 thereof. The
termination of an Employee hereunder shall occur on the ninetieth (90th) day
after the Effective Time; provided, however, an Employee and Parent may mutually
agree to enter into an employment contract and waive the requirements of this
Section 9.18.
ARTICLE X
CONDITIONS
SECTION 10.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger or cause
the Merger to be effected shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions, except, to the extent permitted by
applicable law, that such conditions may be waived in writing pursuant to
Section 11.5:
45
(a) Stockholder Approval. The Company Stockholders' Approval and
the Parent Stockholders' Approval shall have been obtained.
(b) No Injunction or Damages. No suit, action or other proceeding shall
be pending by any Governmental Authority in which it is sought to restrain or
prohibit the performance of or to obtain damages or other relief in connection
with this Agreement or the transactions contemplated hereby, and no temporary
restraining order or preliminary or permanent injunction or other order by any
federal or state court preventing consummation of the Merger or ordering damages
in connection therewith shall have been issued and continue in effect, and the
Merger and the other transactions contemplated hereby shall not have been
prohibited under any applicable federal or state law or regulation.
(c) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act, and no
stop order suspending such effectiveness shall have been issued and remain in
effect.
(d) Listing of Shares. The shares of Parent Common Stock issuable in
the Merger pursuant to Article III and Section 9.10 shall have been approved for
listing on the New York Stock Exchange upon official notice of issuance.
(e) Statutory Approvals. The Company Required Statutory Approvals, the
Parent Required Statutory Approvals and any clearance under the HSR Act or
matters related thereto shall have been obtained at or prior to the Effective
Time (or all applicable waiting periods (and any extensions thereof) under the
HSR Act shall have expired or otherwise been terminated), any such approvals
shall have become or resulted in Final Orders at or prior to the Effective Time,
and no such Final Order shall impose terms or conditions that would have, or
would be reasonably likely to have, a Parent Material Adverse Effect or a
Company Material Adverse Effect.
SECTION 10.2 Conditions to Obligation of Parent to Effect Merger. The
obligation of Parent to effect the Merger or cause the Merger to be effected
shall be further subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, except as may be waived by Parent in writing
pursuant to Section 11.5:
(a) Performance of Obligations of the Company. The Company shall have
performed in all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as if made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.
(c) Closing Certificates. Parent shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer
of the Company, dated the Closing Date, to the
46
effect that, to each such officer's knowledge, the conditions set forth in
Sections 10.2(a), (b) and (d) have been satisfied.
(d) Company Material Adverse Effect. No Company Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance that would
have, or would be reasonably likely to have, a Company Material Adverse Effect.
(e) Tax Opinion. Parent shall have received an opinion of Fulbright &
▇▇▇▇▇▇▇▇ L.L.P., in form and substance satisfactory to Parent, which opinion may
be based on appropriate representations of Parent and the Company, in form and
substance reasonably satisfactory to such counsel, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization transaction
described in Code Section 368.
(f) Opinion of Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation. Parent
shall have received an opinion of Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional
Corporation, in form and substance satisfactory to Parent, addressed to Parent
and dated the Closing Date, which opinion may be based on appropriate
representations of the Company.
(g) Company Required Consents. The Company Required Consents shall have
been obtained except those that in the aggregate would not result in and would
not reasonably be likely to result in a Company Material Adverse Effect.
(h) Pooling Accounting. Parent and Company shall have received a letter
from Ernst & Young, LLP, in form and substance satisfactory to Parent and
Company, to the effect that the Merger should be accounted for as a pooling of
interests under generally accepted accounting principles and applicable
regulations of the SEC.
(i) Fairness Opinion. The ▇▇▇▇▇▇▇ ▇▇▇▇▇ Opinion shall not have
been withdrawn.
(j) Affiliate Letters. The Company shall have delivered to Parent
the Affiliate Letters.
SECTION 10.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger or cause the Merger
to be effected shall be further subject to the satisfaction, on or prior to the
Closing Date, of the following conditions, except as may be waived by the
Company in writing pursuant to Section 11.5.
(a) Performance of Obligations of Parent. Parent shall have performed
in all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and warranties
of Parent set forth in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as if made on and as
of the Closing Date, except as otherwise contemplated by this Agreement.
47
(c) Closing Certificates. The Company shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of Parent,
dated the Closing Date, to the effect that, to each such officer's knowledge,
the conditions set forth in Sections 10.3(a), (b) and (d) have been satisfied.
(d) Parent Material Adverse Effect. No Parent Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance that would
have, or would be reasonably likely to have, a Parent Material Adverse Effect.
(e) Tax Opinion. The Company shall have received an opinion of Jenkens
& ▇▇▇▇▇▇▇▇▇, a professional corporation, in form and substance satisfactory to
the Company, which opinion may be based on appropriate representations of Parent
and the Company, in form and substance reasonably satisfactory to such counsel,
to the effect that the Merger will be treated for federal income tax purposes as
a reorganization transaction as described in Code Section 368 and that the
Company will recognize no gain or loss for federal income tax purposes as a
result of the consummation of the Merger.
(f) Opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P. The Company shall have
received an opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P. in form and substance
satisfactory to the Company, addressed to the Company and dated the Closing
Date, which opinion may be based on appropriate representations of Parent.
(g) Parent Required Consents. The Parent Required Consents shall have
been obtained except those that in the aggregate would not result in and would
not reasonably be likely to result in a Parent Material Adverse Effect.
(h) Fairness Opinion. The DLJ Opinion shall not have been
withdrawn.
(i) Pooling Accounting. Parent and Company shall have received a letter
from Ernst & Young, LLP, in form and substance satisfactory to Parent and
Company, to the effect that the Merger should be accounted for as a pooling of
interests under generally accepted accounting principles and applicable
regulations of the SEC.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 Termination. This Agreement may be terminated and the
Merger abandoned at any time prior to the Closing Date, whether before or after
approval by the stockholders of the respective parties hereto contemplated by
this Agreement:
(a) by mutual written consent of the Boards of Directors of the
Company and Parent;
48
(b) by the Company or Parent, by written notice to the other, if the
Effective Time shall not have occurred on or before December 31, 1997; provided,
however, that such date shall automatically be changed to February 28, 1998 if
on December 31, 1997:
(i) (A) the conditions set forth in Section 10.1(e) have not
been satisfied or waived, (B) the other conditions to the consummation
of the transactions contemplated hereby are then capable of being
satisfied, and (C) any approvals required by Section 10.1(e) that have
not yet been obtained are being pursued with diligence, provided,
further, that the right to terminate this Agreement under this Section
11.1(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before the
termination date; or
(ii) the Company Stockholders' Approval shall not have been
obtained at a duly held Company Special Meeting, including any
adjournments thereof, or the Parent Stockholders' Approval shall not
have been obtained at a duly held Parent Special Meeting, including any
adjournments hereof;
(c) by the Company or Parent, by written notice to the other party if
the Company has failed to obtain the Company Stockholders' Approval at a duly
held Company Special Meeting, including any adjournments thereof; or if the
Parent Stockholders' Approval shall not have been obtained at a duly held Parent
Special Meeting, including any adjournments thereof;
(d) by the Company or Parent, if any state or federal law, order, rule
or regulation is adopted or issued, that has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by the Company or Parent, if any court of competent jurisdiction in the United
States or any State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(e) by the Company, upon three (3) Business Days' prior notice to the
Parent, if as a result of a Takeover Proposal with respect to the Company that
the Board of Directors of the Company has determined to be a Superior Takeover
Proposal, and the Board of Directors of the Company determines in good faith
(after consultation with and based on the advice of its outside counsel) that
the acceptance of such Superior Takeover Proposal could reasonably be required
by the fiduciary obligations of such directors under applicable law; provided,
however, that prior to any such termination, the Company shall advise Parent in
writing of the determination by the Board of Directors of the Company that the
Board of Directors of the Company has determined that such Takeover Proposal is
a Superior Takeover Proposal, which notice will include a summary of such
Takeover Proposal. During such three (3) business day period Parent may propose
to the Company an alternative transaction, and the Company shall, and shall
cause its respective financial and legal advisors to, negotiate with Parent in
good faith with respect to such adjustments in the terms and conditions of this
Agreement so that such Takeover Proposal would not constitute a Superior
Takeover Proposal and thereby enable the Company to proceed with the
transactions contemplated herein;
49
(f) by Parent, upon three (3) Business Days' prior notice to the
Company, if as a result of a Takeover Proposal with respect to Parent that the
Board of Directors of Parent has determined to be a Superior Takeover Proposal
and the Board of Directors of Parent determines in good faith (after
consultation with and based on the advice of its outside counsel) that the
acceptance of such Superior Takeover Proposal could reasonably be required by
the fiduciary obligations of such directors under applicable law; provided,
however, that prior to any such termination, Parent shall advise the Company in
writing of the determination by the Board of Directors of the Parent that the
Parent has determined that such Takeover Proposal is a Superior Takeover
Proposal, which notice will include a summary of such Takeover Proposal. During
such three (3) business day period, the Company may propose to the Parent an
alternative transaction, and the Parent shall, and shall cause its respective
financial and legal advisors to, negotiate with the Company in good faith with
respect to such adjustments in the terms and conditions of this Agreement so
that such Takeover Proposal would not constitute a Superior Takeover Proposal
and thereby enable Parent to proceed with the transactions contemplated herein;
(g) by Parent, by written notice to the Company, if
(i) there shall have been any material breach of any
representation or warranty, or any material breach of any covenant or
agreement, of the Company hereunder, and such breach shall not have
been remedied within ten (10) business days after receipt by the
Company of notice in writing from Parent, specifying the nature of such
breach and requesting that it be remedied, or
(ii) the Board of Directors of the Company or any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to Parent or Sub the approval or recommendation by
the Board of Directors of the Company of this Agreement or the Merger
or take any action having such effect or (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal with respect to
the Company.
(h) by the Company, by written notice to Parent, if
(i) there shall have been any material breach of any
representation or warranty, or any material breach of any covenant or
agreement, of Parent hereunder, and such breach shall not have been
remedied within ten (10) business days after receipt by Parent of
notice in writing from the Company, specifying the nature of such
breach and requesting that it be remedied, or
(ii) if the Board of Directors of Parent or any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to the Company the approval or recommendation by
the Board of Directors of Parent of this Agreement or the Merger or
take any action having such effect or (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal with respect to
Parent.
50
SECTION 11.2 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent pursuant to Section 11.1, there shall
be no liability on the part of either the Company or Parent or their respective
officers or directors hereunder, except that
(a) Section 9.1(b), Section 9.6(d), Section 9.13, Section 11.3 and
Section 12.2 shall survive, and
(b) no such termination shall relieve any party from liability by
reason of any willful breach of any agreement, representation, warranty or
covenant contained in this Agreement.
SECTION 11.3 Certain Damages, Payments and Expenses.
(a) Damages Payable Upon Termination for Breach or Withdrawal of
Approval. If this Agreement is terminated pursuant to Sections 11.1(g) or
Section 11.1(h), then the breaching party, or the Company if its board has
withdrawn its recommendation, shall promptly (but not later than five (5)
business days after receipt of notice that the amount is due from the other
party) pay to the other party, as liquidated damages, an amount in cash equal to
the of out-of-pocket expenses and fees incurred by the other party arising out
of, in connection with or related to the Merger or the transactions contemplated
by this Agreement not in excess of $1 million ("Out-of-Pocket Expenses"),
provided, however, that if this Agreement is terminated by a party as a result
of a willful breach of a representation, warranty, covenant or agreement by the
other party, the non-breaching party may pursue any remedies available to it at
law or in equity and shall, in addition to the amount of Out-of-Pocket Expenses
set forth above, be entitled to recover such additional amounts as such
non-breaching party may be entitled to receive at law or in equity.
(b) Other Company Termination Payments. (i) If this Agreement is
terminated
(A) pursuant to Section 11.1(e) (fiduciary out),
(B) pursuant to Section 11.1(c) (failure to obtain stockholder
approval), following a failure of the stockholders of the Company to
grant the necessary approval described in Section 6.13 if at the time
prior to the Company Special Meeting there shall have been a Takeover
Proposal with respect to the Company and the Board of Directors of the
Company has withdrawn its recommendation of this Agreement, or the
Merger.
(C) as a result of a material breach of Section 9.4 by
the Company (approval of stockholders), or
(D) pursuant to Section 11.1(g)(ii) (board withdrawal of
approval),
and then the Company shall pay Parent a termination fee (the "Company
Termination Fee") equal to$6.5 million, provided that the sum of the Company
Termination Fee and the Out-of-Pocket Expenses paid to Parent pursuant to
Section 11.3(a) shall not exceed $7 million.
51
(ii) In the event this Agreement is terminated pursuant to Section
11.1(c) because the Company has failed to obtain the Company Stockholders
Approval, the Company also agrees to pay to Parent a fee equal to the Company
Termination Fee, provided that the sum of the Company Termination Fee and the
Out-of-Pocket Expenses paid to Parent pursuant to Section 11.3(a) shall not
exceed $7 million, if (A) after the date hereof and before the Company Special
Meeting, a Takeover Proposal with respect to the Company shall have been made by
any Person or group of Persons (a "Company Acquiring Person"), (B) the
stockholders of the Company shall not have approved the Merger at the Company
Special Meeting and (C) at or prior to one (1) year after the date of
termination of this Agreement, the Company Acquiring Person or any affiliate of
the Company Acquiring Person shall have effected a Takeover Proposal (the
"Company Alternative Transaction"). The Company Termination Fee payable under
this Section 11.3(b)(ii) and the Out-of-Pocket Expenses shall be payable as a
condition to the consummation of the Company Alternative Transaction.
(c) Other Parent Termination Payments. (i) If this Agreement is
terminated
(A) pursuant to Section 11.1(f) (fiduciary out),
(B) pursuant to Section 11.1(c) (failure to obtain stockholder
approval), following a failure of the shareholders of the Parent to
grant the necessary approval described in Section 5.13 if at the time
prior to the Parent Special Meeting there shall have been a Takeover
Proposal with respect to the Parent and the Board of Directors of the
Parent has withdrawn its Recommendation of this Agreement or the
Merger.
(C) as a result of a material breach of Section 9.4 by
the Parent (approval of shareholders), or
(D) pursuant to Section 11.1(h)(ii) (board withdrawal of
approval),
then the Parent shall pay the Company a termination fee (the "Parent Termination
Fee") equal to $6.5 million, provided that the sum of the Parent Termination Fee
and the Out-of-Pocket Expenses paid to the Company pursuant to Section 11.3(a)
shall not exceed $7 million.
(ii) In the event this Agreement is terminated pursuant to Section
11.1(c) because the Parent has failed to obtain the Parent Stockholder Approval,
the Parent also agrees to pay to the Company a fee equal to the Parent
Termination Fee, provided that the sum of the Parent Termination Fee and the
Out-of-Pocket Expenses paid to the Company pursuant to Section 11.3(a) shall not
exceed $7 million, if (A) after the date hereof and before the Parent Special
Meeting, a Takeover Proposal with respect to the Parent shall have been made by
any Person or group of Persons (a "Parent Acquiring Person"), (B) the
stockholders of the Parent shall not have approved the Merger at the Parent
Special Meeting and (C) at or prior to one (1) year after the date of
termination of this Agreement, the Parent Acquiring Person or any affiliate of
the Parent Acquiring Person shall have effected a Takeover Proposal (the "Parent
Alternative Transaction"). The Parent Termination Fee payable under this Section
11.3(c)(ii) and the Out-of-Pocket Expenses shall be payable as a condition to
the consummation of the Parent Alternative Transaction.
52
(d) Expenses.
(i) The parties agree that the agreements contained in this
Section 11.3 are an integral part of the transactions contemplated by
this Agreement and constitute liquidated damages and not a penalty.
(ii) If one party fails to promptly pay to the other any
amounts due under this Section 11.3, such defaulting party shall pay
the costs and expenses (including reasonable legal fees and expenses)
in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on
the amount of any unpaid fee at the publicly announced prime rate of
Chase Manhattan Bank in effect from time to time from the date such fee
was required to be paid.
(e) Limitation of Company Fees. Notwithstanding anything herein
to the contrary, the aggregate amount payable by the Company and its affiliates
pursuant to Section 11.3(a) and Section 11.3(b) shall not exceed $7 million.
(f) Limitation of Parent Fees. Notwithstanding anything herein to
the contrary, the aggregate amount payable by the Parent and its affiliates
pursuant to Section 11.3(a) and Section 11.3(c) shall not exceed $7 million.
SECTION 11.4 Amendment.
(a) This Agreement may be amended by the parties hereto pursuant to
action of their respective Boards of Directors, at any time before or after
approval hereof by the stockholders of Parent or the Company and prior to the
Effective Time, but after such approvals, no such amendment shall
(i) alter or change the amount or kind of shares to be received
or exchanged for or on conversion of any class or series of capital
stock of either corporation as provided under Article II, or
(ii) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the
aggregate, would materially and adversely affect the rights of holders
of Company Common Stock or Parent Common Stock.
(b) This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 11.5 Waiver. At any time prior to the Effective Time, to the
extent permitted by applicable law, the parties hereto may (i) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement
53
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by a duly authorized
officer of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 Non-Survival of Representations, Warranties, Covenants and
Agreements. All representations, warranties, covenants and agreements in this
Agreement shall not survive the Merger, except the covenants and agreements
contained in this Section 12.1 and in Article III (Conversion of Shares),
Section 9.1(b) (Access to Information), Section 9.5 (Directors' and Officers
Indemnification), Section 9.10 (Incentive, Stock and Other Plans), Section 9.14
(Employee Benefit Matters), Sections 11.2 and 11.3 (Certain Damages, Payments
and Expenses) and Section 12.7 (Parties In Interest), each of which shall
survive in accordance with its terms.
SECTION 12.2 Brokers.
(a) The Company represents and warrants that, except for DLJ, no
broker, finder or investment bank is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
(b) Parent represents and warrants that, except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co
and Chase Manhattan Bank, no broker, finder or investment bank is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent.
SECTION 12.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) if delivered personally, or
(b) if sent by overnight courier service (receipt confirmed in writing), or (c)
if delivered by facsimile transmission (with receipt confirmed), or (d) five (5)
days after being mailed by registered or certified mail (return receipt
requested) to the parties, in each case to the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) if to the Company:
Cairn Energy USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and
Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
54
with a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) if to Parent or Sub:
The Meridian Resource Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Chairman and
Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.4 Miscellaneous.
(a) This Agreement, including the documents and instruments referred to
herein, (i) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof other than the
Confidentiality Agreement, (ii) shall not be assigned by operation of law or
otherwise, and (iii) shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts executed in and to be
fully performed in such State, without giving effect to its conflicts of laws
statutes, rules or principles.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect. The parties
hereto shall negotiate in good faith to replace any provision of this Agreement
so held invalid or unenforceable with a valid provision that is as similar as
possible in substance to the invalid or unenforceable provision.
SECTION 12.5 Interpretation. When reference is made in this Agreement
to Articles, Sections or Exhibits, such reference shall be to an Article,
Section or Exhibit of this Agreement, as the case may be, 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
55
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Whenever "or" is used in this Agreement it shall be
construed in the nonexclusive sense.
SECTION 12.6 Counterparts; Effect. This Agreement may he executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 12.7 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties and their heirs and representatives as set forth in Section
9.5, nothing in this Agreement, express or implied, is intended to confer upon
any person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
SECTION 12.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 12.9 Further Assurances. Each party hereto shall execute such
further documents and instruments and take such further actions as may
reasonably be requested by any other party hereto in order to consummate the
Merger in accordance with the terms hereof.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------
Title: Chief Executive Officer
-----------------------
C ACQUISITION CORP
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
CAIRN ENERGY USA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
57