Execution Copy
AGREEMENT AND PLAN OF REORGANIZATION
Among
▇▇▇▇▇ ▇▇▇▇▇▇▇ NATURAL GAS CORP.
and
LDNG ACQUISITION, INC.
and
AMERICAN EXPLORATION COMPANY
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................1
1.1 Defined Terms...................................................1
1.2 References and Titles...........................................8
ARTICLE II THE MERGER.......................................................9
2.1 The Merger......................................................9
2.2 Effect of the Merger............................................9
2.3 Governing Instruments, Directors and Officers of the
Surviving Corporation ..........................................9
2.4 Effect on Securities...........................................10
2.5 Exchange of Certificates.......................................13
2.6 Closing........................................................16
2.7 Effective Time of the Merger...................................16
2.8 Taking of Necessary Action; Further Action.....................16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ALPHA........................17
3.1 Organization...................................................17
3.2 Other Entities.................................................17
3.3 Authority and Enforceability...................................17
3.4 No Violations..................................................18
3.5 Consents and Approvals.........................................18
3.6 SEC Documents..................................................18
3.7 Financial Statements...........................................19
3.8 Capital Structure..............................................19
3.9 Absence of Certain Changes or Events...........................20
3.10 Compliance with Laws, Material Agreements and Permits..........20
3.11 Governmental Regulation........................................21
3.12 Litigation.....................................................21
3.13 No Restrictions................................................21
3.14 Taxes..........................................................22
3.15 Employee Benefit Plans.........................................22
3.16 Environmental Matters..........................................23
3.17 Brokers........................................................24
3.18 Vote Required..................................................24
3.19 Amendment to Alpha Rights Agreement............................25
3.20 Opinion of Financial Advisor...................................25
3.21 Affiliate Transactions.........................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF LIMA AND MERGER SUB...........26
4.1 Organization...................................................26
4.2 Other Entities.................................................26
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4.3 Authority and Enforceability...................................26
4.4 No Violations..................................................27
4.5 Consents and Approvals.........................................27
4.6 SEC Documents..................................................28
4.7 Financial Statements...........................................28
4.8 Capital Structure..............................................28
4.9 Absence of Certain Changes or Events...........................29
4.10 Compliance with Laws, Material Agreements and Permits..........29
4.11 Governmental Regulation........................................30
4.12 Litigation.....................................................30
4.13 No Restrictions................................................30
4.14 Taxes..........................................................30
4.15 Employee Benefit Plans.........................................31
4.16 Environmental Matters..........................................32
4.17 Interim Operations of Merger Sub...............................33
4.18 Brokers........................................................33
4.19 Opinion of Financial Advisor...................................33
4.20 Certain Lima Gas Contracts.....................................33
4.21 Affiliate Transactions.........................................33
ARTICLE V COVENANTS........................................................34
5.1 Conduct of Business Pending Closing............................34
5.2 Access to Assets, Personnel and Information....................37
5.3 No Solicitation by Alpha.......................................38
5.4 Alpha Stockholders Meeting.....................................39
5.5 Lima Stockholders Meeting......................................40
5.6 Registration Statement and Proxy Statement/Prospectus..........40
5.7 Stock Exchange Listing.........................................42
5.8 Additional Arrangements........................................42
5.9 Agreements of Affiliates.......................................42
5.10 Public Announcements...........................................43
5.11 Notification of Certain Matters................................43
5.12 Payment of Expenses............................................43
5.13 Indemnification................................................43
5.14 Alpha Employees................................................45
5.15 Board of Directors of Lima Following Effective Time............45
5.16 Employee Agreements............................................46
5.17 Tax-Free Reorganization........................................46
5.18 Alpha Rights Plan..............................................46
5.19 Restructuring of Reorganization................................46
ARTICLE VI CONDITIONS......................................................47
6.1 Conditions to Each Party's Obligation to Effect the Merger.....47
6.2 Conditions to Obligations of Lima and Merger Sub...............48
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6.3 Conditions to Obligation of Alpha..............................49
ARTICLE VII TERMINATION....................................................49
7.1 Termination Rights.............................................49
7.2 Effect of Termination..........................................51
7.3 Termination Fees and Expenses..................................51
ARTICLE VIII MISCELLANEOUS.................................................54
8.1 Nonsurvival of Representations and Warranties..................54
8.2 Amendment......................................................54
8.3 Notices........................................................54
8.4 Counterparts...................................................55
8.5 Entire Agreement; No Third Party Beneficiaries.................55
8.6 Applicable Law.................................................55
8.7 No Remedy in Certain Circumstances.............................55
8.8 Assignment.....................................................55
8.9 Waivers........................................................56
8.10 Confidentiality Agreement......................................56
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "Agreement") is made and
entered into as of the _____ day of _______________, 1997, by and among ▇▇▇▇▇
▇▇▇▇▇▇▇ NATURAL GAS CORP., an Oklahoma corporation ("Lima"), LDNG ACQUISITION,
INC., an Oklahoma corporation ("Merger Sub"), and AMERICAN EXPLORATION COMPANY,
a Delaware corporation ("Alpha").
RECITALS
A. The board of directors of each of Lima and Alpha has determined that it
is in the best interests of Lima and Alpha, and their respective stockholders,
to approve the strategic alliance of Lima and Alpha by means of the merger of
Alpha with and into Merger Sub upon the terms and subject to the conditions set
forth in this Agreement.
B. For federal income tax purposes, it is intended that such merger
qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and it is intended that this
Agreement constitute a plan of reorganization for purposes of Section 368(a).
▇. ▇▇▇▇, Merger Sub, and Alpha desire to make certain representations,
warranties, covenants and agreements in connection with such merger and also to
prescribe various conditions to such merger.
D. ▇▇▇▇▇ ▇▇▇▇▇▇▇ Natural Gas Holdings Corp. ("Shareholder") which owns and
is entitled to vote 20,000,000 shares, constituting approximately 72% of Lima's
outstanding common stock on the date of this Agreement, in order to induce Alpha
to enter this Agreement has agreed to vote such shares in favor of this
Agreement and the Merger and matters related thereto requiring approval of the
stockholders of Lima.
NOW, THEREFORE, for and in consideration of the recitals and the
mutual representations, warranties, covenants and agreements set forth in this
Agreement, the parties to this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, each of the following terms
has the meaning given in this Section 1.1 or in the Sections referred to below:
"Additional Termination Fee" has the meaning specified in Section 7.3(a).
"Affiliate" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person.
"Agreement" means this Agreement and Plan of Reorganization, as amended,
supplemented or modified from time to time.
"Alpha" means American Exploration Company, a Delaware corporation.
"Alpha Certificate" means a certificate representing shares of Alpha
Common Stock or Alpha Preferred Stock, as the case may be.
"Alpha Common Stock" means the common stock, par value $.05 per share, of
Alpha.
"Alpha Companies" means Alpha and each of the other entities specifically
listed in the Alpha Disclosure Schedule as a subsidiary of Alpha.
"Alpha Depositary Shares" means the outstanding depositary shares of Alpha
each representing a 1/200 interest in a share of Alpha Preferred Stock.
"Alpha Disclosure Schedule" means the disclosure schedule delivered by
Alpha to Lima on or before the date of this agreement arranged in paragraphs
corresponding to the numbered and lettered paragraphs in Article III.
"Alpha 11% Senior Subordinated Notes" means those certain 11% Senior
Subordinated Notes due 2004 of Alpha.
"Alpha Employee Agreements" has the meaning specified in Section 5.16.
"Alpha Employee Benefit Plans" has the meaning specified in Section
3.15(a).
"Alpha Financial Statements" means the audited and unaudited consolidated
financial statements of Alpha and its subsidiaries (including the related notes)
included (or incorporated by reference) in Alpha's Annual Report on Form 10-K
for the year ended December 31, 1996, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, in each case as filed with the SEC, and any other
financial statements of Alpha and its subsidiaries relating to subsequent
periods filed with the SEC.
"Alpha Material Agreement(s)" means any written or oral agreement,
contract, commitment or understanding to which any of the Alpha Companies is a
party, by which any of the Alpha Companies is directly or indirectly bound, or
to which any asset of any of the Alpha Companies may be subject, involving total
value or consideration in excess of $1,000,000.
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"Alpha Meeting" means the meeting of the stockholders of Alpha called for
the purpose of voting on this Agreement and the Merger.
"Alpha Permits" has the meaning specified in Section 3.10.
"Alpha Preferred Stock" means the $450 Cumulative Convertible Preferred
Stock, Series C, par value $1.00 per share, of Alpha.
"Alpha Representative" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of any of the Alpha Companies.
"Alpha Restricted Shares" means shares of restricted stock granted
pursuant to the Alpha Stock Compensation Plans.
"Alpha Restricted Units" means a "Restricted Unit" as defined in the Alpha
Phantom Stock Plan.
"Alpha Rights" has the meaning specified in Section 3.19.
"Alpha Rights Agreement" means the Rights Agreement dated as of September
28, 1993 between Alpha and Society National Bank (as amended and supplemented)
as filed or incorporated by reference in the Alpha SEC Documents.
"Alpha SEC Documents" has the meaning specified in Section 3.6.
"Alpha Stock Compensation Plans" means the 1983 Stock Compensation Plan,
as amended, of Alpha, the 1994 Stock Compensation Plan, as amended, of Alpha,
the Alpha Amended and Restated 1983 Stock Option Plan of Hershey Oil
Corporation, and the Alpha Amended and Restated 1988 Stock Option Plan of
Hershey Oil Corporation.
"Alpha Stock Option" means an option (issued and outstanding on the date
hereof and immediately prior to the Effective Time) to acquire shares of Alpha
Common Stock granted pursuant to the Alpha Stock Compensation Plans.
"Alpha Warrants" means the Prudential Warrants and Institutional Warrants.
"Alternative Transaction" has the meaning specified in Section 7.3(b).
"Bank Credit Agreement" means the Amended and Restated Credit Agreement,
dated as of December 21, 1994, between Alpha, as borrower, the banks listed
therein, as lenders, and ▇▇▇▇▇▇ Guaranty Trust Company of New York, as agent (as
amended and supplemented) as filed or incorporated by reference in the Alpha SEC
Documents.
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"Cash-Out Amount" has the meaning specified in Section 2.4(b)(iv).
"Cash Consideration" means $3.00.
"Certificates of Merger" means the certificates of merger, prepared and
executed in accordance with the applicable provisions of the DGCL and the OGCA,
as the case may be, filed with the Secretaries of State of Delaware and Oklahoma
to effect the consummation of the Merger.
"Closing" means the closing of the Merger.
"Closing Date" means the date on which the Closing occurs, which date
shall be the first business day following the day on which both the Alpha
Meeting and the Lima Meeting have been held (or such later date as is agreed
upon by the parties).
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Proposal" has the meaning specified in Section 5.3(b).
"Confidentiality Agreement" means the agreement dated May 5, 1997 between
Alpha and Lima relating to Alpha's furnishing of information to Lima and Lima's
furnishing of information to Alpha in connection with Lima's and Alpha's
evaluation of the possibility of the Merger.
"Conversion Number" means 0.72.
"DGCL" means the Delaware General Corporation Law.
"Deposit Agreement" means that certain deposit agreement dated December
10, 1993 between Alpha and ▇▇▇▇▇▇ Trust and Savings Bank relating to the Alpha
Depositary Shares.
"Dissenting Stockholder(s)" means holder(s) of Alpha Common Stock who have
validly perfected appraisal rights under Section 262 of the DGCL.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Effective Time" has the meaning specified in Section 2.7.
"Environmental Law" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, common law, injunction or other
authorization in effect on the date hereof or at a previous time applicable to
Alpha's or to Lima's, as the case may be, operations relating to (a) emissions,
discharges, releases or threatened releases of Hazardous Materials into the
natural environment, including into ambient air, soil, sediments, land surface
or subsurface, buildings or facilities, surface water, groundwater,
publicly-owned treatment works, septic systems or land;
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(b) the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Materials; (c) occupational health and
safety; or (d) otherwise relating to the pollution of the environment, solid
waste handling treatment or disposal, or operation or reclamation of oil and gas
operations or mines.
"Exchange Agent" means ▇▇▇▇▇ ▇▇▇▇▇▇ Shareholder Services, L.L.C., which
shall serve as transfer agent for shares of Lima Common Stock, Lima Preferred
Stock and Lima Depositary Shares, or such other agent as may be duly appointed
from time to time by Lima.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Fund" has the meaning specified in Section 2.5(a).
"GAAP" means generally accepted accounting principles, as recognized by
the U.S. Financial Accounting Standards Board (or any generally recognized
successor).
"Governmental Authority" means any national, state, county or municipal
government, domestic or foreign, any agency, board, bureau, commission, court,
department or other instrumentality of any such government, or any arbitrator in
any case that has jurisdiction over any of the Alpha Companies, Lima or Merger
Sub or any of their respective properties or assets.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976,
as amended.
"Hazardous Material" means (a) any "hazardous substance," as defined by
CERCLA; (b) any "hazardous waste" or "solid waste," in either case as defined by
the Resource Conservation and Recovery Act, as amended; (c) any solid,
hazardous, dangerous or toxic chemical, material, waste or substance, within the
meaning of and regulated by any Environmental Law; (d) any radioactive material,
including any naturally occurring radioactive material, and any source, special
or byproduct material as defined in 42 U.S.C. 2011 et seq. and any amendments or
authorizations thereof; (e) any asbestos-containing materials in any form or
condition; (f) any polychlorinated biphenyl in any form or condition; or (g)
petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof.
"Initial Termination Fee" has the meaning specified in Section 7.3(a).
"Institutional Warrants" means those certain warrants to purchase Alpha
Common Stock issued to certain institutional investors in connection with the
issuance of the Alpha 11% Senior Subordinated Notes.
"Lien" means any lien, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, encumbrance, rights of a vendor under
any title retention or conditional sale agreement, or lease or other arrangement
substantially equivalent thereto.
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"Lima" means ▇▇▇▇▇ ▇▇▇▇▇▇▇ Natural Gas Corp., an Oklahoma corporation.
"Lima Certificate" means a certificate representing shares of Lima Common
Stock or Lima Preferred Stock, as the case may be.
"Lima Common Stock" means the common stock, par value $.01 per share, of
Lima.
"Lima Companies" means Lima and each of the other entities specifically
listed in the Lima Disclosure Schedule as a subsidiary of Lima.
"Lima Depositary Shares" means the depositary shares of Lima to be issued
in exchange for Alpha Depositary Shares as provided herein each to represent a
1/200 interest in a share of Lima Preferred Stock.
"Lima Disclosure Schedule" means the disclosure schedule delivered by Lima
to Alpha on or before the date of this agreement arranged in paragraphs
corresponding to the numbered and lettered paragraphs in Article IV.
"Lima Employee Benefit Plans" has the meaning specified in Section
4.15(a).
"Lima Financial Statements" means the audited and unaudited consolidated
financial statements of Lima and its subsidiaries (including the related notes)
included (or incorporated by reference) in Lima's Annual Report on Form 10-K for
the year ended December 31, 1996, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, in each case as filed with the SEC, and any other
financial statements of Lima and its subsidiaries relating to subsequent periods
filed with the SEC.
"Lima Material Agreement(s)" means any written or oral agreement,
contract, commitment or understanding to which any of the Lima Companies is a
party, by which any of the Lima Companies is directly or indirectly bound or to
which any asset of any of the Lima Companies may be subject, involving total
value or consideration in excess of $3,000,000.
"Lima Meeting" means the meeting of the stockholders of Lima called for
the purpose of voting on this Agreement and the Merger.
"Lima Permits" has the meaning specified in Section 4.10.
"Lima Preferred Stock" means the series of preferred stock, par value $.01
per share, of Lima to be established on or prior to the Effective Time having
substantially the same rights, preferences, powers and privileges as the Alpha
Preferred Stock, all as set forth in Exhibit "1.1" attached hereto or, if the
vote required by Section 3.18(b) is not received but the vote required by
Section 3.18(a) is received, a series of preferred stock of the Surviving
Corporation having equivalent terms, including rights to convert into Lima
Common Stock and cash as provided in Exhibit "1.1".
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"Lima Representative" means any director, officer, employee, agent,
advisor (including legal, accounting and financial advisors), Affiliate or other
representative of the Lima Companies.
"Lima SEC Documents" has the meaning specified in Section 4.6.
"Lima Stock Option Plan" means the Stock Option Plan of Lima, as amended.
"Market Price" means the average of the per share closing sales prices of
the Lima Common Stock on the NYSE (as reported by The Wall Street Journal, or if
not so reported, by another authoritative source) over the 10 trading days
immediately preceding the Closing Date.
"Material Adverse Effect" means (a) when used with respect to Alpha, a
result or consequence that would materially adversely affect the condition
(financial or otherwise), results of operations or business of the Alpha
Companies (taken as a whole) or the aggregate value of their assets, would
materially impair the ability of the Alpha Companies (taken as a whole) to own,
hold, develop and operate their assets, or would materially impair Alpha's
ability to perform its obligations hereunder or consummate the transactions
contemplated hereby; and (b) when used with respect to Lima, a result or
consequence that would materially adversely affect the condition (financial or
otherwise), results of operations or business of the Lima Companies (taken as a
whole) or the aggregate value of their assets, would materially impair the
ability of the Lima Companies (taken as a whole) to own, hold, develop and
operate their assets, or would materially impair Lima's or Merger Sub's ability
to perform its respective obligations hereunder or consummate the transactions
contemplated hereby.
"Merger" has the meaning specified in Section 2.1.
"Merger Sub" means LDNG Acquisition, Inc., an Oklahoma corporation and a
wholly-owned subsidiary of Lima.
"Merger Sub Common Stock" means the common stock, par value $.01 per
share, of Merger Sub.
"NYSE" means The New York Stock Exchange, Inc.
"OGCA" means the Oklahoma General Corporation Act.
"Person" means any natural person, corporation, company, limited or
general partnership, joint stock company, joint venture, association, limited
liability company, trust, bank, trust company, land trust, business trust or
other entity or organization, whether or not a Governmental Authority.
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"Proxy Statement/Prospectus" means a joint proxy statement in definitive
form relating to the Alpha Meeting and the Lima Meeting, which proxy statement
will be included as a prospectus in the Registration Statement.
"Prudential Warrants" means those certain warrants to purchase Alpha
Common Stock issued in September 1992 to Prudential Insurance Company of
America.
"Registration Statement" means the Registration Statement on Form S-4 to
be filed by Lima in connection with the issuance of Lima Common Stock, Lima
Preferred Stock and Lima Depositary Shares pursuant to the Merger.
"Responsible Officer" means, with respect to any corporation, the Chief
Executive Officer, President or any Vice President of such corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Superior Proposal" has the meaning specified in Section 5.3(b).
"Surviving Corporation" has the meaning specified in Section 2.2.
"Tax Returns" has the meaning specified in Section 3.14(a).
"Taxes" means taxes of any kind, levies or other like assessments,
customs, duties, imposts, charges or fees, including income, gross receipts, ad
valorem, value added, excise, real or personal property, asset, sales, use,
federal royalty, license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security, workers
compensation, utility, severance, production, unemployment compensation,
occupation, premium, windfall profits, transfer and gains taxes or other
governmental taxes imposed or payable to the United States or any state, local
or foreign governmental or Native American tribal subdivision or agency thereof,
and in each instance such term shall include any interest, penalties or
additions to tax attributable to any such Tax, including penalties for the
failure to file any Tax Return or report.
"Third-Party Consent" means the consent or approval of any Person other
than Alpha, Lima or any Governmental Authority.
1.2 References and Titles. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions of or to this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of this Agreement, and shall be disregarded in construing the language
hereof. The
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words "this Agreement," "herein," "hereby," "hereunder" and "hereof," and words
of similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Article," "this
Section" and "this Subsection," and words of similar import, refer only to the
Article, Section or Subsection hereof in which such words occur. The word "or"
is not exclusive, and the word "including" (in its various forms) means
"including without limitation." Pronouns in masculine, feminine or neuter
genders shall be construed to state and include any other gender, and words,
terms and titles (including terms defined herein) in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
As used in the representations and warranties contained in this Agreement,
the phrase "to the knowledge" of the representing party shall mean that
Responsible Officers of such representing party, individually or collectively,
either (a) know that the matter being represented and warranted is true and
accurate or (b) have no reason, after reasonable inquiry, to believe that the
matter being represented and warranted is not true and accurate.
ARTICLE II
THE MERGER
2.1 The Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Alpha shall be merged with and into Merger Sub
in accordance with the provisions of this Agreement. Such merger is referred to
herein as the "Merger."
2.2 Effect of the Merger. Upon the effectiveness of the Merger, the
separate existence of Alpha shall cease and Merger Sub, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall continue its
corporate existence under the laws of the State of Oklahoma. The Merger shall
have the effects specified in this Agreement and the DGCL and the OGCA.
2.3 Governing Instruments, Directors and Officers of the Surviving
Corporation.
(a) The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation until duly amended in
accordance with its terms and applicable law; provided, however, that
Article I thereof shall be amended and restated to read in its entirety as
follows: "Article I: The name of the corporation is American Exploration
Company."
(b) The by-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
duly amended in accordance with their terms and applicable law.
(c) The directors and officers of Merger Sub at the Effective Time
shall be the directors and officers, respectively, of the Surviving
Corporation from the Effective Time until their respective successors have
been duly elected or appointed in accordance with
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the certificate of incorporation and by-laws of the Surviving Corporation
and applicable law.
2.4 Effect on Securities.
(a) Merger Sub Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder thereof, each share of
Merger Sub Common Stock outstanding immediately prior to the Effective
Time shall remain outstanding and continue as one share of capital stock
of the Surviving Corporation and each certificate evidencing ownership of
any such shares shall continue to evidence ownership of the same number of
shares of the capital stock of the Surviving Corporation.
(b) Alpha Securities.
(i) Alpha Common Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder thereof
(but subject to the provisions of Section 2.5(e)), each share of
Alpha Common Stock that is issued and outstanding immediately prior
to the Effective Time (other than shares of Alpha Common Stock held
by Dissenting Stockholders) shall be converted into the right to
receive (A) shares of validly issued, fully paid and nonassessable
Lima Common Stock, with each such share of Alpha Common Stock being
converted into the fraction of a share of Lima Common Stock equal to
the Conversion Number; and (B) cash in the amount of the Cash
Consideration. Each share of Alpha Common Stock, when so converted,
shall automatically be canceled and retired, shall cease to exist
and shall no longer be outstanding; and the holder of any
certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares
of Lima Common Stock to be issued in exchange therefor and the Cash
Consideration (along with any cash in lieu of fractional shares of
Lima Common Stock as provided in Section 2.5(e)) and any unpaid
dividends and distributions with respect to such shares of Lima
Common Stock as provided in Section 2.5(c), without interest, upon
the surrender of such certificate in accordance with Section 2.5.
(ii) Alpha Treasury Stock. At the Effective Time, by virtue of
the Merger, any and all shares of Alpha Common Stock that are issued
and held as treasury stock shall be canceled and retired and shall
cease to exist, and no shares of Lima Common Stock, Cash
Consideration or other consideration shall be paid or payable in
exchange therefor.
(iii) Alpha Preferred Stock and Depositary Shares. At the
Effective Time, by virtue of the Merger and without any action on
the part of any holder thereof, each share of Alpha Preferred Stock
that is issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive one (1) validly
issued, fully paid and nonassessable share of Lima Preferred Stock.
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Thereafter, in accordance with the Deposit Agreement, the Alpha
Depositary Shares will represent rights with respect to the Lima
Preferred Stock and any required action to issue Lima Depositary
Shares in exchange for Alpha Depositary Shares shall be promptly
taken. Each share of Alpha Preferred Stock, when so converted, shall
automatically be canceled and retired, shall cease to exist and
shall no longer be outstanding; and the holder of any certificate
representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the shares of Lima
Preferred Stock to be issued in exchange therefore and any unpaid
dividends and distributions with respect of such shares of Lima
Preferred Stock as provided in Section 2.5(c), without interest,
upon surrender of such certificate in accordance with Section 2.5.
The portion of the cumulative quarterly dividend with respect to the
Alpha Preferred Stock accrued as of the Effective Time shall be
carried to and accumulated with the first cumulative quarterly
dividend to become payable with respect to the Lima Preferred Stock
after the Effective Time. The holders of the Alpha Depositary Shares
shall continue to have the same rights with respect to the Lima
Preferred Stock as they had prior to the Effective Time with respect
to shares of Alpha Preferred Stock under the terms of the Deposit
Agreement.
(iv) Alpha Equity Awards. Each Alpha Stock Option (including
any Alpha Stock Option granted within six months of the Effective
Time) shall be or become fully vested prior to or concurrently with
the Effective Time and, except as provided in the Alpha Employee
Agreements, shall be canceled in accordance with the respective
terms of the Alpha Stock Compensation Plans or otherwise by
appropriate action by Alpha in consideration for the payment of the
Cash-Out Amount to the holder of such Alpha Stock Option as soon as
practicable following the Effective Time. For purposes of this
Agreement, the "Cash-Out Amount" means (i) in the case of any Alpha
Stock Option granted under the Alpha 1983 or 1994 Stock Compensation
Plan, the excess, if any, of the Determined Value (as defined in
such Plan) over the exercise price of such Alpha Stock Option,
multiplied by the number of shares of Alpha Common Stock subject to
such Alpha Stock Option, and (ii) in the case of any Alpha Stock
Option granted under the Alpha Amended and Restated 1983 or 1988
Stock Option Plan of Hershey Oil Corporation, the excess, if any, of
the Effective Time Value over the exercise price of such Alpha Stock
Option, multiplied by the number of shares of Alpha Common Stock
subject to such Alpha Stock Option. For purposes of this Agreement,
the "Effective Time Value" means the sum of (i) the Cash
Consideration and (ii) the product determined by multiplying (x) the
Conversion Number by (y) the Market Price. The restrictions
applicable to each Alpha Restricted Share outstanding under the
Alpha Stock Compensation Plans immediately prior to the Effective
Time shall lapse as of the Effective Time. Each Alpha Restricted
Unit outstanding immediately prior to the Effective Time shall
become fully vested immediately prior to or concurrently with the
Effective Time, and shall be redeemed as soon as practicable
following the Effective Time by
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payment to the holder thereof of an amount in cash equal to the
Effective Time Value less the amount payable per unit by the holder
as set forth in Section 3.15 of the Alpha Disclosure Schedule.
(v) Alpha Warrants. All Alpha Warrants shall remain
outstanding following the Effective Time. At the Effective Time, by
virtue of the Merger and without any action on the part of Alpha or
any holder of Alpha Warrants, each Alpha Warrant shall be assumed by
Lima and shall be exercisable for shares of Lima Common Stock and
other consideration, if any, as may be required pursuant to the
terms and conditions of such Alpha Warrants.
(vi) Alpha 11% Senior Subordinated Notes. All Alpha 11% Senior
Subordinated Notes shall remain outstanding following the Effective
Time. At the Effective Time, by virtue of the Merger and without any
action on the part of Alpha or any holder of Alpha 11% Senior
Subordinated Notes, each Alpha 11% Senior Subordinated Note shall be
assumed by the Surviving Corporation.
(vii) Other Securities. Except as provided in this Section
2.4(b) or in the Alpha Employee Agreements or as otherwise agreed to
by the parties, (A) at the Effective Time, the provisions of any
other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the capital stock of the
Alpha Companies shall become null and void, and (B) the Alpha
Companies shall use all reasonable efforts to ensure that, following
the Effective Time, no holder of options or rights or any
participant in any plan, program or arrangement shall have any right
thereunder to acquire any equity securities of the Alpha Companies,
Merger Sub, Lima or any direct or indirect subsidiary thereof.
(viii) Shares of Dissenting Stockholders. Any issued and
outstanding shares of Alpha Common Stock held by a Dissenting
Stockholder shall be converted into the right to receive such
consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the DGCL; provided, however, shares of Alpha
Common Stock outstanding at the Effective Time and held by a
Dissenting Stockholder who shall, after the Effective Time, withdraw
his demand for appraisal or lose his right of appraisal as provided
in the DGCL, shall be deemed to be converted, as of the Effective
Time, into the right to receive the shares of Lima Common Stock and
the amount of cash (without interest) specified in Section
2.4(b)(i), in accordance with the procedures specified in Section
2.5(b). Alpha shall give Lima (A) prompt notice of any written
demand for appraisal, withdrawal of demand for appraisal and any
other instruments served pursuant to the DGCL received by Alpha, and
(B) the opportunity to direct all negotiations and proceedings with
respect to demand for appraisal under the DGCL. Alpha will not
voluntarily make any payment with respect to any demands for
appraisal and will not, except with the prior written consent of
Lima, settle or offer to settle any such demands.
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2.5 Exchange of Certificates.
(a) Exchange Fund. Immediately prior to the Effective Time, Lima
shall deposit with the Exchange Agent, for the benefit of the holders of
shares of Alpha Common Stock and Alpha Preferred Stock and for exchange in
accordance with this Agreement, certificates representing the shares of
Lima Common Stock and Lima Preferred Stock to be issued, and funds
necessary to pay the Cash Consideration, in exchange for shares of Alpha
Common Stock pursuant to Section 2.4(b)(i) and the Alpha Preferred Stock
pursuant to Section 2.4(b)(iii). Such shares of Lima Common Stock and Lima
Preferred Stock, together with any dividends or distributions with respect
thereto (as provided in Section 2.5(c)) and such funds, are referred to
herein as the "Exchange Fund." The Exchange Agent, pursuant to irrevocable
instructions consistent with the terms of this Agreement, shall deliver
the Lima Common Stock and Lima Preferred Stock and the Cash Consideration
to be issued or paid pursuant to Sections 2.4(b)(i) and 2.4(b)(iii) out of
the Exchange Fund, and the Exchange Fund shall not be used for any other
purpose whatsoever. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Lima Common Stock and
Lima Preferred Stock held by it from time to time hereunder, except that
it shall receive and hold all dividends or other distributions paid or
distributed with respect thereto for the account of Persons entitled
thereto.
(b) Exchange Procedures.
(i) As soon as reasonably practicable after the Effective
Time, Lima shall cause the Exchange Agent to mail to each holder of
record of an Alpha Certificate that, immediately prior to the
Effective Time, represented shares of Alpha Common Stock or Alpha
Preferred Stock, which was converted into the right to receive Lima
Common Stock and Cash Consideration pursuant to Section 2.4(b)(i) or
Lima Preferred Stock pursuant to Section 2.4(b)(iii), as applicable,
a letter of transmittal to be used to effect the exchange of such
Alpha Certificate for an applicable Lima Certificate (and cash in
lieu of fractional shares) and the Cash Consideration, along with
instructions for using such letter of transmittal to effect such
exchange. The letter of transmittal (or the instructions thereto)
shall specify that delivery of any Alpha Certificate shall be
effected, and risk of loss and title thereto shall pass, only upon
delivery of such Alpha Certificate to the Exchange Agent and shall
be in such form and have such other provisions as Lima may
reasonably specify.
(ii) Upon surrender to the Exchange Agent of an Alpha
Certificate for cancellation, together with a duly completed and
executed letter of transmittal and any other required documents
(including, in the case of any Person constituting an "affiliate" of
Alpha for purposes of Rule 145(c) and (d) under the Securities Act,
a written agreement from such Person as described in Section 5.9, if
not
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theretofore delivered to Lima), (A) the holder of such Alpha
Certificate shall be entitled to receive in exchange therefor a Lima
Certificate representing the number of whole shares of Lima Common
Stock and Cash Consideration that such holder has the right to
receive pursuant to Section 2.4(b)(i) or the number of shares of
Lima Preferred Stock that such holder has the right to receive
pursuant to Section 2.4(b)(iii), any cash in lieu of fractional
shares of Lima Common Stock as provided in Section 2.5(e), and any
unpaid dividends and distributions that such holder has the right to
receive pursuant to Section 2.5(c) (after giving effect to any
required withholding of taxes); and (B) the Alpha Certificate so
surrendered shall forthwith be canceled. No interest shall be paid
or accrued on the Cash Consideration, cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to
holders of Alpha Certificates.
(iii) In the event of a transfer of ownership of Alpha Common
Stock or Alpha Preferred Stock that is not registered in the
transfer records of Alpha, a Lima Certificate representing the
appropriate number of shares of Lima Common Stock or shares of Lima
Preferred Stock and the appropriate Cash Consideration, if any
(along with any cash in lieu of fractional shares and any unpaid
dividends and distributions that such holder has the right to
receive), may be issued or paid to a transferee if the Alpha
Certificate representing such shares of Alpha Common Stock or Alpha
Preferred Stock is presented to the Exchange Agent accompanied by
all documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid.
(iv) Until surrendered as contemplated by this Section 2.5(b),
each Alpha Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender a Lima Certificate representing shares of Lima Common
Stock and Cash Consideration as provided in Section 2.4(b)(i) or
shares of Lima Preferred Stock pursuant to Section 2.4(b)(iii) (in
each case, along with any cash in lieu of fractional shares and any
unpaid dividends and distributions).
(v) The procedure for exchange of Alpha Depositary Shares for
Lima Depositary Shares shall be governed by the Deposit Agreement.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to Lima Common Stock or Lima Preferred
Stock declared or made after the Effective Time with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Alpha
Certificate. Subject to the effect of applicable laws, (i) at the time of
the surrender of a Alpha Certificate for exchange in accordance with the
provisions of this Section 2.5, there shall be paid to the surrendering
holder, without interest, the amount of dividends or other distributions
(having a record date after the Effective Time but on or prior to
surrender and a payment date on or prior to surrender) theretofore paid
with respect to the number of whole shares of Lima Common
- 14 -
Stock and Lima Preferred Stock that such holder is entitled to receive
(less the amount of any withholding taxes that may be required with
respect thereto); and (ii) at the appropriate payment date, there shall be
paid to the surrendering holder, without interest, the amount of dividends
or other distributions (having a record date after the Effective Time but
on or prior to surrender and a payment date subsequent to surrender)
payable with respect to the number of whole shares of Lima Common Stock
and Lima Preferred Stock that such holder receives (less the amount of any
withholding taxes that may be required with respect thereto).
(d) No Further Ownership Rights. All shares of Lima Common Stock and
Lima Preferred Stock issued, and the Cash Consideration paid, upon the
surrender for exchange of shares of Alpha Common Stock and Alpha Preferred
Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.5(c) or (e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Alpha Common
Stock and Alpha Preferred Stock. After the Effective Time, there shall be
no further registration of transfers on the Surviving Corporation's stock
transfer books of the shares of Alpha Common Stock or Alpha Preferred
Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, an Alpha Certificate is presented to the
Surviving Corporation for any reason, it shall be canceled and exchanged
as provided in this Section 2.5.
(e) Treatment of Fractional Shares. No Lima Certificates or scrip
representing fractional shares of Lima Common Stock shall be issued in the
Merger and, except as provided in this Section 2.5(e), no dividend or
other distribution, stock split or interest shall relate to any such
fractional share, and such fractional share shall not entitle the owner
thereof to vote or to any other rights of a stockholder of Lima. In lieu
of any fractional share of Lima Common Stock to which a holder of Alpha
Common Stock would otherwise be entitled, such holder, upon surrender of
an Alpha Certificate as described in this Section, shall be paid an amount
in cash (without interest) determined by multiplying (i) the Market Price
by (ii) the fraction of a share of Lima Common Stock to which such holder
would otherwise be entitled, in which case Lima shall make available to
the Exchange Agent, without regard to any other cash being provided to the
Exchange Agent, the amount of cash necessary to make such payments.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
and cash held by the Exchange Agent in accordance with the terms of this
Section 2.5 that remains unclaimed by the former stockholders of Alpha for
a period of one year following the Effective Time shall be delivered to
Lima, upon demand. Thereafter, any former stockholders of Alpha who have
not theretofore complied with the provisions of this Section 2.5 shall
look only to Lima for payment of their claim for Lima Common Stock, Lima
Preferred Stock, the Cash Consideration, any cash in lieu of fractional
shares of Lima Common Stock and any dividends or distributions with
respect to Lima Common Stock or Lima Preferred Stock (all without
interest).
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(g) No Liability. Neither Lima, Alpha, the Surviving Corporation,
the Exchange Agent nor any other Person shall be liable to any former
holder of shares of Alpha Common Stock or Alpha Preferred Stock for any
amount properly delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by former holders of Alpha Common Stock or Alpha
Preferred Stock for a period of three years following the Effective Time
(or such earlier date immediately prior to the time at which such amounts
would otherwise escheat to or become property of any governmental entity)
shall, to the extent permitted by applicable law, become the property of
Lima, free and clear of any claims or interest of any such holders or
their successors, assigns or personal representatives previously entitled
thereto.
(h) Lost, Stolen, or Destroyed Alpha Certificates. If any Alpha
Certificate shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such Alpha Certificate to
be lost, stolen or destroyed and, if required by Lima, the posting by such
Person of a bond, in such reasonable amount as Lima may direct, as
indemnity against any claim that may be made against it with respect to
such Alpha Certificate, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Alpha Certificate the shares of Lima Common
Stock, Lima Preferred Stock and the Cash Consideration (along with any
cash in lieu of fractional shares pursuant to Section 2.5(e), and any
unpaid dividends and distributions, if any, pursuant to Section 2.5(c))
deliverable with respect thereto pursuant to this Agreement.
2.6 Closing. The Closing shall take place on the Closing Date at 10:00
a.m., local time, at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation,
1800 Mid-America Tower, 20 North Broadway, Oklahoma City, Oklahoma, or at such
time and place as is otherwise agreed upon by Lima and Alpha.
2.7 Effective Time of the Merger. The Merger shall become effective
immediately when the Certificates of Merger are accepted for filing by the
respective Secretaries of State of Delaware and Oklahoma or at such time
thereafter as is provided in the Certificates of Merger (the "Effective Time").
As soon as practicable after the Closing, the Certificates of Merger shall be
filed, and the Effective Time shall occur, on the Closing Date; provided,
however, that the Certificates of Merger may be filed prior to the Closing Date
or prior to the Closing so long as it provides for an effective time that occurs
on the Closing Date immediately after the Closing.
2.8 Taking of Necessary Action; Further Action. Each of Lima, Merger Sub,
and Alpha shall use all reasonable efforts to take all such actions as may be
necessary or appropriate in order to effectuate the Merger under the DGCL and
the OGCA as promptly as commercially practicable. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of either of Merger Sub or Alpha, the officers and directors of
the Surviving Corporation are fully authorized, in the name of the Surviving
Corporation or otherwise to take, and shall take, all such lawful and necessary
action.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ALPHA
Except as set forth in the Alpha Disclosure Schedule, Alpha hereby
represents and warrants to Lima and Merger Sub as follows:
3.1 Organization. Each of the Alpha Companies (a) is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, (b) has the requisite power and authority to own, lease and
operate its properties and to conduct its business as it is presently being
conducted, and (c) is duly qualified to do business as a foreign corporation,
and is in good standing, in each jurisdiction where the character of the
properties owned or leased by it or the nature of its activities makes such
qualification necessary (except, in each case, where any failure to be so
qualified as a foreign corporation or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on Alpha).
Copies of the certificate or articles of incorporation and by-laws of each of
the Alpha Companies have heretofore been delivered to Lima, and such copies are
accurate and complete as of the date hereof.
3.2 Other Entities. Alpha has no direct or indirect equity interest in any
corporation, partnership, limited liability company, joint venture, business
association or other entity other than the entities included in the Alpha
Companies (other than joint venture, joint operating or ownership arrangements
entered into in the ordinary course of business or other partnerships that,
individually or in the aggregate, are not material to the operations or business
of the Alpha Companies, taken as a whole).
3.3 Authority and Enforceability. Alpha has the requisite corporate power
and authority to enter into and deliver this Agreement and (with respect to
consummation of the Merger, subject to the valid approval of this Agreement and
the Merger by the stockholders of Alpha) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and (with
respect to consummation of the Merger, subject to the valid approval of this
Agreement and the Merger by the stockholders of Alpha) the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Alpha, including approval by the board
of directors of Alpha, and no other corporate proceedings on the part of Alpha
are necessary to authorize the execution or delivery of this Agreement or (with
respect to consummation of the Merger, subject to the valid approval of this
Agreement and the Merger by the stockholders of Alpha) to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Alpha and (with respect to the Merger, subject to the
valid approval of this Agreement and the Merger by the stockholders of Alpha and
assuming that this Agreement constitutes a valid and binding obligation of Lima
and Merger Sub) constitutes a valid and binding obligation of Alpha enforceable
against Alpha in accordance with its terms.
- 17 -
3.4 No Violations. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance by
Alpha with the provisions hereof will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both) under,
give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of any of the Alpha Companies
under, any provision of (a) the certificate or articles of incorporation or
by-laws of any of the Alpha Companies, (b) any loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or
other agreement or instrument applicable to any of the Alpha Companies, or (c)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.5 are duly and timely obtained or made,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to any of the Alpha Companies or any of their respective properties
or assets, other than (y) in the case of clause (b) above, any such conflict,
violation, default, right, loss or Lien that may arise under the Bank Credit
Agreement and (z) in the case of clause (b) or (c) above, any such conflict,
violation, default, right, loss or Lien that, individually or in the aggregate,
would not have a Material Adverse Effect on Alpha.
3.5 Consents and Approvals. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to any of the Alpha Companies in
connection with the execution and delivery of this Agreement by Alpha or the
consummation by Alpha of the transactions contemplated hereby, except for the
following: (a) any such consent, approval, order, authorization, registration,
declaration, filing or permit which the failure to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect on Alpha; (b)
the filing of the Certificates of Merger with the respective Secretaries of
State of Delaware and Oklahoma pursuant to the provisions of the DGCL and the
OGCA; (c) the filing of a pre-merger notification report by Alpha under the HSR
Act and the expiration or termination of the applicable waiting period; (d) the
filing with the SEC of the Proxy Statement/Prospectus and such reports under
Section 13(a) of the Exchange Act and such other compliance with the Exchange
Act and the Securities Act and the rules and regulations of the SEC thereunder
as may be required in connection with this Agreement and the transactions
contemplated hereby and the obtaining from the SEC of such orders as may be so
required; (e) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover laws or Environmental Laws; and (f)
such filings and approvals as may be required by any foreign pre-merger
notification, securities, corporate or other law, rule or regulation. No
Third-Party Consent is required by or with respect to any of the Alpha Companies
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (x) any such
Third-Party Consent which the failure to obtain would not, individually or in
the aggregate, have a Material Adverse Effect on Alpha, (y) the valid approval
of this Agreement and the Merger by the stockholders of Alpha, and (z) any
consent, approval or waiver required by the terms of the Bank Credit Agreement.
3.6 SEC Documents. Alpha has made available to Lima a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Alpha with
- 18 -
the SEC since December 31, 1994, and prior to the date of this Agreement (the
"Alpha SEC Documents"), which are all the documents (other than preliminary
material) that Alpha was required to file with the SEC since such date. As of
their respective dates, the Alpha SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Alpha SEC Documents, and none of the Alpha SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.7 Financial Statements. The Alpha Financial Statements were, or will be,
prepared in accordance with the applicable published rules and regulations of
the SEC with respect thereto and in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present, or will fairly present, in
accordance with such requirements (in the case of the unaudited statements,
subject to normal, recurring adjustments which are not expected to be material),
the consolidated financial position of Alpha and its subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Alpha and its subsidiaries for the periods presented therein.
There are no material imbalances of production from the oil and gas properties
of any of the Alpha Companies whether required to be disclosed pursuant to GAAP
or otherwise.
3.8 Capital Structure.
(a) The authorized capital stock of Alpha consists of 50,000,000
shares of Alpha Common Stock and 100,000 shares of preferred stock, par
value $1.00 per share.
(b) As of the date hereof, there are issued and outstanding (i)
15,698,870 shares of Alpha Common Stock, (ii) 4,000 shares of Alpha
Preferred Stock and 800,000 Alpha Depositary Shares with respect thereto,
(iii) Alpha Stock Options relating to 1,071,168 shares of Alpha Common
Stock, (iv) Prudential Warrants relating to 356,489 shares of Alpha Common
Stock at an exercise price on the date of this Agreement of $20.20 per
share (subject to future adjustment pursuant to the terms of such
warrants), and (v) Institutional Warrants relating to 1,247,837 shares of
Alpha Common Stock at an exercise price on the date of this Agreement of
$15.01 per share (subject to future adjustment pursuant to the terms of
such warrants). No shares of Alpha Common Stock or Alpha Preferred Stock
(or Alpha Depositary Shares with respect thereto) are held by Alpha as
treasury stock.
(c) Except as set forth in Section 3.8(b) and as provided in the
Alpha Rights Agreement, there are outstanding (i) no shares of capital
stock or other voting securities of Alpha, (ii) no securities of Alpha or
any other Person convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of Alpha, and (iii) no
subscriptions, options, warrants, calls, rights (including preemptive
rights), commitments,
- 19 -
understandings or agreements to which Alpha is a party or by which it is
bound obligating Alpha to issue, deliver, sell, purchase, redeem or
acquire shares of capital stock or other voting securities of Alpha (or
securities convertible into or exchangeable or exercisable for shares of
capital stock or other voting securities of Alpha) or obligating Alpha to
grant, extend or enter into any such subscription, option, warrant, call,
right, commitment, understanding or agreement.
(d) All outstanding shares of Alpha capital stock are validly
issued, fully paid and nonassessable and not subject to any preemptive
right.
(e) All outstanding shares of capital stock and other voting
securities of each entity (other than Alpha) included in the Alpha
Companies are owned, directly or indirectly, by Alpha, free and clear of
all Liens, claims and options of any nature. With respect to each entity
(other than Alpha) included in the Alpha Companies, there are outstanding
(i) no securities of any such entity or any other Person convertible into
or exchangeable or exercisable for shares of capital stock or other voting
securities of any such entity, and (ii) no subscriptions, options,
warrants, calls, rights (including preemptive rights), commitments,
understandings or agreements to which any of such entities is a party or
by which it is bound obligating any of such entities to issue, deliver,
sell, purchase, redeem or acquire shares of capital stock or other voting
securities of any of such entities (or securities convertible into or
exchangeable or exercisable for shares of capital stock or other voting
securities of any of such entities) or obligating any of such entities to
grant, extend or enter into any such subscription, option, warrant, call,
right, commitment, understanding or agreement.
(f) To the best knowledge of Alpha, there are no voting trusts,
proxies or other agreements or understandings with respect to the voting
of shares of capital stock of Alpha.
3.9 Absence of Certain Changes or Events. Since March 31, 1997, the Alpha
Companies have conducted their business only in the ordinary course of business
consistent with past practices and, since such date, there has not been any
event (financial or otherwise, whether or not in the ordinary course of
business), circumstance or condition (a) that would be reasonably likely to have
a Material Adverse Effect; or (b) that would have required the consent of Lima
pursuant to Section 5.1 had such event occurred prior to the date of this
Agreement (other than changes, including changes in commodity prices, generally
affecting the oil and gas industry and changes arising from the announcement of
the Merger).
3.10 Compliance with Laws, Material Agreements and Permits. None of the
Alpha Companies is in violation of, or in default under, and no event has
occurred that (with notice or the lapse of time or both) would constitute a
violation of or default under, (a) its certificate or articles of incorporation
or by-laws, (b) any applicable law, rule, regulation, order, writ, decree or
judgment of any Governmental Authority, or (c) any Alpha Material Agreement,
except (in the case of clause (b) or (c) above) for any violation or default
that would not, individually or
- 20 -
in the aggregate, have a Material Adverse Effect on Alpha. Each of the Alpha
Companies has obtained and holds all permits, licenses, variances, exemptions,
orders, franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of its business or the lawful ownership, use
and operation of its assets ("Alpha Permits"), except for Alpha Permits which
the failure to obtain or hold would not, individually or in the aggregate, have
a Material Adverse Effect on Alpha. Each of the Alpha Companies is in compliance
with the terms of its Alpha Permits, except where the failure to comply would
not, individually or in the aggregate, have a Material Adverse Effect on Alpha.
No investigation or review by any Governmental Authority with respect to any of
the Alpha Companies is pending or, to the knowledge of Alpha, threatened, other
than those the outcome of which would not, individually or in the aggregate,
have a Material Adverse Effect on Alpha. To the knowledge of Alpha, no party to
any Alpha Material Agreement is in material breach of the terms, provisions and
conditions of such Alpha Material Agreement.
3.11 Governmental Regulation. None of the Alpha Companies is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any state public utilities laws.
3.12 Litigation. There is no litigation, arbitration, investigation or
other proceeding of any Governmental Authority pending or, to the knowledge of
Alpha, threatened against any of the Alpha Companies or their respective assets
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect on Alpha. Alpha has no knowledge of any facts that are likely to
give rise to any litigation, arbitration, investigation or other proceeding of
any Governmental Authority which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Alpha. No Alpha Company
is subject to any outstanding injunction, judgment, order, decree or ruling
(other than routine oil and gas field regulatory orders and any injunction,
judgment, order, decree or ruling that, either individually or in the aggregate,
would not have a Material Adverse Effect). There is no litigation, proceeding or
investigation pending or, to the knowledge of Alpha, threatened against or
affecting any of the Alpha Companies that questions the validity or
enforceability of this Agreement or any other document, instrument or agreement
to be executed and delivered by Alpha in connection with the transactions
contemplated hereby. For purposes of this Section 3.12 only, a Material Adverse
Effect on Alpha shall not be deemed to occur unless any litigation, arbitration,
investigation or other proceeding would result in liabilities of the Alpha
Companies in excess of $5 million.
3.13 No Restrictions. None of the Alpha Companies is a party to (a) any
agreement, indenture or other instrument that contains restrictions with respect
to the payment of dividends or other distributions with respect to its capital,
(b) any financial arrangement with respect to or creating any indebtedness for
borrowed money or indebtedness classified as debt under GAAP to any Person
(other than indebtedness reflected in the Alpha Financial Statements or
indebtedness for borrowed money or indebtedness classified as debt under GAAP
incurred in the ordinary course of business), (c) any agreement, contract or
commitment relating to the making of any advance to, or investment in, any
Person (other than advances in the ordinary course of business and to
wholly-owned subsidiaries), (d) any guaranty or other contingent liability with
- 21 -
respect to any indebtedness or obligation of any Person (other than guaranties
undertaken in the ordinary course of business and other than the endorsement of
negotiable instruments for collection in the ordinary course of business), or
(e) any agreement, contract or commitment limiting in any respect its ability to
compete with any Person or otherwise conduct business of any line or nature.
3.14 Taxes.
(a) Each of the Alpha Companies and any affiliated, combined or
unitary group of which any such corporation is or was a member has (i)
timely filed all material federal, state, local and foreign returns,
declarations, reports, estimates, information returns and statements ("Tax
Returns") required to be filed by it with respect to any Taxes, and each
such Tax Return was true, correct and complete in all material respects,
(ii) timely paid all material Taxes that are due and payable (except for
Taxes that are being contested in good faith by appropriate proceedings
and for which sufficient reserves have been established in accordance with
GAAP) for which any of the Alpha Companies may be liable, and (iii)
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes, and has
timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over.
(b) No audits or other administrative or court proceedings are
presently pending with regard to any Taxes for which any of the Alpha
Companies would be liable. There are no pending requests for rulings from
any taxing authority, no outstanding subpoenas or requests for information
by any taxing authority with respect to any Taxes, no proposed
reassessments by any taxing authority of any property owned or leased, and
no agreements in effect to extend the time to file any material Tax Return
or the period of limitations for the assessment or collection of any
material Taxes for which any of the Alpha Companies would be liable.
(c) Except as set forth in the Alpha SEC Documents, none of the
Alpha Companies is a party to, is bound by or has any obligation under any
tax sharing or allocation agreement or similar agreement or arrangement.
(d) There are no material excess loss accounts or deferred
intercompany transactions between Alpha and/or any of its subsidiaries
within the meaning of Treas. Reg. Section 1.1502-19 or 1.1502-13,
respectively.
3.15 Employee Benefit Plans.
(a) Section 3.15 to the Alpha Disclosure Schedule includes (i) a
list of all of Alpha's material "employee benefit plans," as defined in
Section 3(3) of ERISA, and all other material severance, termination,
change in control, sick leave, vacation pay, salary continuation for
disability, consulting, employment, compensation, retirement, deferred
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compensation, bonus, long-term incentive, stock option, stock purchase,
hospitalization, medical insurance, life insurance and scholarship
programs, plans, arrangements or agreements maintained by any of the Alpha
Companies or to which any of the Alpha Companies contributes or is
obligated to contribute for the benefit of any current or former employee,
consultant or director of any of the Alpha Companies, or with respect to
which any of the Alpha Companies would incur material liability under
Section 4069, 4212(c) or 4204 of ERISA (the "Alpha Employee Benefit
Plans"); (ii) a true and complete list of all Alpha Stock Options granted
pursuant to the Alpha Stock Compensation Plans including names of
optionees, grant date, option price and number of shares covered thereby;
(iii) a list of all outstanding awards, including holders, of Alpha
Restricted Shares and Alpha Restricted Units; and (iv) a true and correct
list of all severance or change in control payments payable to any
employee or group of employees of any of the Alpha Companies payable upon
any termination of employment or as a result of the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby, including the name and amount payable for any officer and the
aggregate amount payable to all other employees broken down by department.
(b) There is no violation of ERISA with respect to the filing of
applicable reports, documents and notices regarding any Alpha Employee
Benefit Plan with any Governmental Authority or the furnishing of such
documents to the participants or beneficiaries of the Alpha Employee
Benefit Plans that is reasonably likely to have a Material Adverse Effect
on the Alpha Companies. With respect to the Alpha Employee Benefit Plans,
there exists no condition or set of circumstances in connection with the
Alpha Companies that could be expected to result in liability reasonably
likely to have a Material Adverse Effect on the Alpha Companies under
ERISA, the Code or any applicable law. With respect to the Alpha Employee
Benefit Plans, individually and in the aggregate, there are no unfunded
benefit obligations which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with GAAP, on the financial
statements of the Alpha Companies, which obligations are reasonably likely
to have a Material Adverse Effect on the Alpha Companies.
(c) The Alpha Employee Benefit Plans have been maintained in
accordance with their terms and in accordance with all applicable federal
and state laws, and none of the Alpha Companies has engaged in any
"prohibited transaction" within the meaning of Section 4975 of the Code,
except where the violation of any such term or law or the occurrence of a
prohibited transaction would not be reasonably likely to have a Material
Adverse Effect on the Alpha Companies.
3.16 Environmental Matters. Except for any event, circumstance or
condition that would not have a Material Adverse Effect:
(a) Each of the Alpha Companies has conducted its business and
operated its assets, and is conducting its business and operating its
assets, in material compliance with all Environmental Laws;
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(b) None of the Alpha Companies has been notified by any
Governmental Authority or other third party that any of the operations or
assets of any of the Alpha Companies is the subject of any investigation
or inquiry by any Governmental Authority or other third party evaluating
whether any material remedial action is needed to respond to a release or
threatened release of any Hazardous Material or to the improper storage or
disposal (including storage or disposal at offsite locations) of any
Hazardous Material;
(c) None of the Alpha Companies and no other Person has filed any
notice under any federal, state or local law indicating that (i) any of
the Alpha Companies is responsible for the improper release into the
environment, or the improper storage or disposal, of any Hazardous
Material, or (ii) any Hazardous Material is improperly stored or disposed
of upon any property of any of the Alpha Companies;
(d) None of the Alpha Companies has any material contingent
liability in connection with (i) the release or threatened release into
the environment at, beneath or on any property now or previously owned or
leased by any of the Alpha Companies, or (ii) the storage or disposal of
any Hazardous Material;
(e) None of the Alpha Companies has received any claim, complaint,
notice, inquiry or request for information involving any matter which
remains unresolved as of the date hereof with respect to any alleged
violation of any Environmental Law or regarding potential liability under
any Environmental Law relating to operations or conditions of any
facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or formerly
owned, leased or operated by any of the Alpha Companies;
(f) There are no sites, locations or operations at which any of the
Alpha Companies is currently undertaking, or has completed, any remedial
or response action relating to any such disposal or release, as required
by Environmental Laws; and
(g) All underground storage tanks and solid waste disposal
facilities owned or operated by the Alpha Companies are used and operated
in material compliance with Environmental Laws.
3.17 Brokers. Other than Prudential Securities, Inc., no broker, finder,
investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage, finder's
or other fee or compensation based on any arrangement or agreement made by or on
behalf of Alpha and for which Alpha, Lima, any of the Alpha Companies or Lima
Companies will have any obligation or liability. A copy of any agreement between
Alpha and Prudential Securities, Inc. relating to this Agreement or the Merger
has been provided to Lima.
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3.18 Vote Required. The affirmative vote of (a) the holders of a majority
of the outstanding shares of Alpha Common Stock and Alpha Preferred Stock (or
Alpha Depositary Shares with respect thereto), voting together as a single class
in the manner provided in the certificate of designation relating to the Alpha
Preferred Stock filed with the Secretary of State of Delaware and (b) the
holders of at least two-thirds of the outstanding shares of Alpha Preferred
Stock (or Alpha Depositary Shares with respect thereto), are the only votes of
the holders of any class or series of Alpha capital stock or other voting
securities necessary to approve this Agreement, the Merger and the transactions
contemplated hereby.
3.19 Amendment to Alpha Rights Agreement.
(a) The Board of Directors of Alpha has taken, or will take, all
necessary action to amend the Alpha Rights Agreement so that none of the
execution and delivery of this Agreement and the consummation of the
Merger or any other transaction contemplated hereby will cause (i) the
rights issuable or issued pursuant to the Alpha Rights Agreement (the
"Alpha Rights") to become exercisable under the Alpha Rights Agreement,
(ii) Lima or any of its affiliates to be deemed an "Acquiring Person" (as
defined in the Alpha Rights Agreement), (iii) any such event to be deemed
a "Triggering Event" (as defined in the Alpha Rights Agreement) or (iv)
the "Stock Acquisition Date" (as defined in the Alpha Rights Agreement) to
occur upon any such event.
(b) As of the date of this Agreement, the Alpha Rights have not
separated from the Alpha Common Stock and no distribution of Rights
Certificates (as defined in the Alpha Rights Agreement) will occur as a
result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
3.20 Opinion of Financial Advisor. The Board of Directors of Alpha has
received the opinion dated as of the date hereof of Prudential Securities, Inc.
addressed to such Board (a copy of which has been provided to Lima for
information purposes only) that, as of such date, the Conversion Number and the
Cash Consideration are fair from a financial point of view to the holders of
Alpha Common Stock.
3.21 Affiliate Transactions. Other than as disclosed in the Alpha SEC
Documents, there are no transactions between Alpha and any of its Affiliates
(other than directly or indirectly wholly-owned subsidiaries of Alpha) pending
or proposed, except such transactions as are in the ordinary course of business
consistent with past practices and that would not be in violation of the
restrictions upon transactions with Affiliates set forth in Section 5.1(i)
below. There are no agreements pursuant to which any of the Alpha Companies are
obligated to indemnify any of the persons described in Section 5.13(a) other
than any obligation under the certificate of incorporation or bylaws of any
Alpha Company which are not materially broader in scope than the provisions of
the certificate of incorporation and bylaws of Alpha as contained in the Alpha
SEC Documents.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF LIMA AND MERGER SUB
Except as set forth in the Lima Disclosure Schedule, Lima hereby
represents and warrants to Alpha as follows:
4.1 Organization. Each of the Lima Companies and Merger Sub (a) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, (b) has the requisite power and authority to own,
lease and operate its properties and to conduct its business as it is presently
being conducted, and (c) is duly qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction where the character
of the properties owned or leased by it or the nature of its activities makes
such qualification necessary (except, in each case, where any failure to be so
qualified as a foreign corporation or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on Lima).
Copies of the Certificate of Incorporation and Bylaws of each of the Lima
Companies and Merger Sub have heretofore been delivered to Alpha, and such
copies are accurate and complete as of the date hereof.
4.2 Other Entities. Lima has no direct or indirect equity interest in any
corporation, partnership, limited liability company, joint venture, business
association or other entity other than the entities included in the Lima
Companies (other than joint venture, joint operating or ownership arrangements
entered into in the ordinary course of business or other partnerships that,
individually or in the aggregate, are not material to the operations or business
of the Lima Companies, taken as a whole).
4.3 Authority and Enforceability. Each of Lima and Merger Sub has the
requisite corporate power and authority to enter into and deliver this Agreement
and (with respect to consummation of this Agreement and the Merger, subject to
the approval by the stockholders of Lima) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and (with
respect to consummation of this Agreement and the Merger, subject to the
approval by the stockholders of Lima) the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Lima and Merger Sub, including approval by the
board of directors of Lima and the board of directors and stockholders of Merger
Sub, and no other corporate proceedings on the part of Lima or Merger Sub are
necessary to authorize the execution or delivery of this Agreement or (with
respect to consummation of this Agreement and the Merger, subject to the
approval by the stockholders of Lima) to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Lima and Merger Sub and (with respect to consummation of this
Agreement and the Merger, subject to the approval by the stockholders of Lima,
and assuming that this Agreement constitutes a valid and binding obligation of
Alpha) constitutes a valid and binding obligation of each of Lima and Merger Sub
enforceable against each of them in accordance with its terms.
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4.4 No Violations. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance by
Lima and Merger Sub with the provisions hereof will not, conflict with, result
in any violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of any
obligation or to the loss of a material benefit under, or result in the creation
of any Lien on any of the properties or assets of any of the Lima Companies,
including Merger Sub, under, any provision of (a) the Certificate of
Incorporation or Bylaws of any of the Lima Companies, including Merger Sub, (b)
any loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or other agreement or instrument applicable to
any of the Lima Companies, including Merger Sub, or (c) assuming the consents,
approvals, authorizations or permits and filings or notifications referred to in
Section 4.5 are duly and timely obtained or made, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to any of the Lima
Companies, including Merger Sub, or any of their respective properties or
assets, other than, in the case of clause (b) or (c) above, any such conflict,
violation, default, right, loss or Lien that, individually or in the aggregate,
would not have a Material Adverse Effect on Lima.
4.5 Consents and Approvals. No consent, approval, order or authorization
of, registration, declaration or filing with, or permit from, any Governmental
Authority is required by or with respect to any of the Lima Companies or Merger
Sub in connection with the execution and delivery of this Agreement by Lima and
Merger Sub or the consummation by Lima and Merger Sub of the transactions
contemplated hereby, except for the following: (a) any such consent, approval,
order, authorization, registration, declaration, filing or permit which the
failure to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect on Lima; (b) the filing of the Certificates of Merger
with the respective Secretaries of State of Delaware and Oklahoma pursuant to
the provisions of the DGCL and the OGCA; (c) the filing of a pre-merger
notification report by Lima under the HSR Act and the expiration or termination
of the applicable waiting period; (d) the filing with the SEC of the
Registration Statement and such reports under Section 13(a) of the Exchange Act
and such other compliance with the Exchange Act and the Securities Act and the
rules and regulations of the SEC thereunder as may be required in connection
with this Agreement and the transactions contemplated hereby and the obtaining
from the SEC of such orders as may be so required; (e) the filing with the NYSE
of a listing application relating to the shares of Lima Common Stock and Lima
Depositary Shares to be issued pursuant to the Merger and the obtaining from the
NYSE of its approvals thereof; (f) such filings and approvals as may be required
by any applicable state securities, "blue sky" or takeover laws or Environmental
Laws; and (g) such filings and approvals as may be required by any foreign
pre-merger notification, securities, corporate or other law, rule or regulation.
No Third-Party Consent is required by or with respect to any of the Lima
Companies, including Merger Sub, in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (x) any such Third-Party Consent which the failure to obtain would
not, individually or in the aggregate, have a Material Adverse Effect on Lima,
and (y) the valid approval of this Agreement and the Merger by the stockholders
of Lima.
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4.6 SEC Documents. Lima has made available to Alpha a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by Lima with the SEC since December 31, 1994, and prior to the
date of this Agreement (the "Lima SEC Documents"), which are all the documents
(other than preliminary material) that Lima was required to file with the SEC
since such date. As of their respective dates, the Lima SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Lima SEC Documents, and none of the Lima SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
4.7 Financial Statements. The Lima Financial Statements were, or will be,
prepared in accordance with the applicable published rules and regulations of
the SEC with respect thereto and in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Rule 10-01 of
Regulation S-X of the SEC) and fairly present, or will fairly present, in
accordance with such requirements (in the case of the unaudited statements,
subject to normal, recurring adjustments which are not expected to be material),
the consolidated financial position of Lima and its subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of Lima and its subsidiaries for the periods presented therein. There
are no material imbalances of production from the oil and gas properties of any
of the Lima Companies whether required to be disclosed pursuant to GAAP or
otherwise.
4.8 Capital Structure.
(a) The authorized capital stock of Lima consists of 100,000,000
shares of Lima Common Stock and 10,000,000 shares of preferred stock, par
value $.01 per share, of Lima. The authorized capital stock of Merger Sub
consists of 1,000 shares of Merger Sub Common Stock.
(b) As of the date hereof, (i) there are issued and outstanding
27,802,000 shares of Lima Common Stock and no shares of Lima Preferred
Stock and (ii) 963,500 shares of Lima Common Stock are issuable upon
exercise of outstanding stock options. No shares of Lima Common Stock are
held by Lima as treasury stock.
(c) Except as set forth in Section 4.8(b), there are outstanding (i)
no shares of capital stock or other voting securities of Lima, (ii) no
securities of Lima or any other Person convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities of
Lima, and (iii) no subscriptions, options, warrants, calls, rights
(including preemptive rights), commitments, understandings or agreements
to which Lima is a party or by which it is bound obligating Lima to issue,
deliver, sell, purchase, redeem or acquire shares of capital stock or
other voting securities of Lima (or securities convertible into or
exchangeable or exercisable for shares of capital stock or other voting
- 28 -
securities of Lima) or obligating Lima to grant, extend or enter into any
such subscription, option, warrant, call, right, commitment, understanding
or agreement.
(d) All outstanding shares of Lima capital stock are, and (when
issued) the shares of Lima Common Stock to be issued pursuant to the
Merger and issuable upon conversion of the Lima Preferred Stock and
exercise of the Alpha Warrants will be, validly issued, fully paid and
nonassessable and not subject to any preemptive right.
(e) 1,000 shares of Merger Sub Common Stock are issued and
outstanding, all of which are owned by Lima. All outstanding shares of
Merger Sub Common Stock are validly issued, fully paid and nonassessable
and not subject to any preemptive right.
(f) Other than the agreement of Lima Holdings Corp. to vote for this
Agreement and the Merger referred to elsewhere in this Agreement, to the
best knowledge of Lima, there are no voting trusts, proxies or other
agreements or understandings with respect to the voting of shares of
capital stock of Lima.
4.9 Absence of Certain Changes or Events. Since March 31, 1997, the Lima
Companies have conducted their business only in the ordinary course of business
consistent with past practices and, since such date, there has not been any
event (financial or otherwise, whether or not in the ordinary course of
business), circumstance or condition (a) that would be reasonably likely to have
a Material Adverse Effect; or (b) that would have required the consent of Alpha
pursuant to Section 5.1 had such event occurred prior to the date of this
Agreement (other than changes, including changes in commodity prices, generally
affecting the oil and gas industry and changes arising from the announcement of
the Merger).
4.10 Compliance with Laws, Material Agreements and Permits. None of the
Lima Companies is in violation of, or in default under, and no event has
occurred that (with notice or the lapse of time or both) would constitute a
violation of or default under, (a) its certificate or articles of incorporation
or by-laws, (b) any applicable law, rule, regulation, order, writ, decree or
judgment of any Governmental Authority, or (c) any Lima Material Agreement,
except (in the case of clause (b) or (c) above) for any violation or default
that would not, individually or in the aggregate, have a Material Adverse Effect
on Lima. Each of the Lima Companies has obtained and holds all permits,
licenses, variances, exemptions, orders, franchises, approvals and
authorizations of all Governmental Authorities necessary for the lawful conduct
of its business or the lawful ownership, use and operation of its assets ("Lima
Permits"), except for Lima Permits which the failure to obtain or hold would
not, individually or in the aggregate, have a Material Adverse Effect on Lima.
Each of the Lima Companies is in compliance with the terms of its Lima Permits,
except where the failure to comply would not, individually or in the aggregate,
have a Material Adverse Effect on Lima. No investigation or review by any
Governmental Authority with respect to any of the Lima Companies is pending or,
to the knowledge of Lima, threatened, other than those the outcome of which
would not, individually or in the aggregate, have a Material Adverse Effect on
Lima. To the knowledge of Lima, no
- 29 -
party to any Lima Material Agreement is in material breach of the terms,
provisions and conditions of such Lima Material Agreement.
4.11 Governmental Regulation. None of the Lima Companies is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any state public utilities laws.
4.12 Litigation. There is no litigation, arbitration, investigation or
other proceeding of any Governmental Authority pending or, to the knowledge of
Lima, threatened against any of the Lima Companies or their respective assets
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect on Lima. Lima has no knowledge of any facts that are likely to
give rise to any litigation, arbitration, investigation or other proceeding of
any Governmental Authority which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Lima. No Lima Company is
subject to any outstanding injunction, judgment, order, decree or ruling (other
than routine oil and gas field regulatory orders and any injunction, judgment,
order, decree or ruling that, either individually or in the aggregate, would not
have a Material Adverse Effect). There is no litigation, proceeding or
investigation pending or, to the knowledge of Lima, threatened against or
affecting any of the Lima Companies, including Merger Sub, that questions the
validity or enforceability of this Agreement or any other document, instrument
or agreement to be executed and delivered by Lima or Merger Sub in connection
with the transactions contemplated hereby.
4.13 No Restrictions. None of the Lima Companies is a party to (a) any
agreement, indenture or other instrument that contains restrictions with respect
to the payment of dividends or other distributions with respect to its capital,
(b) any financial arrangement with respect to or creating any indebtedness for
borrowed money or indebtedness classified as debt under GAAP to any Person
(other than indebtedness reflected in the Lima Financial Statements or
indebtedness for borrowed money or indebtedness classified as debt under GAAP
incurred in the ordinary course of business), (c) any agreement, contract or
commitment relating to the making of any advance to, or investment in, any
Person (other than advances in the ordinary course of business and to
wholly-owned subsidiaries), (d) any guaranty or other contingent liability with
respect to any indebtedness or obligation of any Person (other than guaranties
undertaken in the ordinary course of business and other than the endorsement of
negotiable instruments for collection in the ordinary course of business), or
(e) any agreement, contract or commitment limiting in any respect its ability to
compete with any Person or otherwise conduct business of any line or nature.
4.14 Taxes.
(a) Each of the Lima Companies and any affiliated, combined or
unitary group of which any such corporation is or was a member has (i)
timely filed all material Tax Returns required to be filed by it with
respect to any Taxes, and each such Tax Return was true, correct and
complete in all material respects, (ii) timely paid all material Taxes
that are due and payable (except for Taxes that are being contested in
good faith by appropriate proceedings and for which sufficient reserves
have been established in
- 30 -
accordance with GAAP) for which any of the Lima Companies may be liable,
and (iii) complied in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes,
and has timely withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid
over.
(b) No audits or other administrative or court proceedings are
presently pending with regard to any Taxes for which any of the Lima
Companies would be liable. There are no pending requests for rulings from
any taxing authority, no outstanding subpoenas or requests for information
by any taxing authority with respect to any Taxes, no proposed
reassessments by any taxing authority of any property owned or leased, and
no agreements in effect to extend the time to file any material Tax Return
or the period of limitations for the assessment or collection of any
material Taxes for which any of the Lima Companies would be liable.
(c) No Lima Company has entered into any compensatory agreements
which would result in a nondeductible expense pursuant to Section 280G or
162(m) of the Code.
(d) Except as set forth in the Lima SEC Documents, none of the Lima
Companies is a party to, is bound by or has any obligation under any tax
sharing or allocation agreement or similar agreement or arrangement.
4.15 Employee Benefit Plans.
(a) Section 4.15 to the Lima Disclosure Schedule includes a list of
all material "employee benefit plans," as defined in Section 3(3) of
ERISA, and all other material severance, termination, change in control,
sick leave, vacation pay, salary continuation for disability, consulting,
employment, compensation, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs, plans,
arrangements or agreements maintained by any of the Lima Companies or to
which any of the Lima Companies contributes or is obligated to contribute
for the benefit of any current or former employee, consultant or director
of any of the Lima Companies, or with respect to which any of the Lima
Companies would incur material liability under Section 4069, 4212(c) or
4204 of ERISA (the "Lima Employee Benefit Plans").
(b) There is no violation of ERISA with respect to the filing of
applicable reports, documents and notices regarding any Lima Employee
Benefit Plan with any Governmental Authority or the furnishing of such
documents to the participants or beneficiaries of the Lima Employee
Benefit Plans that is reasonably likely to have a Material Adverse Effect
on the Lima Companies. With respect to the Lima Employee Benefit Plans,
there exists no condition or set of circumstances in connection with the
Lima Companies that could be expected to result in liability reasonably
likely to have a Material Adverse Effect on the Lima Companies under
ERISA, the Code or any
- 31 -
applicable law. With respect to the Lima Employee Benefit Plans,
individually and in the aggregate, there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with GAAP, on the financial statements of
the Lima Companies, which obligations are reasonably likely to have a
Material Adverse Effect on the Lima Companies.
(c) The Lima Employee Benefit Plans have been maintained in
accordance with their terms and in accordance with all applicable federal
and state laws, and none of the Lima Companies has engaged in any
"prohibited transaction" within the meaning of Section 4975 of the Code,
except where the violation of any such term or law or the occurrence of a
prohibited transaction would not be reasonably likely to have a Material
Adverse Effect on the Lima Companies.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in any
payment becoming due to any employee or group of employees of any of the
Lima Companies.
4.16 Environmental Matters. Except for any event, circumstance or
condition that would not have a Material Adverse Effect:
(a) Each of the Lima Companies has conducted its business and
operated its assets, and is conducting its business and operating its
assets, in material compliance with all Environmental Laws;
(b) None of the Lima Companies has been notified by any Governmental
Authority or other third party that any of the operations or assets of any
of the Lima Companies is the subject of any investigation or inquiry by
any Governmental Authority or other third party evaluating whether any
material remedial action is needed to respond to a release or threatened
release of any Hazardous Material or to the improper storage or disposal
(including storage or disposal at offsite locations) of any Hazardous
Material;
(c) None of the Lima Companies and no other Person has filed any
notice under any federal, state or local law indicating that (i) any of
the Lima Companies is responsible for the improper release into the
environment, or the improper storage or disposal, of any Hazardous
Material, or (ii) any Hazardous Material is improperly stored or disposed
of upon any property of any of the Lima Companies;
(d) None of the Lima Companies has any material contingent liability
in connection with (i) the release or threatened release into the
environment at, beneath or on any property now or previously owned or
leased by any of the Lima Companies, or (ii) the storage or disposal of
any Hazardous Material;
(e) None of the Lima Companies has received any claim, complaint,
notice, inquiry or request for information involving any matter which
remains unresolved as of
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the date hereof with respect to any alleged violation of any Environmental
Law or regarding potential liability under any Environmental Law relating
to operations or conditions of any facilities or property (including
off-site storage or disposal of any Hazardous Material from such
facilities or property) currently or formerly owned, leased or operated by
any of the Lima Companies;
(f) There are no sites, locations or operations at which any of the
Lima Companies is currently undertaking, or has completed, any remedial or
response action relating to any such disposal or release, as required by
Environmental Laws; and
(g) All underground storage tanks and solid waste disposal
facilities owned or operated by the Lima Companies are used and operated
in material compliance with Environmental Laws.
4.17 Interim Operations of Merger Sub. Merger Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business or activity (or conducted any operations) of any
kind, entered into any agreement or arrangement with any person or entity, or
incurred, directly or indirectly, any material liabilities or obligations,
except in connection with its incorporation, the negotiation of this Agreement,
the Merger and the transactions contemplated hereby.
4.18 Brokers. Other than Salomon Brothers Inc., no broker, finder,
investment banker or other Person is or will be, in connection with the
transactions contemplated by this Agreement, entitled to any brokerage, finder's
or other fee or compensation based on any arrangement or agreement made by or on
behalf of Lima or Merger Sub and for which Alpha, Lima or any of the Alpha
Companies or Lima Companies, including Merger Sub, will have any obligation or
liability. A copy of any agreement between Lima and Salomon Brothers Inc.
relating to this Agreement or the Merger has been provided to Alpha.
4.19 Opinion of Financial Advisor. The Board of Directors of Lima has
received the opinion dated as of the date hereof of Salomon Brothers Inc.
addressed to such Board (a copy of which has been provided to Alpha for
information purposes only) that, as of such date, the consideration to be paid
in the Merger is fair from a financial point of view to Lima.
4.20 Certain Lima Gas Contracts. Lima has provided or made available to
Alpha complete and accurate copies of each of the Lima gas contracts listed in
Section 4.20 of the Lima Disclosure Schedule as in effect on the date of this
Agreement.
4.21 Affiliate Transactions. Other than as disclosed in the Lima SEC
Documents, there are no transactions between Lima and any of its Affiliates
(other than directly or indirectly wholly- owned subsidiaries of Lima) pending
or proposed, except such transactions as are in the ordinary course of business
consistent with past practices and that would not be in violation of the
restrictions upon transactions with Affiliates set forth in Section 5.1(i)
below.
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ARTICLE V
COVENANTS
5.1 Conduct of Business Pending Closing. Prior to the Effective Time (i)
Alpha agrees as to the Alpha Companies that (except as expressly contemplated or
permitted by this Agreement, or to the extent that Lima shall otherwise consent
in writing) and (ii) Lima agrees as to the Lima Companies that (except as
expressly contemplated or permitted by this Agreement, or to the extent that
Alpha shall otherwise consent in writing) (for purposes of this Section 5.1
Alpha and Lima each being a "Party"):
(a) Ordinary Course. Each Party and its respective subsidiaries
shall carry on its businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and shall use all
commercially reasonable efforts to preserve intact its present business
organizations, keep available the services of its current officers and
employees, and endeavor to preserve its relationships with customers,
suppliers and others having business dealings with it.
(b) Dividends; Changes in Stock. Except for transactions solely
among a Party and its subsidiaries, a Party shall not and it shall not
permit any of its respective subsidiaries to: (i) declare or pay any
dividends on or make other distributions in respect of any of its capital
stock or partnership interests, except in the case of Alpha, for the
declaration and payment of regular cash dividends with respect to the
Alpha Preferred Stock in accordance with its terms; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of such Party's capital stock; or (iii)
repurchase, redeem or otherwise acquire, or permit any of its subsidiaries
to purchase, redeem or otherwise acquire, any shares of its capital stock,
except as required by the terms of its securities outstanding on the date
hereof or as contemplated by any existing employee benefit plan.
(c) Issuance of Securities. A Party shall not and it shall not
permit any of its subsidiaries to, issue, deliver or sell, or authorize or
propose to issue, deliver or sell, any shares of its capital stock of any
class, or other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, other voting
securities or convertible securities, other than: (i) in the case of
Alpha, (x) the issuance of Alpha Common Stock upon the exercise of Alpha
Warrants or Alpha Stock Options that are outstanding on the date hereof,
(y) issuances by a wholly owned subsidiary of Alpha of such subsidiary's
capital stock to its parent, and (z) the issuance of Alpha Common Stock
upon the conversion of the Alpha Preferred Stock in accordance with its
terms; and (ii) in the case of Lima (y) the issuance of Lima Common Stock
upon the exercise of stock options granted under the Lima Stock Option
Plan that are outstanding on the date hereof, and (z) issuances by a
wholly owned subsidiary of Lima of such subsidiary's capital stock to its
parent.
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(d) Governing Documents. Except as contemplated hereby or in
connection herewith, no Party shall amend its certificate or articles of
incorporation or bylaws.
(e) No Acquisitions. A Party shall not, and it shall not permit any
of its subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, other than (i) in the case of Alpha, any such acquisition or
acquisitions having a purchase price not exceeding $1,000,000 in the
aggregate; and (ii) in the case of Lima, any such acquisition or
acquisitions having a purchase price not exceeding $3,000,000 in the
aggregate.
(f) No Dispositions. Other than: (i) as may be necessary or required
by law to consummate the transactions contemplated hereby or (ii) sales,
leases, encumbrances or other dispositions in the ordinary course of
business consistent with past practice that are not material, individually
or in the aggregate, to a Party and its subsidiaries taken as a whole, a
Party shall not, and it shall not permit any of its subsidiaries to, sell,
lease, encumber or otherwise dispose of, or agree to sell, lease (whether
such lease is an operating or capital lease), encumber or otherwise
dispose of, any of its material assets.
(g) No Dissolution, Etc. Except as otherwise permitted or
contemplated by this Agreement, neither Party shall authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of such Party or any of its subsidiaries,
except that either Party may merge any of its subsidiaries into itself or
another directly or indirectly wholly-owned subsidiary.
(h) Accounting. Neither Party shall, nor shall either Party permit
any of its subsidiaries to, make any changes in their accounting methods
which would be required to be disclosed under the rules and regulations of
the SEC, except as required by law, rule, regulation or GAAP.
(i) Affiliate Transactions. Neither Party shall, nor shall either
Party permit any of its subsidiaries to, enter into any agreement or
arrangement with any of their respective Affiliates other than with wholly
owned subsidiaries of such Party, on terms less favorable to such Party or
such subsidiary, as the case may be, than could be reasonably expected to
have been obtained with an unaffiliated third party on an arm's-length
basis.
(j) Certain Employee Matters. Except as otherwise required by law, a
Party shall not and it shall not permit any of its subsidiaries to: (i)
pay any bonuses to (whether in cash or property), or grant any increases
in the compensation of, any of its directors, officers or employees,
except increases in salary to employees who are not directors or officers
made in the ordinary course of business and in accordance with past
practice; (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required or contemplated by any of
the existing Alpha Employee Benefit Plans or
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Lima Employee Benefit Plans as applicable, in each case as in effect on
the date hereof to any such director, officer or employee, whether past or
present; (iii) enter into any new, or amend any existing, material
employment or severance or termination agreement with any director,
officer or employee; (iv) grant any options or other awards under the
Alpha Stock Compensation Plans or Lima Stock Option Plan, as applicable,
or any other equity or incentive plan of Alpha or Lima; or (v) become
obligated under any new Alpha Employee Benefit Plan, or any new Lima
Employee Benefit Plan which was not in existence prior to the date hereof,
or amend any such plan or arrangement in existence on the date hereof if
such amendment would have the effect of materially enhancing any benefits
thereunder.
(k) Indebtedness; Leases; Capital Expenditures. No Party shall, nor
shall any Party permit any of its subsidiaries to, (i) incur any
indebtedness for borrowed money (except (x) to finance any transactions or
capital or other expenditures permitted by this Agreement and regular
borrowings under credit facilities made in the ordinary course of such
Party's business, (y) refinancings of existing debt and (z) immaterial
borrowings that, in each such case, permit prepayment of such debt without
penalty (other than LIBOR breakage costs)) or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of such Party or any of its subsidiaries or
guarantee any debt securities of others (other than directly or indirectly
wholly-owned subsidiaries), (ii) except in the ordinary course of
business, enter into any material lease (whether such lease is an
operating or capital lease) or create any material mortgages, liens,
security interests or other encumbrances on the property of such Party or
any of its subsidiaries in connection with any indebtedness thereof, or
(iii) make or commit to make aggregate capital expenditures not described
in the Alpha SEC Documents or Lima SEC Documents in excess, in the case of
each of Alpha and Lima, of an amount equal to the sum of (A) capital
expenditures budgeted by such Party for the fiscal year ending December
31, 1997 as set forth in the capital expenditure budgets delivered to the
other Party, less any budgeted capital expenditures expended prior to the
date of this Agreement, plus (B) capital expenditures (not otherwise
included in budgeted capital expenditures) that may be incurred in
connection with the acquisitions by Alpha and Lima, as applicable,
permitted under Section 5.1(e). Each Party shall consult with the other in
advance prior to actually committing to make budgeted capital expenditures
relating to a single project or field not specifically identified in the
budget in excess of $1,000,000 for Alpha or in excess of $3,000,000 for
Lima.
(l) Material Agreements. No Party shall, nor shall any Party permit
any of its subsidiaries to, (i) enter into any new Alpha Material
Agreement or Lima Material Agreement, as applicable, not contemplated by
the budgeted capital expenditures described in Section 5.1(k) or (ii)
amend, modify or alter any existing Alpha Material Agreement or Lima
Material Agreement, as applicable, in a manner materially adverse to Alpha
or Lima, as applicable.
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(m) Agreements. No Party shall, nor shall any Party permit any of
its subsidiaries to, agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
5.2 Access to Assets, Personnel and Information.
(a) From the date hereof until the Effective Time, Alpha shall
afford to Lima and the Lima Representatives, at Lima's sole risk and
expense, reasonable access to any of the assets, books and records,
contracts, employees, representatives, agents and facilities of the Alpha
Companies and shall, upon request, furnish promptly to Lima (at Lima's
expense) a copy of any file, book, record, contract, permit,
correspondence, or other written information, document or data concerning
any of the Alpha Companies (or any of their respective assets) that is
within the possession or control of Alpha.
(b) From the date hereof until the Effective Time, Lima shall afford
to Alpha and the Alpha Representatives, at Alpha's sole risk and expense,
reasonable access to any of the assets, books and records, contracts,
employees, representatives, agents and facilities of the Lima Companies
and shall, upon request, furnish promptly to Alpha (at Alpha's expense) a
copy of any file, book, record, contract, permit, correspondence, or other
written information, document or data concerning any of the Lima Companies
(or any of their respective assets) that is within the possession or
control of Lima.
(c) From the date hereof until the Effective Time, Alpha will fully
and accurately disclose, and will cause each of the other Alpha Companies
to fully and accurately disclose, to Lima and the Lima Representatives all
information that is (i) reasonably requested by Lima or any of the Lima
Representatives, (ii) known to any of the Alpha Companies, and (iii)
relevant in any material manner or degree to the value, ownership, use,
operation, development or transferability of the assets of any of the
Alpha Companies.
(d) From the date hereof until the Effective Time, Lima will fully
and accurately disclose to Alpha and the Alpha Representatives all
information that is (i) reasonably requested by Alpha or any of the Alpha
Representatives, (ii) known to any of the Lima Companies, and (iii)
relevant in any manner or degree to the value, ownership, use, operation,
development or transferability of the assets of any of the Lima Companies.
(e) From the date hereof until the Effective Time, each of Lima and
Alpha shall (i) furnish to the other, promptly upon receipt or filing (as
the case may be), a copy of each communication between such party and the
SEC after the date hereof relating to the Merger or the Registration
Statement and each report, schedule, registration statement or other
document filed by such party with the SEC after the date hereof relating
to the Merger, and (ii) promptly advise the other of the substance of any
oral communications between such party and the SEC relating to the Merger
or the Registration Statement.
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(f) Alpha will (and will cause each of the other Alpha Companies and
the Alpha Representatives to) fully cooperate in all reasonable respects
with Lima and the Lima Representatives in connection with Lima's
examinations, evaluations and investigations described in this Section
5.2, and Lima will (and will cause the Lima Representatives to) fully
cooperate in all reasonable respects with Alpha and the Alpha
Representatives in connection with Alpha's examinations, evaluations and
investigations described in this Section 5.2.
(g) Alpha agrees that it will not (and will cause the Alpha
Representatives not to), and Lima agrees that it will not (and will cause
the Lima Representatives not to), use any information obtained pursuant to
this Section 5.2 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement.
(h) Notwithstanding anything in this Section 5.2 to the contrary,
(i) Alpha shall not be obligated under the terms of this Section 5.2 to
disclose to Lima or the Lima Representatives, or ▇▇▇▇▇ ▇▇▇▇ or the Lima
Representatives access to, information that is within Alpha's possession
or control but subject to a valid and binding confidentiality agreement
with a third party without first obtaining the consent of such third
party, and Alpha, to the extent reasonably requested by Lima, will use its
reasonable best efforts to obtain any such consent; and (ii) Lima shall
not be obligated under the terms of this Section 5.2 to disclose to Alpha
or the Alpha Representatives, or grant Alpha or the Alpha Representatives
access to, information that is within Lima's possession or control but
subject to a valid and binding confidentiality agreement with a third
party without first obtaining the consent of such third party, and Lima,
to the extent reasonably requested by Alpha, will use its reasonable best
efforts to obtain any such consent.
5.3 No Solicitation by Alpha.
(a) Immediately following the execution of this Agreement, Alpha
will (and will use its reasonable best efforts to cause each of the Alpha
Representatives to) terminate any and all existing activities, discussions
and negotiations with third parties with respect to any possible
transaction involving any proposal to acquire all or any part of the Alpha
Common Stock, Alpha Preferred Stock or all or any material portion of the
assets, business or equity interest of Alpha (other than the transactions
contemplated by this Agreement), whether by merger, purchase of assets,
tender offer, exchange offer or otherwise.
(b) Alpha will not (and will use its reasonable best efforts to
cause the Alpha Representatives not to), directly or indirectly (i)
solicit, initiate or knowingly encourage the submission of any offer or
proposal to acquire all or more than fifteen (15) percent of the Alpha
Common Stock, Alpha Preferred Stock or all or any material portion of the
assets, business or equity interest of Alpha (other than the transactions
contemplated by this Agreement), whether by merger, purchase of assets,
tender offer, exchange offer or otherwise (a "Competing Proposal"); (ii)
engage in negotiations or discussions concerning
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or provide any non-public information to any Person relating to a
Competing Proposal; or (iii) agree to, approve or recommend, or otherwise
facilitate any effort or attempt to make or implement, any Competing
Proposal, or withdraw its recommendation of the Merger, provided, however,
that (i) Alpha's Board of Directors may take and disclose to the
stockholders of Alpha a position contemplated by Rule 14e-2(a) promulgated
under the Exchange Act with regard to the Competing Proposal and (ii)
following receipt from a third party (without any solicitation, initiation
or encouragement, directly or indirectly, by Alpha or any Alpha
Representatives) of a bona fide written Competing Proposal, (x) Alpha may
engage in discussions or negotiations with such third party and may
furnish such third party non-public information concerning it, and its
business, properties and assets if such third party executes a
confidentiality agreement in reasonably customary form and on terms,
including so called "standstill" provisions, at least as restrictive as
those contained in the Confidentiality Agreement and (y) the Board of
Directors of Alpha may recommend such Competing Proposal or withdraw,
modify or not make its recommendation referred to in Section 5.4, if and
only to the extent that (1) Alpha's Board of Directors determines in good
faith based on advice of Alpha's financial advisor that such Competing
Proposal, if consummated, would result in a transaction more favorable to
Alpha's stockholders from a financial point of view than the transaction
contemplated by this Agreement (a "Superior Proposal") and that the Person
making such Superior Proposal has the financial means, or the ability to
obtain the necessary financing, to conclude such transaction; and (2)
Alpha's Board of Directors determines in good faith based on the advice of
Alpha's outside counsel that such action is necessary in order for Alpha's
Board of Directors to act in a manner that is consistent with its
fiduciary obligations under applicable law.
(c) Alpha shall promptly notify Lima after receipt by Alpha or the
Alpha Representatives of any Competing Proposal, any inquiries indicating
that any person is considering making or wishes to make a Competing
Proposal or any requests for nonpublic information.
(d) Nothing in this Section 5.3 shall permit Alpha to terminate this
Agreement except as specifically provided in Section 7.1.
5.4 Alpha Stockholders Meeting. Alpha shall take all action necessary in
accordance with applicable law and its certificate of incorporation and by-laws
to convene a meeting of its stockholders as promptly as practicable after the
date hereof for the purpose of voting on this Agreement and the Merger. The
Board of Directors of Alpha shall recommend approval of this Agreement and the
Merger (unless Alpha's Board of Directors determines in good faith based on the
advice of Alpha's outside counsel that such action is inconsistent with its
fiduciary obligations under applicable law, subject, however, to the provisions
of Article VII hereof) and shall take all lawful action to solicit such
approval, including timely mailing the Proxy Statement/Prospectus to the
stockholders of Alpha. Notwithstanding the above, however, the mailing of the
Proxy Statement/Prospectus shall be subject to the condition that Alpha shall
have received an opinion (reasonably acceptable in form and substance to Alpha)
from Shearman & Sterling (or such other
- 39 -
firm as is reasonably acceptable to Alpha) to the effect that (i) the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, (ii) each of Lima, Alpha and Merger Sub
will be a party to such reorganization within the meaning of Section 368(b) of
the Code, (iii) no gain or loss will be recognized by Lima, Alpha or Merger Sub
as a result of the Merger, and (iv) no gain or loss, except with respect to the
amount of Cash Consideration received (and cash received in lieu of fractional
shares), will be recognized by a stockholder of Alpha as a result of the Merger
with respect to the shares of Alpha Common Stock converted into shares of Lima
Common Stock or the shares of Alpha Preferred Stock converted into shares of
Lima Preferred Stock, and such opinion shall not have been withdrawn, revoked or
modified. Such opinion may be based upon representations of the parties and
shareholders of the parties.
5.5 Lima Stockholders Meeting. Lima shall take all action necessary in
accordance with applicable law and its certificate of incorporation and bylaws
to convene a meeting of its stockholders as promptly as practicable after the
date hereof for the purpose of voting on this Agreement and the Merger. The
Board of Directors of Lima shall recommend approval of this Agreement and the
Merger and shall take all lawful action to solicit such approval, including
timely mailing the Proxy Statement/Prospectus to the stockholders of Lima.
Notwithstanding the above, however, the mailing of the Proxy Statement/
Prospectus shall be subject to the condition that Lima shall have received an
opinion of the type described in Section 5.4 from counsel as is reasonably
acceptable to Lima and such opinion shall not have been withdrawn, revoked or
modified.
5.6 Registration Statement and Proxy Statement/Prospectus.
(a) Lima and Alpha shall cooperate and promptly prepare the
Registration Statement, Lima and Alpha shall file the Proxy
Statement/Prospectus as soon as practicable after the date hereof and Lima
shall file the Registration Statement with the SEC as soon as practicable
thereafter. Lima shall use its best efforts, and Alpha shall cooperate
with Lima (including furnishing all information concerning Alpha and the
holders of Alpha Common Stock as may be reasonably requested by Lima), to
have the Registration Statement declared effective under the Securities
Act as promptly as practicable after such filing. Lima shall use its best
efforts, and Alpha shall cooperate with Lima, to obtain all necessary
state securities laws or "blue sky" permits, approvals and registrations
in connection with the issuance of Lima Common Stock pursuant to the
Merger.
(b) Lima and Alpha will cause the Registration Statement (including
the Proxy Statement/ Prospectus), at the time it becomes effective under
the Securities Act, to comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act and the
rules and regulations of the SEC thereunder.
(c) Alpha hereby covenants and agrees with Lima that (i) the
Registration Statement (at the time it becomes effective under the
Securities Act and at the Effective
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Time) will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading (provided, however, that this clause
(i) shall apply only to information contained in the Registration
Statement that was supplied by Alpha specifically for inclusion therein);
and (ii) the Proxy Statement/Prospectus (at the time it is first mailed to
stockholders of Alpha and Lima, at the time of the Alpha Meeting and the
Lima Meeting, and at the Effective Time) will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading
(provided, however, that this clause (ii) shall not apply to any
information contained in the Proxy Statement/ Prospectus that was supplied
by Lima specifically for inclusion therein). If, at any time prior to the
Effective Time, any event with respect to Alpha, or with respect to other
information supplied by Alpha specifically for inclusion in the
Registration Statement, occurs and such event is required to be described
in an amendment to the Registration Statement, Alpha shall promptly notify
Lima of such occurrence and shall cooperate with Lima in the preparation
and filing of such amendment. If, at any time prior to the Effective Time,
any event with respect to Alpha, or with respect to other information
included in the Proxy Statement/Prospectus, occurs and such event is
required to be described in a supplement to the Proxy
Statement/Prospectus, such event shall be so described and such supplement
shall be promptly prepared, filed and disseminated.
(d) Lima hereby covenants and agrees with Alpha that (i) the
Registration Statement (at the time it becomes effective under the
Securities Act and at the Effective Time) will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading (provided, however, that this clause (i) shall not apply to any
information contained in the Registration Statement that was supplied by
Alpha specifically for inclusion therein); and (ii) the Proxy
Statement/Prospectus (at the time it is first mailed to stockholders of
Alpha and Lima, at the time of the Alpha Meeting and the Lima Meeting, and
at the Effective Time) will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading (provided,
however, that this clause (ii) shall apply only to information contained
in the Proxy Statement/ Prospectus that was supplied by Lima specifically
for inclusion therein). If, at any time prior to the Effective Time, any
event with respect to Lima, or with respect to other information included
in the Registration Statement, occurs and such event is required to be
described in an amendment to the Registration Statement, such event shall
be so described and such amendment shall be promptly prepared and filed.
If, at any time prior to the Effective Time, any event with respect to
Lima, or with respect to other information supplied by Lima specifically
for inclusion in the Proxy Statement/Prospectus, occurs and such event is
required to be described in a supplement to the Proxy
Statement/Prospectus, Lima shall promptly notify Alpha of such occurrence
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and shall cooperate with Alpha in the preparation, filing and
dissemination of such supplement.
(e) Neither the Registration Statement nor the Proxy
Statement/Prospectus nor any amendment or supplement thereto will be filed
or disseminated to the stockholders of Alpha or Lima without the approval
of both Lima and Alpha. Lima shall advise Alpha, promptly after it
receives notice thereof, of the time when the Registration Statement has
become effective under the Securities Act, the issuance of any stop order
with respect to the Registration Statement, the suspension of the
qualification of the Lima Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any comments or
requests for additional information by the SEC with respect to the
Registration Statement.
5.7 Stock Exchange Listing. Lima shall cause the shares of Lima Common
Stock to be issued in the Merger, the shares of Lima Common Stock issuable upon
conversion of the Lima Preferred Stock to be issued in the Merger, the shares of
Lima Common Stock issuable upon exercise of the Alpha Warrants assumed by Lima
in connection with the Merger, and the Lima Preferred Stock and/or Lima
Depositary Shares, as applicable, to be issued in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
5.8 Additional Arrangements. Subject to the terms and conditions herein
provided, each of Alpha and Lima shall take, or cause to be taken, all action
and shall do, or cause to be done, all things necessary, appropriate or
desirable under the HSR Act and any other applicable laws and regulations or
under applicable governing agreements to consummate and make effective the
transactions contemplated by this Agreement, including using its best efforts to
obtain all necessary waivers, consents and approvals and effecting all necessary
registrations and filings. Each of Alpha and Lima shall take, or cause to be
taken, all action or shall do, or cause to be done, all things necessary,
appropriate or desirable to cause the covenants and conditions applicable to the
transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Authority shall have issued any
order, decree, ruling or injunction, or taken any other action that would have
the effect of restraining, enjoining or otherwise prohibiting or preventing the
consummation of the transactions contemplated hereby, each of Alpha and Lima
shall use its reasonable efforts to have such order, decree, ruling or
injunction or other action declared ineffective as soon as practicable.
5.9 Agreements of Affiliates. At least 30 days prior to the Effective
Time, Alpha shall cause to be prepared and delivered to Lima a list identifying
all Persons who, at the time of the Alpha Meeting, may be deemed to be
"affiliates" of Alpha as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act. Alpha shall use its best efforts to cause each Person
who is identified as an affiliate of Alpha in such list to execute and deliver
to Lima, on or prior to the Closing Date, a written agreement, in the form
attached hereto as Exhibit "5.9" (if such Person has not executed and delivered
an agreement substantially to the same effect contemporaneously with the
execution of this Agreement). Lima shall be entitled to place legends as
specified in such agreements on the Lima Certificates representing any Lima
Common Stock
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or Lima Preferred Stock (or Depositary Shares with respect thereto) to be issued
to such Persons in the Merger.
5.10 Public Announcements. Prior to the Closing, Alpha and Lima 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 press release or make any such public
statement prior to obtaining the approval of the other party; provided, however,
that such approval shall not be required where such release or announcement is
required by applicable law or the rules of the NYSE; and provided further, that
either Alpha or Lima may respond to inquiries by the press or others regarding
the transactions contemplated by this Agreement, so long as such responses are
consistent with such party's previously issued press releases.
5.11 Notification of Certain Matters. Alpha shall give prompt notice to
Lima of (a) any representation or warranty contained in Article III being untrue
or inaccurate when made, (b) the occurrence of any event or development that
would cause (or could reasonably be expected to cause) any representation or
warranty contained in Article III to be untrue or inaccurate on the Closing
Date, or (c) any failure of Alpha to comply with or satisfy any covenant,
condition, or agreement to be complied with or satisfied by it hereunder. Lima
shall give prompt notice to Alpha of (x) any representation or warranty
contained in Article IV being untrue or inaccurate when made, (y) the occurrence
of any event or development that would cause (or could reasonably be expected to
cause) any representation or warranty contained in Article IV to be untrue or
inaccurate on the Closing Date, or (z) any failure of Lima to comply with or
satisfy any covenant, condition, or agreement to be complied with or satisfied
by it hereunder.
5.12 Payment of Expenses. Except as otherwise provided in Section 7.3,
each party hereto shall pay its own expenses incident to preparing for, entering
into and carrying out this Agreement and the consummation of the transactions
contemplated hereby, whether or not the Merger shall be consummated, except that
(a) the fee for filing the Registration Statement with the SEC shall be borne by
Lima; (b) the costs and expenses associated with printing the Proxy
Statement/Prospectus shall be borne equally by Lima and Alpha; and (c) the costs
and expenses associated with mailing the Proxy Statement/Prospectus to the
stockholders of (i) Alpha, and soliciting the votes of the stockholders of
Alpha, shall be borne by Alpha, and (ii) Lima, and soliciting the votes of the
stockholders of Lima, shall be borne by Lima.
5.13 Indemnification.
(a) For a period of six (6) years after the Effective Time, Lima and
the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former
director or officer of the Alpha Companies and each such person who served
at the request of Alpha or any Alpha Company as a director, officer,
trustee, partner, fiduciary, employee or agent of Alpha or of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or enterprise against all costs and expenses (including
reasonable attorneys fees),
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judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time),
whether civil, administrative or investigative, arising out of or
pertaining to any action or omission in their capacity as an officer,
director, employee, agent or other person to whom this section applies, in
each case occurring before the Effective Time, including the transactions
contemplated by this Agreement; provided, however, that neither Lima nor
the Surviving Corporation shall be liable for any amounts in connection
with any settlement effected by any indemnified party without Lima's prior
written consent (which consent shall not be unreasonably withheld).
Without limiting the foregoing, in the event of any such claim, action,
suit, proceeding or investigation, Lima or the Surviving Corporation shall
pay the fees and expenses of counsel selected by any such indemnified
party, which counsel shall be reasonably satisfactory to Lima and the
Surviving Corporation, as the case may be, promptly after statements
therefor are received (unless Lima or the Surviving Corporation shall
elect to defend such action). If Lima or the Surviving Corporation shall
elect to defend any such action, Lima and the Surviving Corporation shall
have the right to control the investigation, defense and/or settlement of
each such action or matter, at its cost and expense, including use of
counsel of its choice reasonably satisfactory to the indemnified party;
provided, however, that Lima and the Surviving Corporation will consult
with the indemnified party and take the views of the indemnified party
into consideration in effecting or rejecting any settlement; provided,
further, that if both Lima or the Surviving Corporation and any
indemnified party are parties to any litigation, such indemnified party
shall be entitled to retain separate counsel if there are actual or
potential conflicts of interest between such indemnified party and Lima or
the Surviving Corporation, as the case may be; provided, further, that
neither Lima nor the Surviving Corporation shall enter into any settlement
of any action or matter, except for any action relating solely to money
damages that includes a complete and unconditional release of such
indemnified party, without the prior written consent of such indemnified
party which consent shall not be unreasonably withheld. Lima and the
Surviving Corporation and any indemnified party shall cooperate with each
other in connection with the investigation and defense of any action or
matter for which indemnification is provided under this Section 5.13(a).
(b) From and after the Effective Time, Lima and the Surviving
Corporation shall continue and guarantee the continuation of the rights to
indemnification, including provisions relating to advances of expenses
incurred in defense of any action or suit, and exculpation from liability
existing in favor of the parties so indemnified in the Certificate of
Incorporation and Bylaws of Alpha as in effect on the date of this
Agreement with respect to matters occurring through the Effective Time for
a period of six (6) years from the Effective Time.
(c) In the event Lima or the Surviving Corporation or any of their
respective successor or assigns (i) consolidates with or merges with or
into any other person and shall not be the continuing or surviving
corporation or entity in such consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any person,
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then, in each case proper provision shall be made so that the successors
and assigns of Lima or the Surviving Corporation, as the case may be,
honor the indemnification obligations set forth in this Section 5.13.
(d) The obligations of Lima and the Surviving Corporation under this
Section 5.13 shall not be terminated or modified in such manner as to
adversely affect any indemnified party without the consent of the affected
indemnified party (it being expressly agreed that each such indemnified
party shall be a third party beneficiary of this Section 5.13).
5.14 Alpha Employees.
(a) As soon as reasonably practicable after the Effective Time, Lima
shall provide employee benefit plans and arrangements to active employees
of the Alpha Companies that are the same as, or substantially the
equivalent of, the employee benefit plans and arrangements of the Lima
Companies as in effect immediately prior to the Effective Time or as may
be modified or terminated from time to time thereafter by Lima. Pending
such action, Lima shall, or shall cause the Surviving Corporation to,
maintain the effectiveness of the Alpha Benefit Plans. From and after the
Effective Time, Lima shall also honor, and shall cause the Alpha Companies
to honor, in accordance with their terms, all employment and severance
agreements and arrangements which apply to employees of the Alpha
Companies as disclosed in the Alpha Disclosure Schedule. Lima further
agrees that the employees of the Alpha Companies shall be credited for
their actual and credited service with the Alpha Companies for purposes of
eligibility, vesting and benefit accrual (except in the case of a defined
benefit pension plan) in the employee plans provided by Lima. Such
employees' benefits under Lima's medical benefit plan shall not be subject
to any exclusions for any pre-existing conditions, and credit shall be
received for any deductibles or out-of-pocket amounts previously paid.
(b) As soon as practicable after the Effective Time, the
participants in the Alpha annual incentive and bonus plans for 1997 will
be paid a pro-rata cash bonus through the Effective Time determined by the
Board of Directors of Alpha, which bonuses shall not exceed in any event a
total of $750,000.
5.15 Board of Directors of Lima Following Effective Time. Lima and Alpha
shall take such action as may be necessary or advisable (including seeking
approval of such matters as may be necessary or advisable at the Lima Meeting
and including a solicitation of proxies for such matters in the Proxy
Statement/Prospectus) to ensure that, immediately after the Effective Time, the
Board of Directors of Lima shall consist of not more than eleven individuals,
including three individuals acceptable to Lima who shall be designated by Alpha,
including ▇▇▇▇ ▇▇▇▇▇▇▇ (who shall be appointed as Vice Chairman of the Board of
Directors and shall serve on the Executive Committee of the Board of Directors
of Lima), and to cause such persons (or such substitute nominees as may be
designated by ▇▇▇▇ ▇▇▇▇▇▇▇ and acceptable to Lima) to be nominated for
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reelection at the next annual meeting of the stockholders of Lima, each to serve
until his or her respective successor shall be duly elected and shall qualify.
5.16 Employee Agreements; Certain Payments.
(a) Lima will enter into, and Alpha will use reasonable best efforts
to cause each of the employees of Alpha listed in Section 5.16(a) of the
Alpha Disclosure Schedule to enter into, agreements of employment or
retention in the forms attached to the Alpha Disclosure Schedule (the
"Alpha Employee Agreements").
(b) At the Effective Time, Alpha shall make the payments in amounts
no greater than set forth in Section 5.16(b) of the Alpha Disclosure
Schedule to the employees listed therein and, as a condition to receipt of
any such payment by any such employee, such employee must agree, in form
satisfactory to Lima, to waive any rights to any severance payments for
any termination of employment occurring within two years after the
Effective Time, except as may be otherwise specifically provided in any of
the Alpha Employee Agreements.
5.17 Tax-Free Reorganization. Subject to the terms and conditions hereof,
Alpha and Lima shall each use its best efforts to cause the Merger to be treated
as a reorganization within the meaning of Section 368(a) of the Code and to
obtain the opinions of counsel referred to in Sections 5.4 and 5.5 to such
effect.
5.18 Alpha Rights Plan. Unless and until this Agreement is terminated in
accordance with its terms, Alpha shall maintain the Alpha Rights Agreement in
effect and shall not make any other amendments or modifications, except such
amendments or modifications that are contemplated by Section 3.19 and such other
amendments or modifications that (a) would not adversely affect this Agreement,
the Merger or the transactions contemplated hereby and (b) would not (1)
facilitate or permit the acquisition by any Person of 15% of the outstanding
Alpha Common Stock without such Person becoming an "Acquiring Person" pursuant
to the Alpha Rights Agreement or (2) otherwise modify or impair the operation of
the Alpha Rights Plan in a manner that would diminish the anti-takeover effects
thereof.
5.19 Restructuring of Reorganization. If, as a result of any facts
relating to Alpha, Lima or their respective shareholders, either of the opinions
required by Section 5.4 or 5.5 are not obtained or if either of the conditions
to closing in Section 6.2(d) or 6.3(c) are not either satisfied or waived by the
party entitled to waive such condition, Alpha and Lima shall use their
reasonable best efforts to restructure the transaction contemplated by this
Agreement pursuant to which (a) Lima will cause there to be organized a newly
created holding company corporation ("Newco") with a certificate of
incorporation and bylaws substantially equivalent to those of Lima as of the
date hereof; (b) the holders of Lima Common Stock will receive one share of
common stock ("Newco Common Stock") of Newco in exchange for each share of Lima
Common Stock as a result of a merger of a newly created subsidiary of Newco with
and into Lima; and (c) another newly created subsidiary of Newco will be merged
with and into Alpha and the terms
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of this Agreement shall apply to such merger except that Newco Common Stock and
Newco Preferred Stock shall be issued to Alpha security holders in lieu of the
Lima Common Stock and Lima Preferred Stock issuable hereunder and the Alpha
Warrants shall be exercisable for shares of Newco Common Stock instead of Lima
Common Stock. In such event, this Agreement shall be deemed to be appropriately
modified to reflect such restructuring and the parties hereto shall use their
reasonable best efforts to effect such restructured transaction. It shall be a
condition to the obligations of Alpha and Lima to close the Merger as provided
in Sections 6.3(c) and 6.2(d), respectively, that each party shall have received
tax opinions in satisfactory form and substance to the effect that the
restructured transaction will be treated for federal income tax purposes as a
transaction to which Section 351 and/or Section 368(a) of the Code applies and
will otherwise have the tax attributes and effects described in Section 5.4(iii)
and (iv) as to Alpha, Lima and their respective stockholders.
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been duly and validly approved and adopted by the stockholders of Alpha
and Lima, all as required by the DGCL, the NYSE and the charter and bylaws
of Alpha and Lima.
(b) Other Approvals. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated and all filings required to be made prior to the Effective Time
with, and all consents, approvals, permits and authorizations required to
be obtained prior to the Effective Time from, any Governmental Authority
or other person in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby by
Alpha, Lima and Merger Sub shall have been made or obtained (as the case
may be), except where the failure to obtain such consents, approvals,
permits and authorizations would not result in a Material Adverse Effect
on Lima (assuming the Merger has taken place) or to materially adversely
affect the consummation of the Merger.
(c) Securities Law Matters. The Registration Statement shall have
been declared effective by the SEC under the Securities Act and shall be
effective at the Effective Time, and no stop order suspending such
effectiveness shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend such effectiveness shall have been
initiated and be continuing, and all necessary approvals under state
securities laws relating to the issuance or trading of the Lima Common
Stock to be issued in the Merger shall have been received.
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(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction preventing the consummation of the Merger shall be
in effect; provided, however, that prior to invoking this condition, each
party shall have complied fully with its obligations under Section 5.8
and, in addition, shall use all reasonable efforts to have any such
decree, ruling, injunction or order vacated, except as otherwise
contemplated by this Agreement.
(e) NYSE Listing. The shares of Lima Common Stock and Lima Preferred
Stock and/or Lima Depositary Shares, as applicable, described in Section
5.7 shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
6.2 Conditions to Obligations of Lima and Merger Sub. The obligations of
Lima and Merger Sub to effect the Merger are subject to the satisfaction of the
following conditions, any or all of which may be waived in whole or in part by
Lima and Merger Sub:
(a) Representations and Warranties. The representations and
warranties of Alpha set forth in Article III shall be true and correct in
all material respects as of the Closing Date as though made on and as of
that time other than any breach that would not, either individually or in
the aggregate, have a Material Adverse Effect, and Lima shall have
received a certificate signed by the chief executive officer of Alpha to
such effect.
(b) Performance of Covenants and Agreements by Alpha. Alpha shall
have performed all covenants and agreements required to be performed by it
under this Agreement at or prior to the Closing Date other than any breach
that would not, either individually or in the aggregate, have a Material
Adverse Effect, and Lima shall have received a certificate signed by the
chief executive officer of Alpha to such effect.
(c) No Adverse Change. From the date of this Agreement through the
Closing, except as disclosed in the Alpha Disclosure Schedule, there shall
not have occurred any change in the condition (financial or otherwise),
operations or business of any of the Alpha Companies that would have or
would be reasonably likely to have a Material Adverse Effect on Alpha
(other than changes, including changes in commodity prices, generally
affecting the oil and gas industry or changes due to the announcement of
the Merger).
(d) Tax Opinion. The tax opinion described in Section 5.5 shall have
been confirmed as of the Closing Date.
(e) Dissenting Stockholders. The holders of no more than fifteen
(15) percent of the outstanding Alpha Common Stock shall have exercised
their right to dissent from the Merger under the DGCL.
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6.3 Conditions to Obligation of Alpha. The obligation of Alpha to effect
the Merger is subject to the satisfaction of the following conditions, any or
all of which may be waived in whole or in part by Alpha:
(a) Representations and Warranties. The representations and
warranties of Lima and Merger Sub set forth in Article IV shall be true
and correct in all material respects as of the Closing Date as though made
on and as of that time other than any breach that would not, either
individually or in the aggregate, have a Material Adverse Effect, and
Alpha shall have received a certificate signed by the chief executive
officer of Lima to such effect.
(b) Performance of Covenants and Agreements by Lima and Merger Sub.
Lima and Merger Sub shall have performed all covenants and agreements
required to be performed by them under this Agreement at or prior to the
Closing Date other than any breach that would not, either individually or
in the aggregate, have a Material Adverse Effect, and Alpha shall have
received a certificate signed by the chief executive officer of Lima to
such effect.
(c) Tax Opinion. The tax opinion described in Section 5.4 shall have
been confirmed as of the Closing Date.
(d) No Adverse Change. From the date of this Agreement through the
Closing, there shall not have occurred any change in the condition
(financial or otherwise), operations or business of the Lima Companies
that would have or would be reasonably likely to have a Material Adverse
Effect on Lima (other than changes, including changes in commodity prices,
generally affecting the oil and gas industry or changes due to the
announcement of the Merger).
(e) Alpha Employee Agreements. Lima shall have entered into the
Alpha Employee Agreements with those applicable employees of Alpha who
have also agreed to enter into such respective Alpha Employee Agreements.
ARTICLE VII
TERMINATION
7.1 Termination Rights. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of this Agreement and the Merger by the stockholders of Alpha and
Lima:
(a) By mutual written consent of Lima and Alpha;
(b) By either Alpha or Lima if (i) the Merger has not been
consummated by November 15, 1997 (provided, however, that the right to
terminate this Agreement
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pursuant to this clause (i) shall not be available to any party whose
breach of any representation or warranty or failure to perform any
covenant or agreement under this Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(ii) any Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable (provided, however, that
the right to terminate this Agreement pursuant to this clause (ii) shall
not be available to any party until such party has used all reasonable
efforts to remove such injunction, order or decree).
(c) By Lima, if there has been a breach of the representations,
warranties or covenants made by Alpha in this Agreement which would cause
the conditions in Section 6.2 not to be satisfied and such breach is not
capable of being cured or if capable of being cured, shall not have been
cured within ten (10) business days following receipt by Alpha of written
notice of such breach from Lima.
(d) By Alpha, if there has been a breach of the representations,
warranties or covenants made by Lima in this Agreement which would cause
the conditions in Section 6.3 not to be satisfied and such breach is not
capable of being cured or if capable of being cured, shall not have been
cured within ten (10) business days following receipt by Lima of written
notice of such breach from Alpha.
(e) By Alpha or Lima if this Agreement and the Merger shall not have
been approved by the required vote of the Alpha stockholders at the Alpha
Meeting or at any adjournment thereof.
(f) By Alpha if (i) Alpha is prepared to enter into a binding
definitive agreement to effect a Superior Proposal; and (ii) Alpha has
given Lima at least three (3) business days' prior notice of its intention
to terminate this Agreement pursuant to this Section 7.1(f), during which
period Lima shall have the opportunity to propose amendments or
modifications to the terms of the Merger.
(g) By Lima if (i) the board of directors of Alpha shall have
withdrawn or modified its recommendation or otherwise failed to recommend
adoption of this Agreement and the Merger or shall have resolved or
publicly announced or disclosed to any third party its intention to do so;
(ii) an Alternative Transaction involving Alpha shall have taken place or
the Board of Directors of Alpha shall have recommended such an Alternative
Transaction to the stockholders of Alpha or shall have resolved or
publicly announced its intention to recommend or engage in such an
Alternative Transaction; or (iii) a tender offer or exchange offer for
thirty percent (30%) or more of the outstanding shares of Alpha Common
Stock shall be commenced or a registration statement with respect thereto
shall have been filed (other than by Lima or an affiliate thereof), and
the Board of Directors of Alpha shall have (A) recommended (or shall have
resolved or publicly announced its intention to recommend) that the
stockholders of Alpha tender their
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shares in such tender or exchange offer or (B) resolved or publicly
announced its intention to take no position with respect to such tender or
exchange offer.
(h) By Alpha if the banks parties to the Pledge Agreements dated as
of December 23, 1994 and December 27, 1996 among S. A. ▇▇▇▇▇ ▇▇▇▇▇▇▇, et
Cie and the banks named therein shall not have consented to the voting of
the shares of Lima Common Stock pledged pursuant thereto in favor of the
transactions contemplated hereby on or prior to the twentieth business day
after the date hereof; provided, however, that the period for obtaining
the consent of the banks shall be extended an additional five (5) business
days, and Alpha shall not have the right to terminate this Agreement
pursuant to Section 7.1(h) prior to such time, if Lima and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Natural Gas Holdings Corp. shall have used, and shall be continuing to
use, their reasonable best efforts in good faith to obtain any required
consents or waivers of such banks.
7.2 Effect of Termination. If this Agreement is terminated by either Alpha
or Lima pursuant to the provisions of Section 7.1, this Agreement shall
forthwith become void, and there shall be no further obligation on the part of
any party hereto or its respective Affiliates, directors, officers, or
stockholders, except pursuant to the provisions of Sections 5.2 (but only to the
extent of the confidentiality and indemnification provisions contained therein),
5.6(c), 5.6(d), 5.10, 5.12 and 7.3, Article VIII and the Confidentiality
Agreement (which shall continue pursuant to their terms); provided, however,
that a termination of this Agreement shall not relieve any party hereto from any
liability for damages incurred as a result of a breach by such party of its
representations, warranties, covenants, agreements or other obligations
hereunder occurring prior to such termination.
7.3 Termination Fees and Expenses.
(a) If this Agreement is terminated (i) by Lima pursuant to Sections
7.1(e) or 7.1(g) or (ii) by Alpha pursuant to Sections 7.1(e) or 7.1(f),
then Alpha shall promptly, but in no event later than one business day
after termination of this Agreement, pay to Lima a termination fee in cash
("Initial Termination Fee") equal to $3,000,000; provided, however, the
Initial Termination Fee shall not be payable for a termination pursuant to
Section 7.1(e) or Section 7.1(g)(i), if, in either case, both (A) the Lima
Ratio is less than 85% of the Index Ratio and (B) no Competing Proposal
has been made which has not been rejected by Alpha prior to the date of
the Alpha Meeting in the case of a termination pursuant to Section 7.1(e)
or, in the case of a termination pursuant to Section 7.1(g)(i) prior to
the action of the board of Alpha referred to therein. In addition, if the
Initial Termination Fee is payable and if, within 12 months after payment
of the Initial Termination Fee, an Alternative Transaction involving Alpha
is consummated or Alpha enters into a definitive agreement with respect to
an Alternative Transaction, Alpha shall pay to Lima an additional fee (the
"Additional Termination Fee") of $5,000,000 in cash, at or prior to
consummation of such Alternative Transaction, or within one business day
following the effective date of such definitive agreement, whichever is
earlier.
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(b) For purposes of this Section 7.3, the following terms shall have
the meanings indicated:
(i) "Alternative Transaction" means (A) a transaction or
series of transactions to which any person or group (as such term is
defined under the Exchange Act) other than Lima or any Affiliate
thereof (a "Third Party") acquires or would acquire (upon completion
of such transaction or series of transactions) shares (or securities
exercisable or convertible into shares) representing more than
fifteen percent (15%) of the outstanding shares of Alpha's Common
Stock, pursuant to a tender offer or exchange offer or otherwise,
(B) a merger, consolidation, share exchange or other business
combination involving Alpha or any of its material subsidiaries, if,
upon consummation of such merger, consolidation, share exchange or
other business combination such Third Party owns or would own more
than 15% of the outstanding equity securities of Alpha or any of its
material subsidiaries or the entity surviving such merger or
business combination or resulting from such consolidation, or (C)
any other transaction or series of transactions pursuant to which
any control of assets of Alpha or any of its material subsidiaries
(including for this purpose, outstanding equity securities of
subsidiaries of Alpha) having a fair market value equal to more than
25% of the fair market value of all of the consolidated assets of
Alpha immediately prior to such transaction or series of
transactions.
(ii) "Average Closing Price" means the average of the daily
last sale prices of Lima Common Stock as reported on the NYSE
Composite Transactions reporting system (as reported in The Wall
Street Journal or, if not reported therein, in another mutually
agreed upon authoritative source) for the ten consecutive full
trading days on which such shares are traded on the NYSE ending at
the close of trading on the Determination Date.
(iii) "Average Index Price" means the average of the Index
Prices for the ten consecutive full NYSE trading days ending at the
close of trading on the Determination Date.
(iv) "Determination Date" means (A) for purposes of a
termination pursuant to Section 7.1(e), the last business day before
the date of the Alpha Meeting at which the vote of the stockholders
of Alpha is taken with respect to this Agreement and the Merger; or
(B) for purposes of a termination pursuant to Section 7.1(g)(i), the
last business day before the date of any action of the board of
directors of Alpha referred to in such Section 7.1(g)(i).
(v) "Index Group" means the group of each of the twelve oil
and gas companies listed below, the common stock of all of which
shall be publicly traded and as to which there shall not have been
since the Starting Date and before the Determination Date, any
public announcement of a proposal for such company to
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be acquired or for such company to acquire another company or
companies in transactions with a value exceeding 25% of the
acquiror's market capitalization. In the event that the common stock
of any such company ceases to be publicly traded or such an
announcement is made, such company will be removed from the Index
Group, and the weights (which have been determined based on their
relative market capitalization) redistributed proportionately for
purposes of determining the Index Price. The twelve oil and gas
companies and the weights attributed them are as follows:
Oil and Gas Company Weighting
------------------- ---------
▇▇▇▇▇▇▇ Resources 14.70
Cabot Oil and Gas 5.42
▇▇▇▇▇▇▇▇ Resources 2.97
Cross Timbers Oil and Gas 6.00
Devon Energy 15.31
HS Resources 2.81
Lomak Petroleum 4.97
Nuevo Energy 10.09
Seagull Energy 15.42
▇▇▇▇▇▇ Oil and Gas 7.12
Swift Energy 4.54
Vintage Petroleum 10.65
-----
Total 100%
(vi) "Index Price" on a given date means the weighted average
(weighted in accordance with the factors listed above) of the
closing prices on such date of the companies composing the Index
Group.
(vii) "Index Ratio" means the number obtained by dividing the
Average Index Price by the Index Price on the Starting Date.
(viii) "Lima Ratio" means the number obtained by dividing the
Average Closing Price by the Starting Price.
(ix) "Starting Date" means the last full day on which the NYSE
was open for trading prior to the execution of this Agreement.
(x) "Starting Price" shall mean the last sale price per share
of Lima Common Stock on the Starting Date, as reported by the NYSE
Composite Transactions reporting system (as reported in The Wall
Street Journal or, if not reported therein, in another mutually
agreed upon authoritative source.)
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(c) In no event shall Alpha be required to pay any termination fee
to Lima if, immediately prior to the applicable termination of this
Agreement, Lima was in breach of its material obligations under this
Agreement.
(d) If Alpha fails to promptly pay any fee or expense due hereunder,
Alpha shall pay the costs and expenses (including reasonable documented
legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment,
together with interest on the amount of any unpaid fee at the prime rate
as quoted in the Wall Street Journal, Southwest Edition as in effect from
time to time from the date such fee was required to be paid to the date of
payment.
ARTICLE VIII
MISCELLANEOUS
8.1 Nonsurvival of Representations and Warranties. None of the
representations or warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the consummation of the
Merger, except for covenants and agreements which, by their terms, are to be
performed after the Effective Time.
8.2 Amendment. This Agreement may be amended by the parties hereto at any
time before or after approval of this Agreement and the Merger by the
stockholders of Alpha or Lima; provided, however, that after any such approval,
no amendment shall be made that by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by a written instrument signed on behalf of each of the parties hereto.
8.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally, by facsimile
transmission or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received (or, if mailed, five
business days after the date of mailing) at the following addresses or facsimile
transmission numbers (or at such other address or facsimile transmission number
for a party as shall be specified by like notice):
(a) If to Lima or Merger Sub: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Natural Gas Corp., ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, President and CEO (facsimile transmission
number (▇▇▇) ▇▇▇-▇▇▇▇), with a copy (which shall not constitute notice) to
▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, ▇▇▇▇ ▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (facsimile
transmission number (▇▇▇) ▇▇▇-▇▇▇▇).
(b) If to Alpha: American Exploration Company, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Chairman
and CEO (facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇), with a copy (which
shall not constitute notice) to
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Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇ (facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇).
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and the documents and instruments
delivered by the parties in connection with this Agreement) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; and (b) except as provided in Article II or Section 5.13, 5.14 or 5.16,
is solely for the benefit of the parties hereto and their respective successors,
legal representatives and assigns and does not confer on any other person any
rights or remedies hereunder.
8.6 Applicable Law. This Agreement shall be governed and construed in
accordance with by the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof,
except to the extent the OGCA is required to govern the Merger.
8.7 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article VII. Except as otherwise contemplated by this Agreement, to
the extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent Governmental Authority, such party shall
not incur any liability or obligation unless such party breached its obligations
under Section 5.8 or did not in good faith seek to resist or object to the
imposition or entering of such order or judgment.
8.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations hereunder to any newly-formed direct or
indirect wholly-owned corporate subsidiary of Lima. 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.
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8.9 Waivers. At any time prior to the Effective Time, the parties hereto
may, to the extent legally allowed, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive performance of any of the
covenants or agreements, or satisfaction of any of the conditions, contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. Except as provided in this Agreement, no action taken pursuant to
this Agreement, including any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action of compliance
with any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision hereof
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provisions hereof.
8.10 Confidentiality Agreement. The Confidentiality Agreement shall remain
in full force and effect following the execution of this Agreement until
terminated according to its terms, and is hereby incorporated herein by
reference and shall constitute a part of this Agreement for all purposes. Any
and all information received by Lima or Alpha pursuant to the terms and
provisions of this Agreement shall be governed by the applicable terms and
provisions of the Confidentiality Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives, on the date first written above.
"ALPHA" "LIMA"
AMERICAN EXPLORATION COMPANY ▇▇▇▇▇ ▇▇▇▇▇▇▇ NATURAL GAS CORP.
By: By:
--------------------------------- ---------------------------------
Name: Name:
Title: Title:
"MERGER SUB"
LDNG ACQUISITION, INC.
By:_________________________________
Name:
Title:
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