EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
ENBRIDGE INC.
▇▇▇▇▇▇ ACQUISITION INC.
and
MIDCOAST ENERGY RESOURCES, INC.
March 15, 2001
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER..................................................................................... 1
1.1 The Merger.......................................................................... 1
1.2 Effective Time...................................................................... 1
1.3 Effects of the Merger............................................................... 2
1.4 Articles of Incorporation and Bylaws................................................ 2
1.5 Directors........................................................................... 2
1.6 Officers............................................................................ 2
1.7 Effect on Capital Stock............................................................. 2
(a) Capital Stock of Sub....................................................... 2
(b) Cancellation of Treasury Shares and Parent Owned Shares.................... 2
(c) Conversion of Shares....................................................... 2
1.8 Shares of Dissenting Shareholders................................................... 2
1.9 Further Assurances.................................................................. 3
1.10 Closing............................................................................. 3
ARTICLE II
EXCHANGE PROCEDURE............................................................................. 3
2.1 Exchange of Certificates............................................................ 3
(a) Paying Agent............................................................... 3
(b) Parent to Provide Funds.................................................... 3
(c) Exchange Procedure......................................................... 4
(d) No Further Ownership Rights in Shares...................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................................. 5
3.1 Representations and Warranties of the Company....................................... 5
(a) Organization, Standing and Power........................................... 5
(b) Subsidiaries............................................................... 5
(c) Capital Structure.......................................................... 5
(d) Authority; Non-contravention............................................... 6
(e) SEC Documents.............................................................. 7
(f) Proxy Statement............................................................ 8
(g) Absence of Certain Changes or Events....................................... 8
(h) No Undisclosed Material Liabilities........................................ 10
(i) No Default................................................................. 10
(i)
(j) State Takeover Statutes; Absence of Supermajority Provision................ 10
(k) Litigation................................................................. 11
(l) Employee Benefit Matters................................................... 11
(m) Taxes...................................................................... 13
(n) No Excess Parachute Payments............................................... 14
(o) Environmental Matters...................................................... 14
(p) Compliance with Laws; Permits.............................................. 16
(q) Material Contracts and Agreements.......................................... 16
(r) Title to Properties........................................................ 16
(s) Intellectual Property...................................................... 17
(t) Labor Matters.............................................................. 18
(u) Public Utility Holding Company Act......................................... 20
(v) Investment Company Act..................................................... 20
(w) Opinion of Financial Advisor............................................... 20
(x) Brokers.................................................................... 20
(y) Board Recommendation....................................................... 20
(z) Required Vote of Company Shareholders; Vote of Directors and Management.... 20
3.2 Representations and Warranties of Parent and Sub.................................... 20
(a) Organization; Standing and Power........................................... 20
(b) Authority; Non-contravention............................................... 21
(c) Information Supplied....................................................... 21
(d) Brokers.................................................................... 22
(e) Litigation................................................................. 22
(f) Financing.................................................................. 22
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS...................................................... 22
4.1 Conduct of Business of the Company.................................................. 22
(a) Ordinary Course............................................................ 22
(b) Changes in Employment Arrangements......................................... 25
(c) Other Actions.............................................................. 25
ARTICLE V
ADDITIONAL AGREEMENTS.......................................................................... 25
5.1 Shareholder Approval; Preparation of Proxy Statement................................ 25
5.2 Access to Information............................................................... 26
5.3 Reasonable Efforts; Notification.................................................... 27
(a) Reasonable Efforts......................................................... 27
(b) Notification............................................................... 28
5.4 Indemnification..................................................................... 30
(ii)
5.5 Fees and Expenses................................................................... 31
5.6 Company Stock Options............................................................... 31
5.7 Public Announcements................................................................ 32
5.8 Shareholder Litigation.............................................................. 32
5.9 Pending Regulatory Rate Cases....................................................... 32
5.10 Midcoast Energy Resources, Inc. Employee Stock Purchase Plan........................ 32
ARTICLE VI
CONDITIONS PRECEDENT........................................................................... 33
6.1 Conditions to Each Party's Obligation to Effect the Merger.......................... 33
(a) Shareholder Approval....................................................... 33
(b) Other Approvals............................................................ 33
(c) No Injunctions or Restraints............................................... 33
6.2 Conditions to Obligations of Parent and Sub......................................... 33
(a) Obligations................................................................ 33
(b) Representations and Warranties............................................. 33
(c) Third Party Consents....................................................... 33
(d) Material Adverse Change.................................................... 33
(e) Employment Agreements...................................................... 34
(f) Options.................................................................... 34
(g) Opinion.................................................................... 34
6.3 Condition to Obligations of the Company............................................. 34
(a) Obligations................................................................ 34
(b) Representations and Warranties............................................. 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.............................................................. 34
7.1 Termination......................................................................... 34
7.2 Procedure for Termination, Amendment, Extension or Waiver........................... 35
7.3 Effect of Termination............................................................... 35
7.4 Amendment........................................................................... 35
7.5 Extension; Waiver................................................................... 36
ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS....................................................... 36
8.1 Takeover Defenses of the Company and Standstill Agreements.......................... 36
8.2 No Solicitation..................................................................... 36
8.3 Fee and Expense Reimbursements...................................................... 38
(iii)
ARTICLE IX
GENERAL PROVISIONS............................................................................. 38
9.1 Nonsurvival of Representations and Warranties....................................... 38
9.2 Notices............................................................................. 38
9.3 Definitions......................................................................... 38
9.4 Interpretation...................................................................... 39
9.5 Counterparts........................................................................ 40
9.6 Entire Agreement; No Third-Party Beneficiaries...................................... 40
9.7 Governing Law....................................................................... 40
9.8 Assignment.......................................................................... 40
9.9 Enforcement of the Agreement........................................................ 41
9.10 Performance by Sub.................................................................. 41
9.11 Severability........................................................................ 41
Exhibit A --- Form of opinion of counsel to the Company................................. A-1
Schedule I --- Disclosure Schedule....................................................... I-1
Schedule II --- List of Initial Directors of Surviving Corporation........................ II-1
Schedule III --- List of Initial Officers of Surviving Corporation......................... III-1
(iv)
INDEX OF DEFINED TERMS
Section
-------
affiliate........................................................... 9.3(a)
Agreement........................................................... Preamble
Applicable Period................................................... 8.2(a)
Acquisition Proposal................................................ 8.2(a)
Articles of Merger.................................................. 1.2
Certificates........................................................ 2.1(c)
Closing............................................................. 1.10
Code................................................................ 3.1(1)
Company............................................................. Introduction
Company Balance Sheet............................................... 3.1(e)
Company Balance Sheet Date.......................................... 3.1(e)
Company Benefit Plan................................................ 3.1(l)
Company Charter..................................................... 3.(d)
Company Common Stock................................................ 3.1(c)
Company Financial Advisor........................................... 3.1(w)
Company Permits..................................................... 3.1(p)
Company Preferred Stock............................................. 3.1(c)
Company Regulatory Documents........................................ 5.3(c)(iii)
Company Shareholder Approval........................................ 3.1(j)
Company's Stock Plans............................................... 3.1(c)
Confidentiality Agreement........................................... 8.1
Dedicated Employee.................................................. 3.1(t)(i)
Dissenting Shareholders............................................. Introduction
Effective Time...................................................... 1.2
Employer............................................................ 3.1(l)
Environmental Claim................................................. 3.1(o)
Environmental Permits............................................... 3.1(o)
Environmental Laws.................................................. 3.1(o)
ERISA............................................................... 3.1(l)(i)
Exchange Act........................................................ 3.1(d)
Fairness Opinion.................................................... 3.1(w)
Governmental Entity................................................. 3.1(d)
Hazardous Materials................................................. 3.1(o)
hereof, herein and hereunder........................................ 9.4
HSR Act............................................................. 3.1(d)
include, includes or including...................................... 9.4
Indemnified Parties................................................. 5.4(a)
IRS................................................................. 3.1(l)(i)
Liens............................................................... 3.1(b)
material adverse effect or material adverse change.................. 9.3(b)
(v)
Section
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Merger.............................................................. Preamble
Merger Consideration................................................ 1.7(c)
Notice of Superior Proposal......................................... 8.2(b)
Parent.............................................................. Introduction
Parent Regulatory Documents......................................... 5.3(c)(iii)
Paying Agent........................................................ 2.1(a)
Pending Regulatory Cases............................................ 5.9
person.............................................................. 9.3(c)
Proxy Statement..................................................... 3.1(d)
Real Properties..................................................... 3.1(r)(iii)
S-8 Registration Statement.......................................... 5.6
SARs................................................................ 3.1(c)
SEC................................................................. 3.1(d)
SEC Documents....................................................... 3.1(e)
Securities Act...................................................... 3.1(e)
Share or Shares..................................................... Preamble
Shareholder Meeting................................................. 3.1(f)
Stock Option Assumption Agreement................................... 5.6
Sub................................................................. Introduction
subsidiary.......................................................... 9.3(d)
superior proposal................................................... 8.2(c)
Surviving Corporation............................................... 1.1
Tax or Taxes........................................................ 3.1(m)
Tax Return.......................................................... 3.1(m)
TBCA................................................................ 1.1
(vi)
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is dated as of March 15, 2001, among
Enbridge Inc., a Canadian corporation ("Parent"), ▇▇▇▇▇▇ Acquisition, Inc., a
Texas corporation and an indirect wholly owned subsidiary of Parent ("Sub"), and
Midcoast Energy Resources, Inc., a Texas corporation (the "Company").
WHEREAS, the respective Boards of Directors of each of Parent, Sub and the
Company have approved the acquisition of the Company by Parent on the terms and
subject to the conditions of this Agreement and Plan of Merger (this
"Agreement");
WHEREAS, in order to effect such acquisition of the Company, the respective
Boards of Directors of each of Parent, Sub and the Company have approved the
merger of the Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions of this Agreement, whereby each issued and outstanding
share of common stock, $.01 par value, of the Company (singularly "Share" and
plurally "Shares") not owned directly or indirectly by Parent or the Company,
except Shares held by persons who object to the Merger and comply with all of
the provisions of Texas law concerning the right of holders of Shares to dissent
from the Merger and require appraisal of their Shares ("Dissenting
Shareholders"), will be converted into the right to receive $27.00 per Share;
and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof and
in accordance with the Texas Business Corporation Act (the "TBCA"), the Sub
shall be merged with and into the Company at the Effective Time (as defined
below). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the TBCA.
1.2 Effective Time. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VI, the parties shall file
articles of merger or other appropriate documents with the Secretary of State of
Texas (in any such case, the "Articles of Merger") executed in accordance with
the relevant provisions of the TBCA. The Merger shall become effective at such
time as the Articles of Merger are duly filed with the Secretary of State of
Texas or at such other time as Sub and the Company shall agree should be
specified in the Articles of Merger (the time the Merger becomes effective being
the "Effective Time").
1.3 Effects of the Merger. The Merger shall have the effects set forth in
Article 5.06 of the TBCA.
1.4 Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of Sub, as in effect at the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law, provided that such Articles of Incorporation shall be amended
hereby as of the Effective Time to change the name of the Surviving Corporation
to Enbridge Midcoast Energy, Inc.
(b) The bylaws of Sub as in effect at the Effective Time shall be the
bylaws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
1.5 Directors. The persons listed in Schedule II to this Agreement shall
be the initial directors of the Surviving Corporation and shall hold office
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
1.6 Officers. The persons listed in Schedule III to this Agreement shall
be the initial officers of the Surviving Corporation and shall hold office until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
1.7 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Shares:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Shares and Parent Owned Shares. All
Shares that are owned directly or indirectly by the Company as treasury stock or
by any wholly owned subsidiary of the Company and any Shares owned by Parent,
Sub or any other wholly owned subsidiary of Parent shall be canceled, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. At the Effective Time, each issued and
outstanding Share (other than Shares to be canceled in accordance with Section
1.7(b)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, $27.00 per Share (the "Merger
Consideration").
1.8 Shares of Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares held by a
Dissenting Shareholder shall not be converted as described in Section 1.7(c) but
shall become the right to receive such consideration as may be determined to be
due to such Dissenting Shareholder pursuant to the laws of the State of Texas;
provided, that Shares
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outstanding immediately prior to the Effective Time and held by a Dissenting
Shareholder who shall, after the Effective Time, withdraw such Dissenting
Shareholder's demand for appraisal or lose such Dissenting Shareholder's right
of appraisal, in either case pursuant to the TBCA, shall be deemed to be
converted, as of the Effective Time, into the right to receive the Merger
Consideration. The Company shall give Parent (i) prompt notice of any written
demands for appraisal of Shares received by the Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to any such demands. The
Company shall not, without the prior written consent of Parent, voluntarily make
any payments with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
1.9 Further Assurances. If at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the constituent corporations to the Merger or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its appropriate
officers and directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of either of the constituent corporations to
the Merger, all such deeds, bills of sale, assignments and assurances and do, in
the name and on behalf of such constituent corporations, all such other acts and
things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such constituent corporation and otherwise
to carry out the purposes of this Agreement.
1.10 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fulbright &
▇▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at
10:00 a.m., Houston time, on the second business day after the day on which the
last of the conditions set forth in Article VI shall have been fulfilled or
waived or at such other time and place as Parent, Sub and the Company shall
agree.
ARTICLE II
EXCHANGE PROCEDURE
2.1 Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration upon surrender of certificates representing
Shares.
(b) Parent to Provide Funds. Parent shall take all steps necessary to
enable and cause the Surviving Corporation to provide the Paying Agent on a
timely basis funds necessary to pay for the Shares pursuant to Section 1.7(c).
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(c) Exchange Procedure. Promptly after the Effective Time, the Paying
Agent shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented Shares (the "Certificates"),
other than the Company, Parent and any subsidiary of the Company or Parent, (i)
a letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and which shall be in a form and have such
other provisions as Parent may reasonably specify and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by the Surviving
Corporation, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash into which the Shares theretofore represented by such Certificate shall
have been converted pursuant to Section 1.7(c), and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate. If payment is to be
made to a person other than the person in whose name the Certificate so
surrendered is registered, it shall be a condition of payment that such
Certificate shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.1, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 1.7(c). Notwithstanding the foregoing, neither the Paying Agent nor
any party shall be liable to a former shareholder of the Company for any cash or
interest delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. If any Certificates shall not have been
surrendered prior to seven years after the Effective Time (or immediately prior
to such earlier date on which any payment pursuant to this Section 2.1 would
otherwise escheat to or become the property of any governmental body or agency)
the payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto. Any funds
made available to the Paying Agent that remain unclaimed by holders of
Certificates for six months after the Effective Time shall be delivered to the
Surviving Corporation upon demand and any holder of Certificates who has not
theretofore complied with this Section 2.1(c) shall thereafter look only to the
Surviving Corporation for payment of their claim for Merger Consideration.
(d) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article II shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and no further registration
of transfers of Shares thereafter shall be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, Parent and Sub as follows, subject to any
exceptions specified in the Disclosure Document in the form attached hereto as
Schedule I to the extent that such exceptions reference a specific section of
this Article III:
(a) Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
The Company is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified to do business or in good
standing (individually or in the aggregate) would not have, or would not
reasonably be likely to have, a material adverse effect (as defined in Section
9.3(b)) on the Company.
(b) Subsidiaries. Each of the Company's subsidiaries (and its
jurisdiction of organization) is listed in Section 3.1(b) of the Disclosure
Schedule. The Company's subsidiaries are corporations, limited liability
companies or partnerships that are duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of organization and
have the requisite corporate power and authority (or comparable power and
authority in the case of limited liability companies or partnerships) to own and
operate their respective properties and to carry on their respective businesses
as they are now being conducted. Each of the Company's subsidiaries is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of its respective businesses or the ownership or leasing of its
respective properties makes such qualification necessary, other than in such
jurisdictions where the failure to be so qualified or in good standing would not
have, or would not reasonably be likely to have, a material adverse effect on
the Company. All of the outstanding shares of capital stock of the Company's
subsidiaries that are corporations, and all the ownership interests of the
Company in its other subsidiaries, have been duly authorized and validly issued
and are, except in the case of any subsidiary that is a partnership, fully paid
and non-assessable and were not issued in violation of any preemptive rights or
other preferential rights of subscription or purchase of any person. All such
stock and ownership interests of each of the Company's subsidiaries are owned of
record and beneficially by the Company or by a wholly owned subsidiary of the
Company, free and clear of all liens, mortgages, pledges, security interests,
charges, claims and other encumbrances of any kind or nature ("Liens"). Except
for the capital stock of, or ownership interests in, its subsidiaries, the
Company does not own, directly or indirectly, any capital stock, equity interest
or other ownership interest in any corporation, partnership, association, joint
venture, limited liability company or other entity.
(c) Capital Structure. As of the date hereof, the authorized capital
stock of the Company consists of 31,250,000 shares of common stock, $.01 par
value ("Company Common Stock"), and 5,000,000 shares of preferred stock, $.01
par value ("Company Preferred Stock"). At the close of
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business on March 14, 2001, (i) 12,552,893 Shares were issued and outstanding;
(ii) 909,864 Shares were reserved for issuance pursuant to options or stock
awards granted under the Company's 1996 Incentive Stock Option Plan, the 1997
Non-Employee Director Stock Option Plan and the Employee Stock Purchase Plan
(the "Company's Stock Plans"), (iii) 341,136 Shares were reserved for issuance
pursuant to options or stock awards not yet granted under the Company's Stock
Plans, (iv) 270,271 Shares were reserved for issuance pursuant to outstanding
warrants and (v) no shares of Company Preferred Stock were issued or
outstanding. There are no outstanding stock appreciation rights ("SARs"). The
Shares are listed on the American Stock Exchange. Except as set forth above, no
shares of capital stock or other equity or voting securities of the Company are
reserved for issuance or are outstanding. All outstanding shares of capital
stock of the Company are, and all such Shares issuable upon the exercise of
stock options, stock awards or warrants will be when issued thereunder, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except for Shares issued on exercise of options or warrants, no capital stock
has been issued by the Company since the Company Balance Sheet Date (as defined
in Section 3.1(e)), other than Shares issued pursuant to options outstanding on
or prior to such date in accordance with their terms at such date. Except for
options described above and warrants described above, as of the date hereof
there are no outstanding or authorized securities, options, warrants, calls,
rights, commitments, preemptive rights, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party, or by
which any of them is bound, obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock or other equity or voting securities of, or other ownership
interests in, the Company or of any of its subsidiaries or obligating the
Company or any of its subsidiaries to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking. Each outstanding warrant to purchase Shares will, at the
Effective Time, be exercisable by the holder thereof only for the Merger
Consideration. True and correct copies of all agreements, instruments and other
governing documents relating to the Company's Stock Plans have been furnished to
Parent.
(d) Authority; Non-contravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to
Company Shareholder Approval (as defined in Section 3.1(j)), to consummate the
Merger and other transactions contemplated hereby and to take such actions, if
any, as shall have been taken with respect to the matters referred to in Section
3.1(j). The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to Company Shareholder Approval. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws or judicial
decisions now or hereafter in effect relating to creditors' rights generally and
(ii) the remedy of specific performance and injunctive relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
by the Company do not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of or "put" right with respect to any obligation or to loss of a
material benefit under, or result in the creation of any lien, security
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interest, charge or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries under, any provision of (i) the Restated
Articles of Incorporation, as amended to the date hereof or bylaws of the
Company (the "Company Charter") or any provision of the comparable
organizational documents of its subsidiaries, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease, or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets or (iii) subject to
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation or
arbitration award applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights or liens, security
interests, charges or encumbrances that individually or in the aggregate would
not have, or would not reasonably be likely to have, a material adverse effect
on the Company and would not, or would not reasonably be likely to, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign, including local
authorities (a "Governmental Entity"), is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (i) the filing of a premerger
notification and report form by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) a notice
filing under the Competition Act (Canada), (iii) the filing with the Securities
and Exchange Commission (the "SEC") of (A) a proxy statement relating to the
Company Shareholder Approval (such proxy statement as amended or supplemented
from time to time, the "Proxy Statement") and (B) such reports under Section
13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as may be filed in connection with this Agreement and the transactions
contemplated hereby, and (iv) the filing of the Articles of Merger with the
Secretary of State of Texas with respect to the Merger as provided in the TBCA
and appropriate documents with the relevant authorities of other jurisdictions
in which the Company is qualified to do business and such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not have, or would not reasonably
be likely to have, a material adverse effect on the Company.
(e) SEC Documents. The Company has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1998 (such documents, together with all exhibits and schedules thereto and
documents incorporated by reference therein, as amended, if applicable,
collectively referred to herein as the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of the Company included in
the SEC Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC)
-7-
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and other adjustments described therein). There is no
liability or obligation of any kind, whether accrued, contingent, absolute,
determined, determinable or otherwise, of the Company or any subsidiary of the
Company which is required by generally accepted accounting principles to be
reflected or reserved against or otherwise disclosed in the most recent
financial statements of the Company included in the SEC Documents which is not
so reflected or reserved against that individually or in the aggregate would
have a material adverse effect on the Company. For purposes of this Agreement,
"Company Balance Sheet" means the consolidated balance sheet as of September 30,
2000 set forth in the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2000 and "Company Balance Sheet Date" means September
30, 2000.
(f) Proxy Statement. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement relating to the Shareholder Meeting (defined below) will, at the date
the Proxy Statement is mailed to the Company's shareholders and at the time of
the Company's shareholders meeting convened for the purpose of obtaining the
Company Shareholder Approval (the "Shareholder Meeting"), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its subsidiaries shall occur which is required to be
described in the Proxy Statement, such event shall be so described, and an
amendment or supplement shall be filed promptly with the SEC and, as required by
law, disseminated to the shareholders of the Company. The Proxy Statement, as it
relates to the Shareholder Meeting, will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company in
this Section 31 with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub in writing for inclusion
or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except as disclosed in the
SEC Documents filed with the SEC prior to the date hereof, since the Company
Balance Sheet Date, the Company and its subsidiaries have conducted their
business only in the ordinary course consistent with past practice, and there
has not been
(i) any event, occurrence, circumstance or development that
has had, or has been reasonably likely to have, a material adverse
effect with respect to the Company;
(ii) any declaration, setting aside or payment of any dividend
(whether in cash, stock or property) with respect to any of the
Company's capital stock or any repurchase, redemption or other
acquisition by the Company or any subsidiary of the Company of any
amount of outstanding shares of capital stock or other equity
securities of, or other ownership interests in, the Company or any
subsidiary of the Company;
-8-
(iii) any amendment of any term of any outstanding security of
the Company or any subsidiary of the Company that would materially
increase the obligations of the Company or such subsidiary under such
security;
(iv) (A) any incurrence or assumption by the Company or any
subsidiary of the Company of any indebtedness for borrowed money
other than under existing credit facilities (or any renewals,
replacements or extensions thereof that do not materially increase
the commitments thereunder) in the ordinary course of business
consistent with past practices, or (B) any guaranty, endorsement or
other incurrence or assumption of liability, whether directly,
contingently or otherwise, by the Company or any subsidiary of the
Company for the obligations of any other person (other than any
subsidiary of the Company), other than in the ordinary course of
business consistent with past practice or in connection with the
obligations of the Company and its subsidiaries assumed at the
Effective Time;
(v) any creation or assumption by the Company or any
subsidiary of the Company of any Lien on any material asset of the
Company or any subsidiary of the Company other than in the ordinary
course of business consistent with past practices;
(vi) any making of any loan, advance or capital contribution to
or material investment in any person by the Company or any subsidiary
of the Company other than loans, advances or capital contributions to
or investments in wholly-owned subsidiaries of the Company;
(vii) (A) any contract or agreement entered into by the Company
or any subsidiary of the Company on or prior to the date hereof
relating to any material acquisition or disposition of any assets or
business or (B) any modification, amendment, assignment, termination
or relinquishment by the Company or any subsidiary of the Company of
any contract, license or other right (including any insurance policy
naming it as a beneficiary or loss payable payee) that reasonably
would be likely to have a material adverse effect on the Company,
other than transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement;
(viii) (A) any granting by the Company or any of its subsidiaries
to any officer of the Company or any of its subsidiaries of any
increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under employment
agreements in effect as of the Company Balance Sheet Date, (B) any
granting by the Company or any of its subsidiaries to any such
officer of any increase in severance or termination pay, except as
was required under employment, severance or termination agreements in
effect as of the Company Balance Sheet Date, or (C) except in
accordance with past practice as to officers, any entry by the
Company or any of its subsidiaries into any employment, severance or
termination agreement with any such officer;
-9-
(ix) any damage, destruction or loss, whether or not covered by
insurance, that has or reasonably could be expected to have a
material adverse effect on the Company;
(x) any change in accounting methods, principles or practices
by the Company materially affecting its assets, liabilities or
business, except insofar as may have been required by a change in
generally accepted accounting principles; or
(xi) any event which, if it had taken place following the
execution of this Agreement, would not have been permitted by Section
4.1.
(h) No Undisclosed Material Liabilities. Section 3.1(h) of the
Disclosure Schedule lists all liabilities or obligations, whether pursuant to
contracts or otherwise, of any kind whatsoever incurred by the Company or any
subsidiary of the Company whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
(i) liabilities or obligations which, individually and in the
aggregate, have not had and are not reasonably likely to have a
material adverse effect on the Company or
(ii) liabilities or obligations under this Agreement or
incurred in connection with the transactions contemplated hereby.
(i) No Default. Neither the Company nor any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (i) in the case of the Company and its subsidiaries, their
respective certificate or articles of incorporation and bylaws or other
organizational documents, (ii) any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is now a party or by which the Company or any of its subsidiaries
or any of their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its subsidiaries, except in the case of clauses (ii) and (iii) for
defaults or violations which in the aggregate would not have a material adverse
effect on the Company.
(j) State Takeover Statutes; Absence of Supermajority Provision. The
Company has taken all action to assure that no state takeover statute or similar
statute or regulation shall apply to the Merger or any of the other transactions
contemplated hereby. Except for the approval of the Merger by the holders of a
majority of the voting power of Shares entitled to vote at the meeting of
shareholders held for such purpose, voting together as a class pursuant to which
each Share is entitled to one vote ("Company Shareholder Approval"), no other
shareholder action on the part of the Company is required for approval of the
Merger and the transactions contemplated hereby.
(k) Litigation. There is no suit, action, proceeding or investigation
pending or, to the Company's knowledge, threatened against or affecting the
Company or any of its subsidiaries that has had or could reasonably be expected
to have a material adverse effect on the Company or any of its
-10-
subsidiaries or prevent, hinder or materially delay the ability of the Company
to consummate the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries which has
had, or which, insofar as reasonably can be foreseen, in the future could have,
any such effect.
(l) Employee Benefit Matters. As used in this Section 31(l), the term
"Employer" shall mean the Company as defined in the preamble of this Agreement
and any member of a controlled group or affiliated service group, as defined in
sections 414(b), (c), (m) and (o) of the Internal Revenue Code of 1986, as
amended ("Code"), of which the Company is a member. As used in this Section
3.1(1), "Company Benefit Plan" shall mean (1) any employee welfare benefit plan
or employee pension benefit plan as defined in sections 3(1) and 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including, but not limited to, a plan that provides retirement income or results
in deferrals of income by employees for periods extending to their terminations
of employment or beyond, and a plan that provides medical, surgical or hospital
care benefits or benefits in the event of sickness, accident, disability, death
or unemployment and (2) any other material employee benefit agreement or
arrangement that is not an ERISA plan, including without limitation, any
deferred compensation plan, incentive plan, bonus plan or arrangement, stock
option plan, stock purchase plan, stock award plan, golden parachute agreement,
severance pay plan, dependent care plan, cafeteria plan, employee assistance
program, scholarship program, employment contract, retention incentive
agreement, noncompetition agreement, consulting agreement, confidentiality
agreement, vacation policy, or other similar plan or agreement or arrangement
that has been maintained by, participated in, or contributed to by the Employer
at any time during the three-year period ending on the date of this Agreement,
or with respect to which the Employer may have any liability.
(i) Section 3.1(l)(i) of the Disclosure Schedule contains a
complete and correct list of all Company Benefit Plans. With respect
to each Company Benefit Plan, except as disclosed in Section
3.1(l)(i) of the Disclosure Schedule, to the extent applicable: (A)
the plan is in substantial compliance with the Code and ERISA,
including all reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA; (B) the appropriate Form 5500 has
been timely filed for each year of its existence or a "top-hat"
statement was timely filed with the Department of Labor pursuant to
Department of Labor Regulation section 2520.104-23; (C) there has
been no transaction described in section 406 or section 407 of ERISA
or section 4975 of the Code unless exempt under section 408 of ERISA
or section 4975 of the Code, as applicable; (D) the bonding
requirements of section 412 of ERISA have been satisfied; (E) there
is no issue pending nor any issue resolved adversely to the Employer
which may subject the Employer to the payment of a penalty, interest,
tax or other amount, (F) the plan can be unilaterally terminated or
amended by the Employer on no more than 90 days notice; (G) all
contributions or other amounts payable by the Employer as of the
Effective Time with respect to the plan have either been paid or
accrued in the Employer's most recent financial statements included
in the SEC Documents and (H) no notice has been given or received by
the Employer of an increase or proposed increase in the cost of the
plan. There are no pending or, to the Company's knowledge, threatened
or anticipated claims (other than routine claims for
-11-
benefits), actions, arbitrations, investigations or suits by, on
behalf of, against or relating to any Company Benefit Plan or their
related trusts. With respect to each Company Benefit Plan, the
Company has provided to Parent true and correct copies of each of the
following documents, to the extent applicable to such plan:
(A) the Company Benefit Plan and any amendments thereto
(or if the Company Benefit Plan is not a written agreement, a
description thereof);
(B) the three most recent annual Form 5500 reports filed
with the Internal Revenue Service ("IRS");
(C) the most recent statement filed with the Department
of Labor pursuant to 29 U.S.C. (S) 2520.104-23;
(D) a written summary of the legal basis for an exemption
from the obligation to file annual Form 5500 reports;
(E) the three most recent annual Form 990 and 1041
reports filed with the IRS;
(F) the most recent summary plan description and
summaries of material modifications thereof;
(G) the trust agreement, group annuity contract or other
funding agreement that provides for the funding of the Company
Benefit Plan;
(H) the most recent financial statement; and
(I) the most recent determination letter received from
the IRS with respect to each Company Benefit Plan that is
intended to qualify under section 401 of the Code.
(ii) Neither the Company nor any entity (whether or not
incorporated) that was at any time during the six years before the
date of this Agreement treated as a single employer together with the
Company under section 414 of the Code has ever maintained, had any
obligation to contribute to or incurred any liability with respect to
a pension plan that is or was subject to the provisions of Title IV
of ERISA or section 412 of the Code. During the last six years, the
Employer has not maintained, had an obligation to contribute to or
incurred any liability with respect to a voluntary employees
beneficiary association that is or was intended to satisfy the
requirements of section 501(c)(9) of the Code. No plan, arrangement
or agreement with any one or more employees will cause the Employer
to have liability for severance pay as a result of the Merger, except
as disclosed in Section 3.1(1)(ii) of the Disclosure Schedule. Except
as disclosed in Section 3.1(1)(ii) of
-12-
the Disclosure Schedule, the Employer does not provide employee
benefits, including without limitation, death, post-retirement
medical or health coverage (whether or not insured) or contribute to
or maintain any employee benefit plan which provides for benefit
coverage following termination of employment except as is required by
section 4980B(f) of the Code or other similar applicable statute, nor
has it made any representations, agreements, covenants or commitments
to provide that coverage. Any employee benefit plan that is disclosed
on Section 3.1(l)(ii) of the Disclosure Schedule has, at all times
since its inception, provided that the sponsor of the plan has the
right to amend and terminate the plan at any time without the consent
of any party and no statements have been made to plan participants or
their dependents that would lead such persons to reasonably conclude
the plan may not be amended or terminated without their consent. All
Company Benefit Plans that are group health plans have been operated
in material compliance with section 4980B(f) of the Code.
(iii) All Company Benefit Plans that are intended to qualify
under section 401(a) of the Code have been submitted to and approved
as qualifying under section 401(a) of the Code by the IRS or the
applicable remedial amendment period will not have ended prior to the
Effective Time.
(iv) The transactions contemplated by this Agreement, either
alone or in conjunction with another event (such as termination of
employment) will not accelerate the time of payment or vesting, or
increase the amount, of compensation directly or indirectly due any
person from the Employer.
(v) With respect to any entity (whether or not incorporated)
that is both treated as a single employer together with the Company
under section 414 of the Code and located outside of the United
States, any benefit plans maintained by it for the benefit of its
directors, officers, employees or former employees (or any of their
beneficiaries) are in compliance with applicable laws pertaining to
such plans in the jurisdiction of such entity, except where such
failure to be in compliance would not, either individually or in the
aggregate, have a material adverse effect on the Company.
(m) Taxes. The Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax purposes of which the
Company or any of its subsidiaries is or has been a member, has timely filed
(taking into account any extensions) all Tax Returns required to be filed by it
on or before the Effective Time and has timely paid or deposited (or the Company
has paid or deposited on its behalf) all Taxes and estimated Taxes which are
required to be paid or deposited before the Effective Time. Each of the Tax
Returns filed by the Company or any of its subsidiaries is accurate and complete
in all material respects and has been completed in all material respects in
accordance with applicable laws. The Company Balance Sheet reflects an adequate
reserve for all Taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date thereof. Neither the
Company nor any of its subsidiaries has waived any statute of limitations in
respect of Taxes of the Company, such subsidiary or any group of such entities.
No material deficiencies for any Taxes have been
-13-
proposed, asserted or assessed against the Company or any of its subsidiaries,
no requests for waivers of the time to assess any such Taxes have been granted
or are pending, and there are no Tax Liens upon any assets of the Company or any
of its subsidiaries (except for liens for ad valorem Taxes not yet delinquent
and other Taxes not yet due and payable). There are no current examinations of
any Tax Return of the Company or any of its subsidiaries being conducted and
there are no settlements of any prior examinations which could reasonably be
expected to adversely affect any taxable period for which the statute of
limitations has not run. Neither the Company nor any subsidiary of the Company
is a party to a Tax allocation agreement, Tax sharing agreement, Tax indemnity
agreement or similar agreement or arrangement. The Company and each of its
subsidiaries have complied in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and has
in all respects timely withheld from employee wages and paid over such Taxes to
the appropriate Governmental Entity. As used herein, "Tax" or "Taxes" shall mean
all taxes of any kind, including, without limitation, those on or measured by or
referred to as federal, state, local or foreign income, gross receipts,
property, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, withholding, alternative or added minimum, employment, estimated,
excise, transfer, severance, stamp, occupation, premium, value added, or
windfall profits taxes, customs, duties or similar fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any Governmental Entity. As used herein,
"Tax Return" shall mean any return, report, statement or information required to
be filed with any Governmental Entity with respect to Taxes.
(n) No Excess Parachute Payments. No amount that could be paid
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement to any person who is properly
characterized as a "disqualified individual" (as such term is defined by the IRS
in proposed Treasury Regulation section 1.280G-1) under any employment,
severance or termination agreement, other compensation arrangement or other
Company Benefit Plan currently in effect would be characterized as an "excess
parachute payment" (as such term is defined in section 280G(b)(1) of the Code).
(o) Environmental Matters. Except to the extent that the inaccuracy
of any of the following, individually or in the aggregate, would not have a
material adverse effect on the Company:
(i) the Company and its subsidiaries hold, and are in
compliance with and have been in compliance with all Environmental
Permits, and are otherwise in compliance and have been in compliance
with, all applicable Environmental Laws and there is no condition
that is reasonably likely to prevent or materially interfere with
compliance by the Company and its subsidiaries with Environmental
Laws;
(ii) no modification, revocation, reissuance, alteration,
transfer or amendment of any Environmental Permit, or any review by,
or approval of, any third party of any Environmental Permit is
required in connection with the execution or delivery of this
Agreement or the consummation by the Company of the transactions
contemplated hereby or the operation of the business of the Company
or any of its subsidiaries;
-14-
(iii) neither the Company nor any of its subsidiaries has
received any Environmental Claim, nor has any Environmental Claim
been threatened against the Company or any of its subsidiaries;
(iv) neither the Company nor any of its subsidiaries has
entered into, agreed to or is subject to any outstanding judgment,
decree, order or consent arrangement with any governmental authority
under any Environmental Laws, including without limitation those
relating to compliance with any Environmental Laws or to the
investigation, cleanup, remediation or removal of Hazardous
Materials;
(v) there are no circumstances that are reasonably likely to
give rise to liability under any agreements with any person pursuant
to which the Company or any subsidiary of the Company would be
required to defend, indemnify, hold harmless, or otherwise be
responsible for any violation by or other liability or expense of
such person, or alleged violation by or other liability or expense of
such person, arising out of any Environmental Law; and
(vi) to the best of the Company's knowledge, there are no other
circumstances or conditions that are reasonably likely to give rise
to liability of the Company or any of its subsidiaries under any
Environmental Laws.
For purposes of this Agreement, the terms below shall have the
following meanings:
"Environmental Claim" means any written complaint, notice, claim,
demand, action, suit or judicial, administrative or arbitral proceeding by any
person to the Company or any of its subsidiaries asserting liability or
potential liability (including without limitation, liability or potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resource damages, property damage, personal injury, fines or penalties)
arising out of, relating to, based on or resulting from (i) the presence,
discharge, emission, release or threatened release of any Hazardous Materials at
any location, (ii) circumstances forming the basis of any violation or alleged
violation of any Environmental Laws or Environmental Permits, or (iii) otherwise
relating to obligations or liabilities of the Company or any of its subsidiaries
under any Environmental Law.
"Environmental Permits" means all permits, licenses, registrations,
exemptions and other governmental authorizations required under Environmental
Laws for the Company or any of its subsidiaries to conduct its operations as
presently conducted.
"Environmental Laws" means all applicable foreign, federal, state and
local statutes, rules, regulations, ordinances, orders, decrees and common law
relating in any manner to pollution, protection of the environment or the use,
storage, treatment or disposal of Hazardous Materials.
"Hazardous Materials" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and
-15-
asbestos-containing materials, pollutants, contaminants and all other materials
and substances, including but not limited to radioactive materials, regulated
pursuant to any Environmental Laws.
(p) Compliance with Laws; Permits. The Company and its subsidiaries
hold all required, necessary or applicable federal, state, provincial, local or
foreign permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities, except where the failure to so hold
would not have a material adverse effect on the Company (the "Company Permits").
The Company and its subsidiaries are in compliance with the terms of the Company
Permits except where the failure to so comply would not have a material adverse
effect on the Company. Neither the Company nor any of its subsidiaries has
received notice of any revocation or modification of any of the Company Permits,
the revocation or modification of which would have a material adverse effect on
the Company. Neither the Company nor any of its subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule, permit or
order of any federal, state or local government, domestic or foreign, or any
Governmental Entity, any arbitration award or any judgment, decree or order of
any court or other Governmental Entity, applicable to the Company or any of its
subsidiaries or their respective business, assets or operations, except for
violations and failures to comply that could not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Company.
(q) Material Contracts and Agreements. Except contracts, agreements
and arrangements made in the ordinary course of business, neither the Company
nor any of its subsidiaries is bound by any oral or written material contract
(as defined in Item 601(b)(10) of SEC Regulation S-K) to be performed after the
date hereof that has not been filed with or incorporated by reference in the SEC
Documents filed with the SEC prior to the date of this Agreement. Section 3.1(q)
of the Disclosure Schedule lists (i) each guaranty of the Company and its
subsidiaries and (ii) each oral or written contract, agreement and arrangement
to which the Company or any of its subsidiaries is a party or any of their
respective assets are bound which would be required to be filed as exhibits to
the Company's Annual Report on Form 10-K for the year ended December 31, 2000 or
Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2001.
(r) Title to Properties.
(i) Each of the Company and the Company's subsidiaries has
good and defensible title to, or valid leasehold interests in, all of
its material assets and properties purported to be owned by it in the
SEC Documents, except for such assets and properties as are no longer
used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business and except for defects
in title set forth on Section 3.1(r)(i) of the Disclosure Schedule.
All such assets and properties, other than assets and properties in
which the Company or any of the subsidiaries has leasehold interests,
are free and clear of all Liens, other than those set forth in the
SEC Documents and except for Liens, that, in the aggregate, do not
and will not materially interfere with the ability of the Company or
any of its subsidiaries to conduct business as currently conducted or
as reasonably expected to be conducted.
-16-
(ii) Except as would not have a material adverse effect on the
Company, each of the Company and its subsidiaries has complied in all
material respects with the terms of all leases to which it is a party
and under which it is in occupancy, and all such leases are in full
force and effect. Each of the Company and each of its subsidiaries
enjoys peaceful and undisturbed possession under all such leases.
(iii) Section 3.1(r)(iii) of the Disclosure Schedule sets forth
a description of all gathering systems, pipeline systems, processing
and treating facilities, and other material real property interests
owned by the Company or any of its subsidiaries (the "Real
Properties"). The Company directly or through its subsidiaries, has
good and indefeasible title, free and clear of all Liens, in and to
the Real Properties. The Real Properties are all of the real
properties necessary for the Company and its subsidiaries to operate
their business as currently operated or as reasonably expected to be
operated. The Company or its subsidiaries own all easements, rights-
of-way, surface leases, fee parcels and licenses that are necessary
for the operation of each of the gathering systems and pipeline
systems included in the Real Properties.
(s) Intellectual Property. The Company and its subsidiaries own, or
are licensed or otherwise have the right to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service ▇▇▇▇ rights, copyrights, technology, know-how, processes and other
proprietary intellectual property rights and computer programs which are
material to the condition (financial or otherwise) or conduct of the business
and operations of the Company and its subsidiaries taken as a whole. To the
Company's knowledge, (i) the use of such patents, patent rights, trademarks,
trademark rights, service marks, service ▇▇▇▇ rights, trade names, copyrights,
technology, know-how, processes and other proprietary intellectual property
rights and computer programs by the Company and its subsidiaries does not
infringe on the rights of any person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liability on the part of the
Company and its subsidiaries which could have a material adverse effect on the
Company, and (ii) no person is, in any manner that could have a material adverse
effect on the Company, infringing on any right of the Company or any of its
subsidiaries with respect to any such patents, patent rights, trademarks,
trademark rights, service marks, service ▇▇▇▇ rights, trade names, copyrights,
technology, know-how, processes and other proprietary intellectual property
rights and computer programs. No claims are pending or, to the Company's
knowledge, threatened that the Company or any of its subsidiaries is infringing
or otherwise adversely affecting the rights of any person with regard to any
patent, license, trademark, trade name, service ▇▇▇▇, copyright or other
intellectual property right.
(t) Labor Matters.
(i) None of the Company, any of its subsidiaries or
Administaff Companies, Inc. is a party to any collective bargaining
or similar agreement with respect to any employee of the Company or
any of its subsidiaries or an employee of Administaff Companies, Inc.
who performs services for the Company or any of its subsidiaries
("Dedicated Employees");
-17-
(ii) to the Company's knowledge, the Company and its
subsidiaries are in substantial compliance (A) with the collective
bargaining agreements identified in Section 3.1(s)(i) of the
Disclosure Schedule, if any, and (B) with all applicable laws
respecting employment and employment practices, terms and the
conditions of employment, wages and hours, occupational safety and
health, and are not engaged in any unfair labor or unfair employment
practices, except where the failure to so comply would not have a
material adverse effect on the Company;
(iii) there is no unfair labor practice charge or complaint
against the Company or any of its subsidiaries or Administaff
Companies, Inc. involving or related to Dedicated Employees pending
(with service of process having been made, or written notice of
investigation or inquiry having been served, on the Company or any of
its subsidiaries or Administaff Companies, Inc.), or to the knowledge
of the Company threatened (or pending without service of process
having been made, or written notice of investigation or inquiry
having been served, on the Company or any of its subsidiaries or
Administaff Companies, Inc.), before the National Labor Relations
Board or any court;
(iv) to the Company's knowledge, there is no labor strike, or
other material dispute, slowdown or stoppage pending against the
Company or any of its subsidiaries or Administaff Companies, Inc.
involving or related to Dedicated Employees;
(v) no union certification or decertification petition has
been filed (with service of process having been made on the Company
or any of its subsidiaries or Administaff Companies, Inc.), or to the
knowledge of the Company threatened (or pending without service of
process having been made on the Company or any of its subsidiaries or
Administaff Companies, Inc.), that relates to Dedicated Employees
and, to the Company's knowledge, no union authorization campaign has
been conducted, within the past twenty-four months;
(vi) no grievance proceeding or arbitration proceeding arising
out of or under any collective bargaining agreement is pending (with
service of process having been made on the Company, one of its
subsidiaries or Administaff Companies, Inc.), or to the knowledge of
the Company threatened (or pending without service of process having
been made on the Company or any of its subsidiaries or Administaff
Companies, Inc.), against the Company or any of its subsidiaries or
Administaff Companies, Inc. involving or related to Dedicated
Employees;
(vii) there are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including
discrimination based upon sex, sexual harassment, age, marital
status, race, national origin, sexual preference, handicap,
disability or veteran status) pending (with service of process having
been made, or written notice of investigation or inquiry having been
served, on the Company or any of its subsidiaries or Administaff
Companies, Inc.), or to the knowledge of the Company threatened (or
pending
-18-
without service of process having been made, or written notice of
investigation or inquiry having been served, on the Company or any of
its subsidiaries or Administaff Companies, Inc.), before the Equal
Employment Opportunity Commission or federal, state or local agency
or court against the Company or any of its subsidiaries or
Administaff Companies, Inc. involving or related to Dedicated
Employees;
(viii) there are no charges, investigations, administrative
proceedings or formal complaints of overtime or minimum wage
violations involving or relating to the Dedicated Employees pending
(with service of process having been made, or written notice of
investigation or inquiry having been served on the Company or any of
its subsidiaries or Administaff Companies, Inc.), or to the knowledge
of the Company threatened (or pending without service of process
having been made, or written notice of investigation or inquiry
having been served, on the Company or any of its subsidiaries or
Administaff Companies, Inc.), before the Department of Labor or any
other federal, state or local agency or court;
(ix) there are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or
federal occupational safety and health laws pending (with service of
process having been made, or written notice of investigation or
inquiry having been served, on the Company or any of its subsidiaries
or Administaff Companies, Inc.), or to the knowledge of the Company
pending without service of process having been made, or written
notice of investigation or inquiry having been served, on the Company
or any of its subsidiaries or Administaff Companies, Inc. before the
Occupational Safety and Health Administration or any Governmental
Entity against the Company or any of its subsidiaries or Administaff
Companies, Inc. involving or related to the Dedicated Employees; and
(x) there is no proceeding, claim, suit, action or
governmental investigation pending, or to the knowledge of the
Company or any of its subsidiaries, threatened, in respect to which
any current or former director, officer, employee or agent of the
Company or any of its subsidiaries is or may be entitled to claim
indemnification from the Company or any of its subsidiaries (A)
pursuant to their respective charters or bylaws, (B) as provided in
any indemnification agreement to which the Company or any subsidiary
of the Company is a party or (C) pursuant to applicable law that has,
or would have, a material adverse effect on the Company.
(u) Public Utility Holding Company Act. Neither the Company nor any
of its subsidiaries is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" of a "holding company", in each case within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(v) Investment Company Act. Neither the Company nor any of its
subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, nor are any of them required to register under
the Investment Company Act of 1940, as amended.
-19-
(w) Opinion of Financial Advisor. The Company's financial advisor,
CIBC World Markets Inc. (the "Company Financial Advisor"), has delivered to the
Board of Directors of the Company an oral opinion, to be confirmed in writing
(the "Fairness Opinion") to the effect that, as of the date of this Agreement,
the consideration to be received by the holders of Shares in the Merger is fair
to such holders from a financial point of view. Subject to the prior review and
consent by the Company Financial Advisor, the Fairness Opinion shall be included
in the Proxy Statement.
(x) Brokers. No broker, investment banker or other person, other than
the Company Financial Advisor, the fees and expenses of which will be paid by
the Company, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based on arrangements made by or on behalf of the Company. The Company
previously has delivered to Parent a true, correct and complete copy of any
engagement or fee agreement between the Company and the Company Financial
Advisor.
(y) Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has unanimously (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger and the
transactions contemplated thereby, are fair to and in the best interests of the
shareholders of the Company, and (ii) resolved to recommend to the holders of
the Shares that they approve the Merger and the transactions contemplated
thereby.
(z) Required Vote of Company Shareholders; Vote of Directors and
Management. The affirmative vote of the holders of not less than a majority of
the Shares entitled to vote and represented in person or by proxy at the
Shareholder Meeting is required for the Company Shareholder Approval. No other
vote of the shareholders of the Company is required by law, the Company Charter
or otherwise in order for the Company to consummate the Merger and the other
transactions contemplated hereby. Each director or executive officer of the
Company who has the right to vote any Shares has agreed to vote such Shares in
favor of the Merger, this Agreement and the transactions contemplated thereby
and hereby.
3.2 Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to, and agree with, the Company as follows:
(a) Organization; Standing and Power. Parent and Sub are corporations
duly organized, validly existing and in good standing under laws of their
jurisdictions of incorporation and have the requisite corporate power and
authority to carry on their business as now being conducted. Parent and Sub are
duly qualified to do business and in good standing in each jurisdiction in which
the nature of their business or the ownership or leasing of their properties
makes such qualification necessary, other than in such jurisdictions where the
failure to be so qualified to do business (individually or in the aggregate)
would not have a material adverse effect on Parent.
(b) Authority; Non-contravention. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the consummation by Parent and Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on
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the part of Parent and Sub. This Agreement has been duly executed and delivered
by Parent and Sub and constitutes a valid and binding obligation of Parent and
Sub, enforceable against Parent and Sub in accordance with its terms, except
that (i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws or judicial decisions now or
hereafter in effect relating to creditors' rights generally and (ii) the remedy
of specific performance and injunctive relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. The execution and delivery of this Agreement by Parent and Sub
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
or "put" right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or Sub or any of
their subsidiaries under, any provision of (i) the Articles of Incorporation or
bylaws of Sub or of Parent or any comparable organizational documents of their
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or Sub or any of their subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation or arbitration award
applicable to Parent or Sub or any of their subsidiaries or their respective
properties or assets, other than, in the case of clause (ii), any such
conflicts, violations or defaults that individually or in the aggregate would
not materially impair the ability of Parent and Sub to perform their respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent or Sub or any of their subsidiaries in connection with
the execution and delivery of this Agreement by Parent and Sub or the
consummation by Parent and Sub of the transactions contemplated hereby, except
for (i) the filing by Parent of a premerger notification and report form under
the HSR Act, (ii) a notice filing under the Competition Act (Canada), (iii) the
filing with the SEC of such reports under Sections 13 of the Exchange Act as may
be required in connection with this Agreement and the transactions contemplated
hereby and (iv) filings in Texas by Sub in connection with the Merger.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement will at the date the Proxy Statement is first mailed to the Company's
shareholders and at the time of the Shareholder Meeting contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(d) Brokers. Except for TD Securities Inc., whose fees and expenses
shall be paid by Parent, no broker, investment banker or other person, is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Sub, including any fee for any
opinion rendered by any investment banker.
-21-
(e) Litigation. There is no suit, action, proceeding or investigation
pending or, to the knowledge of Parent, threatened against or affecting Parent
or any of its subsidiaries that could reasonably be expected to prevent, hinder
or materially delay the ability of Parent to consummate the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Parent or any of its subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future could have, any such effect.
(f) Financing. Parent and Sub collectively will have at the Effective
Time and Parent will make available to Sub sufficient funds to enable the
Surviving Corporation to pay the aggregate Merger Consideration to the Paying
Agent pursuant to Section 2.1 of this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Conduct of Business of the Company.
(a) Ordinary Course. During the period from the date of this
Agreement to the Effective Time (except as otherwise specifically contemplated
by the terms of this Agreement), the Company shall and shall cause its
subsidiaries to carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as conducted at the date
hereof, which are being undertaken in the ordinary course of business) and, to
the extent consistent therewith, use all commercially reasonable efforts to
preserve intact their current business organizations, keep available the
services of their current officers and employees and preserve their
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them, in each case consistent with past
practice, to the end that their goodwill and ongoing businesses shall be
unimpaired to the fullest extent possible at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement and Section 4.1 of the Disclosure Schedule, prior
to the Effective Time the Company shall not, and shall not permit any of its
subsidiaries to:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other
than dividends and distributions by any direct or indirect wholly
owned subsidiary of the Company to the Company or a wholly owned
subsidiary of the Company, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its or its subsidiaries' capital stock, any
other voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
-22-
securities or convertible securities (other than, in the case of the
Company, the issuance of Shares upon the exercise of options and
warrants outstanding on the date of this Agreement (as identified and
described in Section 3.1(c)) in accordance with their current terms);
(iii) amend the Company Charter or other comparable charter or
organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the
stock, or other ownership interests in, or assets of, or by any other
manner, any business or any corporation, partnership, association,
joint venture, limited liability company or other entity or division
thereof or (B) any assets that would be material, individually or in
the aggregate, to the Company and its subsidiaries taken as a whole,
except purchases of supplies and inventory in the ordinary course of
business consistent with past practice;
(v) sell, lease, mortgage, pledge, ▇▇▇▇▇ ▇ ▇▇▇▇ on or
otherwise encumber or dispose of any of its properties or assets,
except (A) in the ordinary course of business consistent with past
practice and (B) other transactions involving not in excess of
$1,000,000 in the aggregate;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of the Company or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for borrowings under revolving credit
facilities incurred in the ordinary course of business and except for
indebtedness incurred to refund, refinance or replace indebtedness for
borrowed money outstanding on the date hereof, or (B) make any loans,
advances or capital contributions to, or investments in, any other
person, other than to the Company or any direct or indirect wholly
owned subsidiary of the Company;
(vii) make or incur any new capital expenditure not included in
the Company's approved capital expenditure budget for 2001, previously
provided to Parent, which, singly or in the aggregate with all other
expenditures, would exceed $1,000,000;
(viii) make any material election relating to Taxes or settle or
compromise any material Tax liability;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice
-23-
or in accordance with their terms of liabilities reflected or reserved
against in, or contemplated by, the Company Balance Sheet;
(x) waive the benefits of, or agree to modify in any manner,
any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party;
(xi) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xii) enter into any new collective bargaining agreement;
(xiii) change any accounting principle used by it, except as
required by regulations promulgated by the SEC or the Financial
Accounting Standards Board;
(xiv) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than settlements
or compromises: (A) of litigation where the amount paid in settlement
or compromise does not exceed $500,000, or (B) in consultation and
cooperation with Parent, and, with respect to any such settlement,
with the prior written consent of Parent;
(xv) (A) enter into any new, or amend any existing, severance
agreement or arrangement, deferred compensation arrangement or
employment agreement with any officer, director or employee, except
that, the Company may hire additional employees to the extent deemed
by its management to be in the best interests of the Company;
provided, that the Company may not enter into any employment or
severance agreement or any deferred compensation arrangement with any
such additional employees, (B) adopt any new, or amend any existing,
incentive, retirement or welfare benefit arrangements, plans or
programs for the benefit of current, former or retired employees
(other than amendments required by law or to maintain the tax
qualified status of such plans under the Code), (C) grant any
increases in employee compensation, other than in the ordinary course
or pursuant to promotions, in each case consistent with past practice
(which shall include normal individual periodic performance reviews
and related compensation and benefit increases and bonus payments
consistent with past practices) or (D) grant any stock options or
stock awards; or
(xvi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Changes in Employment Arrangements. Neither the Company nor any
of its subsidiaries shall adopt or amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or other arrangement (including any Company Benefit Plan) for the benefit of any
person, increase the compensation or fringe benefits of any person, or, except
as provided
-24-
in an existing Company Benefit Plan or in the ordinary course of business
consistent with past practice, increase the compensation or fringe benefits of
any person or pay any benefit not required by any existing plan, arrangement or
agreement.
(c) Other Actions. The Company shall not, and shall not permit any of
its subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of the Company
set forth in this Agreement becoming untrue.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Shareholder Approval; Preparation of Proxy Statement.
(a) The Company will, as soon as practicable following the execution
of this Agreement, duly call, give notice of, convene and hold the Shareholder
Meeting for the purpose of approving and adopting this Agreement and approving
related matters. The Company will, through its Board of Directors, recommend to
its shareholders approval and adoption of this Agreement, except to the extent
that the Board of Directors of the Company shall have withdrawn its approval or
recommendation of this Agreement or the Merger as permitted by Section 8.2.
(b) The Company will, as soon as practicable following the execution
of this Agreement, prepare and file a preliminary Proxy Statement with the SEC
and will use its best efforts to respond to any comments of the SEC or its staff
and to cause the Proxy Statement to be mailed to the Company's shareholders.
The Company will notify Parent promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
Parent with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
approval of this Agreement by the Company's shareholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its shareholders such
an amendment or supplement. The Company will not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably and timely
objects.
5.2 Access to Information.
(a) During the period from the date hereof to the Effective Time,
except to the extent otherwise required by United States or Canadian regulatory
considerations:
(i) The Company shall, and shall cause each of its subsidiaries,
officers, employees, counsel, financial advisors and other
representatives to, afford to Parent, and to Parent's accountants,
counsel, financial advisors and other representatives, reasonable
-25-
access to the Company's and its subsidiaries' respective properties,
books, contracts, commitments and records and, during such period, the
Company shall, and shall cause each of its subsidiaries, officers,
employees, counsel, financial advisors and other representatives to,
furnish promptly to Parent,
(A) a copy of each report, schedule, registration statement
and other document filed by the Company during such period
pursuant to the requirements of federal or state securities laws
and
(B) all other information concerning its business,
properties, financial condition, operations and personnel as
Parent may from time to time reasonably request so as to afford
Parent a reasonable opportunity to make at its sole cost and
expense such review, examination and investigation of the Company
and its subsidiaries as Parent may reasonably desire to make.
The Company agrees to advise Parent of all material developments
with respect to the Company, its subsidiaries and their
respective assets and liabilities.
(ii) The Company agrees to request PricewaterhouseCoopers LLP
and ▇▇▇▇ & Associates LLP to permit Parent's accountants to review and
examine the work papers of PricewaterhouseCoopers LLP and ▇▇▇▇ &
Associates LLP with respect to the Company and its subsidiaries, and
the officers of the Company will furnish to Parent such financial and
operating data and other information with respect to the business and
properties of the Company and its subsidiaries as Parent shall from
time to time reasonably request.
(iii) The Company shall notify Parent promptly of any notices
from or investigations by Governmental Entities relating to the
Company's business or assets or the consummation of the Merger. Parent
shall notify the Company promptly of any notices from or
investigations by Governmental Entities that could materially affect
Parent's consummation of the Merger.
(b) Except as required by law and without limiting in any way the
continued efficacy of the Confidentiality Agreement referred to in Section 8.1,
each of the Company and Parent shall, and shall cause its respective directors,
officers, employees, accountants, counsel, financial advisors and
representatives and affiliates to, (i) hold in confidence, unless compelled to
disclose by judicial or administrative process, or, in the opinion of its
counsel, by other requirements of law, all nonpublic information concerning the
other party furnished in connection with the transactions contemplated by this
Agreement until such time as such information becomes publicly available
(otherwise than through the wrongful act of such person), (ii) not release or
disclose such information to any other person, except in connection with this
Agreement to its auditors, attorneys, financial advisors, other consultants and
advisors, and (iii) not use such information for any competitive or other
purpose other than with respect to its consideration and evaluation of the
transactions contemplated by this Agreement. Any investigation by any
-26-
party of the assets and business of the other party and its subsidiaries shall
not affect any representations and warranties hereunder or either party's right
to terminate this Agreement as provided in Article VII.
(c) In the event of the termination of this Agreement, each party
promptly will deliver to the other party (and destroy all electronic data
reflecting the same) all documents, work papers and other material (and any
reproductions or extracts thereof and any notes or summaries thereto) obtained
by such party or on its behalf from such other party or its subsidiaries as a
result of this Agreement or in connection therewith so obtained before or after
the execution hereof.
5.3 Reasonable Efforts; Notification.
(a) Reasonable Efforts. Upon the terms and subject to the conditions
set forth in this Agreement, except to the extent otherwise required by United
States or Canadian regulatory considerations and otherwise provided in this
Section 5.3, each of the parties agrees to use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger, and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by this Agreement; provided, however, that neither of the parties shall be under
any obligation to take any action to the extent that the Board of Directors of
such party shall conclude in good faith, after consultation with and based upon
the written advice of their respective outside legal counsel (which advice in
each case need not constitute an opinion), that such action would cause a breach
of that Board of Directors' fiduciary obligations under applicable law. In
connection with and without limiting the foregoing, each of the Company and
Parent and its respective Board of Directors shall (i) take all action necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Merger, take all action
necessary to ensure that the Merger may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and (iii)
cooperate with each other in the arrangements for refinancing any indebtedness
of, or obtaining any necessary new financing for, the Company and the Surviving
Corporation.
(b) Notification. The Company shall give prompt notice to Parent, and
Parent or Sub shall give prompt notice to the Company, of (i) any representation
or warranty made by it contained in this Agreement becoming untrue or inaccurate
in any respect or (ii) the failure by it to comply with or satisfy
-27-
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations or warranties or covenants or
agreements of the parties or the conditions to the obligations of the parties
hereunder.
(c) (i) Each of the parties hereto shall file a premerger
notification and report form under the HSR Act with respect to the
Merger as promptly as reasonably possible following execution and
delivery of this Agreement. Each of the parties agrees to use
commercially reasonable efforts to promptly respond to any request for
additional information pursuant to Section (e)(1) of the HSR Act.
(ii) Each of the parties hereto shall promptly file a pre-merger
notification pursuant to, and in compliance with, the Competition Act
(Canada) and the regulations thereunder with respect to the
acquisition of the Company by Parent and the Merger and shall promptly
furnish any additional information requested of them under the
Competition Act (Canada) or by the Canadian Competition Bureau. Each
of the Parent and Sub and the Company shall supply the other with
copies of:
(A) all notices and information supplied or filed by it
under the Competition Act (Canada) (save and except for notices
and information which counsel to a party, in each case acting
reasonably, considers highly confidential and sensitive which may
be filed on a confidential basis and will only be provided to
counsel to the other party); and
(B) all notices and correspondence with the officials under
the Competition Act (Canada).
(iii) The Company will furnish to Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.,
counsel to Parent and Sub, copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof
(collectively, "Company Regulatory Documents")) between the Company,
or any of its respective representatives, on the one hand, and any
Governmental Entity, or members of the staff of such agency or
authority, on the other hand, with respect to this Agreement or the
Merger; provided, however, that (A) with respect to documents and
other materials filed by or on behalf of the Company with the
Antitrust Division of the United States Department of Justice, the
United States Federal Trade Commission, under the Competition Act
(Canada), or any state attorneys general that are available for review
by Parent and Sub, copies will not be required to be provided to
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P. and (B) with respect to any Company
Regulatory Documents (1) that contain any information which, in the
reasonable judgment of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., should not be furnished
to Parent or Sub because of antitrust considerations or (2) relating
to a request for additional information pursuant to Section (e)(1) of
the HSR Act, the obligation of the Company to furnish any such Company
Regulatory Documents to Fulbright & ▇▇▇▇▇▇▇▇ L.L.P. shall be satisfied
by the delivery of such Company Regulatory Documents on a confidential
basis to Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
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pursuant to a confidentiality agreement in form and substance
reasonably satisfactory to Parent. Except as otherwise required by
United States or Canadian regulatory considerations, Parent and Sub
will furnish to ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel to the Company, copies
of all correspondence, filings or communications (or memoranda setting
forth the substance thereof (collectively, "Parent Regulatory
Documents")) between Parent, Sub or any of their respective
representatives, on the one hand, and any Governmental Entity, or
member of the staff of such agency or authority, on the other hand,
with respect to this Agreement or the Merger; provided, however, that
(A) with respect to documents and other materials filed by or on
behalf of Parent or Sub with the Antitrust Division of the United
States Department of Justice, the United States Federal Trade
Commission, under the Competition Act (Canada), or any state attorneys
general that are available for review by the Company, copies will not
be required to be provided to ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., and (B) with
respect to any Parent Regulatory Documents (1) that contain
information which, in the reasonable judgment of Fulbright & ▇▇▇▇▇▇▇▇
L.L.P., should not be furnished to the Company because of antitrust
considerations or (2) relating to a request for additional information
pursuant to Section (e)(1) of the HSR Act, the obligation of Parent
and Sub to furnish any such Parent Regulatory Documents to ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P. shall be satisfied by the delivery of such Parent
Regulatory Documents on a confidential basis to ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
pursuant to a confidentiality agreement in form and substance
reasonably satisfactory to the Company.
(iv) At the election of Parent, the Company and Parent shall use
commercially reasonable efforts to defend all litigation under the
federal or state antitrust laws of the United States or federal or
provincial laws of Canada which if adversely determined would, in the
reasonable opinion of Parent (based on the advice of outside counsel),
be likely to result in the failure of the condition set forth in
Section 6.1(c) not being satisfied, and to appeal any order, judgment
or decree, which if not reversed, would result in the failure of such
condition. Notwithstanding the foregoing, nothing contained in this
Agreement shall be construed so as to require Parent, Sub or the
Company, or any of their respective subsidiaries or affiliates, to
sell, license, dispose of, or hold separate, or to operate in any
specified manner, any assets or businesses of Parent, Sub, the Company
or the Surviving Corporation (or to require Parent, Sub, the Company
or any of their respective subsidiaries or affiliates to agree to any
of the foregoing). The obligations of each party under Section 5.3(a)
to use commercially reasonable efforts with respect to antitrust
matters shall be limited to compliance with the reporting provisions
of the ▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ (▇▇▇▇▇▇), and with its obligations
under this Section 5.3(c).
5.4 Indemnification.
(a) The Company shall, and from and after the Effective Time, Parent
and the Surviving Corporation shall, indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
any of its subsidiaries or an employee of the Company or any of its subsidiaries
who acts as a fiduciary
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under any Company Benefit Plans (but, with respect to such persons, only to the
extent, if any, indemnified by the Company as of the date hereof) (the
"Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorneys' fees), liabilities or judgments or amounts that are paid
in settlement with the approval of the indemnifying party (which approval shall
not be unreasonably withheld) of or in connection with any threatened or actual
claim, action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or such employee of the Company or any subsidiary whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
(including arising out of or relating to the Merger, the consummation of the
transactions contemplated herein, and any action taken in connection therewith).
Any Indemnified Party wishing to claim indemnification under this Section 5.4,
upon learning of any such claim, action, suit, proceeding or investigation,
promptly shall notify the Company (or after the Effective Time, Parent and the
Surviving Corporation), but the failure so to notify shall not relieve a party
from any liability that it may have under this Section 5.4, except to the extent
such failure materially prejudices such party. Parent or the Surviving
Corporation shall have the right to assume the defense thereof. If Parent or the
Surviving Corporation does not assume the defense, the Indemnified Parties as a
group may retain only one law firm to represent them with respect to each such
matter unless there is, under applicable standards of professional conduct, a
conflict between the positions of any two or more Indemnified Parties. The
Indemnified Party shall cooperate in the defense of any such matter. Parent
shall not be liable for any settlement effected without Parent's prior written
consent.
(b) Parent shall purchase and maintain in effect for the benefit of
the Indemnified Parties for a period of six years after the Effective Time,
directors' and officers' liability insurance of at least the same coverage and
amounts containing terms and conditions that are no less advantageous in any
material respect to the Indemnified Parties than that maintained by the Company
and its subsidiaries as of the date of this Merger Agreement with respect to
matters arising before the Effective Time, provided that Parent shall not be
required to pay an annual premium of such insurance in excess of three times the
last annual premium paid by the Company prior to the date hereof, but in such
case shall purchase as much coverage as possible for such amount.
(c) All rights to indemnification for acts or omissions occurring
prior to the Effective Time now existing in favor of the Indemnified Parties as
provided in the charter documents or by-laws of the Company or its subsidiaries
and in any indemnification agreements to which they are parties shall survive
the Merger, and the Surviving Corporation shall continue such indemnification
rights for acts or omissions prior to the Effective Time in full force and
effect in accordance with their terms and Parent shall be financially
responsible therefor.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in each such case, proper provisions shall be made, and Parent
shall cause them to be so made, so that the successors and assigns of the
Surviving Corporation, which, in the reasonable opinion of the Surviving
Corporation, shall be financially responsible persons or entities, assume the
obligations set forth in this Section 5.4.
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(e) The provisions of this Section 5.4 are intended to be for the
benefit of, and shall be enforceable by, the parties hereto and each Indemnified
Party, his heirs and representatives.
5.5 Fees and Expenses. Except as provided in Article VIII, all fees and
expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees
or expenses, whether or not the Merger is consummated.
5.6 Company Stock Options. Immediately prior to the Effective Time,
each outstanding option to purchase Shares shall be exchanged for a substitute
option to purchase, on substantially the same terms and vesting schedule as was
applicable to the surrendered option, after giving effect to any existing
provisions in the Company Stock Plans that provide for the automatic
acceleration of vesting upon consummation of a change of control of the Company,
such number of common shares of Parent as is necessary to produce an intrinsic
value that equals the intrinsic value of the surrendered option. However, an
option to purchase a fraction of a share of the common shares of Parent will not
be granted. For purposes of determining the intrinsic values of the surrendered
options and the options granted in exchange therefor pursuant to this Section
5.6, the fair market value of the Shares will be $27.00 and the fair market
value of the Parent's common shares will be the average of the means between the
highest and lowest quoted selling prices of the shares on the five trading days
ending on the date of the Effective Time and consideration will be given to the
exchange rate of the Canadian dollar to the U.S. dollar. In the case of any
Company stock option to which Section 421 of the Code applies by reason of its
qualification under any of Sections 422 and 424 of the Code ("qualified stock
options"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such substituted option shall
be determined in such manner so as to comply with Section 422 of the Code. Prior
to the Effective Time, the Company shall take all actions necessary and obtain
any consents or approvals of holders of options to purchase Shares as may be
necessary to effect the provisions of this Section 5.6.
Immediately after the Effective Time, the Surviving Corporation shall
prepare and file with the SEC a Registration Statement on Form S-8 (the "S-8
Registration Statement") covering any substituted options granted pursuant to
Section 5.6. If necessary to permit reoffers and resales by optionees, Parent
also shall prepare a "reoffer prospectus" (as that term is used in General
Instruction C-1 of Form S-8) and file the reoffer prospectus with a post-
effective amendment to the S-8 Registration Statement and cause any such post-
effective amendment to become effective and remain effective for such period as
is necessary to permit such reoffers and resales.
5.7 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except
that each party may respond to questions from shareholders, respond to inquiries
from financial analysts and media representatives in a manner consistent with
its past practice and make such disclosure as may be required by applicable law
or by obligations pursuant to any listing agreement with any national securities
exchange without prior consultation to the extent such consultation is not
reasonably practicable. The parties agree
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that the initial press release or releases to be issued in connection with the
execution of this Agreement shall be mutually agreed upon prior to the issuance
thereof.
5.8 Shareholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors as of the date hereof or
arising as of any date immediately prior to the Effective Time relating to the
transactions contemplated by this Agreement until the Effective Time, and
thereafter, Parent shall direct the defense of such litigation, but Parent shall
give any directors against whom any such litigation is pending an opportunity to
participate in such litigation; provided, however, that no settlement of
litigation shall be agreed to without the consent of Parent, such directors and,
prior to the Effective Time, the Company, which consent shall not be
unreasonably withheld.
5.9 Pending Regulatory Rate Cases. The Company will not initiate or
participate in any settlement discussions, except in consultation and
participation with Parent, regarding (a) the remand in Missouri Public Service
Commission v. FERC, D.C. Circuit No. 99-1203, decided December 15, 2000, (b) the
rate case filed on August 27, 1999 in FERC Docket No. RP99-485, (c) all cases
pending before the Missouri Public Service Commission, including the Actual Cost
Adjustment proceedings in GR-96-450, GR-98-167, GR-99-304 and GR-2000-425 or (d)
the litigation pending in ▇▇▇▇▇▇▇ County, Kansas in Case No. 99-C06574 (the
"Pending Regulatory Cases") from the date hereof until the Effective Time. The
Company promptly on receipt shall provide to Parent copies of any notices,
correspondence, orders or other documents in respect of the Pending Regulatory
Cases that it receives from any third party or Governmental Entity.
5.10 Midcoast Energy Resources, Inc. Employee Stock Purchase Plan. On or
before March 31, 2001, the Company shall take such actions as are necessary to
amend the Midcoast Energy Resources, Inc. Employee Stock Purchase Plan to
provide that (a) at the Effective Time the offering period under such plan in
which the Effective Time occurs shall expire, (b) no Shares shall be purchased
with respect to such offering period, and (c) the Company shall pay to each
participant in such plan in cash an amount equal to (i) the number of Shares
that the participant could have purchased on the last day immediately preceding
the Effective Time with the aggregate amount of such participant's payroll
deduction contributions accumulated during such offering period through the
Effective Time multiplied by (ii) $27.00.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction prior to the Effective Time of the following conditions:
(a) Shareholder Approval. Company Shareholder Approval shall have
been obtained upon a vote at a duly held meeting of shareholders of the Company
or at any adjournment thereof.
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(b) Other Approvals. All authorizations, consents, orders or
approvals of, or declarations or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, shall have occurred or shall have been obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used reasonable efforts, subject to the limitations set
forth in Section 5.3 hereof, to prevent the entry of any such injunction or
other order and to appeal as promptly as possible any injunction or other order
that may be entered.
6.2 Conditions to Obligations of Parent and Sub. The obligations of
Parent and Sub to effect the Merger are subject to the following conditions:
(a) Obligations. Company shall have performed in all material
respects all obligations to be performed by it under this Agreement prior to the
Effective Time.
(b) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects (disregarding for these purposes any materiality
qualifications contained therein) when made and as of the Effective Time as if
made on and as of such date; provided, that such representations and warranties
that are by their express provisions made as of a specific date need be true and
correct only as of such specific date.
(c) Third Party Consents. All required authorizations, consents or
approvals of any third party the failure of which to obtain would have a
material adverse effect on the Surviving Corporation, assuming the Merger had
taken place, shall have been obtained.
(d) Material Adverse Change. There shall not have occurred a
material adverse change to the Company.
(e) Employment Agreements. ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇ and E. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have entered into employment
arrangements with Parent or the Surviving Corporation in form and substance
satisfactory to Parent and Sub on substantially the same terms as set forth in
the draft agreements previously provided to such individuals.
(f) Options. Each outstanding option to purchase Shares shall have
been exchanged in accordance with the terms of Section 5.6.
(g) Opinion. Parent and Sub shall have received an opinion from
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel to the Company, substantially to the effect set
forth in Exhibit A.
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6.3 Condition to Obligations of the Company. The obligation of the
Company to effect the Merger is subject to the following conditions:
(a) Obligations. Parent and Sub shall have performed in all material
respects all obligations to be performed by them under this Agreement prior to
the Effective Time.
(b) Representations and Warranties. Each of the representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects (disregarding for these purposes any
materiality qualifications contained therein) when made and as of the Effective
Time as if made on and as of such date; provided, that such representations and
warranties that are by their express provisions made as of a specific date need
be true and correct only as of such specific date.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if Company Shareholder Approval shall not have been
obtained upon a vote at a duly held at the Company Shareholder Meeting
or at any adjournment thereof;
(ii) if the Merger shall not have been consummated on or before
August 31, 2001, unless the failure to consummate the Merger is the
result of a material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof during which any party
shall be subject to a non-final order, decree or ruling or action
restraining, enjoining or otherwise prohibiting the consummation of
the Merger or the calling or holding of a meeting of the shareholders
of the Company called to approve the Merger and the other matters
contemplated hereby; or
(iii) if any court of competent jurisdiction or any governmental,
administrative or regulatory authority, agency or body shall have
issued an order, decree or ruling or shall have taken any other action
permanently enjoining, restraining or otherwise prohibiting the
purchase of Shares pursuant to the Merger and such order, decree,
ruling or other action shall have become final and nonappealable;
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(c) by the Company in accordance with the provisions of Section 8.2;
(d) by Parent, if the Company breaches any of its representations or
warranties herein or fails to perform in any material respect any of its
covenants, agreements or obligations under this Agreement, which breach or
failure (i) would give rise to the failure of a condition set forth in Section
6.1 or 6.2 and (ii) cannot be or has not been cured within 45 days following
receipt of written notice of such breach; or
(e) by the Company, if Parent or Sub breaches any of its
representations or warranties herein or fails to perform in any material respect
any of its covenants, agreements or obligations under this Agreement, which
breach or failure (i) would give rise to the failure of a condition set forth in
Section 6.1 or 6.3 and (ii) cannot be or has not been cured within 45 days
following receipt of written notice of such breach.
7.2 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.4 or an extension or waiver pursuant to Section
7.5 shall, in order to be effective, require in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
7.3 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any further
liability or obligation on the part of Parent, Sub or the Company, or any
director, officer, employee or shareholder thereof, other than the
confidentiality provisions of Sections 5.2(b) and 5.2(c) and the provisions of
Sections 3.1(w), 3.2(d), 5.5, 7.3, 8.2, 8.3 and Article IX.
7.4 Amendment. This Agreement may be amended by the parties at any time
before or after Company Shareholder Approval is obtained; provided, however,
that after such Approval, there shall be made no amendment that by law requires
further approval by such shareholders without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
7.5 Extension; Waiver. At any time prior to the Effective Time, the
parties may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or the other acts of the other parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) waive compliance with
any of the agreements or conditions contained herein. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
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ARTICLE VIII
SPECIAL PROVISIONS AS TO CERTAIN MATTERS
8.1 Takeover Defenses of the Company and Standstill Agreements. The
Company hereby waives the provisions of the letter agreement dated effective as
of October 15, 2000 (the "Confidentiality Agreement"), between the Company and
Parent, prohibiting the purchase of Shares or acting to influence or control the
Company, solely in connection with the transactions contemplated hereby.
8.2 No Solicitation.
(a) The Company shall not, nor shall it permit or cause any of its
subsidiaries to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor, agent or
representative of, the Company or any of its subsidiaries ("Company
Representatives") to, and on becoming aware of will take all reasonable actions
to stop such person from continuing to, directly or indirectly, (i) solicit,
initiate or encourage or otherwise intentionally facilitate (including by way of
furnishing information) the making of any Acquisition Proposal, (ii) enter into
any agreement (other than confidentiality and standstill agreements in
accordance with the immediately following proviso) with respect to any
Acquisition Proposal, or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal;
provided, however, that in the case of this clause (iii), to the extent required
by the fiduciary obligations of the Board of Directors of the Company,
determined in good faith by the members thereof taking into consideration the
written advice of outside counsel, the Company may at any time prior to Company
Shareholder Approval (the "Applicable Period"), but not thereafter if the Merger
is approved thereby, and subject to the Company providing written notice to
Parent of its decision to take such action in response and only in response to
an unsolicited written request therefor received without any initiation,
encouragement, discussion or negotiation by the Company or any Company
Representative and other than in contravention of this Section 8.2(a), furnish
information to any person or "group" (within the meaning of Section 13(d)(3) of
the Exchange Act) pursuant to a confidentiality agreement on substantially the
same terms as provided in the Confidentiality Agreement referred to in Section
8.1 hereof and otherwise enter into discussions and negotiations with such
person or group as to any superior proposal (as defined in Section 8.2(c)) such
person or group has made. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding sentence by the
Company or any Company Representative, whether or not such person is purporting
to act on behalf of the Company or otherwise, shall be deemed to be a material
breach of this Agreement by the Company. The Company immediately shall cease and
shall cause to be terminated any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
prior to the date hereof by the Company or any Company Representatives with
respect to any Acquisition Proposal existing on the date hereof. The Company
promptly will notify Parent of the pendency of any negotiations respecting, or
the receipt of, any Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means (i) any proposal, other than a proposal by Parent
or any of its affiliates, for a merger or other business combination involving
the Company, (ii) any proposal or offer, other than a proposal or offer by
Parent or any of its affiliates, to
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acquire from the Company or any of its affiliates in any manner, directly or
indirectly, an equity interest in the Company or any subsidiary, any voting
securities of the Company or any subsidiary or a material amount of the assets
of the Company and its subsidiaries, taken as a whole, or (iii) any proposal or
offer, other than a proposal or offer by Parent or any of its affiliates, to
acquire from the shareholders of the Company by tender offer, exchange offer or
otherwise more than 20% of the outstanding Shares.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall, except in connection with the termination of this Agreement
pursuant to Sections 7.1(a), 7.1(b) or 7.1(e), (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by the Board of Directors of the Company or any such
committee of this Agreement or the Merger or take any action having such effect
or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal. Notwithstanding the foregoing, in the event the Board of
Directors of the Company receives an Acquisition Proposal that, in the exercise
of its fiduciary obligations (as determined in good faith by a majority of the
disinterested members thereof taking into consideration the written advice of
outside counsel), it determines to be a superior proposal, the Board of
Directors may withdraw or modify its approval or recommendation of this
Agreement or the Merger and may (subject to the following sentence) terminate
this Agreement, in each case at any time after midnight on the third business
day following Parent's receipt of written notice (a "Notice of Superior
Proposal") advising Parent that the Board of Directors has received an
Acquisition Proposal which it has determined to be a superior proposal,
specifying the material terms and conditions of such Superior Proposal
(including the proposed financing for such proposal and a copy of any documents
conveying such proposal) and identifying the party making such Superior
Proposal. Parent shall have the right, prior to the expiration of the third
business day following its receipt of a Notice of Superior Proposal to agree to
amend the terms of this Agreement such that they are no less favorable than the
terms of such Superior Proposal. The Company may terminate this Agreement
pursuant to the second sentence of this Section 8.2(b) only if the shareholders
of the Company shall not yet have voted on the Merger, and the Company shall
have paid to Parent the fees set forth in Section 8.3. Nothing contained herein
shall prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) under the Exchange Act following Parent's
receipt of a Notice of Superior Proposal.
(c) For purposes of this Agreement, a "superior proposal" means any
bona fide Acquisition Proposal to acquire, directly or indirectly, for
consideration consisting of cash, securities or a combination thereof, at least
a majority of the Shares then outstanding or all or substantially all the assets
of the Company, and otherwise on terms which a majority of the members of the
Board of Directors of the Company determines in its good faith reasonable
judgment (taking into consideration the written advice of a financial advisor of
nationally recognized reputation, a copy of which shall be provided to Parent)
to be more favorable to the Company's shareholders than the Merger and which it
intends to recommend that the shareholders of the Company approve. In reaching
such good faith determination, the Board of Directors of the Company will give
significant consideration to whether an Acquisition Proposal includes definite
financing.
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8.3 Fee and Expense Reimbursements. The Company agrees to pay Parent a
fee in immediately available funds (in recognition of the fees and expenses
incurred to date by Parent in connection with the matters contemplated hereby)
of $15,000,000 promptly upon
(a) the termination of the Agreement
(i) by Parent or the Company as permitted by Section 7.1(b)(i),
but only in the event that Company Shareholder Approval shall not have
been obtained at the meeting of the Company's shareholders convened
therefor and, prior to the meeting of the shareholders of the Company
convened for the purpose of voting on the Merger, a third party has
made a bona fide written Acquisition Proposal or
(ii) by the Company as permitted by Section 8.2 or
(b) the Board of Directors of the Company taking any of the actions
set forth in clause (i) or (ii) of Section 8.2(b) and the Board of
Directors of the Company has not reinstated its recommendation of this
Agreement or withdrawn its approval or recommendation or both of any such
Acquisition Proposal within two business days of taking such actions.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile or
sent by overnight courier to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Enbridge Inc.
▇▇▇▇, ▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
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with a copy to
Fulbright & ▇▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to the Company, to
Midcoast Energy Resources, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirm: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
9.3 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) "material adverse effect" or "material adverse change" means, when
used in connection with any person, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that is materially adverse to the business, properties, assets,
condition (financial or otherwise) or results of operations of that person and
its subsidiaries, taken as a whole, provided, however, that no such change or
effect shall be deemed to have occurred to the extent such change or effect
arises from conditions generally affecting the oil and gas industry or from the
United States or global economies;
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(c) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
entity; and
(d) a "subsidiary" of any person means any corporation, partnership,
association, joint venture, limited liability company or other entity in which
such person owns over 50% of the stock or other equity interests, the holders of
which are generally entitled to vote for the election of directors or other
governing body of such other legal entity.
9.4 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The words
"hereof", "herein" and "hereunder" and similar terms refer to this Agreement as
a whole and not to any particular provision of this Agreement, unless the
context otherwise requires. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the Exhibits and Schedules hereto and the documents and instruments
referred to herein) and the Confidentiality Agreement (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (b)
except for the provisions of Sections 5.4 and 5.6, are not intended to confer
upon any person other than the parties any rights or remedies hereunder.
9.7 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that Parent or Sub may assign
its rights and obligations under this Agreement to one of its affiliates.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
9.9 Enforcement of the Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any district court of the United
States located in the States of Texas (Southern District
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only), this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal district court sitting in the
Southern District of Texas in the event any dispute between the parties hereto
arises out of this Agreement solely in connection with such a suit between the
parties, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to this Agreement in any court
other than such a federal or state court.
9.10 Performance by Sub. Parent hereby agrees to cause Sub to comply
with its obligations under this Agreement.
9.11 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
Enbridge Inc.
/s/ ▇.▇. ▇▇▇▇▇▇
By ____________________________________
▇.▇. ▇▇▇▇▇▇
Name:__________________________________
President and CEO
Title:_________________________________
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name:__________________________________
Group Vice President, Planning
and Development
Title:_________________________________
▇▇▇▇▇▇ Acquisition, Inc.
/s/ J.R. BIRD
By ____________________________________
J.R. Bird
Name:__________________________________
President
Title:_________________________________
Midcoast Energy Resources, Inc.
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇
By_____________________________________
▇▇▇ ▇. ▇▇▇▇▇▇▇
Name:__________________________________
President
Title:_________________________________
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