EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of June 15, 2004
by and among
CAPITAL C ENERGY OPERATIONS, LP,
CAPITAL C OHIO, INC.
and
▇▇▇▇▇▇ & ▇▇▇▇▇ CORPORATION
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement
to which it is attached but is inserted for convenience
only.
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No.
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ARTICLE I THE MERGER............................................................................................ 1
1.01 The Merger................................................................................... 1
1.02 Closing...................................................................................... 1
1.03 Effective Time............................................................................... 2
1.04 Articles of Incorporation and Code of Regulations of the Surviving Corporation............... 2
1.05 Directors and Officers of the Surviving Corporation.......................................... 2
1.06 Effects of the Merger........................................................................ 2
1.07 Performance Deposit.......................................................................... 2
1.08 Further Assurances........................................................................... 3
ARTICLE II CONVERSION OF SHARES................................................................................. 3
2.01 Conversion of Capital Shares................................................................. 3
2.02 Exchange of Certificates..................................................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................... 8
3.01 Organization and Qualification............................................................... 8
3.02 Capitalization............................................................................... 8
3.03 Authority Relative to this Agreement......................................................... 9
3.04 Non-Contravention; Approvals and Consents.................................................... 10
3.05 SEC Reports and Financial Statements......................................................... 11
3.06 Absence of Certain Changes or Events......................................................... 11
3.07 Absence of Undisclosed Liabilities; Hedging; Accounts Receivable............................. 12
3.08 Legal Proceedings............................................................................ 12
3.09 Permits; Compliance with Laws and Orders..................................................... 12
3.10 Compliance with Agreements................................................................... 13
3.11 Taxes........................................................................................ 13
3.12 Employee Benefit Plans; ERISA................................................................ 15
3.13 Labor Matters................................................................................ 17
3.14 Environmental Matters........................................................................ 17
3.15 Reserve Reports.............................................................................. 18
3.16 Broker's and Finder's Fees................................................................... 19
3.17 Insurance.................................................................................... 19
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No.
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..................................................... 19
4.01 Organization and Qualification............................................................... 19
4.02 Authority Relative to this Agreement......................................................... 19
4.03 Non-Contravention; Approvals and Consents.................................................... 20
4.04 Ownership of Company Common Shares........................................................... 21
4.05 Legal Proceedings............................................................................ 21
4.06 Capitalization of Sub........................................................................ 21
4.07 Financing.................................................................................... 21
ARTICLE V COVENANTS OF THE COMPANY............................................................................... 21
5.01 Covenants of the Company..................................................................... 21
5.02 No Solicitations............................................................................. 23
ARTICLE VI ADDITIONAL AGREEMENTS................................................................................. 24
6.01 Access to Information; Confidentiality....................................................... 24
6.02 Approval of Shareholders..................................................................... 25
6.03 Regulatory and Other Approvals............................................................... 25
6.04 Indemnification; Directors' and Officers' Insurance.......................................... 26
6.05 Employment and Severance Agreements; Retention Plan; Severance Plans; Change in Control Plan;
Bonus Plans.................................................................................. 27
6.06 Expenses..................................................................................... 28
6.07 Sub.......................................................................................... 28
6.08 Notice and Cure.............................................................................. 28
6.09 Fulfillment of Conditions.................................................................... 28
6.10 Delivery of Hedge Reports.................................................................... 29
ARTICLE VII CONDITIONS........................................................................................... 29
7.01 Conditions to Each Party's Obligation to Effect the Merger................................... 29
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger.............................. 30
7.03 Conditions to Obligation of the Company to Effect the Merger................................. 32
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.................................................................. 33
8.01 Termination.................................................................................. 33
8.02 Effect of Termination........................................................................ 34
8.03 Amendment.................................................................................... 34
8.04 Waiver....................................................................................... 35
ARTICLE IX GENERAL PROVISIONS................................................................................... 35
9.01 Survival of Representations, Warranties, Covenants and Agreements............................ 35
9.02 Notices...................................................................................... 35
9.03 Entire Agreement; Incorporation of Exhibits.................................................. 37
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9.04 Public Announcements......................................................................... 37
9.05 No Third Party Beneficiary................................................................... 37
9.06 No Assignment; Binding Effect................................................................ 37
9.07 Headings..................................................................................... 37
9.08 Invalid Provisions........................................................................... 37
9.09 Governing Law................................................................................ 38
9.10 Enforcement of Agreement..................................................................... 38
9.11 Certain Definitions.......................................................................... 38
9.12 Counterparts................................................................................. 39
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GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the
meanings ascribed to them in the corresponding Sections of this Agreement listed
below:
"affiliate" -- Section 9.11(a)
"Advisory Agreement" -- Section 7.02(h)
"Agreement" -- Preamble
"Alternative Proposal" -- Section 5.02
"Antitrust Division" -- Section 6.03
"beneficially" -- Section 9.11(b)
"business day" -- Section 9.11(c)
"Certificate of Merger" -- Section 1.03
"Certificates" -- Section 2.02(b)
"Closing" -- Section 1.02
"Closing Date" -- Section 1.02
"Code" -- Section 2.02(e)
"Company" -- Preamble
"Company Business Plan" -- Section 5.01(b)(D)
"Company Common Shares" -- Section 2.01(b)
"Company Disclosure Letter" -- Introductory Paragraph in
Article III
"Company Employee Benefit Plans" -- Section 3.12(b)(i)
"Company Financial Statements" -- Section 3.05(b)
"Company Material Adverse Effect -- Section 9.11(e)
"Company Options" -- Section 2.01(e)
"Company Option Plan" -- Section 3.02(a)
"Company Permits" -- Section 3.09
"Company Reserve Report" -- Section 3.15
"Company SEC Reports" -- Section 3.05(a)
"Company Shareholders' Approval" -- Section 6.02
"Company Shareholders' Meeting" -- Section 6.02
"Confidentiality Agreement" -- Section 6.01
"Consent Solicitation" -- Section 6.09
"Constituent Corporations" -- Section 1.01
"Contracts" -- Section 3.04(a)
"control," "controlling," "controlled
by" and "under common control with" -- Section 9.11(a)
"Covered Parties" -- Section 1.07(b)
"Credit Agreement" -- Section 4.07
"Current Premium" -- Section 6.04(b)
"Debt Financing" -- Section 4.07
"Dissenting Share" -- Section 2.01(d)(i)
"Effective Time" -- Section 1.03
"Environmental Laws" -- Section 3.14(a)
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"ERISA" -- Section 3.12(b)(i)
"ERISA Affiliate" -- Section 3.12(b)(iii)
"Escrow Agent" -- Section 1.07
"Exchange Act" -- Section 3.05(a)
"Financial Market Adverse Change" -- Section 7.02(e)
"FTC" -- Section 6.03
"Governmental or Regulatory Authority" -- Section 3.04(a)
"group" -- Section 9.11(g)
"Hedge Market Adverse Change" -- Section 7.02(e)
"HSR Act" -- Section 3.04(b)
"Indemnified Party" or "Indemnified Parties" -- Section 6.04
"Indenture" -- Section 4.07
"knowledge" -- Section 9.11(f)
"laws" -- Section 3.04(a)
"Lien" -- Section 3.02(b)
"material", "material adverse
effect" and "materially adverse" -- Section 9.11(d)
"Material Adverse Event" -- Section 7.01(e)
"Merger" -- Preamble
"Merger Consideration" -- Section 2.02(b)
"Merger Price" -- Section 2.01(c)
"OGCL" -- Section 1.01
"Options" -- Section 3.02(a)
"Option Amount" -- Section 2.01(e)
"orders" -- Section 3.04(a)
"Parent" -- Preamble
"Payment Agent" -- Section 2.02(a)
"Payment Fund" -- Section 2.02(a)
"Performance Deposit" -- Section 1.07
"person" -- Section 9.11(g)
"Plan" -- Section 3.12(b)(ii)
"Regulations" -- Section 1.04
"Representatives" -- Section 9.11(h)
"▇▇▇▇▇▇▇▇" -- Section 6.05(a)
"▇▇▇▇▇▇▇▇ Employment Agreement" -- Section 6.05(a)
"SEC" -- Introductory Paragraph
in Article III
"Secretary of State" -- Section 1.03
"Securities Act" -- Section 3.05(a)
"Shareholders' Agreement" -- Section 7.02(f)
"SMRS" -- Section 7.02(f)
"Sub" -- Preamble
"Sub Common Shares" -- Section 2.01(a)
"Subsidiary" -- Section 9.11(i)
"Surviving Corporation" -- Section 1.01
"Surviving Corporation Common Shares" -- Section 2.01(a)
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"Taxes" -- Section 3.11
"TBR Asset Sale" -- Section 7.02(i)
"TBR Asset Purchase Agreement" -- Section 7.02(i)
"Voting Agreement" -- Preamble
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This AGREEMENT AND PLAN OF MERGER dated as of June 15, 2004
(this "Agreement") is made and entered into by and among Capital C Energy
Operations, LP, a Delaware limited partnership ("Parent"), Capital C Ohio, Inc.,
an Ohio corporation wholly owned by Parent ("Sub"), and ▇▇▇▇▇▇ & ▇▇▇▇▇
Corporation, an Ohio corporation (the "Company").
WHEREAS, the general partner of the general partner of Parent,
and the respective boards of directors of Sub and the Company have each
determined that it is advisable and in the best interests of their respective
partners and shareholders, as applicable, to consummate, and have approved, the
business combination transaction provided for herein in which Sub would merge
with and into the Company and the Company would become a wholly-owned subsidiary
of Parent (the "Merger");
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; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's and Sub's willingness to
enter into this Agreement, certain holders of Company Common Shares (as defined
below) are entering into a Revocable Proxy, Voting and Option Agreement in
substantially the form attached hereto as Exhibit A (the "Voting Agreement")
pursuant to which such holders have agreed, among other things, to vote all
Company Common Shares (as defined in Section 2.01(b)) owned by such shareholders
in favor of the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section
1.03), Sub shall be merged with and into the Company in accordance with the
General Corporation Law of the State of Ohio (the "OGCL"). At the Effective
Time, the separate existence of Sub shall cease and the Company shall continue
as the surviving corporation in the Merger (the "Surviving Corporation"). Sub
and the Company are sometimes referred to herein as the "Constituent
Corporations". As a result of the Merger, the outstanding shares of capital
stock and the treasury shares of the Constituent Corporations shall be converted
or cancelled in the manner provided in Article II.
1.02 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 8.01, and subject to the satisfaction or waiver (where
applicable) of the conditions set forth in Article VII, the closing of the
Merger (the "Closing") will take place at the offices of Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇
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and ▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local
time, on a date to be specified by the parties, which shall be no later than the
fifth business day after satisfaction or (to the extent permitted by applicable
law) waiver of the conditions set forth in Article VII (other than any such
conditions which by their nature cannot be satisfied until the Closing, which
shall be required to be so satisfied or (to the extent permitted by applicable
law) waived at the Closing), unless another date, time or place is agreed to in
writing by the parties hereto (the "Closing Date").
1.03 Effective Time. At the Closing, a certificate of
merger (the "Certificate of Merger") shall be duly prepared and executed by the
Constituent Corporations and thereafter delivered to the Secretary of State of
the State of Ohio (the "Secretary of State") for filing, as provided in Section
1701.81 of the OGCL, as soon as practicable on the Closing Date. The Merger
shall become effective at the time of the filing of the Certificate of Merger
with the Secretary of State (the date and time of such filing being referred to
herein as the "Effective Time").
1.04 Articles of Incorporation and Code of Regulations of
the Surviving Corporation. At the Effective Time, (i) the Articles of
Incorporation of Sub as in effect immediately prior to the Effective Time shall
be amended so that the name of Sub shall be changed to ▇▇▇▇▇▇ & Blake
Corporation, and, as so amended, such Articles of Incorporation shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation, and (ii) the Code of
Regulations of Sub (the "Regulations") as in effect immediately prior to the
Effective Time shall be the Regulations of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Regulations.
1.05 Directors and Officers of the Surviving Corporation.
The directors and officers of Sub immediately prior to the Effective Time and
such other individuals specified by the Board of Directors of Sub as officers
prior to the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors shall have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Regulations.
1.06 Effects of the Merger. Subject to the foregoing, the
effects of the Merger shall be as provided in the applicable provisions of the
OGCL.
1.07 Performance Deposit. (a) Within 10 days after the
date of this Agreement, Parent shall deposit with ▇. ▇. ▇▇▇▇▇▇ Trust Company,
N.A. (the "Escrow Agent") a cash performance deposit in the amount of $5,000,000
(the "Performance Deposit"), and Parent, the Company and the Escrow Agent shall
enter into an escrow agreement in substantially the form of Exhibit B providing
for the payment of the Performance Deposit by the Escrow Agent in accordance
with the provisions of this Section 1.07. Parent and the Company mutually
covenant and agree that, absent their mutual agreement to the contrary, (i) if
the Merger is consummated, the Performance Deposit and all interest thereon
shall be paid by the Escrow Agent to Parent, (ii) if this Agreement is
terminated by Parent, Sub and the Company pursuant to Section 8.01(a), the
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Performance Deposit and all interest thereon shall be paid by the Escrow Agent
to Parent, (iii) if this Agreement is terminated by Parent pursuant to Section
8.01(b), Section 8.01(d) or Section 8.01(f), the Performance Deposit and all
interest thereon shall be paid by the Escrow Agent to Parent, (iv) if this
Agreement is terminated by the Company pursuant to Section 8.01(b)(i), (ii) or
(iv) or Section 8.01(c), the Performance Deposit and all interest thereon shall
be paid by the Escrow Agent to Parent, and (v) if this Agreement is terminated
by the Company pursuant to Section 8.01(b)(iii) or Section 8.01(e), then the
Performance Deposit and all interest thereon shall be paid by the Escrow Agent
to the Company.
(b) The payment of the Performance Deposit to the Company
pursuant to Section 1.07(a) shall constitute a termination fee or liquidated
damages and the sole and exclusive remedy (including, without limitation, any
remedy otherwise available at law or in equity) of the Company in respect of the
subject matter of this Agreement as against the Parent, Sub or any of their
respective partners, affiliates, control persons, agents or representatives
(collectively, the "Covered Parties"), and if the Performance Deposit is
returned to Parent, the Covered Parties shall not be liable for any amounts in
excess of the Performance Deposit in respect of the subject matter of this
Agreement. The provisions of this Section 1.07(b) shall not affect or otherwise
limit any of the Company's rights or remedies, whether at law or in equity, as
against the Parent or any Covered Party as a result of a breach or threatened
breach of the Confidentiality Agreement.
1.08 Further Assurances. Each party hereto will, either
prior to or after the Effective Time, execute such further documents,
instruments, deeds, bills of sale, assignments and assurances and take such
further actions as may reasonably be requested by one or more of the others to
consummate the Merger, to vest the Surviving Corporation with full right and
title to, and, as applicable, possession of, all assets, properties, privileges,
rights, immunities, authority and franchises of either of the Constituent
Corporations or to effect the other purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Shares. At the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof:
(a) Conversion of Sub Shares. Each issued and outstanding
common share, without par value, of Sub ("Sub Common Shares") shall be converted
into and become one fully paid and nonassessable common share, without par
value, of the Surviving Corporation ("Surviving Corporation Common Shares").
Each certificate representing outstanding Sub Common Shares shall at the
Effective Time represent an equal number of Surviving Corporation Common Shares.
(b) Cancellation of Treasury Shares and Shares Owned by
Parent and Subsidiaries. All common shares, without par value, of the Company
("Company Common Shares") that are owned by the Company as treasury shares and
any Company Common Shares
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owned by Parent, Sub or any other wholly-owned Subsidiary (as defined in Section
9.11) of Parent shall be canceled and retired and shall cease to exist and no
stock of Parent or other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Shares. (i) Each
issued and outstanding Company Common Share (other than shares to be canceled in
accordance with Section 2.01(b) and other than Dissenting Shares (as defined in
Section 2.01(d))) shall be converted into the right to receive the merger price
per share as determined in accordance with Annex I attached hereto (the "Merger
Price"). If between the date of this Agreement an the Effective Time, the
Company shall split, combine or otherwise reclassify any capital stock of the
Company, or pay a stock dividend or other stock distribution in any shares of
capital stock of the Company, or otherwise change the capital stock of the
Company into other securities, or make any other such stock dividend or
distribution in respect of the capital stock of the Company, the Merger Price
shall be correspondingly adjusted to reflect such action.
(ii) Each issued and outstanding Company Common
Share (other than shares to be canceled in accordance with Section 2.01(b))
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive either (x) the Merger Price per share, upon the surrender of such
certificate in accordance with Section 2.02(c)(i), without interest, subject to
any applicable withholding tax, or (y) payment of fair cash value thereof for
Dissenting Shares, upon the proper exercise thereof, as defined in Section
2.01(d).
(d) Dissenting Shares. (i) Notwithstanding anything in
this Agreement to the contrary, each outstanding Company Common Share that is
held of record by a holder who has properly exercised dissenters' rights with
respect thereto under Section 1701.85 of the OGCL (a "Dissenting Share"), shall
automatically be canceled but shall not be converted into or represent the right
to receive the Merger Price pursuant to Section 2.01(c), but the holder thereof
shall be entitled to receive such payment of the fair cash value of such Company
Common Share from the Surviving Corporation as shall be determined pursuant to
Section 1701.85 of the OGCL; provided, however, that if any such holder shall
have failed to perfect or shall withdraw or lose such holder's rights under
Section 1701.85 of the OGCL, each such holder's Company Common Shares shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive the Merger Price, without any interest thereon, pursuant to
Section 2.01(c ).
(ii) The Company shall give Parent (x) prompt
notice of any written demands for payment of the fair cash value of shares,
withdrawals of such demands and any other instruments delivered pursuant to
Section 1701.85 of the OGCL and (y) the opportunity to jointly participate with
the Company in all negotiations and proceedings with respect to demands for
payment under Section 1701.85 the OGCL. The Company will not voluntarily make
any payment with respect to any demands delivered to the Company pursuant to
Section 1701.85 and will not, except with the prior written consent of Parent,
settle or offer to settle any such demands.
(e) Stock Option Plans. (i) Subject to paragraph (ii)
below, as of the Effective Time, each outstanding option to acquire Company
Common Shares (the "Company Options")
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granted under any agreement or Company Option Plan (as defined in Section
3.02(a)), whether or not then exercisable, shall be cancelled by the Company and
in consideration of such cancellation, the holder thereof shall be entitled to
receive from the Company at the Effective Time an amount in respect thereof
equal to the product of (A) the excess, if any, of the Merger Price per share
over the per share exercise price thereof and (B) the number of Company Common
Shares subject thereto (the "Option Amount") (such payment to be net of
applicable withholding taxes). Notwithstanding the foregoing, if the Merger
Price includes an Arrow Contingent Distribution Right (as such term is defined
in Annex I attached hereto), that portion of the Option Amount shall be
distributed to the holders of the cancelled options after the Effective Time at
approximately the same time as that portion of the Merger Price is distributed
to shareholders. Prior to the Effective Time, the Company shall deposit in a
bank account not within the Company's control an amount of cash equal to the
Option Amount (provided, however, if the Merger Price includes an Arrow
Contingent Distribution Right, that portion of the Option Amount shall not be
deposited in a bank account prior to the Effective Time) for each Company Option
then outstanding (subject to any applicable withholding tax), together with
instructions that such cash be promptly distributed following the Effective Time
to the holders of such Company Options in accordance with this Section 2.01(e)
(including instructions directing that such distributions be made via wire
transfers of immediately available funds to holders of Company Options
immediately after the Effective Time on the Closing Date to those holders of
Company Options who provide the third party payer with all necessary information
to effect such wire transfers).
(ii) After the date of this Agreement and prior to the
Closing Date, the Company shall use its reasonable best efforts and otherwise
take all actions reasonably necessary to implement the cancellation and cash-out
of the Company Options as provided for in this Section 2.01(e), including
seeking the consent of option holders to the cancellation of such options.
2.02 Exchange of Certificates.
(a) Payment Agent. At the Closing, Parent shall deposit
with a bank or trust company designated before the Closing Date by Parent and
reasonably acceptable to the Company (the "Payment Agent"), a cash amount equal
to the aggregate Merger Price to which holders of Company Common Shares shall be
entitled upon consummation of the Merger, to be held for the benefit of and
distributed to such holders in accordance with this Section. Notwithstanding the
foregoing, if the Merger Price includes an Arrow Contingent Distribution Right,
that portion of the Merger Price shall not deposited with the Payment Agent at
the Closing, but the Parent shall deposit with the Payment Agent the aggregate
amount of the Arrow Contingent Distribution Right at such time as such amount is
determined in accordance with Annex I. The Payment Agent shall agree to hold
such funds (such funds, together with earnings thereon, being referred to herein
as the "Payment Fund") for delivery as contemplated by this Section and upon
such additional terms as may be agreed upon by the Payment Agent, the Company
and Parent. If for any reason (including losses) the Payment Fund is inadequate
to pay the cash amounts to which holders of Company Common Shares shall be
entitled, Parent and the Surviving Corporation shall in any event remain liable,
and shall make available to the Payment Agent additional funds, for the payment
thereof. The Payment Fund shall not be used for any purpose except as expressly
provided in this Agreement.
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(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time but in any event not later than three
business days thereafter, the Parent shall cause the Payment Agent to mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding Company Common Shares (the
"Certificates") whose shares are converted pursuant to Section 2.01(c) into the
right to receive the Merger Consideration (as defined below) (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as the Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Parent will use its reasonable efforts to cause provision to be
made for holders of Certificates to procure in person immediately after the
Effective Time a letter of transmittal and instructions and to deliver in person
immediately after the Effective Time such letter of transmittal and Certificates
in exchange for the Merger Price for each Company Common Share represented by
such Certificates. Upon surrender of a Certificate or Certificates for
cancellation to the Payment Agent, together with such letter of transmittal duly
executed and completed in accordance with its terms, the holder of such
Certificate or Certificates shall be entitled to receive in exchange therefor a
check in an amount equal to the Merger Price multiplied by the number of shares
of Company Common Shares formerly represented by the surrendered Certificate(s)
(the "Merger Consideration"), subject to any applicable withholding tax, which
such holder has the right to receive pursuant to the provisions of this Article
II, and the Certificate(s) so surrendered shall forthwith be canceled.
Notwithstanding the foregoing, if the Merger Price includes an Arrow Contingent
Distribution Right, the holder of such Certificate or Certificates shall be
entitled to receive that portion of the Merger Price attributable to the Arrow
Contingent Distribution Right at such time as the aggregate amount of the Arrow
Contingent Distribution Right is determined in accordance with Annex I. In no
event shall the holder of any Certificate be entitled to receive interest on any
funds to be received in the Merger, including any interest accrued in respect of
the Payment Fund. In the event of a transfer of ownership of Company Common
Shares prior to the Effective Time which is not registered in the transfer
records of the Company, the Merger Consideration may be issued to a transferee
if the Certificate representing such Company Common Shares is presented to the
Payment Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration as
contemplated by this Article II, together with the dividends, if any, which may
have been declared by the Company on the Company Common Shares in accordance
with the terms of this Agreement and which remain unpaid at the Effective Time.
Parent and the Surviving Corporation shall pay all fees and expenses of the
Payment Agent in connection with the distribution of the Merger Consideration.
(c) No Further Ownership Rights in Company Common Shares.
All cash paid upon the surrender for exchange of Certificates in accordance with
the terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Company Common Shares represented thereby, subject,
however, to the Surviving Corporation's obligation to pay any dividends which
may have been declared by the Company on such shares of Company
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Common Shares in accordance with the terms of this Agreement and which remained
unpaid at the Effective Time. Unless otherwise required by Section 1701.85 of
the OGCL, from and after the Effective Time, the share transfer books of the
Company shall be closed and there shall be no further registration of transfers
on the share transfer books of the Surviving Corporation of the Company Common
Shares which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates (other than Certificates representing
Dissenting Shares) are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section.
(d) Termination of Payment Fund. Any portion of the
Payment Fund which remains undistributed to the shareholders of the Company for
six (6) months after the Effective Time shall be delivered to the Parent, upon
demand, and any shareholders of the Company who have not theretofore complied
with this Article II shall thereafter look only to the Parent (subject to
abandoned property, escheat and other similar laws) as general creditors for
payment of their claim for the Merger Price per share (without interest).
Neither Parent nor the Surviving Corporation shall be liable to any holder of
Company Common Shares for cash representing the Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) Withholding Rights. Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Shares such amounts as Parent is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Common Shares in
respect of which such deduction and withholding was made by Parent.
(f) Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Payment Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
with respect to the Company Common Shares evidenced by such Certificate.
7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as publicly disclosed with reasonable specificity by
the Company in the Company SEC Reports (as defined in Section 3.05) filed with
the Securities and Exchange Commission (the "SEC") prior to the date of this
Agreement (excluding the exhibits thereto) and except as set forth on the
disclosure letter (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein,
provided that any disclosure set forth with respect to any particular section
shall be deemed to be disclosed in reference to all other applicable sections of
this Agreement if the disclosure in respect of the particular section is
sufficient on its face without further inquiry reasonably to inform Parent of
the information required to be disclosed in respect of the other sections to
avoid a breach under the representation and warranty or covenant corresponding
to such other sections) dated the date hereof and delivered to Parent and Sub by
the Company concurrently with the execution and delivery of this Agreement (the
"Company Disclosure Letter"), the Company hereby represents and warrants to
Parent and Sub as follows:
3.01 Organization and Qualification. Each of the Company
and its Subsidiaries is duly incorporated (in the case of a corporation) or duly
organized (in the case a Subsidiary is a limited liability company), validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, and has full corporate or
limited liability company, as the case may be, power and authority to conduct
its business as and to the extent now conducted and to own, use and lease its
assets and properties. Each of the Company and its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, do not have and would not have a Company Material Adverse Effect (as
defined in Section 9.11). Section 3.01 of the Company Disclosure Letter sets
forth (i) the name and jurisdiction of incorporation or organization of each
Subsidiary of the Company, (ii) its authorized capital shares (if a
corporation), (iii) the number of issued and outstanding capital shares (if a
corporation) and (iv) the record owners of such shares (if a corporation) or of
the membership interests (if a limited liability company). Except for interests
in the Subsidiaries of the Company and as disclosed in Section 3.01 of the
Company Disclosure Letter, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity. The Company has previously delivered or made available to
Parent correct and complete copies of the certificate or articles of
incorporation, bylaws or code of regulations (or other comparable constituent or
organizational documents) of the Company and its Subsidiaries, and each of
which, as so delivered is in full force and effect.
3.02 Capitalization. (a) The authorized capital shares of
the Company consists solely of 58,000,000 Company Common Shares. As of date of
this Agreement, 10,458,900.487 Company Common Shares were issued and
outstanding, 216,527.518 shares were held in the treasury of the Company and the
only Company Common Shares reserved for issuance as of
8
such date consisted of 488,843 shares which were reserved or held for issuance
pursuant to stock options agreements, including stock options outstanding under
the Company's 1997 Non-Qualified Stock Option Plan, as amended (such Plan, the
"Company Option Plan"). All of the issued and outstanding Company Common Shares
are, and all shares reserved for issuance will be, upon issuance in accordance
with the terms specified in the instruments or agreements pursuant to which they
are issuable, duly authorized, validly issued, fully paid and nonassessable.
Except as set forth in Section 3.02 of the Company Disclosure Letter, there are
no outstanding subscriptions, options, warrants, rights (including "phantom"
stock rights), preemptive rights or other contracts, commitments, understandings
or arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company or any of its Subsidiaries to issue or sell any capital shares of
the Company or to grant, extend or enter into any Option with respect thereto.
Section 3.02 of the Company Disclosure Letter sets forth a true and correct
schedule of all outstanding Options as of the date hereof and the exercise
prices for such Options.
(b) Except as disclosed in Section 3.02 of the Company
Disclosure Letter, all of the outstanding capital shares of each Subsidiary of
the Company that is a corporation are duly authorized, validly issued, fully
paid and nonassessable and are owned, beneficially and of record, by the Company
or a Subsidiary wholly owned, directly or indirectly, by the Company, free and
clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, equities and charges of any kind (each a "Lien"). Except as disclosed
in Section 3.02 of the Company Disclosure Letter, there are no (i) outstanding
Options obligating the Company or any of its Subsidiaries to issue or sell any
capital shares of any Subsidiary of the Company that is a corporation or to
grant, extend or enter into any such Option or (ii) voting trusts, proxies or
other commitments, understandings, restrictions or arrangements in favor of any
person other than the Company or a Subsidiary wholly owned, directly or
indirectly, by the Company with respect to the voting of or the right to
participate in dividends or other earnings on any capital shares of any
Subsidiary of the Company.
(c) Except as disclosed in Section 3.02 of the Company
Disclosure Letter, there are no outstanding contractual obligations of the
Company or any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any Company Common Shares or any capital shares of any Subsidiary of the
Company or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any Subsidiary of the Company or any
other person.
3.03 Authority Relative to this Agreement. The Company has
the requisite corporate power and authority to enter into this Agreement and,
subject to obtaining the Company Shareholders' Approval (as defined in Section
6.02), to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company. No other corporate proceedings on the part of the
Company or its shareholders are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby, other than obtaining the
Company Shareholders' Approval. This
9
Agreement has been duly and validly executed and delivered by the Company and,
subject to the obtaining of the Company Shareholders' Approval, constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents. (a) Except
as disclosed in Section 3.04 of the Company Disclosure Letter, the execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or regulations
or bylaws (or other comparable charter documents) of the Company or any of its
Subsidiaries, or (ii) subject to the obtaining of the Company Shareholders'
Approval and the taking of the actions described in paragraph (b) of this
Section 3.04, (x) any statute, law, rule, regulation or ordinance (together,
"laws"), or any judgment, decree, order, writ, permit or license (together,
"orders"), of any court, tribunal, arbitrator, authority, agency, commission,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision (a
"Governmental or Regulatory Authority") applicable to the Company or any of its
Subsidiaries or any of their respective assets or properties, or (y) any note,
bond, mortgage, security agreement, indenture, license, contract, lease or other
instrument, obligation or agreement of any kind (together, "Contracts") to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries or any of their respective assets or properties is bound,
excluding from the foregoing clauses (x) and (y) such conflicts, violations,
breaches and defaults, such rights of payment, reimbursement, termination,
cancellation, modification and acceleration, and such creations and impositions
of Liens, which, individually or in the aggregate, would not be reasonably
expected to have a Company Material Adverse Effect.
(b) No consent, approval or action of, registration or
filing with, notice to or permit from any Governmental or Regulatory Authority
or other public or private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by the Company, the performance by the Company of its
obligations hereunder or the consummation of the transactions contemplated
hereby, except (i) for the filing of the Certificate of Merger and other
appropriate merger documents required by the OGCL with the Secretary of State
and appropriate documents with the relevant authorities of other states in which
the Constituent Corporations are qualified to do business, (ii) as disclosed in
Section 3.04 of the Company Disclosure Letter, and (iii) where the failure to
make, take or obtain, as the case may be, such
10
consents, approvals, actions, registrations, filings, notices and permits would
not, individually or in the aggregate, be reasonably expected to have a Company
Material Adverse Effect. To the knowledge of the Company, neither the filing of
a pre-merger notification report by the Company nor any other actions of the
Company is required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act").
3.05 SEC Reports and Financial Statements.
(a) Since January 1, 2003, the Company has filed with the
SEC all forms, reports, schedules, registration statements, and other documents
(together with all amendments thereof and supplements thereto)(as such documents
have since the time of their filing been amended or supplemented, the "Company
SEC Reports") required to be filed by the Company with the SEC. As of their
respective dates and giving effect to any amendments or supplements thereto
filed prior to the date of this Agreement, the Company SEC Reports (i) complied
as to form in all material respects with the requirements of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (the "Securities
Act"), or the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), as the case may be, and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the Company SEC Reports (the "Company
Financial Statements") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and except with respect to unaudited
statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in
the case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments) the consolidated financial position of the Company
and its consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. Except as set forth in Section 3.05 of the Company
Disclosure Letter, each Subsidiary of the Company is treated as a consolidated
Subsidiary of the Company in the Company Financial Statements for all periods
covered thereby.
3.06 Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Reports filed prior to the date of this Agreement,
(a) since January 1, 2004, there has not been any change, event or development
having, or that would be reasonably expected to have, individually or when
aggregated with any other change(s) or event(s), a Company Material Adverse
Effect, and (b) except as disclosed in Section 3.06 of the Company Disclosure
Letter, between such date and the date hereof (i) the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practice and (ii) neither the Company nor any of its
Subsidiaries has taken any action which, if taken after the date hereof, would
constitute a breach of any provision of clause (ii) of Section 5.01(b).
11
3.07 Absence of Undisclosed Liabilities; Hedging; Accounts
Receivable .
(a) Except for matters reflected or reserved against in
the balance sheet for the period ended December 31, 2003 included in the Company
Financial Statements or as disclosed in Section 3.07(a) of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries has
any liabilities (whether accrued, absolute, contingent or otherwise) of any
nature that would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of the Company and its consolidated
subsidiaries (including the notes thereto), other than any liabilities incurred
since December 31, 2003 which, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
(b) Except as disclosed in Section 3.07(b) of the Company
Disclosure Letter, the Company and its Subsidiaries have no obligations as of
the date of this Agreement for the delivery of hydrocarbons attributable to any
of the Company's or any of its Subsidiaries' properties in the future on account
of prepayment, advance payment, take-or-pay or similar obligations without then
or thereafter being entitled to receive full value for the delivery of such
hydrocarbons. Except as disclosed in Section 3.07(b) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is bound by futures,
hedge, swap, collar, put, call, floor, cap, option or other contracts which are
intended to benefit from or reduce or eliminate the risk of fluctuations in the
price of commodities.
(c) Neither the Company nor any of its Subsidiaries has
any account receivable which exceeds $400,000 and (i) is more than ninety days
past due as of April 30, 2004, (ii) is reasonably likely not to be collected by
the Company or its applicable Subsidiary and (iii) as to which no specific
reserve amount has been provided for and reflected on the Company's balance
sheet as of March 31, 2004 previously provided to Parent.
3.08 Legal Proceedings. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or in Section 3.08 of the
Company Disclosure Letter, (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting, nor to the knowledge of the Company are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, the Company or any of its
Subsidiaries or any of their respective assets and properties which,
individually or in the aggregate, have or would be reasonably expected to have a
Company Material Adverse Effect, and (ii) neither the Company nor any of its
Subsidiaries is subject to any order of any Governmental or Regulatory Authority
which, individually or in the aggregate, has or would be reasonably expected to
have a Company Material Adverse Effect.
3.09 Permits; Compliance with Laws and Orders. The Company
and its Subsidiaries hold all permits, licenses, variances, exemptions, orders
and approvals of all Governmental and Regulatory Authorities necessary for the
lawful conduct of their respective businesses (the "Company Permits"), except
for failures to hold such permits, licenses, variances, exemptions, orders and
approvals which, individually or in the aggregate, do not have and would
12
not be reasonably expected to have a Company Material Adverse Effect. The
Company and its Subsidiaries are in compliance with the terms of the Company
Permits, except failures so to comply which, individually or in the aggregate,
do not have and would not be reasonably expected to have a Company Material
Adverse Effect. Except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement, the Company and its Subsidiaries are not in
violation of or default under any law or order of any Governmental or Regulatory
Authority, except for such violations or defaults which, individually or in the
aggregate, do not have and would not be reasonably expected to have a Company
Material Adverse Effect. Except as described in Company SEC Reports filed prior
to the date of this Agreement or as disclosed in Section 3.09 of the Company
Disclosure Letter, to the knowledge of the Company, no investigation or review
by any Governmental and Regulatory Authority concerning any such possible
violations by the Company or any of its Subsidiaries is pending or threatened,
nor has any Governmental and Regulatory Authority indicated to the Company an
intention to conduct any such investigation or review other than those the
outcome of which would not reasonably be expected to have a Company Material
Adverse Effect.
3.10 Compliance with Agreements. Except as disclosed in
the Company SEC Reports filed prior to the date of this Agreement and except as
set forth in Section 3.10 of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries nor, to the knowledge of the Company, any other
party thereto is in breach or violation of, or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
notice or lapse of time or both, would be reasonably expected to result in a
default under, (i) the certificates or articles of incorporation or bylaws or
regulations (or other comparable charter documents) of the Company or any of its
Subsidiaries or (ii) any Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound, except in the case of
clause (ii) for breaches, violations and defaults which, individually or in the
aggregate, do not have and would not be reasonably expected to have a Company
Material Adverse Effect.
3.11 Taxes. For purposes of this Agreement, "Taxes"
(including, with correlative meaning, the word "Tax") shall include any and all
federal, state, county, local, foreign or other taxes, charges, imposts, rates,
fees, levies or other assessments imposed by any Governmental or Regulatory
Authority, including, without limitation, all net income, alternative minimum,
gross income, sales and use, ad valorem, transfer, gains, profits, excise,
franchise, real and personal property, gross receipt, capital stock, production,
business and occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance, withholding or other taxes, fees, assessments
or other similar charges of any kind whatsoever, together with any interest and
penalties (civil or criminal) on or additions to any such taxes. Except as
specifically identified in Section 3.11 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed
all Tax returns and reports required to be filed by or on behalf of it, or
requests for extensions to file such returns or reports have been timely filed
or granted and have not expired, and all such Tax returns and reports are
complete and accurate in all respects, except to the extent that such failures
(i) to file, (ii) to have extensions granted that remain in effect or (iii) to
be complete and accurate in all
13
respects, as applicable, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(b) The Company and each of its Subsidiaries has timely
paid (or the Company has paid on its behalf) all Taxes shown as due on such Tax
returns and reports.
(c) The accrual for Taxes on the most recent financial
statements contained in the Company SEC Reports reflects an adequate reserve for
all Taxes payable by the Company and its Subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial statements, and
no deficiencies for any Taxes have been proposed, asserted or assessed against
the Company or any of its Subsidiaries that are not adequately reserved for,
except for inadequately reserved Taxes and inadequately reserved deficiencies
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. No material Tax liability since the date of such financial
statements has been or will be incurred by the Company or its Subsidiaries other
than in the ordinary course of business, and adequate provision has been made by
the Company for all Taxes since that date in accordance with generally accepted
accounting principles on at least a quarterly basis.
(d) No requests for waivers of the time to assess any
Taxes against the Company or any of its Subsidiaries have been granted or are
pending, except for requests with respect to such Taxes that have been
adequately reserved for in the most recent financial statements contained in the
Company SEC Reports.
(e) No audits or other proceedings by any Governmental or
Regulatory Authority are presently pending, or, to the knowledge of the Company
or any of its Subsidiaries, threatened, with regard to any Taxes or Tax returns
or reports of the Company or any of its Subsidiaries.
(f) The Company has made available to Parent complete and
accurate copies of (i) all material Tax returns or reports for open years, and
any amendments thereto, filed by or on behalf of the Company or any of its
Subsidiaries, (ii) all audit reports or written proposed adjustments (whether
formal or informal) received from any Governmental or Regulatory Authority
relating to any Tax return or report filed by or on behalf of the Company or any
of its Subsidiaries and (iii) any Tax ruling or request for a Tax ruling
applicable to the Company or any of its Subsidiaries and closing agreements
entered into by the Company or any of its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries (i)
is a party to, is bound by, or has any obligation under, any agreement relating
to the allocation or sharing of Taxes or has any liability for the Taxes of any
person other than the Company or its Subsidiaries, as a transferee, or successor
or otherwise (including, without limitation, any liability under Treasury
Regulations Section 1.1502-6 or any similar provision of state, local or foreign
law), (ii) has made any, or is obligated to make any, payments, or is a party to
any agreement that under certain circumstances could obligate it to make any
payments that under Code Section 280G will not be deductible, or (iii) has ever
been a member of an affiliated group of corporations (within the meaning of Code
Section 1504(a)) filing consolidated Tax returns, other than the affiliated
group of which the Company is the common parent.
14
(h) To the knowledge of the Company, each of the Company
and its Subsidiaries has disclosed on its federal income Tax returns each
position taken therein that could give rise to a substantial understatement of
United States federal income Tax within the meaning of Code Section 6662.
(i) There are no liens relating to material Taxes upon
the assets of the Company or any Subsidiary other than liens relating to Taxes
not yet due or liens for which adequate reserves have been established.
(j) No state or federal "net operating loss" of the
Company or its Subsidiaries determined as of the Effective Time is subject to
limitation on its use pursuant to Code Section 382 or comparable provisions of
state law as a result of any "ownership change" within the meaning of Code
Section 382(g) occurring prior to the Effective Time.
3.12 Employee Benefit Plans; ERISA. (a) Except as
disclosed in Section 3.12 of the Company Disclosure Letter or as would not have
a Company Material Adverse Effect, (i) all Company Employee Benefit Plans (as
defined below) are and have been maintained in compliance with all applicable
requirements of law, including without limitation ERISA (as defined below) and
the Code, and (ii) neither the Company nor any of its Subsidiaries has any
liabilities with respect to any such Company Employee Benefit Plans, whether
accrued, contingent or otherwise, nor to the knowledge of the Company are any
such liabilities expected to be incurred other than contribution obligations and
payment of benefits arising in the normal course under any Company Employee
Benefit Plan. Section 3.12(a)(1) of the Company Disclosure Letter lists all
Company Employee Benefit Plans. Except as specifically disclosed in Section
3.12(a)(2) of the Company Disclosure Letter, the execution of, and performance
of the transactions contemplated in, this Agreement will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Benefit Plan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee. The only severance agreements or
severance policies applicable to the Company or any of its Subsidiaries are the
agreements and policies specifically referred to in Section 3.12(a)(3) of the
Company Disclosure Letter. Each Company Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code is so qualified, has received a
favorable determination letter from the IRS, and nothing has occurred that could
adversely affect such determination.
(b) As used herein:
(i) "Company Employee Benefit Plan" means any Plan
entered into, established, maintained, sponsored, contributed to or
required to be contributed to by the Company or any of its Subsidiaries
for the benefit of the current or former employees or directors of the
Company or any of its Subsidiaries and existing (A) on the date of this
Agreement, (B) at any time subsequent thereto, (C) on or prior to the
Effective Time and (D) in the case of a Plan which is subject to Part 3
of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder
15
("ERISA"), Section 412 of the Code or Title IV of ERISA, at any time
during the five-year period immediately preceding the date of this
Agreement; and
(ii) "Plan" means any employment, bonus, incentive
compensation, deferred compensation, long term incentive, pension,
profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, medical, accident, disability, workmen's compensation or
other insurance, severance, separation, termination, change of control
or other benefit plan, agreement, practice, policy, program, scheme or
arrangement, whether written or oral, including, but not limited to any
"employee benefit plan" within the meaning of Section 3(3) of ERISA.
(iii) "ERISA Affiliate" means any person, who on or before
the Effective Time, is under common control with the Company within the
meaning of Section 414 of the Code.
(c) Complete and correct copies of the following
documents have been made available to Parent, as of the date of this Agreement:
(i) all material Company Employee Benefit Plans and any related trust agreements
or insurance contracts, (ii) the most current summary plan descriptions of each
Company Employee Benefit Plan subject to the requirement to give a summary plan
description under ERISA, (iii) the most recent Form 5500 and Schedules thereto
for each Company Employee Benefit Plan subject to such reporting, (iv) the most
recent determination of the Internal Revenue Service with respect to the
qualified status of each Company Employee Benefit Plan that is intended to
qualify under Section 401(a) of the Code, (v) the most recent accountings with
respect to each Company Employee Benefit Plan funded through a trust and (vi)
the most recent actuarial report of the qualified actuary of each Company
Employee Benefit Plan with respect to which actuarial valuations are conducted.
(d) Except as disclosed in Section 3.12(d) of the Company
Disclosure Letter, neither the Company nor any Subsidiary maintains or is
obligated to provide benefits under any life, medical or health Plan (other than
as an incidental benefit under a Plan qualified under Section 401(a) of the
Code) which provides benefits to retirees or other terminated employees other
than benefit continuations rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(e) Except as set forth in Section 3.12(e) of the Company
Disclosure Letter, each Company Employee Benefit Plan covers only employees who
are employed by the Company or a Subsidiary (or former employees or
beneficiaries with respect to service with the Company or a Subsidiary) or
directors of the Company, so that the transactions contemplated by this
Agreement will require no spin-off of assets and liabilities or other division
or transfer of rights with respect to any such plan.
(f) Neither the Company, any Subsidiary, any ERISA
Affiliate nor any other corporation or organization controlled by or under
common control with any of the foregoing within the meaning of Section 4001 of
ERISA has at any time contributed to any "multiemployer plan", as that term is
defined in Section 4001 of ERISA.
16
(g) No event has occurred, and there exists no condition
or set of circumstances in connection with any Company Employee Benefit Plan or
any Plan sponsored by an ERISA Affiliate, under which the Company or any
Subsidiary, directly or indirectly (through any indemnification agreement or
otherwise), would reasonably be expected to be subject to any risk of material
liability under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA
or Section 4975 of the Code.
(h) Except for payments made or to be made in the manner
contemplated by Section 6.05(b), no payments requiring shareholder approval
according to the requirements of Treasury Regulation Section 1.280G have been
submitted to the Company's shareholders for, or have received, such approval.
3.13 Labor Matters. Except as disclosed in Section 3.13 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement with any labor union,
confederation or association and there are no discussions, negotiations, demands
or proposals that are pending or have been conducted or made with or by any
labor union, confederation or association regarding organizational activities
since January 1, 2004. Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement or in Section 3.13 of the Company Disclosure
Letter, there are no material controversies pending or, to the knowledge of the
Company, threatened between the Company or any of its Subsidiaries and any
representatives of its employees and, to the knowledge of the Company, there are
no material organizational efforts presently being made involving any of the now
unorganized employees of the Company or any of its Subsidiaries. Since January
1, 2004, there has been no work stoppage, strike or other concerted action by
employees of the Company or any of its Subsidiaries. During that period, the
Company and its Subsidiaries have complied in all material respects with all
applicable laws relating to the employment of labor, including, without
limitation, those relating to wages, hours and collective bargaining.
3.14 Environmental Matters. (a) The operations of the
Company and its Subsidiaries, including the transportation, treatment, storage,
handling, transfer, disposition, recycling or receipt of materials, are in
substantial compliance with all applicable legal requirements, laws, rules,
orders and regulations related to environmental, natural resource, health or
safety matters ("Environmental Laws"), including but not limited to those
promulgated, adopted or enforced by the United States Environmental Protection
Agency and by similar agencies in states in which the Company or its
Subsidiaries conduct their business, except where the failure to comply would
not have a Company Material Adverse Effect and except for routine leaks and
spills at individual well sites and meter locations. Neither the Company nor any
of its Subsidiaries is a party to, or has received notice of, any suit, action,
claim, investigation or proceeding now pending before any court, governmental
agency or board or other forum or, to the knowledge of the Company, is
threatened by any person to be made a party to any such suit, action, claim,
investigation or proceeding, which (i) alleges noncompliance with any
Environmental Law, (ii) relates to the discharge or release into the environment
of any hazardous material, pollutant, or waste at or on a site presently or
formerly owned, leased or operated by the Company or any Subsidiary, or (iii)
involves the transportation, treatment, storage, handling, transfer,
disposition, recycling or receipt of hazardous materials, which if determined
adversely to the Company or such Subsidiary would have a Company Material
Adverse Effect.
17
(b) Each of the Company and its Subsidiaries holds all
material permits, licenses and approvals of governmental authorities and
agencies necessary for the use and operation of its business and is in
substantial compliance with such permits, licenses and approvals.
(c) Neither the Company nor any of its Subsidiaries has
been notified that it is a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or any similar
federal, state or local law.
(d) Neither the Company nor any of its Subsidiaries has
entered into or agreed to any consent decree or order, and is not subject to any
judgment, decree or order, relating to compliance with, or cleanup of substances
regulated under, any applicable Environmental Law.
(e) To the knowledge of the Company, (i) the reserves
reflected in the balance sheet relating to environmental matters were adequate
under generally accepted accounting principles as of December 31, 2003, and
neither the Company nor any of its Subsidiaries has incurred any material
liability in respect of any environmental matter since that date that is not
covered by insurance, and (ii) the Company SEC Reports include all material
information relating to environmental matters required to be included in such
reports under the rules and regulations of the SEC applicable thereto.
3.15 Reserve Reports. The Company has furnished to Parent
the Company's estimate of Company's and Company Subsidiaries' oil and gas
reserves as of January 1, 2004, determined by ▇▇▇▇▇▇ & Company, Inc. (the
"Company Reserve Report"). In connection with the preparation of the Company
Reserve Report, the Company made available to ▇▇▇▇▇▇ & Company, Inc. all
material information then in the Company's possession to enable ▇▇▇▇▇▇ & Company
to determine such estimate as of January 1, 2004. Except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, the factual, non-interpretive data on which the Company
Reserve Reports were based for purposes of estimating the oil and gas reserves
set forth in the Company Reserve Report was accurate. Since the date of the
Company Reserve Report, there have been (i) no material adverse changes in the
information provided to the engineers and (ii) no material adverse changes that,
when aggregated with other changes, would cause or be reasonably likely to cause
a materially adverse revision to the estimates of aggregate oil and gas
quantities reflected in the Company Reserve Report or the estimated future net
cash flows to be received from such quantities as reflected in the Company
Reserve Report, except for (w) production of oil, gas and other hydrocarbons in
the ordinary course of business, (x) changes which adversely affect the oil and
gas exploration and development industry generally (including, without
limitation, changes in commodity prices, general market prices and regulatory
changes), (y) changes that arise out of general economic or industry conditions
or (z) those matters reflected on Section 3.15 of the Company Disclosure Letter.
With the exception of the express terms of the warranties set forth in this
Section 3.15, the Company makes no warranty, express or implied, with respect to
the Company Reserve Report, including, without limitation, any conclusions,
opinions, projections, assumptions or judgments set forth in the Company Reserve
Report.
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3.16 Broker's and Finder's Fees. Except as set forth in
Section 3.16 of the Company Disclosure Letter, no agent, broker, finder,
investment banker, person or firm acting on behalf of the Company or any Company
Subsidiary or under the Company's or any Company Subsidiary's authority is or
will be entitled to any advisory, commission or broker's or finder's fee or
commission from any of the parties hereto in connection with any of the
transactions contemplated hereby.
3.17 Insurance. Section 3.17 of the Company Disclosure
Letter lists all insurance policies currently maintained by the Company or any
of its Subsidiaries. There is no default by the Company or any Subsidiary with
respect to any provision contained in any such insurance policy which would
permit the denial of coverage or cancellation of coverage thereunder, except for
defaults or failures which, individually or in the aggregate, would not have a
Company Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, represent and warrant
to the Company as follows:
4.01 Organization and Qualification. Parent is a duly
formed Delaware limited partnership, and Sub is a duly incorporated Ohio
corporation. Each of Parent and Sub are validly existing and in good standing
under the laws of its jurisdiction of formation or incorporation, as the case
may be, and has full partnership or corporate power and authority, as the case
may be, to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties. Sub was formed solely for the purpose
of engaging in the transactions contemplated by this Agreement, has engaged in
no other business activities, has conducted its operations only as contemplated
hereby and has no material liabilities. Parent has previously delivered to the
Company correct and complete copies of the certificate of limited partnership
and partnership agreement of Parent, the articles of incorporation and
regulations of the Sub and any other comparable organizational documents of
Parent, each of which as so delivered is in full force and effect.
4.02 Authority Relative to this Agreement. Each of Parent
and Sub has the requisite partnership or corporate power and authority, as the
case may be, to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by each of Parent and Sub and the consummation
by each of Parent and Sub of the transactions contemplated hereby have been duly
and validly approved by (a) the general partner of the Parent, (b) the Board of
Directors of the Sub and (c) by the Parent in its capacity as the sole
shareholder of Sub, and no other partnership or corporate proceedings on the
part of either of Parent or Sub or their respective partners or shareholders are
necessary to authorize the execution, delivery and performance of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Sub and constitutes a legal, valid and
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binding obligation of each of Parent and Sub enforceable against each of Parent
and Sub in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.03 Non-Contravention; Approvals and Consents. (a) The
execution and delivery of this Agreement by each of Parent and Sub do not, and
the performance by each of Parent and Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any of
the assets or properties of Parent or any of its Subsidiaries under, any of the
terms, conditions or provisions of (i) the certificate of limited partnership or
partnership agreement of the Parent, the articles of incorporation or
regulations of Sub or any other comparable constituent or organizational
documents of Parent or any of its Subsidiaries, or (ii) subject to the taking of
the actions described in paragraph (b) of this Section, (x) any laws or orders
of any Governmental or Regulatory Authority applicable to Parent or any of its
Subsidiaries or any of their respective assets or properties, or (y) any
Contracts 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 or
properties is bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, terminations, cancellations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, would not be reasonably expected to have a material adverse
effect on the Parent and Sub, taken as a whole, or the ability of Parent and Sub
to consummate the transactions contemplated by this Agreement.
(b) Except for the filing of the Certificate of Merger
and other appropriate merger documents required by the OGCL with the Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Constituent Corporations are qualified to do business, no consent,
approval or action of, filing with or notice to any Governmental or Regulatory
Authority or other public or private third party is necessary or required under
any of the terms, conditions or provisions of any law or order of any
Governmental or Regulatory Authority or any Contract 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 or properties is bound for the execution and delivery
of this Agreement by each of Parent and Sub, the performance by each of Parent
and Sub of its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually or
in the aggregate, would not be reasonably expected to have a material adverse
effect on the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement. To the knowledge of Parent and Sub, neither the
filing of a pre-merger notification report by Parent nor any other actions of
Parent is required under the HSR Act.
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4.04 Ownership of Company Common Shares. Neither Parent
nor any of its Subsidiaries or other affiliates beneficially owns any Company
Common Shares.
4.05 Legal Proceedings. There are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of Parent or Sub,
threatened against, relating to or affecting, nor to the knowledge of Parent or
Sub are there any Governmental or Regulatory Authority investigations or audits
pending or threatened against, relating to or affecting, Parent or any of its
Subsidiaries or any of their respective assets and properties which,
individually or in the aggregate, would be reasonably expected to have a
material adverse effect on the ability of Parent and Sub to consummate the
transactions contemplated by this Agreement, and neither Parent nor any of its
Subsidiaries is subject to any order of any Governmental or Regulatory Authority
which, individually or in the aggregate, would be reasonably expected to have a
material adverse effect on the ability of Parent and Sub to consummate the
transactions contemplated by this Agreement.
4.06 Capitalization of Sub. The authorized capital stock
of Sub consists of one thousand five hundred (1,500) shares of common stock, no
par value per share, all of which shares, as of the date of this Agreement, are
validly issued and outstanding, fully paid and nonassessable and are owned by
Parent free and clear of all Liens.
4.07 Financing. Parent and Sub have delivered to the
Company copies of a commitment letter obtained by Parent from Carlyle/Riverstone
Global Energy and Power Fund II, L.P. relating to an equity contribution and a
commitment letter obtained by Parent and Sub relating to debt facilities (the
"Debt Financing") to be incurred at Closing to consummate the transactions
contemplated by this Agreement, and, subject to the terms of such commitment
letters, Parent will have immediately prior to the Closing all funds necessary
(a) to perform its obligations under this Agreement, including the payment of
the amounts required under Article II of this Agreement, (b) to satisfy and
discharge the Company's indebtedness under the Amended and Restated Credit
Agreement dated as of August 23, 2000 among the Company, the lender parties
thereto, Ableco Finance LLC, as collateral agent and as administrative agent,
and Foothill Capital Corporation, as funding agent, as amended to date (the
"Credit Agreement") and (c) to satisfy, discharge or otherwise assume the
obligations of the Company under the Indenture dated as of June 27, 1997 between
LaSalle National Bank, as trustee, the Company, as issuer, and the various
Subsidiary guarantors, as amended to date (the "Indenture"), including the
obligation to offer to repurchase notes issued under the Indenture following the
change in control of the Company under Section 4.13 of the Indenture.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Covenants of the Company. At all times from and after
the date hereof until the Effective Time, the Company covenants and agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, or to the extent that Parent shall otherwise previously
consent in writing):
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(a) Ordinary Course. The Company and each of its
Subsidiaries shall conduct their respective businesses only in, and neither the
Company nor any such Subsidiary shall take any action except in, the ordinary
course consistent with past practice.
(b) Without limiting the generality of paragraph (a) of
this Section, (i) the Company and its Subsidiaries shall use all commercially
reasonable efforts to preserve intact in all material respects their present
business organizations and reputation, to keep available the services of their
key officers and employees, to maintain their assets and properties in good
working order and condition, ordinary wear and tear excepted, to maintain
insurance on their tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve their
relationships with customers and suppliers and others having significant
business dealings with them and to comply in all material respects with all laws
and orders of all Governmental or Regulatory Authorities applicable to them, and
(ii) the Company shall not, nor shall it permit any of its Subsidiaries to,
except as otherwise expressly provided for in this Agreement and except as set
forth in Section 5.01(b) of the Company Disclosure Letter:
(A) amend or propose to amend its certificate or articles
of incorporation or bylaws or regulations (or other comparable
corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital shares,
except for the declaration and payment of dividends by a wholly-owned
Subsidiary solely to its parent corporation, (x) split, combine,
reclassify or take similar action with respect to any of its capital
shares or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for its capital
shares, (y) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization or (z) redeem, cancel, retire, repurchase or
otherwise acquire any capital shares or any Option with respect
thereto;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any of its capital shares or any Option
with respect thereto, other than (i) the issuance of Company Common
Shares or share appreciation or similar rights, as the case may be,
pursuant to Options outstanding on the date of this Agreement and in
accordance with their present terms, and (ii) the issuance of Options
pursuant to the Company Option Plan, in each case in accordance with
their present terms and only in connection with the hiring of new
employees, and the issuance of Company Common Shares upon exercise of
such options;
(D) except for transactions provided for in or
contemplated by the most recent business operating plan of the Company
furnished to Parent (the "Company Business Plan"), acquire (by merging
or consolidating with, or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by any other manner)
any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree
to acquire any assets other than inventory and other assets to be sold
or used in the ordinary course of business consistent with past
practice;
22
(E) sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or properties, other
than (i) sales of inventory in the ordinary course of business
consistent with past practice, (ii) to the extent provided for in the
Company Business Plan, and (iii) to the extent such transactions are
not material to the Company or its Subsidiaries;
(F) except for (i) the canceling of Company Options and
vesting of all unvested Company Options as contemplated by Section
2.01(e), (ii) the severance and retention payments described in Section
6.05(b), and (iii) the employment agreement with ▇▇▇▇▇▇▇▇ described in
Section 6.05(a), enter into, adopt, amend in any material respect
(except as may be required by applicable law) or terminate any Company
Employee Benefit Plan or other agreement, arrangement, plan or policy
between the Company or one of its Subsidiaries and one or more of its
directors, officers or employees, or, 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 the Company and its Subsidiaries taken as a
whole, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by
any plan or arrangement in effect as of the date hereof;
(G) enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside the
ordinary course of business consistent with past practice or not on an
arm's length basis, with any affiliate of the Company or any of its
Subsidiaries;
(H) make any change in the lines of business in which it
participates or is engaged; or
(I) enter into any Contract, commitment or arrangement to
do or engage in any of the foregoing.
(c) Advice of Changes. The Company shall confer on a
regular and frequent basis with Parent with respect to its business and
operations and other matters relevant to the Merger, and shall promptly advise
Parent, orally and in writing, of any change or event, including, without
limitation, any complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be contemplated)
or the institution or threat of litigation, known to the Company, having, or
which, insofar as can be reasonably foreseen, would have, a Company Material
Adverse Effect.
5.02 No Solicitations. From the date of this Agreement
until the Effective Time or, if earlier, the termination of this Agreement in
accordance with its terms, the Company agrees (a) that neither it nor any of its
Subsidiaries shall, and it shall use its best efforts to cause their respective
Representatives (as defined in Section 9.11) not to, knowingly initiate, solicit
or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) with respect to a merger, consolidation
or other business combination including the Company or any of its Subsidiaries
or any acquisition or similar transaction (including, without limitation, a
tender or exchange offer) involving the purchase of (i) all or any significant
portion of the assets of the
23
Company and its Subsidiaries taken as a whole, (ii) 10% or more of the
outstanding Company Common Shares or (iii) 10% of the outstanding capital shares
of any Subsidiary of the Company (any such proposal or offer being hereinafter
referred to as an "Alternative Proposal"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person or group relating to an Alternative Proposal
(excluding the transactions contemplated by this Agreement), or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to any of
the foregoing, and it will take the necessary steps to inform such parties of
its obligations under this Section; and (c) that it will notify Parent
immediately if any such inquiries, proposals or offers are received by, any such
confidential information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it or any of such
persons. Notwithstanding the foregoing, nothing contained in this Section 5.02
shall prohibit the Board of Directors of the Company from (i) furnishing
information to (but only pursuant to a confidentiality agreement in customary
form and having terms and conditions no less favorable to the Company than the
Confidentiality Agreement (as defined in Section 6.01)) or entering into
discussions or negotiations with, any person or group that makes an unsolicited
written Alternative Proposal, if, and only to the extent that, prior to receipt
of the Company Shareholders' Approval, (A) the Board of Directors of the
Company, after consultation and based on advice of outside counsel, determines
in good faith that such action is required for the Board of Directors to comply
with its fiduciary duties to shareholders imposed by law, (B) the Board of
Directors has reasonably concluded in good faith, after consultation with its
financial advisor, that such Alternative Proposal is or is reasonably likely to
be more favorable to the Company's shareholders than the Merger, (C) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or group, the Company provides written notice to Parent to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or group, which notice shall identify such person
or group in reasonable detail, and (D) the Company keeps Parent informed of the
status and substance of any such discussions or negotiations; and (ii) to the
extent required, disclosing to the Company's shareholders a position with
respect to a tender or exchange offer by a third party pursuant to applicable
rules under the Exchange Act with regard to an Alternative Proposal or from
making any similar disclosure to the extent required by applicable law. Nothing
in this Section 5.02 shall (x) permit the Company to terminate this Agreement
(except as specifically provided in Article VIII), (y) permit the Company to
enter into any agreement with respect to an Alternative Proposal for so long as
this Agreement remains in effect (it being agreed that for so long as this
Agreement remains in effect, the Company shall not enter into any agreement with
any person or group that provides for, or in any way facilitates, an Alternative
Proposal (other than a confidentiality agreement under the circumstances
described above)), or (z) affect any other obligation of the Company under this
Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality. The Company
shall, and shall cause each of its Subsidiaries to, throughout the period from
the date hereof to the Effective
24
Time, (i) provide Parent and its Representatives with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of the Company and its Subsidiaries and their
respective assets, properties, books and records, but only to the extent that
such access does not unreasonably interfere with the business and operations of
the Company and its Subsidiaries, and (ii) furnish promptly to Parent (x) a copy
of each report, statement, schedule and other document filed or received by the
Company or any of its Subsidiaries pursuant to the requirements of federal or
state securities laws and each material report, statement, schedule and other
document filed with any other Governmental or Regulatory Authority, and (y) all
other information and data (including, without limitation, copies of Contracts,
Company Employee Benefit Plans and other books and records) concerning the
business and operations of the Company and its Subsidiaries as Parent or any of
such other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this Section 6.01 that
constitutes "Evaluation Material" (as such term is defined in the letter
agreement dated as of June 25, 2002 between the Company and Parent (the
"Confidentiality Agreement")) shall be governed by the terms of the
Confidentiality Agreement.
6.02 Approval of Shareholders. (a) The Company shall,
through its Board of Directors, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Company Shareholders' Meeting") for the
purpose of, among other things, voting on the adoption of this Agreement (the
"Company Shareholders' Approval") as soon as reasonably practicable after the
date hereof. Subject to the exercise of fiduciary obligations as advised by
outside counsel, the Company shall, through its Board of Directors, include in
any materials delivered to the shareholders the recommendation of the Board of
Directors of the Company that the shareholders of the Company adopt this
Agreement, and shall use its best efforts to obtain such adoption.
(b) Unless this Agreement has been earlier terminated in
accordance with its terms, the Company shall not be relieved of its obligation
under the first sentence of paragraph (a) of this Section 6.02 in the event that
its Board of Directors withdraws its recommendation of this Agreement and the
Merger.
6.03 Regulatory and Other Approvals. Subject to the terms
and conditions of this Agreement and without limiting the provisions of Section
6.02 , each of the Company and Parent will proceed diligently and in good faith
to, as promptly as practicable, (a) obtain all consents, approvals or actions
of, make all filings with and give all notices to Governmental or Regulatory
Authorities or any other public or private third parties required of Parent, the
Company or any of their Subsidiaries to consummate the Merger and the other
matters contemplated hereby, and (b) provide such other information and
communications to such Governmental or Regulatory Authorities or other public or
private third parties as the other party or such Governmental or Regulatory
Authorities or other public or private third parties may reasonably request in
connection therewith. In addition to and not in limitation of the foregoing, if
any filing under the HSR Act is required, each of the parties will (x) take
promptly all actions necessary to make the filings required of Parent and the
Company or their affiliates under the HSR Act, (y) comply at the earliest
practicable date with any request for additional information
25
received by such party or its affiliates from the Federal Trade Commission (the
"FTC") or the Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the HSR Act, and (z) cooperate with the other party in
connection with such party's filings under the HSR Act and in connection with
resolving any investigation or other inquiry concerning the Merger or the other
matters contemplated by this Agreement commenced by either the FTC or the
Antitrust Division or state attorneys general.
6.04 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent shall cause
the Surviving Corporation to indemnify, advance expenses to, and hold harmless
the present and former officers and directors of the Company and its
Subsidiaries (individually, an "Indemnified Party" and collectively the
"Indemnified Parties") in respect of the acts or omissions occurring prior to
the Effective Time to the fullest extent provided or permitted under (i) the
Company's or any Subsidiary's Articles (or Certificate) of Incorporation or
Regulations (or By-laws) on the date of this Agreement, (ii) the OGCL or (iii)
any agreement in effect on the date hereof. From and after the Effective Time,
the Surviving Corporation shall be liable to pay and perform in a timely manner
all such obligations.
(b) Parent and the Surviving Corporation shall, for a
period of not less than six years after the Effective Time, use its best efforts
to cause to be maintained in effect, at no cost to the beneficiaries thereof,
the policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries as of the date hereof (or policies of at least the
same coverage and amounts containing terms that are no less advantageous to the
insured parties without any gaps or lapses in coverage) with respect to acts or
omissions occurring prior to the Effective Time; provided, however, that the
Surviving Corporation will not be required to pay an annual premium therefore in
excess of 200% of the last annual premium paid prior to the date hereof (the
"Current Premium"); and, provided, further, however, that if the existing
director and officer liability insurance expires, is terminated or canceled
during such six-year period, the Surviving Corporation will use its best efforts
to obtain as much director and officer liability insurance as can be obtained
for the remainder of such period for a premium on an annualized basis not in
excess of 200% of the Current Premium.
(c) The obligations of Parent and the Surviving
Corporation under this Section 6.04 shall survive the consummation of the Merger
and shall not be terminated or modified in such a manner as to adversely affect
any Indemnified Party to whom this Section 6.04 applies without the consent of
such affected Indemnified Party (it being expressly agreed that the Indemnified
Parties to whom this Section 6.04 applies shall be third party beneficiaries of
this Section 6.04, each of whom may enforce the provisions of this Section
6.04).
(d) If Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving 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 the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 6.04.
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6.05 Employment and Severance Agreements; Retention Plan;
Severance Plans; Change in Control Plan; Bonus Plans. (a) At the Closing, the
Parent shall cause the Surviving Corporation to pay in cash and provide such
benefits to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") as are described in Section 6.05(a) of
the Company Disclosure Schedule, whether or not ▇▇▇▇▇▇▇▇'▇ employment terminates
before, during or after the Closing. The Surviving Corporation shall be liable
to make all such payments to and to provide all such benefits to ▇▇▇▇▇▇▇▇. Prior
to and as a condition to Closing, the Company shall cause ▇▇▇▇▇▇▇▇ to waive any
rights to any payments or benefits due from the Company or the Surviving
Corporation other than the amounts and benefits set forth in Section 6.05(a) of
the Company Disclosure Schedule.
(b) At the Closing, the Parent shall cause the Surviving
Corporation to transfer to the trust established between the Company and trustee
under the ▇▇▇▇▇▇ & ▇▇▇▇▇ Corporation Retention Plan (the "Retention Plan") all
amounts necessary to fund fully and completely the bonus pool described in such
retention plan. Section 6.05 of the Company Disclosure Letter sets forth the
amount that will be transferred to the trust to fund the bonus pool (or if such
amount is not precisely determinable as of the date of this Agreement, the
Company shall set forth a good faith estimate of such amount and prior to the
Closing Date the Company shall notify Parent of any change in such estimate in
an addendum to the Company Disclosure Letter delivered to the Parent). Prior to
and as a condition to Closing, Company shall offer employees who are
"disqualified individuals" (as such term is defined in Section 280G(c) of the
Code) an opportunity to waive any rights to any payments or benefits that could
reasonably be expected to constitute "excess parachute payments" (as defined in
section 280G(b) of the Code). Upon shareholder approval according to the
requirements of section 280G Q/A 7 of the Treasury Regulations, the Company may
make additional payments to such individuals not to exceed the amounts waived,
provided, however, that such waivers shall not be contingent upon shareholder
approval of such additional payments. Prior to the Closing Date, the Company
shall set forth in an addendum to the Company Disclosure Letter: (i) the amount
of any such additional payments made by the Company to such individuals, (ii) a
copy of the disclosures to and resolutions approved by shareholders according to
the requirements of Treasury Regulation section 1.280G Q/A 7; and (iii) a copy
of each such individual's waiver.
(c) Except as may be amended or waived as described
above, following the Effective Time, the Surviving Corporation shall be bound by
each of the employment agreements, severance agreements, retention plans,
severance plans, change in control protection plans and bonus plans disclosed in
Section 6.05 of the Company Disclosure Letter. Parent agrees to cause the
Surviving Corporation to honor the obligations of the Surviving Corporation
under such agreements and plans as in effect on the date hereof. Parent agrees
to provide such funds to the Surviving Corporation as may be required to enable
the Surviving Corporation to satisfy such obligations.
(d) The provisions of this Section 6.05 are intended for
the benefit of, and shall be enforceable by, the officers and employees who are
parties to such employment or severance agreements and by the participants in
such severance pay, employee performance incentive and
27
bonus plans, and Parent agrees to bear and pay all of the costs and expenses
that may be incurred by such persons in enforcing any such rights.
(e) Except for payments made or to be made in the manner
contemplated by Section 6.05(b), the Company will not take any action that would
result in an obligation on the part of the Company or the Surviving Corporation
to make any payments to any employees.
6.06 Expenses. Except as set forth in Section 8.02,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such cost or expense. If any filing is required
under the HSR Act, Parent shall pay the filing fee in connection with the
filings required under the HSR Act.
6.07 Sub. Prior to the Effective Time, Sub shall not
conduct any business or make any investments other than as specifically
contemplated by this Agreement and will not have any assets (other than a de
minimis amount of cash paid to Sub for the issuance of its stock to Parent) or
any material liabilities. Parent will take all action necessary to cause Sub to
perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement.
6.08 Notice and Cure. Each of Parent and the Company will
notify the other of, and will use all commercially reasonable efforts to cure
before the Closing, any event, transaction or circumstance, as soon as practical
after it becomes known to such party, that causes or will cause any covenant or
agreement of Parent or the Company under this Agreement to be breached or that
renders or will render untrue any representation or warranty of Parent or the
Company contained in this Agreement. Each of Parent and the Company also will
notify the other in writing of, and will use all commercially reasonable efforts
to cure, before the Closing, any violation or breach, as soon as practical after
it becomes known to such party, of any representation, warranty, covenant or
agreement made by Parent or the Company. No notice given pursuant to this
Section shall have any effect on the representations, warranties, covenants or
agreements contained in this Agreement for purposes of determining satisfaction
of any condition contained herein.
6.09 Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, each of Parent and the Company will take or cause
to be taken all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the other's
obligations contained in this Agreement and to consummate and make effective the
transactions contemplated by this Agreement, and neither Parent nor the Company
will, nor will it permit any of its Subsidiaries to, take or fail to take any
action that could be reasonably expected to result in the nonfulfillment of any
such condition. If the TBR Asset Sale has not closed by June 25, 2004, subject
to any contractual rights of Fortuna Energy, Inc. under the TBR Asset Purchase
Agreement and the other terms and conditions of this Agreement, the parties
agree to use their commercially reasonable efforts to negotiate in good faith an
alternative transaction for the disposition of the assets included within the
TBR Asset Sale and an amendment to this Agreement to effectuate such alternative
transaction within the time frame contemplated hereby, together with such
adjustments to the Merger Price as necessary to
28
preserve the economic bargain between the parties as reflected in this
Agreement, after taking into account any changes or increased financing or
hedging costs resulting from delays in closing, that are mutually agreeable to
the parties hereto, and to enter into any necessary or appropriate transition
services or ancillary agreements on commercially reasonable terms and
conditions. For purposes of clarification, the Company agrees to use its
commercially reasonable efforts to consummate a consent solicitation and tender
offer for the notes under the Indenture (the "Consent Solicitation") after the
date hereof on terms reasonably requested by Parent; and the Company further
agrees to cooperate reasonably with Parent to facilitate the Debt Financings and
oil and gas commodity price swap transactions to be arranged by Parent for the
Company in connection with the Debt Financings for the Merger (the "▇▇▇▇▇▇").
The Company and its Subsidiaries shall not make any payments to any parties to
obtain any of the consents required as a condition to closing under Sections
7.02(f) or (g), (it being understood and agreed that, in connection with
obtaining the agreement referenced in Section 7.02(g), the extension of a
vehicle lease agreement shall not be deemed to be a prohibited payment for
purposes of this sentence) or for any waivers or consents pursuant to Section
6.05 (it being understood and agreed that all amounts otherwise due to persons
under Section 6.05 shall not be deemed to be prohibited payments for purposes of
this sentence).
6.10 Delivery of Hedge Reports Parent and Sub agree to
provide the Company with hedge quotations from ▇. ▇▇▇▇ contemplated by Section
7.02(e) of this Agreement not later than the business day after Parent receives
such quotations. Parent and Sub agree to use their reasonable best efforts to
provide such quotations to the Company on the same day that Parent receives such
quotations.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger is subject
to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been
adopted by the requisite vote of the shareholders of the Company under the OGCL
and the Company's Articles of Incorporation.
(b) HSR Act. If required, any waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
(c) No Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall have
enacted, issued, promulgated, enforced or entered any law or order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
29
(d) Governmental and Regulatory and Other Consents and
Approvals. Other than the filing provided for by Section 1.03, all consents,
approvals and actions of, filings with and notices to any Governmental or
Regulatory Authority or any other public or private third parties required of
Parent, the Company or any of their Subsidiaries to consummate the Merger and
the other matters contemplated hereby, the failure of which to be obtained or
taken would be reasonably expected to have a material adverse effect on Parent
and its Subsidiaries or the Surviving Corporation and its Subsidiaries, in each
case taken as a whole, or on the ability of Parent and the Company to consummate
the transactions contemplated hereby shall have been obtained, all in form and
substance reasonably satisfactory to Parent and the Company.
(e) Material Adverse Event. There shall not have occurred
or exist (i) any actions, suits, arbitrations or proceedings brought or
threatened against the Company other than as disclosed in the Company Disclosure
Letter or in the Company SEC Reports, or any judgments with respect to any
actions, suits, arbitrations or proceedings that are not covered by insurance
("Material Adverse Litigation Event"), (ii) any facts, circumstances, events or
occurrences relating to the operation of the business of the Company, any of its
Subsidiaries or their assets (including, without limitation, any indemnity
agreements for assets previously owned or operated by the Company or its
Subsidiaries), which form the basis of a violation of any Environmental Law
which would have required reporting to a Governmental or Regulatory Authority,
monitoring, investigation, clean-up, removal, treatment or the conduct of an
environmental impact assessment or any other use, transportation, storage,
handling, transfer, disposition, recycling or receipt of hazardous materials,
which are not reserved against by the Company or covered by insurance or (iii)
the failure of the Company or its Subsidiaries to have good and indefeasible
title to their real property, mineral interests, rights of way, easements,
leases, drilling or drilling project units or consolidated units, in each case
under this clause (iii) that (x) would materially impair the present use of any
of the Company's assets, (y) would reduce the value of such assets as set forth
in the Company Reserve Report or (z) would otherwise materially detract from the
value thereof (such events, in the aggregate, a "Material Adverse Event") in an
amount that the parties reasonably and in good faith mutually agree exceeds
$10,000,000, or, in the case of a Material Adverse Litigation Event, $3,000,000.
7.02 Conditions to Obligation of Parent and Sub to Effect
the Merger. The obligation of Parent and Sub to effect the Merger is further
subject to the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in part by
Parent and Sub in their sole discretion):
(a) Representations and Warranties. The representations
and warranties made by the Company in this Agreement that are qualified by
materiality shall be true and correct and such representations and warranties
that are not so qualified shall be true and correct in all material respects, in
each case, as of the Closing Date as though made on and as of the Closing Date
or, in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, except as
affected by the transactions contemplated by this Agreement, and the Company
shall have delivered to Parent a certificate, dated the Closing Date and
executed in the name and on behalf of the Company by both its President and
Chief Financial Officer to such effect.
30
(b) Performance of Obligations. The Company shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
the Company at or prior to the Closing, and the Company shall have delivered to
Parent a certificate, dated the Closing Date and executed in the name and on
behalf of the Company by both its President and Chief Financial Officer to such
effect.
(c) Proceedings. All proceedings to be taken on the part
of the Company in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to Parent, and Parent shall have received copies of all such
documents and other evidences as Parent may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
(d) Consent Solicitation. Prior to the Closing, holders
of a majority of the outstanding principal amount of the Subordinated Notes
shall have consented and tendered their Subordinated Notes in accordance with
the terms of the Consent Solicitation, and the Indenture trustee, the Company
and applicable guarantors shall have executed and delivered a supplemental
indenture as contemplated by the Consent Solicitation.
(e) Financial Markets; ▇▇▇▇▇▇. There shall not have
occurred any disruption, adverse change or condition in the financial, banking,
oil and gas, commodities or capital markets generally, or in the market for loan
syndications or high yield debt in particular, which has materially impaired, or
could materially impair, the successful syndication or placement of the Debt
Financings (a "Financial Market Adverse Change") or the weighted average annual
NYMEX based swap prices for the calendar years 2006, 2007, 2008 and 2009,
weighted by the factors set forth below, as quoted by ▇. ▇▇▇▇ & Company ("▇.
▇▇▇▇") to Parent as of the closing of any trading day, is less than $4.57/MMBtu
(a "Hedge Market Adverse Change"). The annual periods shall be weighted as
follows: 2006 - 35%; 2007 - 25%; 2008 - 25%; and 2009 - 15%. In the event a
Hedge Market Adverse Change occurs, Parent may terminate the Agreement in
accordance with Section 8.01(f) within 7 days of the date of such Hedge Market
Adverse Change. If Parent does not notify the Company of its desire to terminate
the Agreement within 7 days of such Hedge Market Adverse Change, such event
shall cease to be a Hedge Market Adverse Change, and the parties shall remain
bound by the terms of this Agreement.
(f) The State Treasurer of the State of Michigan,
Custodian of the Public School Employees' Retirement System, State Employees
Retirement System, Michigan State Police Retirement System and Michigan Judge
Retirement System ("SMRS"), TPG Partners II, L.P., TPG Parallel II, L.P., TPG
Investors II, L.P. and the Company shall have executed and delivered a
termination, waiver and release agreement with respect to the Shareholders'
Agreement, dated as of February 20, 1998 (the "Shareholders' Agreement"), by and
among the Company, TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors
II, L.P., and SMRS, which waiver shall (i) be issued at no cost to, and shall
not be conditioned upon any payment by, the Company, (ii) include a waiver of
any and all past defaults under the Shareholders' Agreement, and (iii) be in a
form reasonably acceptable to counsel to Parent.
31
(g) Arrow Energy Services shall have executed and
delivered an acknowledgement and agreement that the non-competition agreement
contained in the Asset Purchase Agreement dated as of May 12, 2004, between
Arrow Energy Services and Canton Oil & Gas Company (dba Arrow Oilfield
Services), shall not apply to any affiliates of ▇▇▇▇▇▇ & Blake Corporation that
are not controlled by ▇▇▇▇▇▇ & ▇▇▇▇▇ Corporation or its subsidiaries.
(h) Parent and the Company shall have received an
agreement and release from TPG Partners II, L.P. setting forth all amounts due
at Closing to TPG Partners II, L.P. pursuant to the Transaction Advisory
Agreement dated June 27, 1997, between the Company and TPG Partners II, L.P.
(the "Advisory Agreement"), and a release of any and all other claims against
the Company or its Affiliates.
(i) The sale of assets (the "TBR Asset Sale") pursuant to
the Letter Agreement dated June 14, 2004 by and between the Company and Fortuna
Energy Inc. (the "TBR Asset Purchase Agreement"), shall have been consummated at
or prior to Closing in accordance with the terms of the TBR Asset Purchase
Agreement at a cash purchase price not less than the Minimum TBR Price (as such
term is defined in Annex I).
(j) The Company shall have received all waivers described
in Section 6.05(b).
(k) The Company shall have received the consent of each
of the executive officers of the Company listed on Section 9.11(f) of the
Company Disclosure Letter who hold Company Options and other holders of Company
Options to the cancellation of Company Options in accordance with the terms of
this Agreement that, in the aggregate, gave such holders the option to acquire
not less than eighty (80%) of the 488,843 Company Common Shares that are the
subject of such Company Options.
7.03 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger is further subject to
the fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the Company
in its sole discretion):
(a) Representations and Warranties. The representations
and warranties made by Parent and Sub in this Agreement that are qualified by
materiality shall be true and correct, and such representations and warranties
that are not so qualified shall be true and correct in all material respects, in
each case, as of the Closing Date as though made on and as of the Closing Date
or, in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, except as
affected by the transactions contemplated by this Agreement, and Parent and Sub
shall each have delivered to the Company a certificate, dated the Closing Date
and executed in the name and on behalf of Parent by its general partner and in
the name and on behalf of Sub by both its President and Chief Financial Officer
to such effect.
(b) Performance of Obligations. Parent and Sub shall have
performed and complied with, in all material respects, each agreement, covenant
and obligation required by this Agreement to be so performed or complied with by
Parent or Sub at or prior to the Closing, and Parent and Sub shall each have
delivered to the Company a certificate, dated the Closing Date
32
and executed in the name and on behalf of Parent by its general partner and in
the name and on behalf of Sub by its President or Chief Financial Officer to
such effect.
(c) Proceedings. All proceedings to be taken on the part
of Parent and Sub in connection with the transactions contemplated by this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Company, and the Company shall have received copies of
all such documents and other evidences as the Company may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
(d) Availability of Funds. Parent and Sub shall have all
funds or shall have arranged and obtained funds for the Company necessary to
perform their obligations under this Agreement, including the payment of the
amounts required under Article II of this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and
the transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after the Company Shareholders' Approval:
(a) By mutual written agreement of the parties hereto
duly authorized by action taken by or on behalf of the respective Boards of
Directors of the Company and Sub and the general partner of the general partner
of Parent;
(b) By either the Company or Parent upon written
notification to the non-terminating party by the terminating party:
(i) at any time after July 31, 2004 if the
Merger shall not have been consummated on or prior to such date and
such failure to consummate the Merger is not caused by a breach of this
Agreement by the terminating party;
(ii) if the Company Shareholders' Approval shall
not be obtained by reason of the failure to obtain the requisite vote
upon a vote held at a meeting of such shareholders, or any adjournment
thereof, called therefor;
(iii) if (x) there has been a material breach of
any representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement, which breach is not
curable or, if curable, has not been cured within fifteen (15) days
following receipt by the non-terminating party of notice of such breach
from the terminating party and (y) the terminating party is not in
material breach of any representation, warranty, covenant or agreement
on the part of the terminating party set forth in this Agreement at the
time of such notification; or
(iv) if any court of competent jurisdiction or
other competent Governmental or Regulatory Authority shall have issued
an order making illegal or
33
otherwise restricting, preventing or prohibiting the Merger and such
order shall have become final and nonappealable;
(c) By the Company if (i) the Company shall not have
breached any provision of this Agreement in any material respect, (ii) the Board
of Directors of the Company authorizes the Company, subject to complying with
the terms of Section 5.02 and this paragraph (c), to enter into a binding
written agreement concerning a transaction that constitutes an Alternative
Proposal and the Company notifies Parent in writing that it intends to enter
into such an agreement, attaching the most current version of such agreement to
such notice, and (iii) Parent does not make, within three business days of
receipt of the Company's written notification of its intention to enter into
such agreement, an offer that the Board of Directors of the Company determines,
in its good faith judgment (after receipt of the advice of its financial
advisor), is at least as favorable to the Company's shareholders from a
financial point of view as the Alternative Proposal;
(d) By Parent if the Board of Directors of the Company
(or any committee thereof) shall have withdrawn or modified in a manner adverse
to Parent its approval or recommendation of this Agreement or the Merger or
shall have recommended an Alternative Proposal to the shareholders of the
Company or failed to reconfirm its recommendation of this Agreement and the
Merger within five (5) business days following a reasonable written request for
such reconfirmation by Parent; or
(e) By the Company at any time after July 16, 2004 if (i)
the TBR Asset Sale has closed on or before June 25, 2004, (ii) the Company is
not in breach of any provision of this Agreement in any material respect, (iii)
the Company has satisfied as of July 16, 2004 all of the conditions required of
it in order for the transactions contemplated by this Agreement to close, (iv)
the conditions set forth in Sections 7.02(d), (e), (f), (g), (h), (j) and (k)
have been satisfied, and (v) Parent and Sub have not satisfied as of July 16,
2004 all of the conditions required to have been satisfied by them in order for
the transactions contemplated by this Agreement to close.
(f) By Parent upon the occurrence of a Hedge Market
Adverse Change if Parent provides written notification to the Company within
seven days of the date of the Hedge Market Adverse Change.
8.02 Effect of Termination. If this Agreement is validly
terminated by either the Company or Parent pursuant to Section 8.01, this
Agreement will forthwith become null and void and there will be no liability or
obligation on the part of either the Company or Parent (or any of their
respective Representatives or affiliates), except (i) that the provisions of
Section 1.07, Section 6.06 and this Section 8.02 will continue to apply
following any such termination, and (ii) that nothing contained herein shall
relieve any party hereto from liability for willful breach of its
representations, warranties, covenants or agreements contained in this
Agreement. In addition, the Confidentiality Agreement shall not be affected by
the termination of this Agreement.
8.03 Amendment. This Agreement may be amended,
supplemented or modified by action taken by or on behalf of the respective
Boards of Directors of the parties
34
hereto at any time prior to the Effective Time, whether prior to or after the
Company Shareholders' Approval shall have been obtained, but after such adoption
and approval only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any
party hereto, by action taken by or on behalf of its Board of Directors, may to
the extent permitted by applicable law (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 of the other parties
hereto contained herein or in any document delivered pursuant hereto or (iii)
waive compliance with any of the covenants, agreements or conditions of the
other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and agreements
contained in this Agreement shall not survive the Merger but shall terminate at
the Effective Time; provided, however, that this Section 9.01 shall not limit
any covenant or agreement of the parties hereto, which by its terms contemplates
performance after the Effective Time or the termination of this Agreement.
9.02 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally, by facsimile transmission or by a nationally
recognized overnight courier service or mailed (first class postage prepaid) to
the parties at the following addresses or facsimile numbers:
35
If to Parent or Sub, to:
Capital C Energy Operations, LP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Frost ▇. ▇▇▇▇▇▇▇
with a copy to:
Riverstone Holdings LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
with an additional copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇
If to the Company, to:
▇▇▇▇▇▇ & Blake Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Vice President, Legal Affairs/Gas Marketing
with a copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
All such notices, requests and other communications will (i) if delivered
personally or by overnight courier to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided in this Section, be deemed given upon receipt,
and (iii) if delivered by mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section).
36
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits. (a) This
Agreement supersedes all prior discussions and agreements among the parties
hereto with respect to the subject matter hereof, and contains, together with
the Confidentiality Agreement, the sole and entire agreement among the parties
hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter and any Exhibit
attached to this Agreement and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
9.04 Public Announcements Except as otherwise required by
law or the rules of any applicable securities exchange or national market
system, so long as this Agreement is in effect, Parent and the Company will not,
and will not permit any of their respective Representatives to, issue or cause
the publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. Parent and
the Company will cooperate with each other in the development and distribution
of all press releases and other public announcements with respect to this
Agreement and the transactions contemplated hereby, and will furnish the other
with drafts of any such releases and announcements as far in advance as
practicable.
9.05 No Third Party Beneficiary. The terms and provisions
of this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and except as provided in
Section 6.04 and Section 6.05 (which are intended to be for the benefit of the
persons entitled to rights thereunder and which may be enforced by any of such
persons), it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
9.06 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and any
attempt to do so will be void. This Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and permitted assigns.
9.07 Headings. The headings used in this Agreement have
been inserted for convenience of reference only and do not define, modify or
limit the provisions hereof.
9.08 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future law or order, and if the rights or obligations of any party hereto under
this Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (iii) the remaining provisions of this Agreement
will remain in full force and effect
37
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance from this Agreement.
9.09 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
9.10 Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.11 Certain Definitions. As used in this Agreement:
(a) the term "affiliate," as applied to any person, shall
mean any other person directly or indirectly controlling, controlled by, or
under common control with, that person; for purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own
securities if such person would be the beneficial owner of such securities under
Rule 13d-3 under the Exchange Act, including securities which such person has
the right to acquire (whether such right is exercisable immediately or only
after the passage of time);
(c) the term "business day" means a day other than
Saturday, Sunday or any day on which banks located in the States of Ohio are
authorized or obligated to close;
(d) any reference to any event, change or effect being
"material" or "materially adverse" or having a "material adverse effect" on or
with respect to an entity (or group of entities taken as a whole) means such
event, change or effect is, or would reasonably be expected to be, material or
materially adverse, as the case may be, to the business, operations, assets,
liabilities, condition (financial or otherwise) or results of operations of such
entity (or of such group of entities taken as a whole);
(e) the term "Company Material Adverse Effect" means a
material adverse effect on (i) the business, operations, assets, liabilities,
condition (financial or otherwise) or results of operations of the Company and
the Company Subsidiaries considered as a single enterprise or (ii) the ability
of the Company to perform its obligations under this Agreement or to consummate
the transactions contemplated by this Agreement; provided, however, that any
event, condition, change, occurrence or development of a state of circumstances
which (x) adversely affects the oil and gas exploration and development industry
generally (including
38
without limitation changes in commodity prices, general market prices and
regulatory changes) or (y) arises out of general economic or industry conditions
shall not be considered in determining whether a Company Material Adverse Effect
has occurred.
(f) the term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to the Company, the actual knowledge, after
reasonable inquiry, of the executive officers of the Company described in
Section 9.11(f) of the Company Disclosure Letter.
(g) the term "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups (which term shall
include a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act);
(h) the "Representatives" of any entity means such
entity's directors, officers, employees, legal, investment banking and financial
advisors, accountants and any other agents and representatives; and
(i) the term "Subsidiary" means, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which more than fifty percent (50%) of either the equity
interests in, or the voting control of, such corporation or other organization
is, directly or indirectly through Subsidiaries or otherwise, beneficially owned
by such party or any organization of which such party or a Subsidiary of such
party is a general partner or managing member.
9.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
39
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the date
first above written.
CAPITAL C ENERGY OPERATIONS, LP
By: Capital C Energy, LP, it general partner
By: Capital C Energy, LLC, its general
partner
By: /s/ Frost ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: Frost ▇. ▇▇▇▇▇▇▇
Title: President and CEO
CAPITAL C OHIO, INC.
By: /s/ Frost ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: Frost ▇. ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ & BLAKE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and CEO
40
ANNEX I
MERGER PRICE DETERMINATION
Section 1.01. Capitalized terms that are not defined in this Annex I shall have
the meanings ascribed to such terms in the Agreement. The following capitalized
terms, when used in this Annex I, shall have the following meanings:
"Arrow Adjustment" shall mean as follows: if the Arrow Asset Sale does not close
as of the Effective Time, then the Arrow Adjustment shall be equal to (a) a
twenty-two cent ($0.22) reduction to the Base Merger Price and (b) the
distribution as part of the Merger Price of the Arrow Contingent Distribution
Right.
"Arrow Contingent Distribution Right" shall mean the right per Company Common
Share (or, in connection with the Options, per share issuable upon the exercise
of an outstanding Option) to receive a payment within 120 days from the Closing
Date in an amount rounded to the nearest whole cent determined as follows: (a)
first, the total cash proceeds received by the Company from the sale of the
assets covered by the Arrow Asset Sale, if any, shall be reduced by any and all
direct and indirect costs incurred by the Company in connection with the assets
in connection with or prior to such disposition, including auctioning, broker,
consulting, advisory, administrative, storage, transportation, maintenance and
insurance costs, taxes (excluding income taxes), related employee costs and
expenses other than for operating purposes, and any other losses and liabilities
associated therewith (such amount being referred to as the "Net Proceeds"), (b)
second, the Net Proceeds shall be multiplied by 62.5% (the result of such
calculation, the "Adjusted Net Proceeds") and (c) third, the Adjusted Net
Proceeds shall be divided by the number of Fully Diluted Common Shares. The
amount determined in clause (c) shall be the amount distributed on a per share
basis in connection with the Arrow Contingent Distribution Right. The manner of
disposition of such assets in good faith shall be in the Company's sole
discretion.
"Base Merger Price" shall mean $10.45 in cash.
"Fully Diluted Common Shares" shall mean all the issued and outstanding Company
Common Shares plus Company Common Shares issuable upon the exercise of Options.
"Minimum TBR Price" shall mean $55,250,000.
"TBR Adjustment" shall mean if the cash purchase price received under the TBR
Asset Purchase Agreement is less than $65 million (the "Target Price"),
excluding any purchase price received pursuant to Section 4 or Exhibit "F"
thereof, and not below the TBR Minimum Price, a reduction in the Base Merger
Price by the amount (rounded to the nearest whole cent) determined as follows:
(a) first, the Target Price minus such cash purchase price actually received
under the TBR Asset Purchase Agreement (excluding any purchase price received
pursuant to Section 4 or Exhibit "F") shall be determined (the "Shortfall"), (b)
second, the Shortfall shall be multiplied
41
by 61.5% (the result of such calculation, the "Adjusted Shortfall") and (c)
third, the Adjusted Shortfall shall be divided by the number of Fully Diluted
Common Shares. The number resulting from clause (c) shall be the TBR Adjustment.
Section 1.02. If, as of the Effective Time, the Company has closed (1) the TBR
Asset Sale without a purchase price adjustment made under Section 6 of the TBR
Asset Purchase Agreement that reduces the consideration to be paid to the
Company below the amount set forth in Section 1 of the TBR Asset Purchase
Agreement, and (2) the transactions contemplated by the draft prepared June 15,
2004 of the Asset Purchase Agreement between ▇▇▇▇▇▇▇ Oilfield Services, LLC, the
Company and The Canton Oil & Gas Company (the "Arrow Asset Sale") and which is
attached to the Company Disclosure Letter, then the Merger Price shall be the
Base Merger Price.
Section 1.03. If, as of the Effective Time, (a) the Company has closed the TBR
Asset Sale but with a purchase price adjustment made under Section 6 of the TBR
Asset Purchase Agreement that reduces the consideration to be paid to the
Company below the amount set forth in Section 1 of the TBR Asset Purchase
Agreement, or (b) the Company has not closed the Arrow Asset Sale, then the
Merger Price shall be equal to the Base Merger Price adjusted by the TBR
Adjustment (if applicable) and the Arrow Adjustment (if applicable).
42
EXHIBIT A
FORM OF VOTING AGREEMENT
43
EXHIBIT B
FORM OF ESCROW AGREEMENT
44